EMPLOYMENT AGREEMENT SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Exhibit
10.1
SENIOR
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Agreement
made as of this 30th day of March, 2006, by and between Xxxxx X. Xxxxxx (the
“Employee”) and DrugMax, Inc. (the “Company”).
PREAMBLE
The
Company desires to employ the Employee as Senior Vice President and Chief
Financial Officer and to compensate him therefore. Employee desires to be
employed by the Company and to commit himself to serve the Company on the
terms
herein provided. In connection with his employment, Employee shall be eligible
to participate in the Company’s stock option programs and stock purchase
programs which may be in effect from time to time for key employees, and
performance bonus program in accordance with the terms and conditions adopted
by
the Company governing such programs.
NOW,
THEREFORE, in consideration of the foregoing and of the respective covenants
and
agreement of the parties, the parties agree as follows:
1.
Definitions.
“Affiliates”
shall mean any corporation, partnership or other legal entity which is
controlled by or under common control with the Company.
“Benefits”
shall mean all the fringe benefits approved by the Board from time to time
and
established by the Company in its discretion for the benefit of the employees
generally and/or for key employees of the Company as a class, including,
but not
limited to, regular holidays, vacations, absences resulting from illness
or
accident, health insurance, disability and medical plans (including dental
and
prescription drug), group life insurance, automobile allowance, pharmacy
allowance, un-reimbursed medical allowance, stock option plans and stock
purchase plans, and pension, profit-sharing or their equivalent.
“Board”
shall mean the Board of Directors of the Company, together with an executive
committee thereof (if any), as the same shall be constituted from time to
time.
“Cause”
for termination shall mean (i) Employee’s final conviction of or admission to a
felony involving a crime of moral turpitude, (ii) acts of Employee which,
in the
judgment of the Board, constitute willful fraud on the part of Employee in
connection with his duties under this Agreement, including but not limited
to
misappropriation or embezzlement in the performance of duties as an employee
of
the Company, or (iii) intentional or repeated acts of the Employee which
constitute misfeasance that in the judgment of the Board is materially injurious
to the Company, including the Employee’s dereliction of duty, and which Employee
does not correct within a reasonable period of time after Employee is informed
of the Board’s intent to terminate him for a stated cause under this Subsection
(iii) and Employee is given an opportunity to discuss his behavior with the
Board before being terminated for cause hereunder.
“Chairman”
shall mean the person designated by the Board from time to time as its Chairman.
“Change
of Control” shall mean the (i) a merger or consolidation of the Company with or
into another corporation which is not an affiliate of the Company or a
recapitalization or reorganization of the Company and, immediately upon the
consummation of such merger, consolidation, reorganization or recapitalization,
the persons who were the shareholders of the Company immediately thereafter
own
more than fifty percent (50%) of the total voting power of the merged,
consolidated, reorganized or recapitalized Company’s voting securities entitled
to vote generally in the election of directors; (ii) the sale of all or
substantially all of the assets of the Company to another person or entity
which
is not an affiliate of the Company; (iii) the acquisition by any person,
entity
or “group” (excluding, for this purpose, the Company, any affiliate of the
Company, or any employee benefit plan of the Company or of any affiliate
of the
Company which acquires beneficial ownership of voting securities of the Company)
within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the
Exchange Act) of either fifty percent (50%) or more of the then outstanding
shares of Common Stock or fifty percent (50%) or more of the combined voting
power of the Company’s then outstanding voting securities entitled to vote
generally in the election of directors, which, in the case of clause (i),
(ii)
and (iii) of this definition, such merger, consolidation, reorganization
or
recapitalization sale or acquisition is not approved by a vote of at least
eighty percent (80%) of the directors that constitute the Board immediately
prior to the effectiveness of such merger, consolidation, reorganization
or
recapitalization, sale or acquisition, as the case may be; or (iv) during
any
period of two consecutive years, if persons who at the beginning of such
period
constitute the Board cease for any reason to constitute at least a majority
of
the Board unless the election, or the nomination for election by the Company’s
shareholders, of each new director was approved by a vote of at least eighty
percent (80%) of the directors then still in office who were directors at
the
beginning of such period. For purposes of this definition, (A) an “affiliate” is
any person or entity which, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with
the
Company and “control” (including the terms “controlling,” “controlled by” and
“under common control with”) means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of
a
person or entity, whether through the ownership of voting securities, by
contract or otherwise and (B) “Board” means the board of directors of the
Company as constituted at the time a determination thereof is required to
be
made pursuant to this definition.
“Chief
Executive Officer” shall mean the individual having responsibility to the Board
for direction and management of the executive and operational affairs of
the
Company and who reports and is accountable only to the Board.
“Disability”
shall mean a written determination by a physician mutually agreeable to the
Company and Employee (or, in the event of Employee’s total physical or mental
disability, Employee’s legal representative) that Employee is physically or
mentally unable to perform his duties of Senior Vice President and Chief
Financial Officer under this Agreement and that such disability can reasonably
be expected to continue for a period of six (6) consecutive months or for
shorter periods aggregating one hundred and eighty (180) days in any twelve
(12)
month period.
“Employee”
shall mean Xxxxx X. Xxxxxx and, if the context requires, his heirs, personal
representatives, and permitted successors and assigns.
“Person”
shall mean any natural person, incorporated entity, limited or general
partnership, business trust, association, agency (governmental or private),
division, political sovereign, or subdivision or instrumentality, including
those groups identified as “persons” in Section 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934.
“Territory”
shall mean the world wide web and any state of the United States and any
equivalent section or area of any country in which the Company has operating
brick and mortar pharmacies or has franchised brick and mortar operations
at the
time of the termination of this Agreement.
“Company”
shall mean DrugMax, Inc., a Connecticut corporation, together with such
subsidiaries or Affiliates of the Company as may from time to time exist.
2.
Position,
Responsibilities and Term of Employment
2.01
Position.
Employee shall be engaged on a full time basis and shall serve as Senior
Vice
President and Chief Financial Officer and in such additional management
position(s) as the Board shall designate. In this capacity, Employee shall
be
subject to the bylaws of the Company and to the direction of the Board. Employee
shall serve the Company and any Affiliates by performing such duties and
carrying out such responsibilities as are normally related to the position
of
Senior Vice President and Chief Financial Officer in accordance with the
standards of the industry. The Employee shall report to the President and
Chief
Executive Officer. The Employee shall have such other responsibilities as
the
Company may reasonably determine from time to time, including, without
limitation, such management duties as may be necessary or desirable to further
the interests of the Affiliates of the Company. Nevertheless, it is understood
and agreed that the Employee shall not be given duties or responsibilities
that
are inconsistent in any material way with his position as a member of the
senior
management of the Company. Employee’s responsibilities and capacities shall
include, without limitation, the following:
(a)
overall responsibility for all financial and accounting facts of the Company,
including reporting, compliance and asset management;
(b)
developing banking and financial investment relationships;
(c)
treasury functions and activities;
(d)
planning and strategic framework for all financial systems and control
mechanisms;
(e)
handling all banking and financial relationships;
(f)
set
standards for control and audit of Company financial matters;
(g)
in
conjunction with operations store-level and distribution accounting systems
and
controls; and
(h)
overall supervision and responsibility for all accounting and finance staff.
2.02
Term.
The
term of this Agreement shall commence on April 13, 2006 and, unless sooner
terminated as provided in Section 4 hereof, terminate on April 12, 2009;
provided, however, that this Agreement shall automatically renew for successive
one (1) year periods thereafter without the necessity of any action or notice
by
either party to the other, except that either party may terminate this Agreement
following the Initial Term by giving the other party written notice of its
intention to terminate this Agreement at least ninety (90) days prior to
the
proposed termination date.
2.03
Best
Efforts Covenant.
Employee will, to the best of his ability, devote his full professional and
business time and commercially reasonable best efforts to the performance
of his
duties for the Company and its Affiliates. The Employee shall at all times
comply with all state and federal laws, rules and regulations with respect
to
the operations of the Company, or its Affiliates.
2.04
Exclusivity
Covenant.
During
the Agreement’s term, Employee will not undertake or engage in any other
employment, occupation or business enterprise other than a business enterprise
in which Employee does not actively participate. Further, Employee agrees
not to
acquire, assume, or participate in, directly or indirectly, any position,
investment, or interest adverse or antagonistic to the Company, its business
prospects, financial or otherwise, or take any action towards any of the
foregoing. The provisions of this Section shall not prevent Employee from
owning
shares of any competitor of the company as long as such shares (i) do not
constitute more than 1% of the outstanding equity of such competitor, and
(ii)
are regularly traded on a recognized exchange, or listed for trading by NASDAQ
in the over-the-counter market.
2.05
Intentionally
Omitted.
2.06
Confidential
Information.
Employee recognizes and acknowledges that the Company’s trade secrets,
proprietary information and know-how, as they may exist from time to time
(“Confidential Information”), are valuable, special and unique assets of the
Company’s business, and that access to and knowledge of the Confidential
Information is the term of his employment by the Company, in whole or in
part,
disclose such secrets, information or know-how to any Person for any reason
or
purpose whatsoever, nor shall Employee make use of any such Confidential
Information for his own purposes or for the benefit of any Person (except
the
Company) under any circumstances during or after the term of his employment.
Notwithstanding the foregoing, after the term of Employee’s employment the
foregoing restrictions shall not apply to such secrets, information and know-how
which are then in the public domain (provided that Employee was not responsible,
directly or indirectly, for such secrets, information or know-how entering
the
public domain without the Company’s consent). Employee shall have no obligation
hereunder to keep confidential any Confidential Information if and to the
extent
its disclosure is specifically required by law; provided, however, that in
the
event disclosure is required by applicable law, the Employee shall provide
the
Company with prompt notice of such requirement, prior to making any disclosure,
so that the Company may seek an appropriate protective order. Employee agrees
to
hold as the Company’s property all memoranda, books, papers, letters, customer
lists, processes, computer software, records, financial information, policy
and
procedure manuals, training and recruiting procedures and other data, and
all
copies thereof and therefrom, in any way relating to the Company’s business and
affairs, whether made by him or otherwise coming into his possession, and
on
termination of his employment, or on demand of the Company at any time, to
deliver the same to the Company.
Employee
shall use his best efforts to prevent any removal of any Confidential
Information from the premises of the Company, except as required in his normal
course of employment by the Company. Employee shall use his best efforts
to
cause all persons or entities to whom any Confidential Information shall
be
disclosed by him hereunder to observe the terms and conditions set forth
herein
as though each such person or entity was bound hereby.
2.07
Records,
Files.
All
records, file drawings, documents, equipment and the like relating to the
business of the Company which are prepared or used by Employee during the
terms
of this employment under this Agreement shall be and shall remain the sole
property of the Company.
2.08
Hired
to Invent.
Employee agrees that every improvement, invention, process apparatus, method,
design, and any other creation that Employee may invent, discover, conceive,
or
originate by himself or in conjunction with any other Person during the term
of
Employee’s employment under this Agreement that relates to the business carried
on by the Company during the term of Employee’s employment under this Agreement
or contemplated by the Company during the term hereof even if not implemented
during the term of this Agreement (“Work For Hire”) shall be the exclusive
property of the Company. Employee agrees to disclose to the Company every
patent
application, notice of copyright, or other action taken by Employee or any
affiliate or assignee to protect intellectual property during the 12 months
following Employee’s termination of employment at the Company, for whatever
reason, so that the Company may determine whether to assert a claim under
this
Section or any other provision of this Agreement. The Employee does hereby
assign to the Company all of the Work For Hire and hereby appoints the Company
as his attorney-in-fact coupled with an interest to execute such documents
as
may be required to evidence such assignment.
2.09
Equitable
Relief.
Employee acknowledges that his services to the Company are of a unique character
which give them a special value to the Company. Employee further recognizes
that
violations by Employee of any one or more of the provisions of this Section
2
may give rise to losses or damages for which the Company cannot be reasonably
or
adequately compensated in an action at law and that such violations may result
in irreparable and continuing harm to the Company. Employee agrees that,
therefore, in addition to any other remedy which the Company may have at
law and
equity, including the right to withhold any payment of compensation under
Section 3 of this Agreement, the Company shall be entitled to injunctive
relief
to restrain any violation, actual or threatened, by Employee of the provisions
of this Agreement.
3.
Compensation.
3.01
Minimum
Annual Compensation.
The
Company shall pay to Employee for the services to be rendered herein a base
salary at the initial annual rate of Two Hundred Forty Thousand ($240,000.00)
Dollars (“Minimum Annual Compensation”) effective as of the date hereof, which
base salary shall be subject to annual review and increase to be determined
by
the Compensation Committee of the Board. Employee’s salary shall be payable
bi-weekly.
3.02
Incentive
Compensation.
In
addition to Minimum Annual Compensation, Employee shall be entitled to
participate in, at the discretion of the Board, any bonus or incentive
compensation plan adopted by the Compensation Committee of the Board for
key
employees of the Company, up to fifty percent (50%) of Minimum Annual
Compensation, provided the Employee attained the goals (the “Performance Goals”)
which may be set by the Board from time to time.
3.03
Participating
in Benefits.
Employee shall be entitled to all Benefits made available to similarly situated
employees of the Company, other than medical and dental benefits, for as
long as
such Benefits may remain in effect. In addition, Employee shall be entitled
to
any substitute or additional Benefits made available in the future to similarly
situated employees of the Company.
Employee’s
entitlement to the aforementioned Benefits shall be subject to and on a basis
consistent with the terms, conditions and overall administration of such
Benefits adopted by the Company and in the discretion of the Company. Benefits
paid to Employee shall not be deemed to be in lieu of other compensation
to
Employee hereunder as described in this Section 3.
3.04
Specific
Benefits.
During
the term of this Agreement (and thereafter to the extent this Agreement shall
require):
(a)
Vacation.
Commencing on April 13, 2006, Employee shall be entitled to three (3) weeks
of
paid vacation time per year, to be taken at time mutually acceptable to the
Company and Employee.
(b)
Insurance
Policies.
The
Company may, at its discretion, and at any time after the execution of this
Agreement, and for so long as Employee remains employed by the Company, apply
for and procure, as owner and for its own benefit, insurance on the life
of the
Employee, in such amounts and in such form or forms as the Company may choose.
The Employee shall have no interest whatsoever in the policy or policies,
but
the Employee shall, at the request of the Company, subject himself to such
medical examinations, supply such information, and execute such documents
as may
be required by the insurance company or companies to which it has applied
for
such insurance. At the termination of employment hereunder either for cause
or
otherwise, the Company shall either: (i) surrender such policies to the issuer;
or (ii) transfer ownership of any policies procured pursuant to this Agreement
to the Employee who shall thereafter be responsible for the payment of any
premiums thereunder. It is the intention of the parties that the Company
shall
retain no insurance on the life of the Employee after employment hereunder
has
been terminated for any reason whatsoever.
(c)
Disability.
If
Employee is unable to perform his obligations under this Agreement because
of
illness and/or disability, Employee shall continue to receive his full
compensation and benefits under this Agreement for a period not to exceed
six
(6) consecutive months; provided, however, Employee’s base salary from the
Company shall be reduced by the amount, if any, of income payments received
by
Employee as a result of group or individual disability insurance coverage
maintained at the cost of the Company.
(d)
Purchasing
Allowance.
The
Company shall reimburse Employee for expenditures made by the Employee at
any
Arrow Prescription Center location in an amount not to exceed Two Hundred
Dollars ($200) per month.
(e)
Medical
Reimbursement.
The
Company shall reimburse Employee for medical expenses incurred by Employee
for
himself or his immediate family which are not covered expenses pursuant to
the
health insurance policies provided by Company pursuant to paragraph (b),
above,
in an amount not to exceed Three Thousand Dollars ($3,000) per annum.
(f)
Expense
Reimbursement.
Employee shall be entitled to receive prompt reimbursements for all reasonable
expenses incurred by him (in accordance with the policies and procedures
established by the Company or the Board for the similarly situated employees
of
the Company) in performing services hereunder.
(g)
Automobile
Allowance.
Employee shall be entitled to an automobile allowance in an amount not to
exceed
five hundred dollars ($500) per month.
(h)
Fitness
or Club Allowance.
Employee shall be entitled to a fitness or club allowance in an amount not
to
exceed two hundred dollars ($200) per month.
(i) Education
Allowance. Employee shall be reimbursed for reasonable education expenses,
approved in advance by the CEO, associated with continuing education fees,
educational seminars and fees associated with maintaining CPA status.
3.05
Sign
On Bonus.
Upon
date of employment, Employee shall receive 100,000 options to purchase DrugMax,
Inc. common stock at an exercise price of fair market value on the date of
grant
and 100,000 restricted shares of DrugMax, Inc. common stock. Such shares
and
options shall vest 1/3 at each anniversary of the grant date and are subject
to
the terms and conditions contained in a separate stock option agreement and
restricted stock agreement.
4.
Termination.
4.01
Termination
by Company for Other Than Cause.
If
during the term of this Agreement the Company terminates the employment of
Employee and such termination is not for Cause then the Company shall pay
to
Employee an amount equal to the monthly portion of Employee’s Minimum Annual
Compensation multiplied by twelve (12) months (the “Severance Period”). If
during the term of this Agreement there is a Change of Control resulting
in a
change of position of Employee’s employment, and if Employee’s annual
compensation in his new position shall be less than the Minimum Annual
Compensation, then the difference shall be paid to Employee for the balance
of
the Severance Period. If the Employee’s employment in a new position shall
terminate, then for the purposes of this paragraph 4.01, Employee shall be
entitled to continuation of the Minimum Annual Compensation until the earlier
of
the conclusion of the Severance Period or the date when he shall again become
reemployed, in which case only the difference shall be payable as aforesaid.
If
the Employee’s reemployment in a new position shall terminate, Employee shall
use his best efforts to become reemployed as soon as reasonable possible
in a
position consistent with Employee’s experience and stature. Any amounts due
hereunder shall be paid at such times and in such manner as the Employee
had
previously been paid his Minimum Annual Compensation. The payments provided
herein are in lieu of any other payments due the Employee hereunder, including
but not limited to, any claim for breach of contract.
4.02
Termination
by the Company for Cause.
The
Company shall have the right to terminate the employment of Employee for
Cause,
however, nothing herein shall be deemed to constitute a waiver of the right
of
the Employee to challenge the Company’s determination of Cause. Effective as of
the date that the employment of Employee terminates for Cause, this Agreement,
except for Sections 2.04 through 2.09, shall terminate and no further payments
of the Compensation described in Section 3 (except for such remaining payments
of Minimum Annual Compensation under Section 3.01 relating to periods during
which Employee was employed by the Company, benefits which are required by
applicable law to be continued, and reimbursement of prior expenses under
Section 3.04) shall be made.
4.03
Termination
on Account of Employee’s Death.
(a)
In
the event of Employee’s death during the term of this Agreement;
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(1)
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This
Agreement shall terminate except as provided in this Section; and
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(2)
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The
Company shall pay to Employee’s beneficiary or beneficiaries (or to his
estate if he fails to make such designation) an amount equal to
the
Employee’s Minimum Annual Compensation as in effect on the date of his
death. This amount shall be paid in one lump sum as soon as practicable
after the date of his death.
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(b)
Employee may designate one or more beneficiaries for the purposes of this
Section by making a written designation and delivering such designation to
the
Treasurer of the Company. If Employee makes more than one such written
designation, the designation last received before Employee’s death shall
control.
4.04
Termination
on Account of Disability.
The
Company shall have the right to terminate the employment of Employee in case
of
Disability of the Employee. In such case, the provisions of Section 3.04(c)
of
this Agreement shall apply and the provisions of Section 4.01 of this Agreement
shall not apply, notwithstanding the terms of said Section 4.01.
4.05
Benefits
Upon Termination.
Upon
the termination of the Employee’s employment hereunder for Cause, the Employee
shall not receive any other benefits except as required by law. In the case
of
termination without Cause, any health insurance, dental insurance, life
insurance and disability insurance coverage provided under the Company’s benefit
programs shall be continued for a period of twelve months or such earlier
date
that the Employee obtains other employment.
5.
Miscellaneous.
5.01
Assignment.
The
Company shall have the right to assign all of its rights under this Agreement
to
any affiliate or to any purchaser of substantially all of the assets of the
Company; provided, however, any such assignment shall not release the Company
from any of its obligations under this Agreement. Upon any such assignment,
this
Agreement shall be binding upon and inure to the benefit of such assigns
and the
Employee. If any such purchaser of substantially all of the assets of the
Company is unwilling to accept an assignment of this Agreement and to assume
the
obligations hereof, then Company shall remain fully liable hereunder
notwithstanding the sale of its assets and the resulting cessation of its
business operations. The Employee shall have no right to assign or delegate
any
rights or obligations under this Agreement.
5.02
Governing
Law.
This
Agreement shall be construed in accordance with and governed for all purposes
by
the laws of the State of Connecticut.
5.03
Interpretation.
In case
any one or more of the provisions contained in this Agreement shall, for
any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provisions had never been contained herein.
5.04
Notice.
Any
notice required or permitted to be given hereunder shall be effective when
received and shall be sufficient if in writing and if personally delivered
or
sent by prepaid cable, telex or registered air mail, return receipt requested,
to the party to receive such notice at its address set forth at the end of
this
Agreement or at such other address as a party may by notice specify to the
other.
5.05
Amendment
and Waiver.
This
Agreement may not be amended, supplemented or waived except by a writing
signed
by the party against which such amendment or waiver is to be enforced. The
waiver by any party of a breach of any provision of this Agreement shall
not
operate to, or be construed as a waiver of, any other breach of that provision
nor as a waiver of any breach of another provision.
5.06
Binding
Effect.
This
Agreement shall be binding on the successors and assigns of the parties hereto.
5.07
Survival
of Rights and Obligations.
All
rights and obligations of Employee or the Company arising during the term
of
this Agreement shall continue to have full force and effect after the
termination of this Agreement unless otherwise provided herein.
5.08
Entire
Agreement.
This
Agreement contains the entire understanding of the parties and supersedes
all
prior agreements between the parties. There are no oral understandings, terms
or
conditions and no party has relied upon any representation, express or implied,
not contained in this Agreement. The rights and protection afforded by any
and
all provisions of this Agreement shall inure to the benefit of (and may be
fully
enforced by) any Affiliate of the Company, it being understood such Affiliates
are intended third party beneficiaries of this Agreement.
5.09
Partial
Invalidity.
The
invalidity of one or more of the phrases, sentences, clauses, sections or
articles contained in the Agreement shall not affect the validity of the
remaining portions.
5.10
Genders.
Any
reference to the masculine gender shall be deemed to include the feminine
and
neuter genders, and vice versa, and any reference to the singular shall include
the plural, and vice versa, unless the context otherwise requires.
5.11
Company
Policies.
The
Company’s Policies as amended from time to time will govern all terms,
privileges and conditions of employment of the Employment which are not
specifically addressed in this Agreement and shall include all rules and
regulations adopted by the Company from time to time in its sole discretion.
IN
WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year
first written above.
DRUGMAX,
INC.
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By: | /s/ | |
Xxxxxxx
Xxxxxxxxxx
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Its
Chairman and Chief Executive
Officer
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EMPLOYEE | ||
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By: | /s/ | |
Xxxxx
X. Xxxxxx
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