1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 31st day of August,
------------------------
2000 by and between D & K Healthcare Resources, Inc. (the "Company") with
offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Executive") of ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, the Company desires to enter an employment contract with
Executive upon the terms and conditions set forth herein;
WHEREAS, the Executive is desirous of entering into such contract.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein set forth, the parties hereto agree as follows:
1. EMPLOYMENT
----------
The Company agrees to employ the Executive, and the Executive agrees
to be employed by the Company, subject to the terms and conditions
set forth in this Agreement.
2. POSITION AND RESPONSIBILITIES
-----------------------------
2.1 The Executive shall during the continuance of his employment:
2.1.1 serve the Company to the best of his ability in the capacity of
Senior Vice President and Chief Financial Officer or in such other
capacity or capacities, consistent with the Executive's level of
experience and expertise as may be specified from time to time by the
Chief Operating Officer or the Chief Executive Officer;
2.1.2 faithfully and diligently perform such duties and exercise such
powers consistent with such office, subject to the direction and
supervision of the Chief Operating Officer and the Chief Executive
Officer,
2.1.3 if and so long as the Chief Operating Officer or the Chief Executive
Officer so directs, perform and exercise the said duties and powers
on behalf of any Affiliated Company and act as a director or other
officer of any Affiliated Company; and
2.1.4 unless prevented by sickness, injury or otherwise agreed by the Chief
Operating Officer or the Chief Executive Officer, devote his full
time and attention and abilities during his hours of work (which
shall be normal business hours and such additional hours as may be
necessary for the proper performance of his duties) to the
performance of his duties under this Agreement.
3. REMUNERATION
------------
3.1 The Company shall pay to the Executive during the continuance of his
employment a salary at the rate of $208,000 per year and at the
Executive's option either the use of an automobile appropriate for
his position or an automobile allowance at the rate of $750 per
month. The salary shall be payable in equal semi-monthly installments
in arrears or as otherwise determined by the Company on a
company-wide basis.
3.2 During the continuance of his employment the Executive shall be
entitled to an annual bonus based upon the achievement of performance
criteria established by the Company. The target amount for the
achievement of 100% of targeted performance will not be less that 35%
of the Executive's then annual salary.
3.3 The salary and bonus shall be reviewed from time to time and the
rates thereof may be increased by the Company.
3.4 Notwithstanding anything to the contrary contained in the terms of
any stock option granted to the Executive under the Stock Option Plan
(but Subject, however, to any restriction contained in the Stock
Option Plan as in effect on the date hereof that, pursuant to the
terms of the Stock Option Plan, cannot be modified by mutual agreement
of the Company with an individual optionee), all stock options granted
to the Executive by the
79
2
Company shall vest and become fully exercisable upon the first to occur
of a Change in Control, as defined herein, or the termination of the
Executive's employment by the Company without Cause, non-renewal by the
Company or termination by the Executive for Good Reason and the
Executive shall be allowed a period of 12 months following the
effective date of such termination, to exercise options granted under
the Stock Option Plan. The terms of any agreement in effect on the date
hereof between the Company and the Executive granting or otherwise
relating to such options shall be deemed amended hereby to the extent
such terms are inconsistent with the foregoing.
4. INSURANCE AND OTHER BENEFITS
----------------------------
The Executive shall be entitled to participate in any Benefit Plans
(including any medical expense insurance and permanent health and
accident insurance and travel insurance plans) of the Company enjoyed
by or made available to other senior executive officers of the
Company to the extent that the Executive qualifies under the
eligibility provisions of any such plan, as presently in effect or as
they may be modified from time to time. The Company shall continue to
pay for the Executive's membership in the organizations for which the
Company currently pays.
5. EXPENSES
--------
5.1 The Company shall reimburse the Executive in respect of all
reasonable and appropriate travel, accommodation, entertainment and
other similar out-of-pocket expenses actually incurred or expended by
him in the performance of his duties hereunder.
5.2 Except where specified to the contrary all expenses shall be
reimbursed subject to the Executive providing appropriate authorized
evidence (including receipts, invoices, tickets and/or vouchers as
may be appropriate) of the expenditure in respect of which he claims
reimbursement.
6. VACATION
--------
The Executive shall (in addition to the usual public and Company
holidays) be entitled during the continuance of his employment to 15
business days' paid vacation in each vacation year of the Company,
which shall be the calendar year.
7. INTELLECTUAL PROPERTY
---------------------
7.1 Subject to applicable law, if at any time in the course of his
employment the Executive makes or discovers or participates in the
making or discovery of any Intellectual Property relating to or
capable of being used in the business of the Company or any
Affiliated Company he shall immediately disclose full details of such
Intellectual Property to the Company and all such Intellectual
Property shall be the sole property of the Company. At the request
and expense of the Company he shall do all things which may be
necessary or desirable for obtaining appropriate forms of protection
for the Intellectual Property in such parts of the world as may be
specified by the Company and for vesting all rights in the same in
the Company or its nominee.
7.2 All rights and obligations under this Clause 7 in respect of
Intellectual Property made or discovered by the Executive during his
employment shall continue in full and force and effect after the
termination of his employment and shall be binding upon the
Executive's personal representatives.
8. CONFIDENTIALITY
---------------
8.1 Except as necessary or appropriate to the proper performance of his
duties, or with the prior written consent of the Company, or as
ordered by a court of competent jurisdiction, the Executive shall not
at any time either during the continuance of his employment or after
its termination disclose or communicate to any person or use for his
own benefit or the benefit of any person other than the Company or
any Affiliated Company any information relating to the Company or any
Affiliated Company that is not generally known to the public
("Confidential Information") which may come to his knowledge in the
course of his employment.
80
3
8.2 All notes and memoranda of any trade secret or other Confidential
Information concerning the business of the Company and the Affiliated
Companies or any of its or their suppliers, agents, distributors,
clients, customers or others which shall have been acquired, received
or made by the Executive during the course of his employment shall be
the property of the Company and shall be surrendered by the Executive
to someone duly authorized in that behalf at the termination of his
employment or at the request of the Board of Directors at any time
during the course of his employment.
9. TERM AND TERMINATION OF EMPLOYMENT
----------------------------------
9.1 Term. The term of the Executive's employment under this Agreement
----
shall be three years from the date first set forth above and, unless
sooner terminated as set forth herein, and shall automatically renew
for successive one year terms thereafter unless either party gives
the other a notice of non-renewal at least 90 days before the end of
the then current term.
9.2 Termination by the Company without Cause; Termination by the
------------------------------------------------------------
Executive for Good Reason. The Company may terminate the employment
-------------------------
of the Executive at any time without Cause by giving the Executive
notice of termination. The Executive may terminate his employment by
the Company at any time for Good Reason by giving a notice of
termination to the Company, and the effective date of such
termination shall be determined in accordance with Clause 12.2.
9.2.1 Except as provided in Clause 9.2.2, in the event of a termination
by the Company without Cause, non-renewal by the Company or
termination by the Executive for Good Reason:
(a) the Company shall continue to pay his salary and provide his
other benefits hereunder, including automobile allowance and
benefits pursuant to Clause 4 (less the monthly payroll
deductions if any, charged to the Executive immediately prior
to such termination in respect of such benefits) through the
remainder of the then current term, but in no event for less
than for 12 months (without giving effect to any reduction
thereto unless such reduction was made with the Executive's
prior written consent); and
(b) the Executive shall also be entitled to a bonus for that year
equal to 35% of his then annual salary (irrespective of whether
performance objectives have been achieved), but prorated from
the beginning of such year through such effective date of
termination, provided, however, that in the event of a
termination for Good Reason pursuant to Clause 14.1.8(b), the
annual salary used for computation under this Clause 9.2.1(b)
shall be the one in effect prior to the reduction referred to
in Clause 14.1.8(b); and
9.2.2 Notwithstanding the other provisions of Clause 9.2.1 in the event
that (x) the Company terminates the Executive's employment without
Cause in anticipation of, or pursuant to a notice of termination
delivered to the Executive within 24 months after, a Change in
Control, or (y) the Executive terminates his employment for Good
Reason pursuant to a notice of termination delivered to the Company
in anticipation of, or within 24 months after, a Change in Control or
(z) the Company delivers a notice of non-renewal to the Executive in
anticipation of, or within 24 months after, a Change of Control:
(a) the Company shall pay to the Executive, within 30 days after
such notice of termination or non-renewal is given, a lump-sum
cash amount equal to (i) two times the sum of (A) his then
current annual salary and (B) 35% of his then current annual
salary (representing his annual bonus for the achievement of
100% of performance objectives, irrespective of whether
performance objectives have been achieved), plus (ii) a
prorated bonus for the then current fiscal year equal to 35% of
his then annual salary, (irrespective of whether performance
objectives have been achieved), plus (iii) if such notice is
given within the first 12 months after the date first set forth
above, then, the salary the Executive should have been paid
from the date of termination through the end of such 12 month
period, provided, however, that in the event of a termination
for Good Reason pursuant to Clause 14.1.8(b), the annual salary
used for computation under this Clause 9.2.2(a) shall be the
one in effect prior to the reduction referred to in
Clause14.1.8(b); and
81
4
(b) for a period of 24 months after the effective date of such
termination, the Company shall provide the Executive with
benefits hereunder, including automobile allowance and benefits
pursuant to Clause 4 (less the monthly payroll deduction, if
any, charged to the Executive immediately prior to such
termination in respect of any such benefits) at the respective
levels of coverage in effect at the time the termination
(without giving effect to any reduction thereto unless such
reduction was made with the Executive's consent)or the cash
equivalents of the foregoing on a monthly basis.
9.2.3 In the event of a termination without Cause by the Company,
non-renewal by the Company or termination for Good Reason by the
Executive, in addition to the rights and benefits to which the
Executive would be entitled under Clause 9.2.1 or 9.2.2, as the case
may be:
(a) subject to the provisions of Clause 3.4 the Company shall
vest as of the effective date of such termination all options
granted to the Executive under the Stock Option Plan and allow
the Executive a period of 12 months following such effective
date within which to exercise such options;
(b) the Company shall provide the Executive with appropriate
outplacement services through Drake Bean ▇▇▇▇▇, Inc. (or other
nationally recognized outplacement firm) at a cost to the
Company of no more than 15% of the Executive's annual salary
immediately prior to termination (without giving effect to any
reduction thereto unless such reduction was made with the
Executive's consent); and
(c) the Executive shall also be entitled to a contribution under
the Company's Executive Retirement Benefit Plan for that fiscal
year equal to the greater of (i) the amount that would have
been contributed for that fiscal year determined in accordance
with past practice or (ii) the highest amount contributed by
the Company on behalf of the Executive under that Plan for any
of the three prior fiscal years, but prorated from the
beginning of the fiscal year in which termination occurs
through the effective date of termination.
9.3 Termination by the Company for Cause. The Company may at any time
------------------------------------
terminate the Executive's employment for Cause by giving the
Executive a notice of termination. In the event of a termination by
the Company for Cause the Executive shall be entitled to receive any
unpaid amount of his then current salary through the effective date
of such termination, as well as any other benefits which shall have
vested and become payable to him under the Benefit Plans as of such
effective date.
9.4 Retirement. The employment of the Executive shall terminate
----------
automatically upon his Retirement. "Retirement" shall mean a
termination of the Executive's employment initiated by the Executive,
other than for Good Reason, whereby the Executive is entitled to
receive an immediately payable benefit, including any applicable
early retirement benefit, under any other pension or retirement plan
then generally applicable to its salaried employees or under any
retirement arrangement established with respect to the Executive with
his prior written consent; in either case, whether or not the
Executive commences to receive such benefit at the time of such
termination. In the event of the termination of the Executive's
employment pursuant to his Retirement, the Executive shall be
entitled to any other benefits which shall have vested and become
payable to him under the Benefit Plans as of the effective date of
such Retirement or to which the Executive is otherwise entitled upon
his Retirement under any Benefit Plan or other policy or program of
the Company or any Affiliated Company in accordance with the
respective terms of such Benefit Plan, policy or program.
9.5 Death or Disability.
-------------------
9.5.1 Disability. Subject to the requirements of the Americans with
----------
Disabilities Act of 1990, as amended, the Family and Medical Leave
Act of 1993, as amended, and/or any other legislation applicable to
the Executive's employment by the Company, the Company may terminate
the employment of the Executive, by giving him not less than 30 days
written notice prior if the Executive shall have been absent from
work due to sickness, injury or other incapacity for a continuous
period of more than 120 days or if, in the opinion of a physician
reasonably selected by the Company, the Executive is likely to be
unable to perform his duties for a continuous period of more than 120
days provided, that the Company shall withdraw such notice if during
its pendency the Executive fully resumes his performance hereunder
and provides the Company with a certificate from a physician
reasonably acceptable to the Company certifying the Executive's
ability to perform his duties hereunder. Circumstances justifying
termination of the Executive's employment by the Company pursuant to
82
5
this Clause 9.5.1 are referred to herein as "Disability". Any refusal
by the Executive to submit to a medical examination by a physician or
other appropriate expert selected by the Company for the purposes of
certifying his ability to perform his duties and responsibilities
hereunder shall, at the option of the Company, be deemed to constitute
conclusive evidence of the Executive's inability to perform such duties
and responsibilities.
9.5.2 Death. In the event of the death of the Executive while employed by
-----
the Company, his employment shall terminate automatically but the
Executive's salary payable hereunder shall nevertheless continued to
be paid to the Executive's surviving spouse, or if there is no
surviving spouse, then to the Executive's designee or representative
(as the case may be) through the 12 month period following the end of
the calendar month in which the death occurred.
9.6 Upon the termination of his employment the Executive shall be
entitled to accrued vacation pay calculated on a pro rata basis in
respect of each completed month of service in the vacation year in
which his employment terminates and the appropriate amount shall be
paid in cash to the Executive, provided that if the Executive shall
have taken more days than his accrued entitlement the Company is
hereby authorized to make an appropriate deduction from the
Executive's final salary payment.
9.7 The Executive shall have no obligation to take any action to mitigate
or offset any amounts payable by the Company pursuant to this Clause
9, by seeking other employment or otherwise, nor shall the amount of
any payment provided for in this Agreement be reduced by any
compensation earned by the Executive as the result of employment by
another employer after the date of termination of the Executive's
employment or otherwise.
9.8 The termination of the Executive's employment for any reason
whatsoever shall not operate to terminate this Agreement as an
entirety or to adversely affect the respective continuing rights and
obligations of the parties under Clauses 5, and 7 through 16,
inclusive, of this Agreement, all of which shall survive the
effective date of such termination of employment in accordance with
their respective terms.
9.9 The Executive acknowledges that the Company may have in effect from
time to time a written severance plan or policy, which plan or policy
is or may be subject to change at the discretion of the Company. The
executive shall not be entitled to any notice, payment in lieu of
notice or other severance payments under such plan or policy, but if
the notice period (or payment) to which the Executive would have been
entitled under such plan or policy as it may then exist is greater
than the notice period (or payment in lieu of such notice) to which
the Executive would be entitled under this Agreement, then the notice
period (and payment is Lieu thereof) for termination hereunder shall
be deemed to be such greater amounts.
9.10 Upon the termination of his employment (for whatever reason and
howsoever arising) the Executive shall at the request of the Company
immediately resign without claim for compensation from office as a
Director of any Affiliated Company and from any other office held by
him in the Company or any Affiliated Company (but without prejudice
to any claim he may have for damages for breach of this Agreement)
and the Executive hereby irrevocably authorizes the Company to
appoint some person in his name and on his behalf to sign and deliver
such resignations to the Board in the event of the Executive's
failure to so resign.
10. EXECUTIVE'S COVENANTS
---------------------
10.1 The Executive acknowledges that during the course of his employment
with the Company he will receive and have access to Confidential
Information of the Company and its Affiliated Companies (including
without limitation those matters specified in Clause 8.2 of this
Agreement, as well as detailed client/customer lists and information
relating to the operations and business requirements of those
client/customers) and accordingly he is willing to enter into the
covenants described in Clauses 10.2 and 10.3 in order to provide the
Company and is Affiliated Companies with what he considers to be
reasonable protection for those interests.
10.2 The Executive hereby covenants with the Company that during the
term of his employment he will not either directly or indirectly
engage or participate in any activity competitive with or adverse to
the business or interests of the Company or any of its Affiliated
Companies.
10.3 The Executive hereby covenants with the Company that during the
12 month period (24 months with respect to Clause 10.3.3) following the
last day of the Executive's employment, the Executive shall not,
directly or
83
6
indirectly, as a stockholder (other than as a less than 1% stockholder
of a publicly and traded Company), partner, officer, director, agent,
consultant, employee, or otherwise:
10.3.1 engage in any business in the United States of America that competes
with the business then conducted by the Company or any Affiliated
Company ("Company" defined in this clause to mean all Affiliated
Companies, divisions, successors, and assigns of the Company);
10.3.2 purposefully interfere or attempt to interfere with any of the
Company's or any Affiliated Company's contract (regardless of whether
these contracts are in writing or verbal) or business relationships
or advantages existing and in effect as of the employment date of
termination of Executive's employment;
10.3.3 solicit for employment, either directly or indirectly, for himself
or for another, any persons who are or were employed by the Company
or any Affiliated Company as a head of any function, the direct
report of such function head, or in any other key technical,
marketing or sales position during the six month period prior to the
termination of his employment; or
10.3.4 request or cause or attempt to cause any customer or supplier of
the Company or an Affiliated Company to alter or terminate any
business relationship with the Company or any Affiliated Company
10.4 The covenants contained in Clauses 10.3.1, 10.3.2, 10.3.3 and
10.3.4 are intended to be separate and severable and enforceable as
such.
10.5 In the event of a breach of Clauses 10.3.1, 10.3.2, 10.3.3 and
10.3.4, the Executive acknowledges that in addition to any other
remedies available under law to the Company and any Affiliated
Company, the Company and any Affiliated Company may be entitled to an
injunction enjoining the Executive or any person or persons acting
for or with the Executive in any capacity whatsoever from violating
any of the terms thereof.
11. ASSIGNMENT
----------
11.1 This Agreement shall be binding upon and shall inure to the benefit
of the Company and any successor of the Company.
11.2 This Agreement shall be binding upon and shall inure to the benefit
of Executive, his legal representatives, heirs, legatees, executors,
administrators and assigns, except that Executive's obligations to
perform services under this Agreement are personal and are expressly
declared to be nonassignable and nontransferable by him without the
consent in writing of the Company.
11.3 In the event of a Change in Control, the Company shall require the
successor to the Company as the Executive's employer (whether such
succession is direct or indirect, by purchase, merger, consolidation
or otherwise, to all or a substantial portion of the business and/or
assets of the Company) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken
place. As used in this Agreement, the term "Company" as hereinbefore
defined and any successor to all or a substantial portion of its
business and/or assets as aforesaid.
12. NOTICES
-------
12.1 Any notice to be given under this Agreement shall be given in writing
and shall be deemed to be sufficiently served by one party on the
other if it is delivered personally or is sent by facsimile
transmission, overnight service or registered or recorded delivery
prepaid post addressed to either the Company's principal office for
the time being or the Executive's last known address as the case my
be.
12.2 Any purported termination of the Executive's employment by the
Company or by the Executive or non-renewal of the term of the
Executive's employment shall not be effective unless communicated in
writing to the other party hereto in accordance with Clause 12.1
above and relevant provisions of Clauses 9 and 14. A notice of
termination shall identify the specific termination provision of this
Agreement relied upon, shall specify the intended effective date of
such termination (which date shall comply with the notice period
84
7
requirements of the provision so identified) and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination under the provision so identified.
13. MISCELLANEOUS
-------------
13.1 Golden Parachute Tax
--------------------
13.1.1 Anything in this Agreement to the contrary notwithstanding, in the
event that any payment by the Company to or for the benefit of the
Executive, whether paid or payable pursuant to the terms of this
Agreement or otherwise, including any accelerated vesting of any
options granted under the Stock Option Plan (such payment or income,
excluding any payment pursuant to Clause 13.1, a "Payment") is either
reasonable determined by the Company to be subject, or is subjected
by the IRS (after exhaustion by the Company of its remedies described
in Clause 13.1.3), to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, (the "Code") or any
interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive from the Company, within 15 days
following the determination described in Clause 13.1.2 below, an
additional payment (an "Excise Tax Adjustment Payment") in an amount
such that after payment by the Executive of all applicable U.S.
federal, state and local taxes (computed at the maximum marginal
rates and including any interest or penalties imposed with respect to
such taxes) and the Hospital Insurance portion of FICA tax, including
any Excise Tax imposed upon the Excise Tax Adjustment Payment, the
Executive retains an amount of the Excise Tax Adjustment Payment
equal to the Excise Tax imposed upon the Payments.
13.1.2 In the event that as the result of a position taken by the Company
or the IRS, the Executive is required to make a payment of any Excise
Tax, the determination of the amount of the Excise Tax Adjustment
Payment shall be made by a nationally recognized accounting firm
acceptable to the Executive and the Company (the "Accounting Firm"),
which shall provide detailed supporting calculations to the Company
and the Executive. Subject to the provisions of Clause 13.1.3 below,
the amount of the Excise Tax Adjustment Payment shall be promptly
paid by the Company to or for the benefit of the Executive. The
determination of the Excise Tax Adjustment Payment by the Accounting
Firm shall be binding upon the Company and the Executive.
13.1.3 The Executive shall notify the Company in writing of any claim by
the IRS that, if successful, would require the payment by the Company
of the Excise Tax Adjustment Payment. Such notification shall be
given as soon as practicable but no later than 10 business days after
the Executive is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such
claim, the Executive shall:
(a) give the Company any information reasonably requested by the
Company relating to such claim,
(b) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(c) cooperate with the Company in good faith in order effectively
to contest such claim, and
(d) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of the Clause
13.1.3, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole
85
8
option, either direct the Executive to pay the tax claimed and ▇▇▇ for
a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay such claim
and ▇▇▇ for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify
and hold the Executive harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that
any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which an Excise Tax
Adjustment Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue
raised by the IRS or any other taxing authority.
13.1.4 If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Clause 13.1.3, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Clause
13.1.3) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 13.1.3, a
determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent thereof,
the amount of Excise Tax Adjustment Payment required to be paid.
13.2 The Executive hereby warrants that by virtue of entering into this
Agreement he will not be in breach of any express or implied terms of
any court order, contract or of any other obligation legally binding
upon him.
13.3 Any benefits provided by the Company to the Executive or his family
which are not expressly referred to in this Agreement shall be
regarded as ex gratia benefits provided at the entire discretion of
the Company and shall not form part of the Executive's contract of
employment.
13.4 Except as expressly provided in the Clause 13, the Executive shall
be responsible for the payment of all individual taxes on all amounts
paid or benefits provided to him under this Agreement. All
compensation (including with limitation, salary and any severance
payments) paid to the Executive shall be subject to such deductions
as from time to time may be required by law or regulation or by
agreement with, or consent of the Executive.
13.5 Any waiver by either party of any breach of any provision of this
Agreement must be set forth in a writing signed by such party, in
order for it to be effective, and no such waiver shall operate as a
waiver of any subsequent breach of that provision or any breach of
any other provision of this Agreement.
13.6 The Company will indemnify the Executive (and his legal
representatives, heirs, estate or other successors) to the fullest
extent permitted (including payment of expenses in advance of final
disposition of any proceeding) by the laws of the jurisdiction of the
incorporation of the Company as in effect at the time of the subject
act or omission, or by the certificate of incorporation and by-laws
of the Company as in effect at such time or on the date of this
Agreement, or by the terms of any indemnification agreement between
the Company and the Executive, whichever affords or afforded greatest
protection to the Executive, and the Executive shall be entitled to
the protection of any insurance policies the Company or an Affiliated
Company may elect to maintain generally for the benefit of its
directors and officers (and to the extent the Company or an
Affiliated Company maintains such an insurance policy or policies,
the Executive shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the
coverage available for a person serving or having served in the
positions and offices in which the Executive is serving or has
served), against all costs, charges and expenses whatsoever incurred
or sustained by him (or his legal representative, heirs, estate or
other successors) at the time such costs, charges and expenses are
incurred or sustained, in connection with any action, suit or
proceeding to which he (or his legal representatives, heirs, estate
or other successors) may be made a party by reason of his being or
having been a director, officer or employee of the
86
9
Company or any Affiliated Company, or be reason of he serving or having
served any other enterprise as a director, officer or employee at the
request of the Company or any Affiliated Company.
14. DEFINITIONS AND INTERPRETATION
------------------------------
14.1 In this Agreement unless the context otherwise requires or as
otherwise defined herein the following expressions have the following
meanings:
14.1.1 "AFFILIATED COMPANY"
Any legal entity that, directly or indirectly, controls, is
controlled by or is under common control with the Company, where
"control" means the power to direct or cause the direction of the
management and policies of such entity, whether through ownership of
voting securities, by contract or otherwise.
14.1.2 "BENEFIT PLANS"
The 401(k) plan and other pension, retirement, life insurance,
medical, health, accident, disability, welfare, savings, deferred
compensation or similar plans of the Company and its Affiliated
Companies.
14.1.3 "THE BOARD OF DIRECTORS"
The Board of Directors for the time being of the Company including
any duly appointed committee thereof.
14.1.4 "CAUSE"
Any of the following:
(a) the Executive's willful and continued failure substantially
to perform his duties hereunder (other than as a result of
sickness, injury or other physical or mental incapacity or as a
result of termination by the Executive for Good Reason);
provided, however, that such failure shall constitute "Cause"
only if (x) the Company delivers a written demand for
substantial performance to the Executive that specifies the
manner in which the Company believes the Executive has failed
substantially to perform his duties hereunder and (y) the
Executive shall not have corrected such failure within 10
business days after his receipt of such demand;
(b) willful misconduct by the Executive in the performance of his
duties hereunder that is demonstrably and materially injurious
to the Company or any Affiliated Company for which he is
required to perform duties hereunder;
(c) the Executive's conviction of (or plea of nolo contendere to)
a felony under the laws of the United States or any state
thereof;
(d) the Executive's illegal or immoderate use or abuse of alcoholic
beverages or drugs in a manner that in the reasonable opinion
of the Company demonstrably and materially impairs the
Executive's ability to perform his duties under this Agreement
or demonstrably and materially adversely affects the
Executive's or the Company's reputation with customers or in
the community as a whole; provided, however, that this clause
(d) shall not apply to use of prescription drugs in the manner
prescribed by a physician or other duly licensed medical or
health practitioner authorized to issue prescriptions for such
prescription drugs.
No action, or failure to act, shall be considered "willful" if it is
done by the Executive in good faith and with the reasonable belief
that he action or omission was in the best interest of the Company.
14.1.5 "CHANGE IN CONTROL"
The occurrence of any of the following:
87
10
(a) any event pursuant to which any "Person" becomes an "Acquiring
Person" (as such terms are defined in that certain Rights
Agreement dated as of November 12, 1998 between the Company and
▇▇▇▇▇▇ Trust and Savings Bank as Rights Agent, as such rights
Agreement initially entered into effect as of such date);
(b) a merger, consolidation, exchange, combination or other
transaction involving the Company and another entity (or the
securities of the Company and such other entity) as a result of
which the holders of all of the shares of Common Stock of the
Company outstanding prior to such transaction do not hold,
directly or indirectly, shares of the outstanding voting
securities of, or other voting ownership interest in, the
surviving, resulting or successor entity in such transaction in
substantially the same proportions as those in which they held
the outstanding shares of Common Stock of the Company
immediately prior to such transaction;
(c) the sale, transfer, assignment or other disposition by the
Company in one transaction or a series of transactions within
any period of 18 consecutive calendar months (including,
without limitation, by means of the sale of capital stock of
any subsidiary or subsidiaries of the Company) of assets which
account for an aggregate of 50% or more of the consolidated
revenues of the Company and its subsidiaries, as determined in
accordance with U.S. generally accepted accounting principles,
for the fiscal year most recently ended prior to the date of
such transaction (or, in the case of a series of transactions
as described above, the first such transaction); provided,
however, that no such transaction shall be taken into account
if substantially all the proceeds thereof (whether in cash or
in kind) are used after such transaction in the ongoing conduct
by the Company and/or its subsidiaries of the business
conducted by the Company and/or its subsidiaries prior to such
transaction;
(d) the Company is dissolved; or
(e) a majority of the directors of the Company are persons who were
not members of the Board of Directors as of the date (the
"Reference Date") which is the more recent of the date hereof
and the date which is two years prior to the date on which such
determination is made, unless the first election or appointment
(or the first nomination for election by the Company's
shareholders) of each director who was not a member of the
Board of Directors on the Reference Date was approved by a vote
of at least two-thirds of the Board of Directors in office
prior to the time of such first election, appointment or
nomination.
14.1.6 "THE CHIEF EXECUTIVE OFFICER"
The Chief Executive Officer of the Company.
14.1.7 "THE CHIEF OPERATING OFFICER"
The Chief Operating Officer of the Company.
14.1.8 "GOOD REASON"
The occurrence of any of the following (other than by reason of a
termination of the Executive for Cause or Disability):
(a) the position or responsibilities of the Executive are
significantly reduced, (including, without limitation, by
reason of the elimination of such position or the failure to
elect the Executive to such position or by reason of a change
in the reporting responsibilities to and of such position, or,
following a Change in Control, by reason of a substantial
reduction in the size of the Company or other substantial
change in the character or scope of the Company's operations),
or the Executive is assigned without his written consent to any
duties inconsistent with his positions, duties,
responsibilities and status with the Company immediately prior
to such assignment;
88
11
(b) the salary provided in Clause 3 hereof (as the same may be
increased from time to time in accordance with said Clause 3)
is reduced (except if such reduction occurs prior to a Change
in Control and is part of an across-the-board reduction
applicable to all senior level executives of the Group);
(c) the annual incentive compensation provided for in Clause 3.2
hereof is eliminated or reduced, or, if after a Change in
Control, the Executive's participation level is reduced or the
manner of assessing actual performance is changed in a manner
that results in the Executive earning less such compensation
for a given period than he would have for the same period
absent such change;
(d) the Executive's aggregate level of benefits under the Benefit
Plans is reduced, except if such reduction occurs prior to a
Change in Control and is part of an across-the-board reduction
in such benefits applicable to all senior level executives of
the Group;
(e) after a Change in Control, the Company fails to continue to
provide the Executive with benefits and perquisites which are
substantially similar in the aggregate to those to which the
Executive is entitled under the Company's Benefit Plans in
which the Executive was participating immediately prior to the
Change in Control, or fails to provide the Executive with
directors' or officers' insurance, as applicable, at least at
the level maintained immediately prior to the Change in
Control;
(f) the Executive is required to change his regular work location
to a location that is more than 35 miles from his regular work
location prior to such change;
(g) the Company fails to pay the Executive any amount otherwise
vested and due hereunder or under any plan or policy of the
Company, or fails to comply with any other provision of or
perform any of its other obligations under this Agreement; or
(h) the Company fails to obtain from any successor and to deliver
to the Executive such successor's written agreement to assume
and agree to perform the Company's obligations under this
Agreement.
If the Executive delivers to the Company a notice of termination in
connection with an event described in Clauses (a) through (g)
above, the Company shall have 10 business days from the date of
receipt of such notice to effect a cure of the event described
therein and upon cure thereof by the Company to the Executive's
reasonable satisfaction, such event shall no long constitute "Good
Reason" for purposes of this Agreement.
14.1.9 "INTELLECTUAL PROPERTY"
Letters patent, trademarks, trade names, service marks, designs,
copyrights, utility models, design rights, applications for
registration of any of the foregoing and the right to apply for
them in any part of the world, inventions, drawings, computer
programs, trade secrets and other nonpublic proprietary
information, know-how and right of like nature arising or
subsisting anywhere in the world in relation to all of the
foregoing whether registered or unregistered.
14.1.10 "IRS"
The United States Internal Revenue Service, or any successor agency
of the United States Government.
14.1.11 "STOCK OPTION PLAN"
D & K Healthcare Resources, Inc. Amended and Restated 1992 Long Term
Incentive Plan as the same may be amended from time to time, or any
employee stock option plan that replaces, supersedes or supplements
such plan.
14.2 The headings in this Agreement are for convenience only and shall not
affect its construction or interpretation.
14.3 Any reference in this Agreement to a statutory provision shall be
deemed to include a reference to any statutory amendment,
modification or re-enactment of it or to any legislation that
supersedes it.
89
12
14.4 This Agreement together with the Company plans, agreements and other
arrangements referred to herein contains the entire understanding
between the parties and supersedes the Original Agreement and any
other prior agreements, arrangements and understandings (written or
oral) between the Company and the Executive relating to the
employment of the Executive with the Company which such agreements,
arrangements and understandings shall be deemed to have been
terminated by mutual consent; provided, however, that this Agreement
shall not terminate any agreement in effect on the date hereof
between the Company and the Executive granting or otherwise relating
to any stock option, and any such agreement shall be deemed to be
modified and amended hereby to the extent that the terms of such
agreement are inconsistent with the terms hereof.
14.5 The various Clauses of this Agreement are severable and if any
Clause or identifiable part thereof is held to be invalid or
unenforceable by an court of competent jurisdiction then such
invalidity or unenforceability shall not affect the validity or
enforceability of the remaining Clauses or identifiable parts thereof
in this Agreement, and the parties hereto agree that the portion so
held invalid, unenforceable or void shall, if possible, be deemed
amended or reduced in scope, or otherwise be stricken from this
agreement, to the extent required for the purposes of the validity
and enforcement hereof.
14.6 In the event of a dispute between the Executive and the Company with
respect to any of the Executive's rights under this Agreement, the
Company shall reimburse the Executive for any and all legal fees and
disbursements incurred by him in connection with enforcing such
rights, at the time such fees and disbursements are incurred (but in
no event more frequently than monthly); provided, however, that if
the Executive's claim is found by a court of competent jurisdiction
to have been frivolous, the Executive shall reimburse the Company for
all amounts paid by the Company pursuant to this Clause 14.6.
14.7 Unless the context otherwise requires, any reference in this
Agreement to the employment of the Executive refers to the
Executive's employment with the Company.
14.8 This Agreement is governed by and shall be construed in accordance
with the laws of the State of Missouri and the parties to this
Agreement hereby submit to the nonexclusive jurisdiction of the
federal and state courts sitting in St. Louis County, Missouri.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by an authorized representative of the Company and by the
Executive as of the date first above written.
D & K HEALTHCARE RESOURCES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------
Title: President and COO
-----------------
EXECUTIVE:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
90