EXHIBIT 10.12
EMPLOYMENT AGREEMENT
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This Agreement is made as of the 3rd day of July, 1995 between Suburban
Ostomy Supply Co., Inc., a Massachusetts corporation (the "Company"), and
Herbert P. Gray, an individual residing at 300 Boylston Street, Apt. 5-10, The
Heritage, Boston, Massachusetts 02116 (the "Employee").
RECITALS
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WHEREAS, pursuant to a Stock Purchase and Redemption Agreement dated as of
July 3, 1995 (the "Purchase Agreement"), Summit Ventures III, L.P., Summit
Investors II, L.P., Summit Subordinated Debt Fund, L.P. and The Bear Stearns
Companies, Inc. (collectively, the "Investors") have agreed to purchase an
aggregate of 66,500 shares of Series A Redeemable Preferred Stock, par value
$.01 per share, of the Company, 280 shares of Common Stock (before giving effect
to the stock dividend described in the Purchase Agreement), no par value per
share, of the Company and $6,750,000 in aggregate principal amount of 12%
Subordinated Debentures of the Company (collectively, the "Securities");
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company will
apply the proceeds received upon the sale of the Securities to redeem a portion
of the shares of Common Stock held by the Employee; and
WHEREAS, the Investors would be unwilling to purchase the Securities and
the Company would be unwilling to redeem and the Employee would be unwilling to
permit the redemption of the shares of Common Stock held by the Employee without
the execution of this Agreement by the Employee and the Company.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as the Chairman
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of the Board and Chief Executive Officer of the Company, and the Employee
accepts such employment for the term of employment specified in Section 3 below
(the "Employment Term"). During the Employment Term, the Employee shall, subject
to the direction of the Board of Directors of the Company, be responsible for
the general charge and supervision of the business, property and affairs of the
Company, and shall perform such other duties, consistent with his position as
the Chairman of the Board and Chief Executive Officer of the Company as may from
time to time be reasonably assigned to him by the Board of Directors. The
Employee shall not, however, be required to change his principal residence or to
spend extended periods of time away from his principal residence without his
consent, which consent may be withheld in his sole and absolute discretion.
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2. Performance. The Employee agrees to devote his reasonable business
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efforts and substantially the same amount of his business time as heretofore
devoted to the performance of his duties hereunder during the Employment Term.
3. Employment Term. The Employment Term shall begin on the date of this
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Agreement and continue until July 1, 2000 (the "Employment Term"), unless
earlier terminated in accordance with the terms of this Agreement. At the end
of the Employment Term, the period of employment will be automatically renewed
for a further twelve (12) month term, and subsequently renewed for twelve (12)
months periods upon each anniversary date thereof, unless written notice to the
contrary is given by either party to the other at least ninety (90) days before
the end of the Employment Term or any renewal thereof.
4. Compensation.
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(a) Salary. During the Employment Term, the Company shall pay the
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Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of One Hundred Fifty
Thousand Dollars ($150,000). The annual base salary shall be increased annually
on each July 1, during the Employment Term by an amount equal to the greater of
(i) such amount, if any, as the Compensation Committee of the Company shall
determine, and (ii) the percentage increase in the cost of living for the twelve
months ending immediately prior to such July 1, as reflected in the All Items
Consumer Price Index for all Urban Consumers for the Boston, MA Primary
Metropolitan Statistical Area as published by the United States Bureau of Labor
Statistics, multiplied by the annual base salary then in effect.
(b) Bonus. The Employee shall be eligible to participate in a bonus
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plan of the Company pursuant to which he may be entitled to receive an annual
bonus equal to a specified percentage of the annual base salary then in effect,
subject to achieving specified financial targets. The actual amount of such
bonus and the financial targets for the payment thereof shall be determined by
the Compensation Committee of the Board of Directors of the Company as it may
from time to time deem appropriate.
(c) Insurance; Other Benefits. The Employee shall be entitled to
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medical, retirement, life insurance and disability insurance not less favorable
to the Employee than those which he currently receives as an employee of the
Company. In addition, the Employee shall be entitled to participate in all
employee benefit plans now existing or hereinafter established by the Company,
including, but not limited to, medical plans, group life and disability
insurance plans, profit sharing or bonus plans, and any other employee benefit
plan or arrangement made available to executive officers of the Company, but
only to the extent such plans provide benefits greater than those currently
received by the Employee.
(d) Automobile. In recognition of the necessity of the use of an
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automobile for the efficient and expeditious performance of the Employee's
duties and obligations on
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behalf of the Company, the Company, at its cost, shall supply to the Employee
for such use an automobile of such make and model and upon such terms and
conditions as the Board shall determine from time to time. In addition, the
Company shall pay for the insurance and maintenance of such automobile.
(e) Vacation. The Employee shall be entitled to take the same
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number of weeks of paid vacation during each year of the Employment Term as
heretofore taken, consistent with the Company's past employment practices with
regard to the Employee, to be taken at such time or times during such year as
shall be mutually convenient and consistent with his duties and obligations to
the Company. The Employee may not accrue more than an aggregate of 50% vacation
days, and such accrual may not be for more than one year. The Employee shall
also be entitled to all paid holidays given by the Company to its personnel
similarly situated.
5. Expenses. The Employee shall be reimbursed by the Company for all
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reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with policies established by the Board of
Directors from time to time and upon receipt of appropriate documentation.
6. Agreement Not to Compete. In consideration of the distributions
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payable to the Employee under the Purchase Agreement in connection with the
partial redemption of the shares of Common Stock held by him, the Employee
agrees that during the Non-Competition Period (defined below) he will not in any
capacity, either separately, jointly, or in association with others, directly or
indirectly, as an officer, director, consultant, agent, employee, owner,
partner, stockholder or otherwise, engage or have a financial interest in any
business which competes with the business of the Company of wholesale
distribution of health and medical products (as such business is modified from
time to time prior to any termination of employment) in the United States
(excepting only the ownership of not more than 5% of the outstanding securities
of any class listed on an exchange or regularly traded in the over-the-counter
market). The parties agree that the Employee may during the Non-Competition
Period work for a manufacturer of health and medical products. The "Non-
Competition Period" shall mean the longer of (i) the period during which the
Employee is employed pursuant to this Agreement and, to the extent applicable,
the following:
(a) Upon termination of the Employment Term or any renewal thereof:
twelve (12) months from such expiration.
(b) Upon termination by the Company with Cause: twenty-four (24)
months from such termination;
(c) Upon termination by the Company without Cause: so long as the
Company is making payments pursuant to the provisions of Section 9(b);
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(d) Upon termination by the Company on account of disability:
twelve (12) months from such termination;
(e) Upon termination by the Employee without Good Reason:
twenty-four (24) months from such termination; and
(f) Upon termination by the Employee with Good Reason: so long as
the Company is making payments pursuant to the provisions of Section 9(b).
The Employee further agrees that during the Non-Competition Period, except
in connection with the performance of services hereunder, he will not in any
capacity, either separately, jointly or in association with others, directly or
indirectly, hire or solicit for hire any person who was an employee of the
Company at any time during the two years immediately preceding termination of
employment hereunder.
If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to time or
space, the court is hereby requested and authorized by the parties hereto to
revise the foregoing restrictions to include the maximum restrictions allowed
under the applicable law. The Employee expressly agrees that breach of the
foregoing would result in irreparable injuries to the Company, that the remedy
at law for any such breach will be inadequate and that upon breach of this
provision, the Company, in addition to all other available remedies, shall be
entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damage to the Company.
7. Secret Processes and Confidential Information. For the Employment
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Term and thereafter, (a) the Employee will not divulge (except as legally
compelled by court order, and then only to the extent required, after prompt
notice to the Company of any such order), directly or indirectly, other than in
the regular and proper course of business of the Company, any Confidential
Information (as defined below) and (b) the Employee will not use, directly or
indirectly, any Confidential Information for the benefit of anyone other than
the Company. For purposes of this Agreement, "Confidential Information" means
any information which is proprietary or unique to the Company, including
information with respect to the operations or finances of the Company or with
respect to confidential or secret processes, techniques, machinery, customers,
plans or products manufactured or sold by the Company. Notwithstanding the
foregoing, Confidential Information shall not include information (i) that is of
public knowledge at the time of disclosure to Employee, (ii) that becomes
generally available to the public other than as a result of disclosure by
Employee, (iii) that is rightfully received by the Employee from a third party
on a nonconfidential basis, or (iv) that is unrelated to the products then being
developed, manufactured or sold by the Company and is developed by Employee
independently and is not derived from Confidential Information. All new
processes, techniques, know-how, inventions, plans, products, patents and
devices (collectively, "Developments") developed, made or invented by the
Employee, alone or with
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others, while an employee of the Company, shall be and become the sole property
of the Company, unless released in writing by the Company or unless such
Developments do not result from tasks assigned to the Employee by the Company
and do not relate to the business of the Company or any of its products or
services, and the Employee hereby assigns any and all rights therein or thereto
to the Company.
8. Termination.
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(a) Termination at End of Term. The employment of the Employee
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hereunder shall automatically renew at the end of the Employment Term, unless
terminated in accordance with the provisions of Section 3 or unless the parties
hereto mutually agree otherwise in writing at least sixty (60) days prior to
expiration of the Employment Term, or the Agreement is earlier terminated by the
Company or the Employee pursuant to this Section 8.
(b) Termination by the Company With Cause. The Company shall have
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the right, subject to the provisions hereinafter set forth, at any time to
terminate the Employee's employment hereunder upon the occurrence of any of the
following (any such termination being referred to as a termination for "Cause"):
(i) the commission by the Employee of any embezzlement or other
deliberate act of dishonesty against the financial or business interests of the
Company;
(ii) the habitual drug addiction or intoxication of the
Employee;
(iii) the conviction by the Employee of or the pleading by the
Employee of nolo contendere to, a felony or breach of fiduciary trust for the
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purpose of gaining a personal profit;
(iv) the willful or intentional failure or refusal of the
Employee to perform the duties specified in and pursuant to Section 1 hereof or
to follow reasonable directives of the Board of Directors of the Company which
failure or refusal is not cured within thirty (30) days following Employee's
receipt of notice from the Company specifying in reasonable detail such failure
or refusal;
(v) the breach by the Employee of any material term of this
Agreement which breach is not cured within thirty (30) days following Employee's
receipt of notice from the Company specifying in reasonable detail such breach.
(c) Termination Upon Death or Disability. The Employee's
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employment hereunder shall automatically terminate upon the Employee's death or
upon his inability to
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have performed his duties hereunder by reason of any mental, physical or other
disability for a period of at least six consecutive months, as determined by a
qualified physician chosen by the Board of Directors of the Company and
reasonably acceptable to the Employee or his legal representatives.
(d) Termination by the Company Without Cause. The Company shall
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have the right to terminate the Employee's employment at any time for any reason
without Cause.
(e) Termination for Good Reason. The Employee shall have the
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right to terminate his employment with the Company for "Good Reason" upon
written notice to the Company. The Employee's termination for Good Reason
hereunder shall be treated for purposes of this Agreement, including without
limitation Section 6 and 9(b), as if the Employee were terminated without Cause
pursuant to Section 8(d) above. For purposes of this Agreement, "Good Reason"
shall mean: (i) without the Employee's consent, the assignment to him during
the Employment Term of any material duties or responsibilities substantially
inconsistent with his position and duties and responsibilities with the Company
as set forth herein, or a material change in his reporting responsibilities,
titles or authority as set forth herein, which assignment, change or
inconsistency is not cured by the Company within thirty (30) days following its
receipt of notice from the Employee specifying in reasonable detail such
assignment, change or inconsistency; or (ii) the Company's breach of any
material terms of this Agreement, which breach is not cured by the Company
within thirty (30) days following its receipt of notice from the Employee
specifying in reasonable detail the breach.
9. Effect of Termination of Employment.
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(a) Upon Expiration of Employment Term. If the Employee's employment
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terminates upon expiration of the Employment Term or any renewal thereof upon
notice given in accordance with Section 3, the Employee will receive salary,
bonus and vacation accrued through the date of termination, but shall be
entitled to no further benefits hereunder.
(b) With Cause; Resignation Without Good Reason. If the Employee's
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employment is terminated with Cause pursuant to Section 8(b) or if the Employee
elects to terminate his employment other than pursuant to Section 8(e), the
Employee's salary, bonus and other benefits specified in Section 4 shall cease
at the time of such termination. The Employee shall be entitled only to receive
accrued salary and vacation through the date of termination, but shall be
entitled to no further benefits hereunder.
(c) Without Cause by the Company. If the Employee's employment is
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terminated by the Company without Cause pursuant to Section 8(d) including for
such purposes termination by the Employee for Good Reason pursuant to Section
8(e), the Employee's salary, bonus and other benefits specified in Sections 4
shall cease at the time of such termination, and the Employee shall be entitled
to receive (i) his base salary then payable under Section 4(a) above, subject,
however, to the C.P.I. adjustment therein provided for
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subsequent payments ("Salary Payment") for a period of twelve (12) months
following termination; provided, however that if such termination occurs during
the first year of the Employment Term such Salary Payment shall continue for the
balance of such first year and for the twelve months commencing upon expiration
of such first year; and provided further, however, that the Company may, at its
option, extend for up to twelve (12) months the period during which Salary
Payments are otherwise required to be made; (ii) accrued salary and vacation
through the date of termination; (iii) continuation at the Company's expense of
comparable medical benefits during the period during which Salary Payments are
made; and (iv) payment of such pro rata bonus, if any, as was earned in the
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year in which termination occurred. The term "pro rata bonus" shall mean the
bonus which the Employee would have received had he remained employee for the
entire year in which his employment was terminated (calculated on an annualized
basis on results of operations as of the end of the month immediately preceding
his termination, without taking into account results of operations after the end
of such month) times a fraction, the numerator of which is the number of days
the Employee was employed in the year of termination, and the denominator of
which is 365. Any pro rata bonus earned will be paid when other bonuses are paid
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for the year in which termination occurs. The Employee shall not be required to
mitigate the amount of any Salary Payment provided for in this Section 9(b) by
seeking other employment or otherwise. The Salary Payment (as previously
described in this Section 9(b)) shall be the Employee's sole and exclusive
severance payment and remedy at law or in equity for termination of employment
hereunder by the Company without Cause or by Employee for Good Reason.
(d) Medical Benefits. Notwithstanding the foregoing, in the case of
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any termination of employment of the Employee, the Employee shall be entitled to
continue to participate in the Company's medical benefit plans to the extent
required by law.
10. Insurance. The Company may purchase insurance on the life of the
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Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
11. Notice. Any notices required or permitted hereunder shall be in
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writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses or such other address as to which notice is given in the manner
provided herein:
If to the Employee:
Herbert P. Gray
300 Boylston Street, Apt. 5-10
The Heritage
Boston, MA 02116
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If to the Company:
Suburban Ostomy Supply Co., Inc.
75 October Hill Road
Holliston, MA 01746
Attention: President
With copies to:
Summit Partners III, L.P.
One Boston Place
Boston, MA 02108
Attn: Joseph F. Trustey;
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: James Westra; and
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Attn: Norman A. Bikales
12. General.
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(a) Governing Law. The terms of this Agreement shall be governed by
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and construed under the laws of The Commonwealth of Massachusetts without regard
to its principles of conflicts of laws.
(b) Assignability. The Employee may not assign his interest in or
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delegate his duties under this Agreement. Except in the case of a sale of all
or substantially all of the stock or assets of the Company, the Company may not
assign the Agreement or the rights and obligations hereunder without consent of
Employee.
(c) Enforcement Costs. In the event that either the Company or the
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Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including reasonable attorney's fees and
expenses) of the prevailing party shall be paid by the other party, such party
to be deemed to have prevailed if such action or claim is concluded pursuant to
a court order or final judgment which is not subject to appeal, a settlement
agreement or dismissal of the principle claims.
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(d) Binding Effect. This Agreement shall be binding upon and inure
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to the benefit of the Company, its permitted successors and assigns and the
Employee, his representatives and heirs.
(e) Entire Agreement; Modification. This Agreement constitutes the
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entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder,
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this Agreement shall continue for so long as any obligations remain under this
Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
SUBURBAN OSTOMY SUPPLY CO., INC.
By: /s/ Donald Benovitz
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Name:
Title:
EMPLOYEE
/s/ Herbert Gray
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Herbert P. Gray
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