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EXHIBIT 10(w)(1)
AMENDED AND RESTATED SEVERANCE AGREEMENT
Amended and Restated Severance Agreement dated May 21, 1997 (the
"Restated Agreement") by and between Substance Abuse Technologies, Inc., a
Delaware corporation (the "Company"), and Robert Stutman (the "Executive")
restating the Severance Agreement (the "Severance Agreement") dated May 21,
1996 by and between the Company and the Executive.
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Purchase Agreement dated May 21, 1996
(the "Stock Purchase Agreement") the Company purchased all of the issued and
outstanding shares of common stock of Robert Stutman Associates, Inc. ("RSA");
WHEREAS, the Executive was the majority shareholder of RSA and the
President of RSA;
WHEREAS, a condition of the Company's agreeing to purchase all of the
issued and outstanding shares of the common stock of RSA was the Executive
agreeing to become employed as the Chief Executive Officer of the Company;
WHEREAS, from April 18, 1996 to May 20, 1996, the Executive was
employed on an at-will basis as the Chief Executive Officer of the Company and,
from May 21, 1996 to May 20, 1997, the Executive was employed by the Company as
its Chief Executive Officer subject to the terms of the Severance Agreement;
WHEREAS, the Executive and the Company desire to amend and restate the
Severance Agreement on the terms and conditions set forth herein which provide
for the Executive's right to severance pay upon his termination as an employee
of the Company without cause as set forth in this Restated Agreement; and
WHEREAS, effective as of the date hereof, the compensation to be paid
to the Executive by the Company for the services to be performed is as follows:
(1) a base salary (the "Base Salary") of $350,000 per annum
and an annual review at the end of each fiscal year during the term of this
Restated Agreement by the Company's Compensation Committee, with a minimum raise
each year of three times the Consumer Price Index if the Executive's performance
is deemed satisfactory by the Compensation Committee. The annual minimum Base
Salary shall be increased (a) to $400,000 upon the Company being profitable for
a fiscal year during the term of this Restated Agreement or renewal hereof with
sales equal to, or greater than $20,000,000 and (b) to $500,000 upon the Company
being profitable for a fiscal year during the term of this Restated Agreement or
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renewal hereof with sales equal to, or greater than, $40,000,000; provided,
however, that in calculating profitability, the operations of U.S. Drug Testing,
Inc. shall be excluded;
(2) an aggregate year end bonus (the "Annual Bonus") equal to
the Bonus Percentage (as hereinafter defined) multiplied by the Executive's
annual Base Salary as follows: (a) if the Company achieves its financial
objectives in such fiscal year, based upon a Board-approved budget, commencing
with the fiscal year ending March 31, 1998, the Bonus Percentage shall be 75%;
(b) if the Company achieves 100% of its financial objectives and up to 150% of
its financial objectives for a fiscal year, then the Bonus Percentage shall
equal the product of 75% and a fraction, the numerator of which shall be the
percentage of the financial objectives actually achieved (e.g., 150%), except
that any amount in excess of 150% shall be deemed to be 150% for the purposes of
this calculation, and the denominator of which shall be 75%; (c) if the Company
achieves 80% or more of its financial objectives for a fiscal year up to 100%,
the Executive shall receive an Annual Bonus based upon a pro rata amount of the
Bonus Percentage (e.g., if 90% of the financial objectives are achieved, the
Bonus Percentage shall be 37.5%); and (d) if the Company achieves less than 80%
of its financial objectives for a fiscal year, the Executive shall not receive
any Annual Bonus. If the Company acquires a company or companies in a fiscal
year, 50% of the sales of such acquired a company or companies up to
$10,000,000, 33% of the sales above $10,000,000 and all losses of such acquired
Company shall count toward the Executive achieving any sales objectives in
determining the Annual Bonus in the year of acquisition.
(3) a bonus payment in the amount of $50,000 upon a renewal
of this Restated Agreement pursuant to Section 4(b) hereof;
(4) the grant of a stock option to purchase a minimum of
50,000 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), per year at the end of each year during the term of this
Restated Agreement or renewal hereof at an exercise price equal to the closing
sale price, as reported on the American Stock Exchange, Inc. (the "AMEX") or
such other exchange or national securities association on which the Common Stock
may then be regularly quoted or, if not so quoted, as reported in the
over-the-counter market at the time of such grant and if such day shall be a day
on which the AMEX shall be closed, the preceding day on which the Common Stock
is traded (the "Closing Sales Price") and the expiration date of each such grant
shall be three years from the date of grant; and
(5) the award of 150,000 shares of the Common Stock for each
$.75 increase in the closing sales price of the Common Stock (as determined in
accordance with paragraph (4) of this WHEREAS clause) above $1.375, with such
increase to be determined by the average of the closing sales prices of the
Common Stock during any 90-day period commencing with the fiscal year ending
March 31, 1998; provided, however, once the average of the closing sales prices
of the Common Stock reaches an award level (e.g., $2.125), no awards will be
made again until the average of the closing sales prices of the Common Stock
during a 90-day period reaches the next award level (e.g., $2.875 after $2.125).
All shares of the Common Stock underlying the stock options granted under this
paragraph (5) shall be registered under the Securities Act of 1933, as amended,
as part of a pool of stock options to be registered in connection with a
currently proposed underwritten offering.
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WHEREAS, in the event that this Restated Agreement is not renewed and
in consideration of the Executive's agreement not to compete as set forth in
Section 5 hereof, the Executive shall receive a one-time lump sum payment equal
to the annual Base Salary and car allowance at such time and the costs of the
benefits stated below;
WHEREAS, the employee benefits, vacation, life insurance and other
perquisites to be received by Executive during the term of this Restated
Agreement are as follows:
(i) participation in all employee pension and welfare benefit
plans and programs made available to the Company's senior level executives or to
its employees generally, as such plans or programs may be in effect from time to
time, including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any other pension or
retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded;
(ii) five weeks vacation per year which, if not taken, will
accrue;
(iii) term life insurance coverage in the amount of $1,500,000
face value, the beneficiary of which shall be designated by the Executive;
(iv) a monthly automobile allowance of $1,000 which allowance
shall be reviewed a the end of each fiscal year during the term of this Restated
Agreement and any renewal hereof and adjusted to the market price;
(vi) an annual physical examination; and
(vi) an allowance for professional services of $7,500 for
each fiscal year during the term of this Restated Agreement and any renewal
hereof to be paid to the Executive.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Company and the Executive hereby agree as
follows:
1. COMPANY'S RIGHT TO TERMINATE. Subject to the Company
fulfilling its obligations to the Executive relating to compensation and
benefits during the term of this Restated Agreement, the Executive agrees that
he will not voluntarily leave the employ of the Company and will continue to
perform the Executive's regular duties as Chief Executive Officer of the
Company. Notwithstanding the foregoing, the Company may terminate the
Executive's employment at any time, subject to providing the benefits
hereinafter specified in accordance with the terms hereof.
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2. TERMINATION OF EMPLOYMENT. The termination of the
Executive as an employee of the Company for Disability or Cause shall be on the
following terms and conditions:
(a) Disability.
Termination by the Company of the
Executive's employment based on "Disability" shall mean termination (i) because
of the Executive's inability to perform his duties with the Company on a full
time basis for four consecutive months, or 180 days out of any twelve-month
period, as a result of the Executive's incapacity due to physical or mental
illness; or (ii) as a result of the Executive being certified incompetent by a
court of competent jurisdiction and all appeals from such certification having
expired.
(b) Cause.
Termination by the Company of the
Executive's employment for "Cause" shall mean termination because of: (i) the
Executive's conviction of a felony; (ii) any action by the Executive involving
dishonesty, fraud or gross or willful misconduct in connection with his
employment with the Company; (iii) the Executive's gross negligence in the
performance of his duties and obligations hereunder or habitual neglect of his
duties; (iv) the Executive's substance abuse, including, without limitation,
chronic alcoholism or drug addiction; (v) the Executive's intentional refusal
or failure to perform his duties as the Chief Executive Officer of the Company,
including, without limitation, the intentional disregard of a lawful directive
by the Board of Directors of the Company or any Committee thereof; (vi)
intentional conduct on the part of the Executive which is knowingly detrimental
to the best interests of the Company; or (vii) the Executive's failure to
perform in a competent manner his duties as the Chief Executive Officer of the
Company.
(c) Notice of Termination.
Any purported termination by the Company
pursuant to subsections (a) or (b) of this Section 2 or for any other reason
shall be communicated by written Notice of Termination to the Executive from
the President of the Company (or such other officer as may be designated) at
the direction of the Board of Directors of the Company. For purposes of this
Restated Agreement, a "Notice of Termination" shall mean a notice which shall
indicate that it is without Cause or shall indicate the specific termination
provision in this Restated Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(d) Date of Termination.
"Date of Termination" shall mean (i) if the
Executive's employment is terminated for Disability, the date specified in the
Notice of Termination, (ii) if the Executive's employment is terminated for
Cause, the date specified in the Notice of Termination, (iii) if the
Executive's employment is terminated for death, the date of death, and
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(iv) if the Executive's employment is terminated, without Cause, the date on
which a Notice of Termination is given.
3. CERTAIN BENEFITS UPON TERMINATION.
(a) Subject to Section 6(b) hereof, if the
Executive's employment is terminated by the Company other than for Cause,
Disability or death or Change in Control (as hereinafter defined in Section 6
hereof, then the Executive shall be entitled to the benefits provided below:
(i) the Company shall pay the Executive his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive;
(ii) in lieu of any further salary, bonuses
or benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance to the Executive on the 30th
day following the Date of Termination a lump sum amount equal to the total
amount of the Base Salary that would have been paid to the Executive had he not
been terminated during the period commencing on the Date of Termination and
ending on May 20, 2001; and
(iii) the Company shall maintain in full
force and effect, for the Executive's continued benefit until the earlier of
(A) May 20, 2001 or (B) the Executive's commencement of full time employment
with a new employer, his automobile allowance and all life insurance, medical,
health and accident, and disability plans, programs or arrangements in which
the Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans
and programs.
(b) If the Executive's employment is
terminated for Disability under Section 2(a), then the Executive shall be
entitled to the benefits provided below:
(i) the Company shall pay the Executive his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive;
(ii) in lieu of any further salary, bonuses
or benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the
30th day following the Date of Termination a lump sum amount equal to the Base
Salary that would have been paid to the Executive had he not been
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terminated during the period commencing on the Date of Termination and ending
on the earlier of four months after the Date of Termination or May 20, 2000;
and
(iii) the Company shall maintain in full
force and effect for the Executive's continued benefit, until the earlier of
four months after the Date of Termination and May 20, 2000, his automobile
allowance and all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs.
(c) If the Executive's employment is terminated for
Cause, Disability under Section 2(i)(a), death or the voluntary termination or
resignation of employment by the Executive, the Executive shall be paid his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive.
(d) The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 3 by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Section 3 be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
4. TERM OF AGREEMENT.
(a) This Restated Agreement shall terminate May 20,
2000 subject to renewal in accordance with Section 4(b) below.
(b) The Company shall have two one-year options to
renew this Restated Agreement by notifying the Executive of such intention at
least three months prior to the end of the term of this Restated Agreement or
any renewal thereof.
5. COVENANT NOT TO COMPETE.
(a) In consideration of the consideration provided
in the Stock Purchase Agreement and the Company agreeing to the severance
arrangements and the Change in Control provisions set forth in this Restated
Agreement, the Executive shall be bound from May 21, 1997 through May 20, 2003
by the terms of Sections 6.1 and 6.2 of the Stock Purchase Agreement, except
that the term "Purchased Business" set forth in subsection 6.1.1 of the Stock
Purchase Agreement is hereby amended to mean the business of the Company as
conducted by the Company at the time his employment is terminated.
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(b) Anything in this Section 5(a) to the contrary
notwithstanding, if the Company ceases to exist other than by reason of a
merger, consolidation, sale of assets or similar transaction, the Executive
shall no longer be bound by the terms of Sections 6.1 and 6.2 of the Stock
Purchase Agreement and the Executive shall have the right to use his name in
connection with any business he enters into.
(c) The parties hereto agree that the remedy at law
for any breach of Section 5(a) will be inadequate and that the Company shall be
entitled to injunctive relief to compel the Executive to perform or refrain
from action required or prohibited hereunder. The necessity of protection
against the competition of the Executive and the nature and scope of such
protection has been carefully considered by the parties hereto. The parties
hereby agree and acknowledge that the duration, scope and geographic area
applicable to the restrictions set forth in Section 5(a) are fair, reasonable
and necessary. The consideration provided for herein is sufficient and adequate
to compensate the Executive for agreeing to the restrictions contained in this
Section 5. If, however, any court determines that the foregoing restrictions
are not reasonable, such restrictions shall be modified, rewritten or
interpreted to include as much of their nature and scope as will render them
enforceable.
6. CHANGE IN CONTROL.
(a) In the event of a Change in Control, the
Executive shall have the right to terminate voluntarily his employment with the
Company, with or without reason, within six months after the occurrence of such
Change in Control by giving written Notice of Termination to the Company. A
Change in Control shall be deemed to occur upon (i) the election of one or more
individuals to the Board of Directors of the Company which election results in
one-third of the directors of the Company consisting of individuals who have
not been directors of the Company for at least two years, unless such
individuals have been elected as directors or nominated for election as
directors by three fourths of the directors of the Company who have been
directors for at least two years; (ii) the sale by the Company of all or
substantially all of its assets to any Person, the consolidation of the Company
with any Person, the merger of the Company with any Person as a result of which
merger the Company is not the surviving entity as a publicly held corporation
or the sale or transfer of shares of the Company by the Company and/or any one
or more of its stockholders, in one or more transactions, related or unrelated,
to one or more Persons under circumstances whereby any Person and his, her or
its Affiliates shall own, after such sales and transfers, at least one-fourth,
but less than one-half, of the shares of the Company having voting power for
the election of directors, unless, in any such case, such sale, consolidation,
merger or transfer has been approved in advance by three-fourths of the
directors of the Company who have been directors of the Company for at least
two years; or (iii) the sale or transfer of shares of the Company by the
Company and/or any one or more of its stockholders, in one or more
transactions, related or unrelated, to one or more Persons under circumstances
whereby any Person and its Affiliates shall own, after such sales and
transfers, at least one-half of the shares of the Company having voting power
for the election of directors. Nothing contained in this definition shall limit
or restrict the right of the Executive from participating in any discussions or
voting on any matter referred to in this definition at any meeting of the
Company's Board of Directors. For purposes of this Restated Agreement, the term
"Affiliate" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, any other
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Person. For purposes of this Restated Agreement, the term "Person" shall mean
an individual, partnership, firm, trust, corporation, limited liability
corporation, limited liability partnership, limited partnership, association or
other similar entity. When two or more Persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring, holding,
or disposing of securities of the Company, such partnership, limited
partnership, syndicate or other group shall be deemed a "Person" for the
purposes of this Restated Agreement.
(b) Upon the voluntary termination of employment
with the Company by the Executive within six months after the occurrence of a
Change in Control, or upon the involuntary termination of employment with the
Company of the Executive for any reason other than death, Disability or
termination for Cause within six months after the occurrence of a Change in
Control, the Company, or the consolidated, surviving or transferee Person in
the event of a consolidation, merger or sale of assets, shall pay to the
Executive, in a lump sum immediately subsequent to the date of such
termination, in addition to any compensation otherwise owed to the Executive at
the date of such termination, an amount equal to two times the total cash
compensation, including Base Salary, Annual Bonus and car allowance, paid to
the Executive during, or, in the case of the Annual Bonus, for, the prior
fiscal year; provided, however, that, if the Executive is terminated without
Cause, he may elect to receive either the severance under Section 3(a) hereof
or, if applicable, the payments set forth in this Section 6(b) and the benefits
set forth in Section 6(c) hereof.
(c) Upon the voluntary termination of employment
with the Company by the Executive within six months after the occurrence of a
Change in Control, or upon the involuntary termination of employment with the
Company by the Executive for any reason other than death, Disability or
termination for Cause within six months after the occurrence of a Change in
Control, the Company, or the consolidated, surviving or transferee Person in
the event of a consolidation, merger or sale of assets, shall also provide, for
a period of two years commencing on such termination of employment, medical,
dental, life and disability insurance coverage for the Executive and the
members of his family which is not less favorable to the Executive than the
group medical, dental, life and disability insurance coverage carried by the
Company for such Executive and the members of his family either immediately
prior to such termination of employment or on the occurrence of such Change in
Control, whichever is greater; provided, however, that the obligations set
forth in this sentence shall terminate to the extent the Executive obtains
comparable medical, dental, life and disability insurance coverage from any
other employer during such period, but the Executive shall not have any
obligation to seek or accept employment during such period, whether or not any
such employment would provide comparable medical, dental, life and disability
insurance coverage.
(d) Upon the voluntary termination of employment
with the Company by the Executive within six months after the occurrence of a
Change in Control, or upon the involuntary termination of employment with the
Company by the Executive for any reason other than death, Disability or
termination for Cause within six months after the occurrence of a Change in
Control, any Common Stock purchase warrant or stock option then held by the
Executive shall, anything to the contrary notwithstanding in the Common Stock
purchase warrant or stock option, become immediately exercisable.
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(e) In the event that, subsequent to a Change in
Control, the Executive incurs any costs or expenses, including attorneys fees,
in the enforcement of his rights under this Section 6, then, unless the
Company, or the consolidated, surviving or transferee Person in the event of a
consolidation, merger or sale of assets, is wholly successful in defending
against the enforcement of such rights, the Company, or such consolidated,
surviving or transferee Person, shall promptly pay to such Participant all such
costs and expenses.
7. SUCCESSORS; BINDING AGREEMENT. This Restated Agreement
shall be binding upon, and shall inure to the benefit of, the respective
successors, assigns, legal representatives and heirs of the parties hereto.
8. NOTICE. Any and all notices or other communications or
deliveries required or permitted to be given or made shall be in writing and
delivered personally, or sent by certified or registered mail, return receipt
requested and postage prepaid, or sent by overnight courier service as follows:
If to the Company, at:
Substance Abuse Technologies, Inc.
4517 NW 31st Avenue
Ft. Lauderdale, FL 33309
Attention: President
with a copy to:
Wachtel & Masyr, LLP
110 East 59th Street
New York, New York 10022
Attention: Robert W. Berend, Esq.
If to the Executive, at:
c/o Edward D. Feldstein, Esq.
Roberts, Carroll, Feldstein & Pierce
10 Weybosset Street
Providence, Rhode Island 02903-2808
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 7. The date of giving of any such notice
shall be the date of hand delivery, two days after the date of the posting of
the mail or the date when deposited with the overnight courier.
9. WAIVER. No provisions of this Restated Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Restated Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
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10. VALIDITY. The invalidity or unenforceability of any
provision of this Restated Agreement shall not affect the validity or
enforceability of any other provision of this Restated Agreement, which shall
remain in full force and effect.
11. COUNTERPARTS. This Restated Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
12. GOVERNING LAW. This Restated Agreement shall be construed
(both as to validity and performance) and enforced in accordance with, and
governed by, the laws of the State of Florida applicable to contracts to be
performed entirely within that State, without giving effect to the principles of
conflicts of law. Any suit or proceeding arising out of this Restated Agreement
shall be brought only in a federal or state court located in the County of Palm
Beach, State of Florida; provided, however, that neither party waives its right
to request the removal of such action or proceeding from the state court to a
federal court in such jurisdiction. The parties hereto each waive any claim that
such jurisdiction is not a convenient forum for any such suit or proceeding and
the defense of lack of personal jurisdiction.
13. ENTIRE AGREEMENT. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Restated Agreement.
IN WITNESS WHEREOF, this Restated Agreement has been executed
on May 21, 1997.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
By:
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ROBERT STUTMAN
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