Exhibit 10.19
EMPLOYMENT, NON-DISCLOSURE AND
LIMITED NON-COMPETITION AGREEMENT
THIS EMPLOYMENT, NON-DISCLOSURE AND LIMITED NON-COMPETITION AGREEMENT (this
"Agreement") is made as of the ____ day of March, 1998, by and among OUTSOURCING
SERVICES GROUP, INC., a Delaware corporation having its principal place of
business at 425 South Ninth Avenue, City of Industry, California 91716-3382 (the
"Company"), and its subsidiaries AEROSOL SERVICES COMPANY, INC., PIEDMONT
LABORATORIES, INC., KOLMAR LABORATORIES, INC. (the "Subsidiaries"), and JOHN G.
HEWSON, whose address is 6 Birkdale Way, Coto de Caza, California (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged or proposed to be engaged, through its
Subsidiaries, in the business of providing aerosol and liquid filling of
cosmetics, toiletries and skin care products and related packaging services and
has need for management personnel with experience in said business;
WHEREAS, the Employee is experienced in the business of providing aerosol
and liquid filling, packaging of cosmetics, toiletries and skin care products,
and related services and in the management of such business;
WHEREAS, the Company and the Subsidiaries desire to employ the Employee an
executive capacity upon the terms and conditions set forth in this Agreement;
and
WHEREAS, the Employee is willing to enter into this Agreement with respect
to the Employee's employment and services upon the terms and conditions set
forth;
NOW THEREFORE, in consideration of the foregoing recitals and the promises
herein contained, the parties agree as follows:
I. TERM
SECTION 1.01. EMPLOYMENT. Subject to the provisions of Section 4.01
hereof, the Company hereby employs the Employee and the Employee hereby accepts
employment with the Company for a period of three (3) years beginning on
February 1, 1998 and terminating at the close of business on January 31, 2001
(the "Employment Term") , including service at Company's principal executive
offices located in the Eastern United States. The Employment Term may be
extended by a mutual agreement in writing for additional years on the same or
mutually agreeable terms, but if no such mutual agreement is executed prior to
January 31, 2001 the Employment Term shall expire. If the employment of
Employee is terminated pursuant to Article 4 of this
Agreement or by reason of the death or disability of Employee, the time during
which the Employee is actually employed shall be referred to as the "Employee's
Employment."
II. DUTIES
SECTION 2.01. GENERAL DUTIES. The Employee shall serve as the Senior Vice
President -- Sales and Marketing of the Company during the Employee's
Employment. Further, Employee shall, if requested, serve as an officer or
director of the Company's subsidiaries. The Employee shall, during
Employee's Employment, subject to the policies of the Chief Executive Officer
and the Board of Directors of the Company, manage and direct the sales and
marketing efforts of the Company, being directly responsible to manage perform
those acts and doing those things customarily done by officers in similar
positions for companies comparable to the Company. The Company shall indemnify
the Employee for such service to the maximum extent permitted by applicable law.
SECTION 2.02. DEVOTION OF TIME TO THE COMPANY'S BUSINESS. The Employee
agrees during Employee's Employment, to devote his best efforts to his
employment, and perform such duties consistent with his capacity as an officer
of the Company as shall be determined by the Chief Executive Officer of the
Company and the Board of Directors of the Company. The Employee further agrees
to (i) devote substantially all his business time to fulfill the duties of his
office to the business and affairs of the Company, (ii) devote his time and
resources to the recruitment, training and development of a team of focused
professionals capable of managing and directing the business of the Company, and
(iii) faithfully observe his duties to preserve as confidential all trade and
other secrets of the Company. The Employee shall not, during Employee's
Employment, unless otherwise agreed to in advance and in writing by the Company,
seek or accept other employment, become self-employed in any other capacity, or
engage in any activities which are detrimental to the business of the Company.
Notwithstanding the foregoing, the Employee may engage in personal investment
activities which do not interfere with the Employee's duties under this
Agreement.
III. COMPENSATION
SECTION 3.01. BASE SALARY. As compensation for his services hereunder,
during the Employment Term, the Employee shall receive an annual base salary
(effective as of February 1, 1998) of Two Hundred Thousand Dollars ($200,000).
Such base salary shall be payable in cash at the times and in the installments
consistent with the Company's payroll practices. Company shall review such
salary on at least an annual basis with a view to consider increases
considering, among other factors, Company performance and cost-of-living
increases.
SECTION 3.02. BONUS PLANS.
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(a) The Employee shall be a full participant in any performance bonus
plan made available to senior executives of the Company. It is intended for
such plans to include a stock ownership/purchase plan and an annual cash bonus
plan. Company intends to adopt a plan on or prior to June 30, 1998.
(b) Employee shall receive options (the "Options") to purchase twenty
thousand (20,000) shares of the Company's common stock at the price of $10.00
per share. The Options shall be exercisable on the earlier of (A) the third
anniversary of this Agreement and (B) the date, if any, prior to such third
anniversary on which (i) the Company's common stock becomes publicly traded on a
national securities exchange or the Nasdaq stock market, (ii) the Company
completes an initial public offering of its common stock with proceeds in excess
of $15,000,000, or (iii) the Company, or its assets or business, is sold
substantially as entirety. The Options are subject to the terms and conditions
of the Company's 1998 Management Stock Option Plan.
(c) For each of the first five years after January 1, 1998, provided
he remains an employee, Employee shall participate in a stock option program
providing for the annual award, to all participants in the aggregate, of options
to purchase up to 60,000 shares of Company stock. The Chief Executive Officer
will recommend for approval by the Compensation Committee of the Board of
Directors the allocation of such options among participants in the program.
(d) Company shall continue in effect the terms of its current
certificate of incorporation and bylaws which provide for indemnification of
officers and directors to the maximum extent provided by law. Company currently
carries directors' and officers' liability insurance with a deductible of
$100,000 and a maximum coverage of $5 million but reserves the right to change
such coverage if Company's directors so determine.
SECTION 3.03. CONTINUATION OF SALARY. If the Employee dies or becomes
disabled during the Employment Term so that he is unable to perform his duties
hereunder, if Company terminates this Agreement for any reason except as
specified in Section 4.01, or if Employee resigns for "good reason" as described
in Section 4.02, the Company agrees to continue to pay the Employee or his
estate his base salary monthly, but not beyond the end of the Employment Term,
and to continue to provide the benefits described in Section 3.04.
SECTION 3.04. BENEFITS. During the Employment Term, the Employee shall be
entitled to insurance benefits substantially similar to those now provided under
the Kolmar Laboratories, Inc. employee health benefit plan as now in effect, and
may continue such benefits after any termination of the Employee's Employment by
paying the applicable premium to the extent allowed by applicable law. However,
the Company may cease providing such benefits if any law or regulation prohibits
making benefits available except on an equal basis for all employees and if the
benefits now provided Employee are not so available. To be more specific:
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(a) Company shall provide Employee medical, dental, life insurance,
profit-sharing and other benefits in accordance with the Kolmar Laboratories,
Inc. benefit plans. However, Employee shall receive his allocation of all
profit-sharing benefits available to him for 1997 from Aerosol Services Company,
Inc., and if Employee is unable to participate in any Kolmar Laboratories, Inc.
plan by reason of an eligibility or waiting period, shall continue to
participate in the most equivalent plan of Aerosol Services Company, Inc. until
he is eligible for the Kolmar Laboratories, Inc. benefits.
(b) Employee shall receive three (3) weeks of paid vacation per year
or such greater amount of vacation as is provided under any Company policy then
applicable to employee.
(c) Employee shall receive an automobile allowance of $800 per month.
Company shall also reimburse Employee for the costs of maintenance and fuel for
one automobile as a business expense. Employee shall pay the insurance premiums
on such automobile and shall, on Company request, furnish proof that liability
insurance of at least $500,000 is in effect.
IV. TERMINATION
SECTION 4.01. TERMINATION BY THE COMPANY. Any of the following acts or
omissions shall constitute grounds for the Company to terminate this Agreement:
(a) Employee's failure to perform the duties of his office or to
conduct and manage the business of the Company in a manner reasonably consistent
with the criteria established by the Chief Executive Officer and the Board of
Directors; provided that prior to any termination under this Section 4.01(a)
Employee shall be given written notice of the deficiencies and a reasonable
opportunity to correct his conduct if the matters in question can be corrected.
The criteria established by the Chief Executive Officer and the Board of
Directors shall be identified in advance;
(b) Conduct on the part of the Employee which constitutes the breach
of any statutory or common law duty of loyalty to the Company which has, in the
view of the Chief Executive Officer or the Board of Directors, a material
adverse effect on Company;
(c) Any illegal act by the Employee (as evidenced by a conviction)
which, in the view of the Chief Executive Officer or the Board of Directors,
materially and adversely affects the business of the Company; or
(d) Intentional wrongful engagement in any competitive activity
prohibited by Section 5.01 or 5.02 hereof or employment in another business in a
manner not permitted by Section 2.02.
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It shall be presumed that the Employee's participation in a business
enterprise other than the Company (except for service on boards of directors
approved by the Company) constitutes cause for termination under clause (d) of
this section. Termination by the Company shall be accomplished by written
notice to the Employee and, if pursuant to paragraph (a) above, shall be
preceded by a written notice.
SECTION 4.02. RESIGNATION FOR GOOD REASON. Employee may resign for "good
reason" and thereby terminate Employee's Employment (but not his other
obligations hereunder) as a result of the following:
(a) Without the Employee's prior written consent, a reduction in his
then current salary;
(b) The taking of any action by the Company that would substantially
diminish the aggregate value of the benefits provided to the Employee under the
Employee's medical, health, accident, disability, life insurance, thrift and
retirement plans in which he was participating other than any such reduction
which is (i) required by law, (ii) implemented in connection with a general
concessionary arrangement affecting all employees or affecting the group of
employees (senior management) of which the Employee is a member or (iii)
generally applicable to all beneficiaries of such plans;
(c) An involuntary relocation of the Employee's place of employment
to a place other than within fifty (50) miles of the greater New York, New York
area;
(d) Resignation as a result of unlawful discrimination or other
unlawful acts committed against employee, as evidenced by a settlement,
arbitration award or final court order; or
(e) A reduction in duties and responsibilities which results in the
Employee no longer having the customary duties of the Senior Vice President of
Sales and Marketing.
Provided Company continues to make the payments provided for in Section 3.03,
none of the actions specified in clauses (a) through (e) above shall constitute
a breach of this Agreement.
4.03 RELOCATION. Company relocated its headquarters to the greater New
York area. Upon a decision that Employee shall work from the new headquarters
location:
(a) Company shall notify Employee in writing of the requirement to
work from the new headquarters and Employee shall commence performing his duties
in the new location on the date specified.
(b) Company shall pay Employee's costs to move his furniture and
personal effects to the new headquarters location, shall pay a customary real
estate commission and other selling expenses to sell Employee's personal
residence, shall pay the reasonable expenses of two trips to the new
headquarters location for Employee and
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his spouse to look for a new residence (such trips to be of not more than four
days' duration), and shall pay the rent on an appropriate temporary apartment
approved by the Chief Executive Officer for up to three months in the new
location. As the reimbursement of these expenses presents income tax
consequences to the Employee, such payments will be increased by thirty percent
(30%) in order to alleviate or reduce the tax impact of the payments to the
Employee. If prior to Employee's relocation Company adopts any policy providing
more generous relocation benefits, such policy shall apply rather than this
Section 4.03(b).
SECTION 4.04. DAMAGES FOR BREACH OF CONTRACT. In the event of a breach of
this Agreement by either the Company or the Employee resulting in damages to the
other party, that party may recover from the party breaching this Agreement any
and all damages that may be sustained, excluding incidental, consequential and
punitive damages.
SECTION 4.05. ARBITRATION. With the exception of suits for specific
enforcement of the provisions of Sections 5.01 and 5.02, any controversy,
dispute or claim arising out of, relating to, or concerning this Agreement, the
breach of this Agreement, the employment of the Employee, or the termination of
the Employee's employment will be resolved pursuant to this Section 4.05. This
includes all claims, whether arising in tort or contract, and whether arising
under statute or common law. Any such controversy, dispute or claim will be
submitted to the American Arbitration Association ("AAA") in New York, New York
for final and binding arbitration in accordance with its Employment Dispute
Rules then existing; PROVIDED that, if the rules of the AAA differ from those in
this section, the provisions of this section will control. Any demand for
resolution of such a matter must be sent to the AAA and served on the other
party within the period covered by the applicable statute of limitations. No
arbitrator will have any authority to extend, modify, or suspend any of the
terms of this Agreement. The arbitrator must make his award in writing and must
accompany it with an opinion discussing the evidence and setting forth the
reasons for the award. The decision of the arbitrator within the scope of the
submission will be final and binding on both parties, and any right to judicial
action on any matter subject to resolution by arbitration hereunder hereby is
waived unless otherwise required by applicable law, except suit to enforce an
award by the arbitrator or in the event resolution by an arbitrator is not
available for any reason. This Section 4.05 will be specifically enforceable.
Judgment upon any award rendered by the AAA and/or any other arbitrator may be
entered in any court having jurisdiction.
SECTION 4.06. ATTORNEYS' FEES AND COSTS. If any action in law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party or parties shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled, to the extent awarded or allocated by the court or
arbitrator.
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V. RESTRICTIVE COVENANTS
The following restrictive covenants shall apply to this Agreement:
SECTION 5.01. CONFIDENTIALITY. Employee acknowledges and agrees that the
Company's formulas, sources of supply, cost and financial data, customer
arrangements, marketing plans and other non-public data have a unique nature and
value, derived in part from their status as non-public and proprietary
information. Employee agrees, during the Employment Term and thereafter, to
preserve and protect the confidential nature of said information, and not to
disclose to any third parties, or use for anyone's benefit except the benefit of
the Company, any non-public information about the Company or its business.
SECTION 5.02. NO ADVERSE ACTS. During the Employment Term and continuing
for two (2) years after the date of the expiration of Employee's Employment, the
Employee will not directly or indirectly, solicit, take away, or attempt to
solicit or take away any customer or employee of the Company either on the
Employee's behalf or on behalf of any other person or entity which competes with
Company, or accept a position with one of Company's direct competitors. If the
Company terminates this Agreement on a basis not stated in Section 4.01, or on a
basis described in Section 4.01(a), Employee shall not be required to honor this
Section 5.02 unless Company continues to pay Employee's salary and benefits for
the balance of the Term even if such payments would not otherwise be required.
VI. MISCELLANEOUS
SECTION 6.01. NOTICES. Any notices to be given hereunder by either party
to the other shall be in writing and may be effected by personal delivery, by
courier, or by mail (registered or certified), postage prepaid with return
receipt requested, or by facsimile confirmed by mail. Mailed notices shall be
addressed to the parties at the addresses appearing in the introductory
paragraph or such other address as is specified in a notice conforming to this
Section 6.01. Mailed notices shall be deemed communicated as of four (4)
calendar days after mailing. Notices delivered personally or by courier shall
be deemed delivered when actually received.
Section 6.02. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Company and contains all of the
covenants and agreements between the parties with respect to such employment in
any manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or otherwise, have
been made by any party, which are not embodied herein, and that no other prior
agreement, statement or promise not contained in this Agreement shall be valid
and binding. Any modification of this Agreement, statement or promise not
contained in this Agreement shall not be valid or
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binding. Any modification of this Agreement will be effective only if it is in
writing signed by the party to be charged.
Section 6.03. PARTIAL INVALIDITY. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
Section 6.04. LAW GOVERNING AGREEMENT. This Agreement shall be governed
by and construed in accordance with the law of the State of New York.
Section 6.05. CURRENCY. All amounts described in this Agreement are in
United States Dollars.
Section 6.06. SUCCESSORS AND ASSIGNS. The rights and obligations of the
Company and the Employee under this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of the Company.
Section 6.07. NO CONFLICT. The Company hereby represents and warrants to
Employee that this Agreement and the Company's obligations hereunder do not
violate or conflict with the terms, conditions or covenants of the Company's
(and certain of its subsidiaries') financing agreements entered into on or about
the Effective Date.
Section 6.08. WAIVER. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
"Subsidiaries" "Company"
AEROSOL SERVICES COMPANY, INC.
By: OUTSOURCING SERVICES
----------------------------- GROUP, INC.
Name:
---------------------------
Title:
-------------------------- By:/s/ Christopher Denney
----------------------------
PIEDMONT LABORATORIES, INC. Name: Christopher Denney
--------------------------
Title:CEO and President
By: -------------------------
-----------------------------
Name:
--------------------------- "Employee"
Title:
--------------------------
/s/ John G. Hewson
-------------------------------
KOLMAR LABORATORIES, INC. JOHN G. HEWSON
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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