EXHIBIT 10i
EMPLOYMENT AGREEMENT
DATE: April 14, 1996
PARTIES: WHOLESOME & HEARTY FOODS, INC. (the "Company")
000 X.X. Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
XXXX X. XXXXXXX ("Employee")
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
RECITAL:
The Company is engaged in the business of manufacturing and selling food
products. The Company desires to employ and retain the unique experience,
abilities, and services of Employee as its Chief Executive Officer.
AGREEMENT:
The parties agree as follows:
SECTION 1. EMPLOYMENT
1.1 TERM. The Company agrees to employ Employee as its Chief Executive
Officer for a term of three years, commencing on April 14, 1996, and terminating
on April 13, 1999, or until an earlier termination in accordance with Section 5.
The Board of Directors of the Company shall review Employee's performance within
60 days of the end of the second year of the employment term and, in the event
this Agreement is extended at the end of the second year, within 60 days of the
end of each subsequent one-year period thereafter. After completing each such
review, the Board of Directors may elect, in its sole and absolute discretion,
to extend this Agreement for an additional one-year period. For example, at the
conclusion of the second year of the employment term, the Board of Directors may
elect to extend the term of this Agreement until April 13, 2000. The Board of
Directors shall promptly notify Employee, after completing each such review,
whether the Board of Directors elects to extend this Agreement for an additional
one-year term. The Board of Directors shall be under no obligation to extend
the term of this Agreement, either at the end of the second year of the
employment term, or at the end of any subsequent one-year period thereafter, and
no extension shall be valid and binding unless set forth in writing and signed
by both parties.
1.2 DUTIES. Employee accepts employment with the Company on the terms and
conditions set forth in this Agreement, and agrees to devote his full time and
attention (reasonable periods of illness excepted) to the performance of his
duties under this Agreement. In general, Employee shall perform such duties as
are customarily performed by a chief executive officer of a publicly held
company engaged in a business similar to the Company's business. Employee shall
perform such specific duties and shall exercise such specific authority as may
be assigned to Employee from time to time by the Board of Directors of the
Company. In performing such
Page 1 - EMPLOYMENT AGREEMENT
duties, Employee shall be subject to the direction and control of the Board of
Directors of the Company. Employee further agrees that in all aspects of such
employment, Employee shall comply with the instructions, policies, and rules of
the Company established from time to time, and shall perform his duties
faithfully, intelligently, to the best of his ability, and in the best interest
of the Company. Employee shall serve as an officer of the Company without
additional compensation if so requested. The devotion of reasonable periods of
time by Employee for personal purposes, outside business activities, or
charitable activities shall not be deemed a breach of this Agreement, provided
that such purposes or activities do not materially interfere with the services
required to be rendered to or on behalf of the Company.
SECTION 2. COMPENSATION
2.1 BASE COMPENSATION. In consideration of all services to be rendered by
Employee to the Company, the Company shall pay to Employee a base compensation
of $225,000 per year, payable in equal biweekly installments. The Board of
Directors shall formally review Employee's base compensation in February, 1997
and, in the event the Board of Directors, in its sole and absolute discretion,
decides to increase such base compensation, such increase shall be made
retroactively effective to January 1, 1997.
2.2 BONUS COMPENSATION. The Board of Directors recognizes that the
success of the Company is based on the collective efforts of all of its
employees. The Board of Directors has approved the concept of a success sharing
plan, whereby management would establish, subject to approval of the Board of
Directors, annual performance and financial targets in three areas, namely Net
Sales, Income Before Provision For Income Taxes As Percentage of Net Sales
(hereinafter referred to as "PBT"), and after-tax percent return on equity
(hereinafter referred to as "XXX"), and employee bonuses would be awarded based
on the Company's success in achieving such targets. The Board of Directors of
the Company is willing to consider input from Employee in refining the success
sharing plan, provided, however, the Board of Directors shall retain sole and
absolute discretion and control over the final form of such plan. Employee
shall be entitled to participate in the success sharing plan, as established and
amended from time to time by the Board of Directors, the same as any other
employee of the Company in 1996 and 1997 and, in the event this Agreement is
extended, during the term of any extensions. Management has established the
following targets for Net Sales, PBT and XXX for calendar year 1996 and the
Company shall pay Employee a bonus in each such category, based on the Company's
highest level of achievement within the category, if the Company achieves such
targets in 1996:
1996 % x 33% of Non-Cumulative
Achievement Targets Base Compensation Bonus Amounts
------------------- ----------------- -------------
Net Sales
---------
Less than $50 MM -0- -0-
$50MM to less than
$54 MM 30% x $74,925 $22,478
$54MM to less than
$58 MM 40% x 74,925 29,970
$58MM or greater 60% x 74,925 44,955
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Income Before Provision
For Income Taxes
As Percentage of Net Sales
--------------------------
PBT of 10% x Net Sales 30% x $74,925 $22,478
PBT of 12% x Net Sales 40% x 74,925 29,970
PBT of 14% x Net Sales 60% x 74,925 44,955
Percent Return
On Equity
--------------
XXX of 12% 30% x $74,925 $22,478
XXX of 16% 40% x 74,925 29,970
XXX of 18.5% 60% x 74,925 44,955
The foregoing bonuses within each objective category are NOT cumulative
and, in the event the Company is successful in achieving more than one level of
achievement within any one category, the Company shall only be obligated to pay
Employee a bonus based on the highest level of achievement. The Company's
accountants shall, as soon as reasonably practical after December 31, 1996,
determine the Company's Net Sales, PBT and XXX for calendar year 1996, which
determination shall be based on the figures set forth by the Company in its 1996
Annual Report to Shareholders and shall be final and binding on all parties.
The Company shall, in the event Employee is entitled to any bonuses for 1996
based on the foregoing schedule, pay the same to Employee within 30 days of
receipt of the accountants' final determination of Net Sales, PBT and XXX.
2.3 NONSTATUTORY STOCK OPTIONS. The Company granted Employee the
following nonstatutory stock options under the Company's 1992 First Amended and
Restated Combination Stock Option Plan (the "Plan") on April 14, 1996, the date
of commencement of Employee's employment:
2.3.1. The Company granted Employee a nonstatutory stock option
to purchase 300,000 shares of the Company's common stock at an exercise price of
$8.69 per share. The terms and conditions of such nonstatutory stock option are
set forth in the Nonstatutory Stock Option Agreement attached as Exhibit 1,
which the parties shall execute contemporaneously with the execution of this
Agreement.
2.3.2. The Company granted Employee a nonstatutory stock option
to purchase 150,000 shares of the Company's common stock at an exercise price of
$8.69 per share. The terms and conditions of such nonstatutory stock options
are set forth in the Nonstatutory Stock Option Agreement attached as Exhibit 2,
which the parties shall execute contemporaneously with the execution of this
Agreement.
2.4 RELOCATION EXPENSES. The Company shall pay Employee a lump sum of
$180,000 upon mutual execution of this Agreement to be used by Employee, in
Employee's sole discretion, to cover relocation-related expenses, including but
not limited to temporary housing, air transportation, real estate transaction
costs, and household moving expenses. Employee acknowledges that this lump sum
payment is a grossed-up amount and includes reimbursement to Employee for the
tax liability that Employee will incur as a result of the funds being paid to
him for relocation expenses.
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2.5 OTHER BENEFITS. The Company shall provide to Employee and Employee's
family the same benefits that the Company provides to other management employees
and their families, subject to Employee's satisfaction of the normal eligibility
conditions for such benefits.
2.6 TAXES. All compensation payable to Employee under this Section 2 or
Section 5 below shall be subject to the customary withholding of income and
other taxes as required by federal and state law with respect to compensation
paid by a corporation to an employee.
2.7 VACATION. Employee shall be entitled to four weeks paid vacation
during each full year of employment and to the number of paid holidays provided
for under the current policies and procedures of Employer in effect from time to
time.
SECTION 3. CONFIDENTIALITY AGREEMENT
Employee agrees to execute contemporaneously with this Agreement the
Employee Proprietary Rights, Confidentiality and Inventions Agreement attached
hereto as Exhibit 3, and to strictly comply with the terms and conditions
thereof.
SECTION 4. NONCOMPETITION COVENANT
4.1 NEED FOR NONCOMPETITION COVENANT. Employee recognizes and
acknowledges that the business contacts he will make, and the knowledge and
proprietary information that he will gain, as a result of his employment with
the Company, is special and unique and that a covenant on his part not to
compete against the Company upon termination of his employment is essential to
protect the properties, assets and business of the Company. Employee
acknowledges and agrees that the noncompetition covenant set forth in this
Section 4 is being entered into in connection with his initial employment by the
Company.
4.2 NONCOMPETITION COVENANT. In consideration of his initial employment
by the Company, Employee agrees that he will not, during the period of his
employment with the Company and for a period of two years from the date of
termination of such employment, within any state or country in which the Company
conducts its business or sells or distributes its products: (i) directly or
indirectly, whether as an owner, partner, principal, member, stockholder (other
than a stockholder in a corporation whose stock is publicly traded and in which
Employee owns less than five percent (5%) of the issued and outstanding voting
stock), officer, director, employee, agent, representative, associate,
consultant or otherwise, engage in, or assist in any manner, any business that
competes with the Company in the production, marketing, or sale of meat
substitute vegetarian food products; (ii) induce, or attempt to induce, any
person who is in the employment of the Company to leave such employment and
engage in any business that is competitive with the Company; or (iii) directly
or indirectly, suggest, request or encourage any suppliers or customers of the
Company to curtail, reduce or cancel their business done with the Company, or
otherwise solicit for himself or any other person or entity any business of the
Company.
4.3 REMEDIES; EQUITABLE RELIEF. Employee acknowledges that a breach of
any of the provisions of this Noncompetition Covenant will cause the Company
irreparable and continuing injury and damage, for which there will be no
adequate remedy at law. By reason thereof, Employee agrees that the Company
shall be entitled to specific performance, including immediate issuance of a
temporary restraining order and/or preliminary or permanent injunctive relief
Page 4 - EMPLOYMENT AGREEMENT
enforcing this Noncompetition Covenant, without the necessity of proof of actual
damages and without posting bond for such relief, in addition to any and all
other remedies provided by applicable law or equity.
4.4 SEVERABILITY. While Employee acknowledges that the restrictions
contained herein are reasonable, if any term or condition of this Noncompetition
Covenant is determined to be unenforceable because of its scope, duration,
geographical area or similar factor, the court making such determination shall
have the power to reduce or limit such scope, duration, area or other factor,
and such covenant shall then be enforceable in its reduced or limited form.
4.5 EXCEPTION TO NONCOMPETITION COVENANT. Notwithstanding the provisions
of this Section 4, Employee shall not be prohibited, directly or indirectly, as
an officer, director, employee, agent, representative, associate, consultant or
otherwise, from working for, or associating with, a public company involved in
producing, marketing or selling meat substitute vegetarian food products,
PROVIDED (i) such company has gross annual revenues of not less than $500
million, (ii) the portion of the company's business involved in the meat
substitute vegetarian food product business does not constitute more than 5% of
the total gross annual revenues of such company, and (iii) Employee does not
work in, and is not directly involved with, the portion of the company's
business that is involved in the meat substitute vegetarian food product
business.
SECTION 5. TERMINATION OF EMPLOYMENT
5.1 TERMINATION FOR CAUSE. Employee's employment under the terms of this
Agreement may be terminated immediately, at the option and in the sole
discretion of the Company, for "Cause." For purposes of this Agreement,
termination of Employee's employment for "Cause" shall be limited to (a)
Employee's conviction by a court with proper jurisdiction of a felony; (b)
objective evidence of a material act of dishonesty by Employee related to his
employment; (c) Employee's drunkenness or intoxication on the job, use of
illegal drugs, or use of lawful drugs or alcohol in a manner violative of
Company policy; (d) any material breach of Employee's obligations under this
Agreement, provided, however, if the breach is of such nature that can be cured,
Employee shall be given 15 days (the "Cure Period") after Employee's receipt of
notice of such breach to cure the same, and if such breach cannot be cured
within the Cure Period and if Employee has commenced to cure such breach within
the Cure Period and thereafter proceeds with reasonable diligence and in good
faith to effect a cure as soon as practicable, then the Cure Period shall be
extended to such time as Employee can reasonably cure such breach; (e)
Employee's diversion of any corporate opportunity of the Company for the
Employee's direct or indirect benefit; or (f) inaccuracy of any representation
made by Employee at Section 7 of this Agreement.
5.2 TERMINATION ON DEATH OR DISABILITY. Employee's employment under the
terms of this Agreement shall automatically terminate upon Employee's death or
"Disability." For purposes of this Agreement, "Disability" shall mean a health
condition or other circumstance which renders Employee unable to perform the
essential functions of his position with or without reasonable accommodation.
The Company and Employee acknowledge (without limitation to their right to
assert that other circumstances constitute a disability) that Employee's
inability due to a physical or mental injury or illness to perform his duties
for a consecutive period of 90 days or for at least 120 days in a 12-month
period shall satisfy the requirements of this provision. Provided such
requirements are satisfied, Employee acknowledges that the nature of his
position is such that no reasonable accommodation is possible without undue
hardship to the Company.
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5.3 TERMINATION ON CHANGE IN CONTROL. Employee's employment under the
terms of this Agreement may be terminated immediately, at the option and in the
sole discretion of the Company, during the period commencing 30 days prior to
and ending 180 days following a "Change in Control" of the Company. For
purposes of this Agreement, "Change in Control" of the Company shall be deemed
to have occurred upon the earlier of:
(a) The date that any "person" (as that term is defined in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Act")), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
becomes a beneficial owner (within the meaning of Rule 13d-3
promulgated under the Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities; or
(b) The date of any annual or special meeting of stockholders at
which a majority of the directors then elected are not individuals
nominated by the Company's then incumbent Board of Directors; or
(c) The date of approval by the stockholders of the Company
of a plan of merger or consolidation of the Company in which such
stockholders will not hold at least seventy-five percent (75%) of the
combined voting power of the resulting entity immediately following
such merger or consolidation, or the approval by the stockholders of
the Company of a plan of complete liquidation of the Company or an
agreement for the sale of substantially all of the Company's assets.
5.4 TERMINATION BY EMPLOYER WITHOUT CAUSE. Employee's employment under
the term of this Agreement may be terminated by Employer, in the exercise of
Employer's sole discretion, at any time without Cause, provided Employer pays
Employee the compensation and severance pay provided in Section 5.5.2.
5.5 EFFECT OF TERMINATION; PAYMENTS UPON TERMINATION.
5.5.1 In the event of the termination of Employee's employment
for Cause pursuant to Section 5.1, the Company shall pay to Employee the then
current base compensation payable to Employee under Section 2.1, prorated
through the effective date of such termination. No other compensation, benefits
or payments of any nature whatsoever shall be due and payable under this
Agreement in the event of termination of Employee's employment by the Company
for Cause.
5.5.2 In the event of the termination of Employee's employment
pursuant to Section 5.2 (Death or Disability) or Section 5.3 (Change of
Control), or Section 5.4 (termination of Employee's employment by the Company
without Cause), the Company shall pay to Employee:
(a) The then current base compensation payable to Employee under
Section 2.1 prorated through the effective date of the termination.
Page 6 - EMPLOYMENT AGREEMENT
(b) If Employee is entitled to a bonus in the year in which his
employment is terminated, the Company shall, as soon as the Company's
accountants have determined the amount of the bonus, prorate the same
through the effective date of Employee's termination and pay Employee
his prorata share thereof based on the effective date of his
termination.
(c) Severance pay equal to the greater of (i) 18 months of the
base compensation payable to Employee under Section 2.1, or (ii) the
base compensation remaining to be paid to Employee under Section 2.1
between the effective date of such termination and the end of the
employment term under this Agreement. Employee agrees, as a condition
to payment and receipt of such severance pay, to execute a full and
complete release, in form and substance satisfactory to the Company,
of any and all claims of every kind and nature whatsoever against the
Company.
(d) No other compensation, benefits or payments of any nature
whatsoever shall be due and payable under this Agreement in the event
of termination of Employee's employment by the Company pursuant to
Sections 5.2, 5.3, or 5.4. without Cause.
5.6 DECISION OF COMPANY NOT TO EXTEND TERM; DECISION OF EMPLOYEE NOT TO
ACCEPT EXTENSION.
5.6.1 DECISION OF COMPANY NOT TO EXTEND TERM. The Company is
required under Section 1.1 above to notify Employee at the end of the second
year of the employment term and, in the event this Agreement is extended, at the
end of each subsequent one-year period thereafter, whether the Company elects to
extend this Agreement for an additional one-year term. If the Company, in its
sole and absolute discretion, decides not to extend this Agreement for an
additional one-year term, then the Company shall, in the event it has not
already paid severance pay to Employee under Section 5.5.2 above, pay to
Employee at the end of the final year of Employee's employment, as severance
pay, 18 months of the then current base compensation payable to Employee under
Section 2.1, provided, however, the Company shall have no obligation to pay such
severance pay if the reason for not extending this Agreement is Employee's
retirement. Employee agrees, as a condition of payment and receipt of such
severance pay, to execute a full and complete release, in form and substance
satisfactory to the Company, of any and all claims of every kind and nature
whatsoever against the Company. The Board of Directors shall be under no
obligation, in the event it elects not to extend the term of this Agreement, to
review Employee's performance, or offer Employee another extension, at the end
of the final year of Employee's employment.
5.6.2 DECISION OF EMPLOYEE NOT TO ACCEPT EXTENSION. If the
Company, in its sole and absolute discretion, decides to extend this Agreement
at any time for an additional one-year term and Employee decides not to accept
such extension, then the Company shall have no obligation to pay, and shall not
pay, any severance pay to Employee.
5.7 OUTPLACEMENT SERVICES. In the event of the termination of Employee's
employment pursuant to Section 5.3 (Change of Control) or Section 5.4
(Termination of Employee's employment by the Company without cause), or in the
event the Company elects not to extend the term of this Agreement and Employee's
employment ceases due to expiration of the
Page 7 - EMPLOYMENT AGREEMENT
employment term, the Company shall retain a reputable outplacement agency,
acceptable to Employee, to assist Employee in finding another job, provided,
however, the maximum amount that the Company shall be obligated to expend in
outplacement services for Employee shall be $25,000.
SECTION 6. FACILITIES AND PERSONNEL
Employee shall be provided a private office, secretarial services, and such
other facilities, supplies, and services as shall be required for the
performance of Employee's duties under this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE
Employee represents and warrants to the Company that there is no employment
contract or any other contractual obligation to which Employee is subject which
prevents Employee from entering into this Agreement or from performing fully
Employee's duties under this Agreement and that Employee has accurately stated
his educational background, employment history and experience in the
pre-employment process.
SECTION 8. MISCELLANEOUS PROVISIONS
8.1 RESTRICTION ON ASSIGNMENT. Employee acknowledges that the services to
be rendered hereunder are special, unique and of extraordinary character and
that he may not assign any of his rights, or delegate any of his duties or
obligations hereunder without the prior written consent of the Company.
8.2 ENTIRE AGREEMENT. This document (including the exhibits attached
hereto) is the entire, final and complete Agreement and understanding of the
parties with respect to the subject matter hereof, and supersedes and replaces
all written and oral agreements and understandings heretofore made or existing
by and between the parties or their representatives with respect thereto,
specifically including without limitation that certain letter, dated April 12,
1996, from The Xxxxxxx Company to Employee.
8.3 WAIVER. No waiver of any provision of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
8.4 BINDING EFFECT. All rights, remedies and liabilities herein given to
or imposed upon the parties shall extend to, inure to the benefit of and bind,
as the circumstances may require, the parties and their respective heirs,
personal representatives, administrators, successors and permitted assigns.
8.5 NOTICES. Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be deemed given on the date
of transmission when sent by telex or facsimile transmission, on the third
business day after the date of mailing when mailed by certified mail, postage
prepaid, return receipt requested, from within the United States, or on the date
of actual delivery, whichever is the earliest, and shall be sent to the parties
at the addresses shown on the first page of this Agreement, or at such other
address as either party may hereafter
Page 8 - EMPLOYMENT AGREEMENT
designate by written notice to the other.
8.6 AMENDMENT. No supplement, modification or amendment of this Agreement
shall be valid, unless the same is in writing and signed by all parties hereto.
8.7 SEVERABILITY. In the event any provision or portion of this Agreement
is held to be unenforceable or invalid by any court of competent jurisdiction,
the remainder of this Agreement shall remain in full force and effect and shall
in no way be affected or invalidated thereby.
8.8 ATTORNEY'S FEES. In the event any suit, action or other legal
proceeding shall be instituted to declare or enforce any right created by this
Agreement, or by reason of any breach of this Agreement, the prevailing party
shall be entitled to recover reasonable attorney fees as fixed by the trial
court and all appellate courts.
8.9 LEGAL REPRESENTATION. This Agreement was prepared by Xxxxxx, Xxxxxxxx
& Xxxxx as attorneys for the Company. Employee acknowledges that Xxxxxx,
Xxxxxxxx & Xxxxx has acted as attorneys only for the Company and does not
represent Employee. Employee acknowledges that he has exercised his right to
independent legal counsel and is freely and voluntarily entering into this
Agreement having exercised such right.
8.10 GOVERNING LAW AND VENUE. This Agreement shall be deemed to have been
executed and entered into in Portland, Oregon, and this Agreement, and its
formation, operation and performance, shall be governed, construed and enforced
in accordance with the laws of the State of Oregon, without regard to its
conflict of law principles. If any suit or action is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, venue shall be in the federal court or state court in Portland,
Oregon, and the parties hereby waive their right to change such venue and submit
to the jurisdiction of such courts.
8.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original instrument and all of which together
shall constitute a single agreement.
8.12 INDEMNIFICATION. The Company shall indemnify Employee, in the event
Employee is made, or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal, administrative, investigative or otherwise
by reason of the fact that Employee is or was an officer or employee of the
Company, to the fullest extent permitted by the Oregon Business Corporation Act,
and shall, upon request of Employee, advance expenses to Employee in any such
action, suit or proceeding, subject to the terms, conditions and limitations set
forth in the Oregon Business Corporation Act.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
respective dates set forth below, retroactively effective as of April 14, 1996.
EMPLOYEE: COMPANY:
WHOLESOME & HEARTY FOODS, INC.
------------------------- an Oregon corporation
Xxxx X. Xxxxxxx
Date: By:
------------------------- -------------------------------------
Title:
----------------------------------
Date:
---------------------------------
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