EXHIBIT 10.21
SEVERANCE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the ninth day of
June, 1998, by and between Certified Grocers of California, Ltd., a California
corporation (the "Company" or "Certified") and Xxxxxx X. Xxxx, Xx. (the
"Executive").
WHEREAS, the Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of the Company and its shareholders; and
WHEREAS, the Executive has been determined to be a vital member of the senior
management team of the Company; and
WHEREAS, the Company recognizes that the possibility of termination due to
Change of Control or without cause may arise and the uncertainty it may raise
among management of the Company may result in the departure or distraction of
management personnel, in each case to the detriment of the Company and its
shareholders.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants
herein contained, it is agreed as follows:
This Agreement sets forth the severance benefits which the Company agrees will
be provided to the Executive in the event the Executive's employment with the
Company is terminated without cause under the circumstances described below.
1. RIGHT TO TERMINATE. Certified or the Executive may terminate the
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Executive's employment at any time, subject to Certified's providing
the benefits hereinafter specified in accordance with the terms
thereof.
2. TERM OF AGREEMENT. This Agreement shall commence on June 9, 1998; and
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shall continue in effect until the earlier of June 9, 2001, or
termination of the Executive's employment; provided, however, that
commencing on June 9, 2001 the term of this Agreement shall be
extended for one additional year unless at least 90 days prior to such
date, Certified or the Executive shall have given written notice per
Section 9 herein that this Agreement shall not be extended; and
provided, further, that notwithstanding the delivery of any such
notice, the term of this Agreement shall automatically extend for an
additional period of twelve (12) months after a Change of Control of
the Company. For the purposes of this Agreement, "Change of Control"
shall mean (i) The acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities and Exchange
Act of 1934, of beneficial ownership of fifty-one percent (51%) or
more of the outstanding Class A Shares of Certified Grocers of
California, Ltd.; or (ii) if the individuals who presently serve on
the Certified
Board of Directors no longer constitute a majority of the members of
the Certified Board of Directors; provided, however, any person who
becomes a director subsequent to the commencement date of this
Employment Agreement, who was elected to fill a vacancy by a majority
of Certified's members shall be considered as if a member prior to the
commencement date of this Agreement; or (iii) A liquidation or
dissolution of Certified or the sale of all or substantially all of
the assets of Certified.
3. TERMINATION. The Executive shall be entitled to the benefits provided
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in Section 4 hereof upon the termination of the Executive's employment
with Certified during this Agreement period, unless such termination
is (i) because of the Executive's death, Disability, or Retirement,
(ii) by Certified for Cause, or (iii) by the Executive other than for
Good Reason (as all such capitalized terms are hereinafter defined).
(a) Disability. Termination by Certified of the
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Executive's employment based on "Disability" shall mean the
Executive's incapacity due to physical or mental illness to
substantially perform his duties on a full-time basis for six (6)
consecutive months and, within thirty (30) days after a notice of
termination is thereafter given by the Company, the Executive
shall not have returned to the full-time performance of the
Executive's duties; provided, however, if the Executive shall not
agree with a determination to terminate him because of
Disability, the question of the Executive's disability shall be
subject to the certification of a qualified medical doctor agreed
to by the Company and the Executive or the Executive's legal
representative, in the event of the Executive's incapacity to
designate a doctor. In the absence of agreement between the
Company and the Executive, each party shall nominate a qualified
medical doctor and the two doctors shall select a third doctor,
who shall make the determination as to Disability.
(b) Retirement. Termination by the Executive or by
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Certified of the Executive's employment based on "Retirement"
shall mean termination on or after the Executive's attainment of
age sixty-five (65) or an earlier age mutually agreed to by the
Executive and Certified.
(c) Cause. Termination by Certified of the Executive's
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employment for "Cause" shall mean termination upon:
(i) the willful and continued failure by the Executive
to substantially perform his duties (other than
any such failure resulting from the Executive's
incapacity due to physical or mental illness),
after demand for substantial performance is
delivered in writing by the Company to the
Executive that
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specifically identifies the manner in which the
Company believes the Executive has not
substantially performed his duties, or
(ii) the willful engaging by the Executive in illegal
or fraudulent misconduct which is materially
injurious to the Company, or
(iii) the willful material breach of the
Confidentiality and Nonsolicitation Agreement set
forth in Section 6.
No act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him
not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
(d) Good Reason. Termination by the Executive of the
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Executive's employment for "Good Reason" shall mean termination
based on (i) an adverse change in the Executive's status or
position(s), in effect immediately prior to the date of this
Agreement, (ii) a reduction in the Executive's base salary as in
effect immediately prior to the date of this Agreement, (iii) a
Change in Control, or (iv) the requirement by the Company that
the Executive be based at an office greater than 35 miles from
where the Executive's office is located on the date of the Change
of Control.
(e) Notice of Termination. Any purported termination by
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Certified or by the Executive shall be communicated by written
Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this
Agreement relied upon.
(f) Date of Termination. "Date of Termination" shall be
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the date set forth by written Notice of Termination or, if none,
then by mutual written agreement of the parties or by the
arbitrator in a proceeding as provided in Section 11 hereof.
During the pendency of any such dispute, Certified will continue
to pay the Executive the Executive's full compensation in effect
just prior to the time the Notice of Termination is given and
until the dispute is resolved in accordance with Section 11.
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4. COMPENSATION UPON TERMINATION.
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(a) Subject to Section 8 hereof, if, the Executive's employment
with Certified shall be terminated (i) by Certified other than for
Cause, Disability, Death or Retirement or (ii) by the Executive for
Good Reason, then within five business days of the Date of
Termination, Certified shall pay the Executive an amount equal to the
Executive's highest annual base salary during the three year period
immediately prior to the Date of Termination, plus an amount equal to
the average annual incentive bonus paid during the three years prior
to the Date of Termination.
(b) Certified shall maintain all benefits for the Executive and
his dependents in substantially the same form as those benefits in
place immediately prior to the Executive's termination for a period
terminating on the earliest of (i) twelve (12) months from the Date of
Termination, (ii) the commencement of similar benefits from a new
employer (but only to the extent that equivalent benefits are offered
by said employer), or (iii) attainment of age 65.
(c) All payments and benefits provided for yet unpaid in this
Section 4 shall be forfeited if the Executive violates any material
provision of this Agreement including, without limitation, the
Confidentiality and Nonsolicitation Agreement specified in Section 6
herein.
(d) In the event of termination of the Executive by the Company
for Cause, death, Disability, Retirement, or by the Executive for
other than Good Reason, no payment shall be provided under this
Agreement. This Agreement does not, and is not intended to, limit any
rights or benefits of the Executive pursuant to any other plan, policy
or written agreement.
5. NO OBLIGATION TO MITIGATE.
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The Executive is under no obligation to mitigate damages in the amount
of any payment provided for hereunder by seeking other employment or
otherwise.
Subject to paragraph 4(b), the amount of any payment provided for in
this Agreement shall not be reduced, offset or subject to recovery by
Certified by reason of any compensation earned by the Executive as the
result of employment by another employer after the Date of
Termination, or otherwise.
6. CONFIDENTIALITY AND NONSOLICITATION AGREEMENT.
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(a) The Executive acknowledges that in the course of his
employment by the Company, he will have access to and become informed
of confidential and secret information which is a competitive asset of
the Company ("Confidential Information"), including (i) the terms of
any agreement between
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the Company and any employee, customer or supplier, (ii) pricing
strategy, (iii) product development strategies, (iv) personnel
training and development programs, (v) financial results, (vi)
strategic plans and demographic analyses, (vii) proprietary computer
and systems software, and (viii) any confidential non-public
information received from the Company concerning the Company, its
employees, suppliers and customers. The Executive agrees that he will
keep all Confidential Information in strict confidence during the term
of his employment by the Company and thereafter and will never make
known, divulge, reveal, furnish, make available, or use any
Confidential Information (except in the course of his regular
authorized duties on behalf of the Company). The Executive agrees that
the obligations of confidentiality hereunder shall survive termination
of his employment at the Company regardless of any actual or alleged
breach by the Company of this Agreement and shall continue for one
year following such termination provided that such obligation shall
terminate earlier (i) as to specific information that shall have
become known through no fault of the Executive or (ii) as to
Confidential Information which the Executive is required by law to
disclose (after giving the Company notice and an opportunity to
contest such requirement). The Executive's obligations under this
Section 6 are in addition to, and not in limitation or preemption of,
all other obligation of confidentiality which the Executive may have
to the Company under general legal or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of
this Agreement, make or cause to be made, any copies, pictures,
duplicates, facsimiles, or other reproductions or recordings or any
abstracts or summaries including or reflecting Confidential
Information. All such documents and other property furnished to the
Executive by the Company or otherwise acquired or developed by the
Company shall at all times be the property of the Company. Upon
termination of the Executive's employment by the Company, the
Executive will return to the Company any such documents or other
property of the Company which are in the possession, custody or
control of the Executive.
(c) In the event of the Executive's termination of employment at
the Company, the Executive agrees that he will not in any capacity, on
his own behalf or on behalf of any other firm, person, or entity, for
a period of one year, solicit, or assist in the solicitation of, any
employee of the Company to terminate his or her employment with the
Company.
(d) The Executive acknowledges and agrees that a violation of
the foregoing provisions of this Section 6 (referred to collectively
as the Confidentiality and Nonsolicitation Agreement) that results in
material detriment to the Company would cause irreparable harm to the
Company, and that the Company's remedy at law for any such violation
would be inadequate. In recognition of the foregoing, the Executive
agrees that, in addition to any other
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relief afforded by law or this Agreement, including damages sustained
by a breach of this Agreement and forfeiture of any and all
compensation or benefit otherwise provided under Section 4, and
without any necessity or proof of actual damages, the Company shall
have the right to enforce this Agreement by specific remedies, which
shall include, among other things, temporary and permanent
injunctions, it being the understanding of the undersigned parties
hereto that damages, the forfeitures described above and injunctions
shall all be proper modes of relief and are not to be considered as
alternative remedies.
7. SUCCESSORS; BINDING AGREEMENT.
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(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees,
and legatees. If the Executive should die while any amount would still
be payable to the Executive hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee, or if there be no such designee,
to the Executive's estate.
(c) This Agreement, and all of the provisions hereof, shall be
binding upon Certified and all of its affiliates, successors,
transferees, or surviving or continuing entity.
8. TAXES.
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(a) All payments to be made to the Executive under this
Agreement will be subject to required withholding of federal, state,
and local income and employment taxes.
(b) Notwithstanding anything in the foregoing to the contrary,
if any of the payments provided for in this Agreement, together with
any other payments which the Executive have the right to receive from
Certified, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), the payments pursuant to this
Agreement shall be reduced to the largest amount as will result in no
portion of such payments being subject to the excise tax imposed by
Section 4999 of the code; provided, however, that the determination as
to whether any reduction in the payments under this Agreement
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pursuant to this provision is necessary shall be made by the Executive
in good faith, and such determination shall be conclusive and binding
on Certified with respect to its treatment of the payment for tax
reporting purposes.
9. NOTICE. For purposes of this Agreement, notices and all other
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communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered by United
States registered or certified mail, return receipt requested, postage
prepaid and addressed, in the case of Certified, to the address set
forth on the first page of this Agreement or, in the case of the
undersigned employee, to the address set forth below his signature,
provided that all notices to Certified shall be directed to the
attention of the Chief Executive Officer of the Certified, with a copy
to the Secretary of Certified, or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective
only upon receipt.
10. VALIDITY. The invalidity or unenforceability of any provision of this
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Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and
effect.
11. ARBITRATION. Any dispute or controversy arising under or in
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connection with this Agreement shall be settled exclusively by an
arbitrator selected under the rules of the American Arbitration
Association and the arbitration shall be conducted under the rules of
said association. Any claim must be filed within thirty (30) days of
the Notice of Termination unless extended by mutual written agreement
by both parties. Each party shall be entitled to present evidence and
argument to the arbitrator. The arbitrator shall have the right only
to interpret and apply the provisions of this Agreement and may not
change any of its provisions. The arbitrator shall permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a
claim or a defense to a claim, subject to supervision by the
arbitrator. The hearing shall begin within thirty (30) days of the
filing of the claim, unless extended by mutual written agreement by
both parties, and the arbitrator's decision shall be rendered within
thirty (30) days of the completion of the hearing unless extended by
mutual written agreement by both parties. The determination of the
arbitrator shall be conclusive and binding upon the parties and
judgment upon the same may be entered in any court having
jurisdiction. The Company shall bear all direct costs of the
arbitration proceedings pursuant to this Section 11 (arbitration fees,
transcript expenses, etc.) and pay reasonable legal fees of the
Executive.
12. SURVIVAL OF PROVISIONS. Notwithstanding any other provision of this
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Agreement, the parties' respective rights and obligations under
Sections 4, 5, 6, and 7, 11 of this Agreement shall survive
termination of this Agreement.
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13. MISCELLANEOUS. No provision of this Agreement may be modified, waived
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or discharged unless such waiver, modifications or discharge is agreed
to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party
hereto or compliance with any condition or provision of this Agreement
to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Unless otherwise noted, references to "Sections" are
to sections of this Agreement. The captions used in this Agreement
are designed for convenient reference only are not to be used for the
purpose of interpreting any provision of this Agreement.
14. ENFORCEABILITY. Notwithstanding any other provision of this
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Agreement, to the extent that any payment to be made pursuant to this
Agreement is prohibited by applicable federal or state law or
regulation, or by any action of any federal or state regulatory
agencies, unless Certified has obtained prior approval for such
otherwise prohibited payment from the appropriate regulatory
authority, Certified shall not be obligated to make such payments
under this Agreement.
15. GOVERNING LAW. The validity, interpretation, construction and
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performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of California,
without giving effect to the principles of conflict of laws of such
State.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed as of the date set forth below.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By:
_______________________________________
Xxxxxx X. Xxxxxxx
President
Agreed to this ninth day of June, 1998.
___________________________________________
Xxxxxx X. Xxxx, Xx.
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