EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
October 1, 1996, between The Morningstar Group Inc., a Delaware
corporation (the "Company"), and C. Xxxx Xxxxxxxxxxx (the
"Executive").
WHEREAS, the Executive has made and is expected to make a major
contribution to the profitability, growth and financial strength of
the Company;
WHEREAS, the Compensation Committee of the Company's Board of
Directors has determined that it is appropriate to induce the
Executive to continue in the employment of the Company as Chairman and
Chief Executive Officer ("CEO") of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Company and the
Executive agree as follows:
Section I. Definitions.
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For the purpose of the Agreement, unless the context otherwise
requires, the following terms shall have the respective meanings
assigned to them in this Section I:
(A) "Cause" shall mean (i) fraud on the part of the Executive
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against the Company, (ii) willful and intentional breach by the
Executive of the duties of the Executive as an executive officer of
the Company that are within the control and ability of the Executive
to perform (provided that the Executive shall first be notified of and
be given thirty (30) days to cure such breach), or (iii) conviction of
the Executive for fraud, misappropriation, embezzlement or any felony
(excluding traffic violations).
(B) "Date of Termination" shall mean (1) if the Executive's
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employment is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the
Executive's duties on a full-time basis during such 30-day period); or
(2) if the Executive's employment is terminated by the Company for any
other reason, the date on which a Notice of Termination is received by
the Executive; or (3) if the
Executive's employment is terminated by the Executive, the date on
which the Notice of Termination is given to the Company.
(C) "Disability" shall mean the Executive shall have been absent
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from his duties with the Company on a full-time basis for six
consecutive months, or for a total of six months in any 12-month
period, and within 30 days after written Notice of Termination is
thereafter given by the Company the Executive shall not have returned
to the performance of the Executive's duties.
(D) "EBITDA" shall mean the Company's earnings before interest,
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taxes, depreciation and amortization, as derived from the Company's
financial statements and as determined in accordance with generally
accepted accounting principles.
(E) "Good Reason" shall mean any of the following (without the
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Executive's express written consent):
(1) (a) the assignment (excluding any promotion or
advancement) to the Executive by the Company of duties
materially inconsistent with the Executive's position,
authority, duties, responsibilities and status with the
Company on the date of this Agreement, except on a temporary
basis (not more than 30 days in any 12-month period) as
deemed necessary by the Board of Directors in its reasonable
good faith judgment, or any action by the Company which
results in a material diminishment in such position,
authority, duties, responsibilities or status, or
(b) a determination by the Executive, made in
good faith, that as a result of the occurrence of a
Triggering Event, the Executive is unable to carry out the
duties and responsibilities the Executive had with the
Company immediately prior to the occurrence of a Triggering
Event and such determination shall be conclusive and binding
upon the Company, or
(c) a material change (excluding any promotion or
advancement) in the Executive's reporting responsibilities,
titles or functional offices, except on a temporary basis
(not more than 30 days in any 12-month period) as deemed
necessary by the Board of Directors in its reasonable good
faith judgment, or
(d) any removal of the Executive from, or any
failure to reelect the Executive to, any of such
titles or functional offices, except in connection with the
termination of the Executive's employment for disability,
resignation, Retirement, Cause, or as a result of the Executive's
death, or
(e) any removal of the Executive, or any failure
to reelect the Executive, as a director of the Company,
except in connection with the termination of Executive's
employment for Disability, resignation, Retirement, Cause,
or as a result of the Executive's death; or
(2) (a) any failure by the Company to continue in
effect for the Executive any material benefit plan or
arrangement which the Company otherwise keeps in effect for
its management, except to the extent the Executive is a
participant in any other plans providing the Executive with
substantially similar benefits, or
(b) failure by the Company to include the
Executive in any other similar plan which may be provided to
other officers of the Company of comparable or lower status,
except to the extent the Executive is a participant in any
other plans providing the Executive with substantially
similar benefits (each plan referred to in (2) (a) and (b)
shall hereinafter be referred to as a ""Benefit Plan"), or
(c) the taking of any other action by the Company
if the effect of said action would be to reduce materially
the benefits enjoyed by the Executive unless such reduction
in benefits generally affects the other members of
management similarly; or
(3) any material breach by the Company of any material
provision of this Agreement or any Stock Option Agreement in
effect with the Executive (provided that the Company shall
first be notified of and be given a reasonable opportunity
to cure such breach, which reasonable opportunity to cure
shall not exceed five business days with respect to any
failure to pay money); or
(4) any purported termination of the Executive's
employment by the Company which is not effected pursuant to
a Notice of Termination satisfying the requirements of this
Agreement.
(F) "Notice of Termination" (1) for termination of the
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Executive's employment by the Company for Disability, Retirement or
Cause shall mean a written notice which shall indicate those specific
termination provisions in this Agreement relied upon and which sets
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, and (2) "Notice of Termination" for
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termination of the Executive's employment by the Company or the
Executive for any other reason shall mean a written notice by the
Company or the Executive, as the case may be, which shall indicate the
reason for termination of the Executive's employment, setting forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment and specific
provisions in this Agreement relevant to such facts and circumstances.
(G) "Retirement" shall mean termination by the Company or the
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Executive of the Executive's employment based on the Executive's
having reached age 65 or such other age as shall have been fixed in
any arrangement established with the Executive's consent with respect
to the Executive.
(H) "Stock Option Agreement" shall mean any Stock Option
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Agreement between the Company and the Executive in effect as of the
date of execution hereof or hereafter.
(I) "Triggering Event" shall mean the sale of a majority of the
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shares of the Company, sale of a majority of the assets of the
Company, merger of the Company into another company whereby the
Company is not the surviving entity or the Board of Directors of the
Company no longer controls the surviving entity or other like event.
Section II. Term.
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The term of Executive's employment under this Agreement shall be
3 years; shall commence effective as of October 1, 1996 and shall
automatically renew such that the term at the beginning of each year
commencing October 1 of 1997 and thereafter, shall be 3 years. This
Agreement shall terminate, upon the earliest of (1) the Date of
Termination of the Executive's employment with the Company; (2) the
Executive's death; or (3) the Executive's resignation or Retirement.
Section III. Compensation.
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(A) Salary. The Company shall pay to the Executive a salary
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("Base Salary") expressed in dollars per annum but payable
biweekly in accordance with the Company's customary payroll
procedures. The Base Salary for each of the first three years shall
be $600,000; provided, however, that said Base Salary shall be
renewable in the event of a material acquisition or like event which
occurs after the commencement date of this Agreement and greatly
changes or increases the Executive's duties and responsibilities.
(B) Benefits, Reimbursements and Expenses.
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(1) In addition to the other provisions of this Section III,
Executive shall be entitled to receive any employee benefits regularly
provided by the Company to its regularly engaged executive employees
from time to time and shall continue to receive any employee benefits
which he is receiving or entitled to as of the date of this Agreement.
(2) The Company, in accordance with the rules and
regulations that it may issue from time to time, shall reimburse
Executive for reasonable business expenses incurred in the performance
of his duties, including travel and lodging expenses while away from
time, provided that the Executive presents to the Company documentary
evidence which provides sufficient information to establish the
amount, date, place and essential character of each expenditure.
Further, the Company shall continue to reimburse Executive for
expenses on a monthly basis as it reimburses Executive as of the date
of commencement of this Agreement.
(C) Bonus. Within fifteen (15) days after the completion of the
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Company's independent audit for the calendar year just ended by the
Company's independent outside auditors selected by the Board of
Directors, the Company shall pay the Executive a bonus of up to
$300,000 per calendar year, such bonus to be payable based on an
EBITDA target established by the Board of Directors.
Section IV. Termination.
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(A) Severance Compensation. The Executive shall be entitled to
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the compensation set forth in Section V provided that any of the
following events occur: (1) if a Triggering Event shall have occurred
subsequent to the date of this Agreement and while the Executive is
still an employee of the Company; or (2) an event constituting Good
Reason has occurred and the Executive terminates his employment with
the Company; or (3) the Executive's employment is terminated by the
Company for any
reason other than (a) Cause or (b) the Executive's resignation without
an event constituting good reason or Retirement.
(B) Notice of Termination. Any termination of the Executive's
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employment for any reason shall be communicated to the other party by
a Notice of Termination. For purposes of this Agreement, no such
purported termination shall be effective without such Notice of
Termination;
(C) Termination upon Death or Disability. If the Executive
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shall die or become disabled during the period of employment
hereunder, the Executive's estate, heirs or beneficiaries, or the
Executive, as applicable, shall be entitled, to benefits specifically
provided to them or the Executive under any benefit plan and an amount
equal to two years of "aggregate compensation" payable in equal
monthly increments.
Section X. Xxxxxxxxx compensation. Except as otherwise provided
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in Section IX or Section IV(C), if the Executive is entitled to
compensation pursuant to Section IV(A), the Company shall pay to the
Executive as severance pay in a lump sum, in cash, on the fourteenth
calendar day following the date of termination, an amount equal to
Executive's "aggregate compensation" (as hereinafter defined), for the
balance of the then existing 3 year term. For purposes of this
Section "aggregate compensation" shall mean an amount equal to the
Executive's then current Base Salary plus Bonus based on the prior
year's payment.
Section VI. Successors.
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(A) The Company. The Company will require any successor or
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assign (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business or assets,
or both, of the Company, to expressly absolutely and unconditionally
assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined
(including its subsidiaries), and any successor or assign to its
business or assets as aforesaid which executes and delivers the
Agreement provided for in this Section VI or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation
of law.
(B) Binding Agreement. This Agreement shall inure to the
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benefit of, and be enforceable by, the Executive's personal and
legal representatives, executors, administrators, heirs, distributees,
devisees and legatees. If the Executive should die while any amounts
are still payable to the Executive hereunder, all such amounts shall
be paid in accordance with the terms of this Agreement to the
Executive's devise, legatee, or other designee or, if there be no such
designee, to the Executive's estate.
Section VII. Notice.
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For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage
prepaid, as follows:
If to the Company:
The Morningstar Group Inc.
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Secretary and General Counsel
With a copy to:
Chairman of the Compensation Committee
of the Board of Directors
The Morningstar Group Inc.
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
If to the Executive:
C. Xxxx Xxxxxxxxxxx
0000 Xxxxxx Xxxxx Xxxx., #0X
Xxxxxx, Xxxxx 00000
or such other address as wither party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
Section VIII. Miscellaneous.
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(A) No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by
either party of any breach by the other party hereto of, or compliance
with, any condition or provision of this
Agreement to b e 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. 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 set forth
expressly in this Agreement or any Stock Option Agreement, and except
as provided herein, this Agreement and any Stock Option Agreement
presently in place or approved, supersede all prior agreements
relating to the subject matter hereof and thereof. This Agreement
shall be governed by and construed in accordance with the laws of the
State of Texas and the parties hereto each agree to bring any action,
suit or proceeding in connection with this Agreement either in the
district Court of Dallas, Dallas County, Texas, or the United States
District Court for the Northern District of Texas - Dallas Division.
(B) Validity. This invalidity or unenforceability of any
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provision of this Agreement shall not affect the validity or
enforceability of an other provision of this Agreement, which shall
remain in full force and effect.
(C) Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
(D) Confidentiality. During the period of employment hereunder
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and for five years thereafter, the Executive shall not use for his
personal benefit, or disclose, communicate or divulge to, or use for
the direct or indirect benefit of any person, firm, association or
Company other than the Company, any Confidential Information.
"Confidential Information" means information relating to the
processes, products, services or operations of the Company or any
subsidiary thereof that is not generally known, is proprietary to the
Company or such subsidiary and is made known to the Executive or
learned or acquired by the Executive while in the employ of the
Company, including, without limitation, (i) information relating to
research, development, manufacture, purchasing, accounting,
engineering, marketing, merchandising, advertising, selling, leasing,
finance and business methods and techniques and (ii) customer lists
and other information relating to past, present or prospective
customers or suppliers. However, Confidential Information shall not
include under any circumstances any information with respect to the
foregoing matters that becomes publicly available through no fault of
the Executive or is available to the Executive from other sources who
have not secured such information on a
confidential basis from the Company or any affiliate thereof. All
materials or articles of information of any kind furnished to the
Executive by the Company or developed by the Executive in the course
of his employment hereunder are and shall remain the sole property of
the Company; and if the Company requests the return of such
information at any time during, upon, or after the termination of the
Executive's employment, the Executive shall immediately deliver the
same to the Company.
(E) Requisite Approvals. The Company has received all requisite
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approvals with respect to this Agreement (including, without
limitation, approval of the Company's Board of Directors) so that such
agreements are valid, binding and duly authorized and enforceable
against the Company in accordance with their terms.
Section IX. Noncompetition.
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(A) During the period of employment hereunder and, (x) if the
Executive is terminated for Cause, or if the Executive terminates his
employment with the Company other than for Good Reason, for an
additional period of two years following the Date of Termination, the
Executive shall not, directly or indirectly, (i) hire any executive
officer, general manager or key employee to terminate his or her
employment, (ii) call upon or solicit any clients, customers or
accounts of the Company or any of its subsidiaries, with the intent to
direct to rake away any specialty dairy foods business of the Company
or any of its subsidiaries or to otherwise interfere or compete with
the Company or any of its subsidiaries in the specialty dairy foods
business, or (iii) in his own behalf or as a partner, officer,
director, employee, agent, consultant or stockholder (other than as a
holder of less than 5% of the outstanding capital stock of any
corporation with a class of equity security registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended)
engage in, invest in or render services to any person or entity which
has as its principal business the specialty dairy foods business (the
prohibited activities in this sentence herein being referred to as the
"Prohibited Activities").
(B) Executive acknowledges that, in view of the nature of the
business in which the Company is engaged, the restrictions contained
in Sections VII(D) and IX(A) above (the "Restrictions") are reasonable
and necessary in order to protect the legitimate interests of the
Company, and that nay violation thereof would result in irreparable
injuries to the Company, and the Executive therefore further
acknowledges that, in the event the Executive violates, or threatens
to violate, any of such Restrictions, the
Company shall be entitled to obtain from any court of competent
jurisdiction, without the posting of any bond or other security,
preliminary and permanent injunctive relief as well as damages and an
equitable accounting of all earnings, profits and other benefits
arising from such violation.
(C) If any Restriction, or any part thereof, shall be determined
in any judicial or administrative proceeding to be invalid or
unenforceable, the remainder of the Restrictions shall not thereby be
affected and shall be given full effect, without regard to the invalid
provisions. If the period of time or the area specified in the
Restrictions shall be determined in any judicial or administrative
proceeding to be unreasonable, then the court or administrative body
shall have the power to reduce the period of time or the area covered
and, in its reduced form, such provisions shall then be enforceable
and shall be enforced.
(D) If the Executive violates any of the Restrictions, the
applicable restrictive period shall be tolled form the time of the
commencement of any such violation until such time as such violation
shall be cured by the Executive to the reasonable satisfaction of the
Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
THE MORNINGSTAR GROUP INC.
By:
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Name:
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Title:
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C. Xxxx Xxxxxxxxxxx
