X. X. XXXXXXXX, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This is an Employment Agreement (the "Agreement") dated as of August
25, 2000, between X. X. Xxxxxxxx, Inc., a California corporation (the
"Company") and Xxxx Xxxxxxxx ("Executive").
RECITALS
A. The Company has employed Executive for many years, and Executive's
managerial and financial experience, as well as his knowledge of the
Company's policies, methods, personnel and plans for the future are of
great value to the Company.
B. The Company's Board of Directors recognizes that Executive's
contribution to the success of the Company has been substantial and
wishes to induce Executive to remain employed by the Company following
a contemplated change in control of the Company in which Executive's
retention has been sought.
C. This Agreement is entered into pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") between the Company, Vincor
International Inc., Vincor Holdings, Inc., and Toast Acquisition
Company, Inc.
D. Capitalized terms used but not defined herein have the meanings set
forth in the Merger Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and of the covenants
contained herein, the Company and Executive agree as follows:
SECTION 1--EMPLOYMENT
The Company shall continue to employ the Executive as President and
Chief Executive Officer of the Company, and Executive hereby agrees to
continue such employment, for the period provided in Section 2, all upon the
terms and conditions of this Agreement.
SECTION 2--TERM
Subject to extension in accordance with this Section 2 or unless
sooner terminated in accordance with Section 5 of this Agreement, the term of
this Agreement (the "Term") shall commence upon the Offer Purchase Closing
and shall conclude at the close of business five years thereafter; provided,
however, that such initial Term shall be automatically extended for
additional successive 12-month periods thereafter, unless either party (A)
gives written notice to the other within 90 days prior to expiration of the
original five (5) year period, or (B) otherwise terminates this Agreement
during any extension period. In the event of an extension beyond the original
five (5) year period of this Agreement, the Executive shall be compensated
during any
extension period solely under Section 4.1(i), without regard to 4.1(ii) and
4.1(iii), and may, at the discretion of the Board of Directors, be permitted
to participate in any bonus arrangement or program in effect for the Company
for which he is eligible.
SECTION 3--DUTIES AND RESPONSIBILITIES
Executive shall perform the duties customary for the position of
President and Chief Executive Officer, as well as such other duties as the
Board of Directors may assign to Executive from time to time. Executive shall
use Executive's best efforts for the Company's benefit; throughout the Term,
Executive shall devote his full time and effort to the performance of these
duties to the Company. Executive shall not, without the Company's prior
written consent, engage in any other business activities, whether or not such
business activity is pursued for profit, gain or other pecuniary advantage.
The foregoing shall not prohibit Executive's service on no more than two (2)
Boards of Directors of non-competing businesses or service related to
non-profit, trade association or similar charitable or community service
entities if these activities do not interfere with the Executive's duties and
responsibilities to the Company, including the obligation to devote his full
time and effort in the performance of his duties. Executive may invest
Executive's assets in such form or manner as will not require any services on
Executive's part in the operation of the affairs of the enterprise(s) in
which the investments are made. Notwithstanding the foregoing provisions of
Section 3, Executive may (i) own up to three percent (3%) of a winery
("Winery Investment"), (ii) invest in farming and cultivation of grapes
("Grape Farming") so long as neither the Winery Investment nor the Grape
Farming require any services on Executive's part in the operation or the
affairs of the enterprises, and (iii) operate the vineyard purchased pursuant
to the Grape Purchase Agreement of the same date herewith, so long as
Executive shall devote his full time and effort to the performance of his
duties to the Company and these activities do not interfere with Executive's
duties and responsibilities to the Company.
SECTION 4--COMPENSATION
4.1 COMPENSATION. During the Term, Executive's compensation for
duties performed under this Agreement shall consist of the following:
(i) MONTHLY SALARY. Executive shall receive a monthly
salary, paid pro rata on the Company's regular pay dates for employees
generally in effect from time to time. The initial monthly salary shall be
$15,500.00 (the "Base Salary").
(a) On September 1 of each year beginning
September 1, 2001 (each, an "Anniversary Date"), the Board of Directors of the
Company will review the Executive's prior monthly salary and shall adjust it
upward, but not downward by an amount computed below (the "Adjustment"). Once
increased, the monthly salary will not thereafter be decreased during the Term.
(b) The basis of the computation of the Rate is
the "Consumer Price Index - All Items Figures for Urban Wage Earners and
Clerical Workers" (CPI-W for San
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Francisco, Oakland and San Xxxx, with base 1982-84 = 100) (the "Index")
published by the Bureau of Labor Statistics of the United States Department
of Labor. If the Bureau of Labor Statistics at any time during the Term
compiles the Index in a different manner than is in effect on the date of
this Agreement, the Company has the right, in its reasonable discretion, to
determine which Consumer Price Index as then compiled by the Bureau of Labor
Statistics will be used for the purpose of this Agreement.
(c) The Index for the month of August, 2000 is
the "Base Index Number" and the Index for the month of August of each succeeding
year is the "Current Index Number."
(d) The rate (the "Rate") on any Anniversary
Date shall be determined by dividing the Current Index Number by the Base Index
Number, and then subtracting one (1): Rate = (Current Index Number/Base Index
Number) - 1.
(e) The Adjustment shall equal the Base Salary
multiplied by the Rate less the current monthly salary: (Adjustment = (Base
Salary x Rate) - current monthly salary). Notwithstanding the foregoing
sentence, any negative Adjustment shall be deemed equal to zero.
(ii) RETENTION BONUS AND RESTRICTED STOCK.
(a) CASH PAYMENTS. Executive shall receive a
long term retention bonus of $1,000,000 (the "Retention Bonus "), which shall
vest and be payable in five (5) annual payments of $200,000 on each twelve (12)
month anniversary of this Agreement, provided Executive is then actively
employed by the Company. In the event of an extension beyond the original five
(5) year period of this Agreement, Company shall be under no obligation to
continue cash payments under this 4.1(ii)(a).
(b) RESTRICTED STOCK. The Company or the
Company's parent corporation, Vincor International Inc. ("Vincor"), shall issue
to Executive an instrument entitling the Executive to 100,000 shares of Vincor
common stock upon the execution of this Agreement. Executives rights to the
stock shall vest and be payable in five (5) annual payments of 20,000 shares on
each twelve (12) month anniversary of this Agreement (the "Restriction"). If
within 90 days after termination of the Executive's employment, the foregoing
common stock of Vincor is not transferable on the Toronto Stock Exchange or
other public securities market by Executive, Vincor agrees to purchase any
vested shares at a price to be determined by an appraisal conducted by an
independent assessor mutually agreeable to the parties. In the event of an
extension beyond the original five (5) year period of this Agreement, Company
shall be under no obligation to issue further restricted stock under this
4.1(ii)(b).
(iii) ANNUAL CASH BONUS AND 5-YEAR CUMULATIVE BONUS.
(a) ANNUAL CASH BONUS. Executive shall receive a
bonus of twenty percent (20%) of the Company's annual bonus pool of up to
$350,000.00 for management
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generally (the "Annual Bonus Pool"), which amount shall be calculated and
payable only if the Company achieves the strategic plan EBITDA goals pursuant
to the Management Incentive Plan attached hereto as ANNEX A (the "MIP").
(b) 5-YEAR CUMULATIVE BONUS. Executive shall
receive twenty percent (20%) of any 5-Year Cumulative Bonus, which shall be
calculated and payable only if the Company achieves the cumulative five (5) year
strategic plan EBITDA goals pursuant to the MIP.
(iv) EMPLOYEE BENEFITS. Executive shall be entitled to
participate in all employee benefit plans and programs provided by the Company
under which Executive is eligible in accordance with the terms of such plans
and programs. The Company expressly reserves unto itself the right to alter,
modify, amend or terminate any or all such benefit plans and programs at any
time and for any reason at its sole discretion. Notwithstanding the forgoing,
the Company will provide Executive with at least the benefits described on
ANNEX B. With regard to the Executive's housing which the Company currently
requires Executive to occupy, Executive may elect to receive $1,167 per month
(subject to applicable withholding) in lieu of the Executive's use of the
Company's house if the Executive; (i) delivers to the Company sixty (60) days
prior written notice, and (ii) completely vacates the Company's house including
the removal of all non-Company owned personal property. If such election is
made, Executive shall not have any rights to return to the Company's house
without the prior written consent of the Company's Board of Directors. All
benefits whether described on ANNEX B or otherwise shall immediately cease upon
termination of Executive's employment under this Agreement or otherwise.
(v) BUSINESS EXPENSES. The Company shall, in accordance
with, and to the extent of its policies for all Company executives in effect
from time to time and subject to delivery of reasonable documentation and
receipts, reimburse Executive for all reasonable, ordinary, and necessary
business expenses Executive incurs in performing his duties hereunder.
(vi) TIME OFF. Executive shall be entitled to 4 weeks per
calendar year of paid time off for vacation and sick/personal days consistent
with the Company's policies.
(vii) DIRECTOR AND OFFICER LIABILITY INSURANCE. The Company
shall maintain directors and officers indemnity agreements and liability
insurance for Executive in accordance with its customary practice.
SECTION 5--TERMINATION
5.1 EVENTS OF TERMINATION. Notwithstanding any other provision of
this Agreement to the contrary, Executive's employment hereunder will terminate
immediately and without notice upon the first of the following events to occur:
(i) Executive's death.
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(ii) Executive's Permanent Disability, as defined in
Section 5.5 of this Agreement.
(iii) Executive's Termination for Cause as set forth in
Section 5.2 of this Agreement.
(iv) On the date specified in a written notice by either
party to the other, for any reason, with or without Cause (except as provided in
Section 5.3(d)).
5.2 CAUSE. Termination by the Company of Executive's employment
for "Cause" shall mean termination upon (A) Executive's breach of the terms of
this Agreement; (B) Executive's willful and continued failure substantially to
perform his duties with the Company after the Company's written demand for
substantial performance has been delivered to Executive; (C) Executive's gross
negligence or willful misconduct resulting in material and demonstrable injury
to the Company, (D) Executive's breach of fiduciary duty involving personal
profit; or (E) Executive's conviction of, or plea of nolo contendre to, a felony
with the understanding that the Executive's first conviction or plea of nolo
contendre to a felony that results from a violation of State or Federal motor
vehicle laws shall not be considered Cause if the underlying felony did not
result in death or serious injury to a third party. For purposes of this
definition, no act, or failure to act, on Executive's part shall be considered
"willful" unless done, or admitted to be done, by Executive not in good faith
and without reasonable belief that Executive's action or omission was in the
Company's best interests.
5.3 COMPENSATION UPON TERMINATION.
(a) The Company shall have no further liability
(including no obligation for any unpaid Retention Bonus due, the vesting of
Vincor Stock due, or the payment of bonus amounts under the MIP pursuant to
Section 4.1) to Executive under this Agreement for (A) any period subsequent to
Executive's termination for Cause; (B) any period subsequent to termination of
this Agreement pursuant to 5.1(iv) if notice is from the Executive; and (C) any
period beyond the initial Term, in the event Company renews this Agreement.
(b) If the Company terminates Executive without Cause
pursuant to Section 5.1(iv), then the Company shall (A) pay to Executive an
amount equal to the Retention Bonus payable to Executive under Section 4.1(ii)
in the same time and manner as if Executive had remained an active employee of
the Company until September 25, 2005; (B) allow the Restrictions on Executive's
restricted stock awarded pursuant to Section 4.1(ii)(b) to lift and the stock
vest in the same time and manner as if Executive had remained an active employee
of the Company until September 25, 2005; (C) pay Executive his portion, of the
Annual Cash Bonus pro rated base upon the number of days Executive was employed
by the Company during the current bonus period divided by three hundred and
sixty-five (365) (payable on the date scheduled in the MIP); (D) pay Executive
his share of the 5-Year Cumulative Bonuses pro rated based upon the number of
days Executive was employed during the cumulative bonus period divided by one
thousand eight hundred and twenty five (1,825) (payable on the date scheduled in
the MIP); and (E) if termination occurs after the original five (5) year term,
pay to Executive a
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number of weeks of Executive's then Base Salary equal to the number of years
of Executive's employment with the Company multiplied by two, up to a maximum
of fifty two (52) weeks. The Company shall have no further liability or
obligation to Executive under this Agreement.
(c) If Executive's employment with the Company terminates
due to Executive's death pursuant to Section 5.1(i), then (A) the Retention
Bonus payable to Executive under Section 4.1(ii) shall be payable to Executive's
estate in the same time and manner as if Executive had remained an active
employee of the Company until September 25, 2005; (B) the Company shall allow
the Restrictions on Executive's restricted stock awarded pursuant to Section
4.1(ii)(b) to lift and the stock vest in the same time and manner as if
Executive had remained an active employee of the Company until September 25,
2005; (C) pay Executive his portion, of the Annual Cash Bonus pro rated base
upon the number of days Executive was employed by the Company during the current
bonus period divided by three hundred and sixty-five (365) (payable on the date
scheduled in the MIP); (D) pay Executive his share of the 5-Year Cumulative
Bonuses pro rated based upon the number of days Executive was employed during
the cumulative bonus period divided by one thousand eight hundred and twenty
five (1,825); (payable on the date scheduled in the MIP); and (E) the Company
shall have no further liability or obligation to Executive under this Agreement.
(d) Notwithstanding Section 5.3(a) above, if Executive
terminates his employment with the Company pursuant to Section 5.1(iv) for Good
Reason (as defined below), Executive shall be entitled to the amounts described
in Section 5.3(c) as if the Company had terminated Executive's employment due to
Executive's death. For purposes of this Section 5.3(d), termination of
employment by Executive for Good Reason shall mean: (i) without Executive's
express written consent, the assignment to Executive of substantial duties
inconsistent with an executive position except in connection with Executive's
own resignation or Executive's termination of employment for Cause, or as a
result of Permanent Disability; (ii) without Executive's express written
consent, the Company relocates Executive's current place of business to another
location that is greater than fifty (50) miles from its current site; (iii)
within six (6) months of an event or series of events which have the effect of
any Person other than Vincor International, Inc. or its Affiliates owning an
interest in the Company representing fifty percent (50%) or more of the combined
voting power of the Company (a "Change in Control") and the Company's ownership
imposes a material change in strategy that is materially inconsistent with the
current management plan and achievement of EBITDA targets; or (iv) Permanent
Disability.
(e) Executive shall not be required to mitigate the
payment provided for in this Section by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section be reduced by
any compensation earned by Executive as the result of employment by another
employer after the date of termination, or otherwise. Amounts payable under this
Section 5.3 are in lieu of any severance pay that would otherwise be payable to
Executive on termination of his employment under the Company's severance pay
policies, if any.
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5.4 REDUCTION OF AMOUNTS PAYABLE. No amount payable under any
provision of this Agreement shall equal or exceed an amount which would cause
the Company to forfeit, pursuant to Section 280G(a) of the Internal Revenue Code
of 1986 ("IRC"), as amended, the Company's deduction for any or all such amounts
payable. Pursuant to this Section 5.4, the Chairman of the Board of the Company
may reduce any termination payments under this Agreement, if such payments alone
or in conjunction with termination benefits provided under other Company plans
or agreements between the Executive and the Company would cause the Company to
forfeit otherwise deductible payments; PROVIDED, HOWEVER, that no amounts
payable under this Agreement shall be reduced pursuant to this Section 5.4 to
less than $1.00 below the amount which the Company may properly deduct under IRC
Section 280G(a).
5.5 DISABILITY. For purposes of this Agreement, "Permanent
Disability" shall mean the onset of a physical or mental disability which
prevents Executive from performing the essential functions of Executive's job
for periods aggregating one hundred eighty (180) days, whether or not
continuous, in any continuous period of three hundred sixty-five (365) days,
with any reasonable accommodation required by applicable disability
anti-discrimination laws, including, but not limited to, the Americans With
Disabilities Act of 1990. Permanent Disability of the Executive will be
determined by a medical doctor selected by the Executive, provided the Company
agrees with the determination. If the Company desires a second opinion, the
Company may request in writing, and the Executive agrees to, a second
examination to be performed by a medical doctor chosen by the Company. In the
event the determinations of the two medical doctors are in disagreement, the
doctors shall together select a third medical doctor whose decision shall be
conclusive and binding on the parties.
5.6 EFFECT OF TERMINATION. Employment beyond the initial five (5)
year Term of this Agreement, regardless of any extension of this Agreement, is
terminable at the will of either party without notice. Except as pursuant to
Section 5.3(b)(E), the Company shall have no obligation under this Section 5
after the initial five (5) year Term of this Agreement has expired. Termination
of Executive's employment hereunder by either party shall not be construed to
nullify or terminate any covenant or obligation of Executive which is intended
to survive Executive's employment pursuant hereto, including, but not limited
to, the covenants contained in Sections 6 and 7 of this Agreement.
SECTION 6--COVENANTS OF NONDISCLOSURE.
6.1 EMPLOYMENT RELATIONSHIP AND ACKNOWLEDGMENTS. Executive
acknowledges that:
(a) The Company's employment of Executive creates a
relationship of confidence and trust between Executive and the Company.
(b) The Company has a proprietary interest in documents
and information applicable to its business or to the business of its clients and
customers which may be made known to Executive during the period of Executive's
employment.
(c) "Confidential Information" means information, not
generally known in the
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wine production and distribution industry, disclosed to Executive, or known
by Executive, as a consequence of or through his employment by the Company or
its predecessors, about the Company's costs, pricing, marketing, ideas,
problems, developments, research records, technical data, processes,
products, plans for products or service improvement and development, business
and strategic plans, financial information, forecasts, customer records and
any other information which derives independent economic value, actual or
potential, and all other information of a trade secret or confidential nature.
(d) "Confidential Material" means any writing of any
kind, obtained by Executive as a consequence of or through his employment by the
Company or its predecessors, containing any Confidential Information and shall
include, without limiting the generality of the foregoing, customer lists, price
lists, financial data, operating instructions, forms and manuals, procedural
instructions, information on computer disks or computer print-outs, computer
programs, any physical property of the Company or any of its sources with which
insurance is placed, policyholders, expiration or renewal dates, inspection or
credit reports and data on insurance risks being written, catalogs, records,
drawings, blueprints, notes, notebooks, and all other materials of a trade
secret or confidential nature.
6.2 CONFIDENTIALITY AGREEMENT.
(i) RESTRICTED DISCLOSURE AND USE. Notwithstanding any
other provision of this Agreement, unless Executive shall first secure the
written consent of the Company's Board of Directors, and except for authorized
use in performance of Executive's duties on behalf of and for the benefit of the
Company, Executive shall not disclose to any others, or use, at any time, in any
way, or anywhere, either during or subsequent to employment with the Company,
any trade secret or other Confidential Information, whether or not of a
technical nature, or any Confidential Material.
(ii) RETURN OF MATERIALS UPON TERMINATION. Upon
termination of Executive's employment, Executive shall promptly deliver to the
Company all Confidential Material relating in any way to the Company's business
which Executive possesses or controls, whether made, written or obtained by
Executive or by others. Executive shall retain no copies of such materials,
either for Executive's own use or otherwise.
6.3 BINDING NATURE. Executive hereby expressly agrees that the
covenants in this Section 6 shall be binding upon Executive's heirs, successors
and legal representatives.
6.4 NON-DISCLOSURE OF INFORMATION TO SUBSEQUENT EMPLOYERS. If,
following termination or cessation of Executive's employment, Executive accepts
other employment or enters into a business relationship with any person,
partnership, corporation or other entity doing business of the kind then being
performed by the Company, Executive shall obtain from said second employer and
shall provide to the Company a written acknowledgment by the successor employer
of its notification of the terms of Section 6 of this Agreement. The provisions
of this Section 6 shall survive any termination of this Agreement.
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6.5 SURVIVAL. The provisions of this Section 6 shall survive any
termination of this Agreement for the periods referenced above.
SECTION 7--COVENANT NOT-TO-COMPETE
7.1 GENERAL. So long as Company is not in breach of this Agreement
and except as provided for in the Grape Purchase Agreement dated August 25, 2000
and the passive investments allowed under Section 3, for a period of five (5)
years from the Offer Purchase Closing (the "Restricted Period"), Executive shall
not, directly or indirectly, individually, in partnership or through a limited
liability company, corporation or other business entity, as proprietor, manager,
executive, partner, member, stockholder, employee, independent contractor,
consultant or in any other capacity, engage in the manufacture or sale of wine,
or the growing or cultivation of grapes used in the manufacture or sale of wine
or otherwise compete with the Company or assist others to so compete, except
that after any termination of the Executive pursuant to Section 5, the Executive
may engage solely in the growing or cultivation of grapes used in the
manufacture or sale of wine. Except as otherwise stated herein, this
covenant-not-to-compete shall be limited to (1) the field(s) of Business (as
defined below) in which the Company is, at the Offer Purchase Closing, actively
engaged and intends to be actively engaged within the Restricted Period, and (2)
the geographical area and appellations listed on ANNEX C attached. For purposes
of this Section 7, the Business shall consist of the manufacture and sale of
wine in the $8.00 to $16.00 (subject to reasonable adjustment for inflation) per
bottle retail price range and the growing or cultivation of grapes used in the
manufacture and sale of wine in the $8.00 to $16.00 (subject to reasonable
adjustment for inflation) per bottle retail price range. Notwithstanding the
provisions of this Section 7.1, Executive may invest or become an employee of a
vineyard or winery provided that (A) any such investment or employment is
subsequent to Executive's termination, and (B) no more than fifteen percent
(15%) of the gross revenue from the vineyard's or winery's sale of wine is
derived from wines in the $8.00 to $16.00 (subject to reasonable adjustment for
inflation) per bottle retail price range.
7.2 NON-SOLICITATION OF DISTRIBUTORS, BROKERS AND SUPPLIERS. For a
period of five (5) years following the Offer Purchase Closing, Executive shall
not, directly or indirectly, purchase any grapes from any of the Company's top
ten (10) grape suppliers or distribute wine through use of the Company's top ten
(10) U.S. distributors and brokers, as listed on ANNEX D hereto. Notwithstanding
the foregoing, Executive may distribute wine through use of the Company's U.S.
distributors and brokers, if (i) such distribution is subsequent to Executive's
termination and (ii) the wine has a per bottle retail price greater than $19.00
(subject to reasonable adjustment for inflation).
7.3 NON-SOLICITATION OF EMPLOYEES. Following any termination of
Executive's employment with the Company, for a period of three (3) years from
the date of termination or for the balance remaining of the Term of this
Agreement, whichever is greater, Executive shall not, directly or indirectly,
approach or solicit any employee of the Company with a view to hiring such
employee for any other entity or persuading such employee to leave the
employment of Company.
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7.4 FORMATION OF COMPETITIVE BUSINESS PROHIBITED. During his
employment, Executive shall neither plan nor organize any business activity or
undertaking, competitive with the business of the Company. Executive will not
combine or conspire with other Company executives of the Company for the purpose
of organizing any such competitive business activity undertaking.
7.5 SURVIVAL. The provisions of this Section 7 shall survive any
termination of this Agreement for the periods referenced above.
7.6 ADVICE TO FUTURE EMPLOYERS. While any provision of this
Section 7 remains in effect, if Executive seeks or is offered employment by any
other company, firm, or person, Executive shall provide a copy of this Section 7
to the prospective employer prior to accepting employment with that prospective
employer.
SECTION 8--ENFORCEMENT
Executive acknowledges that the restrictions contained in Sections 6
and 7, in view of the nature of the Business, are reasonable and necessary to
protect the legitimate business interests of the Company and that any violation
of Sections 6 or 7 would result in irreparable injury to the Company. Upon a
breach or a threatened breach by Executive of the Sections 6 or 7 of this
Agreement, the Company shall be entitled to an injunction restraining Executive
from the commission of such breach and to recover its attorneys' fees, costs and
expenses related to the breach or threatened breach. Nothing herein contained
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach, including the recovery of
money damages.
The covenants and disclosures in Sections 6 and 7 will be construed as
independent of any other provisions in this Agreement, and the existence of any
claim or cause of action by Executive against the Company, whether predicated on
this Agreement or otherwise, will not constitute a defense to the Company's
enforcement of such covenants and agreements. If any provision of this
Agreement, including Section 6 and 7, is invalid in part or in whole, it will be
deemed to have been amended, whether as to time, area covered or otherwise, as
and to the extent required for its validity under applicable law and, as so
amended, will be enforceable. The parties will execute all documents necessary
to evidence such amendment.
SECTION 9--MISCELLANEOUS
9.1 ASSIGNMENT. The services rendered by Executive under this
Agreement are unique and personal, and Executive may not assign any of
Executive's rights or delegate any of Executive's duties under this Agreement.
Except as provided in the immediately preceding sentence, this Agreement shall
benefit Executive and Executive's heirs and personal representatives.
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9.2 NOTICES. Any notice or consent required or permitted hereunder
shall be deemed to have been given when hand-delivered or mailed by registered
mail, postage prepaid and return-receipt requested, to the intended recipient at
the following address (or at such other address as either party may notify the
other):
A. If to Company:
X. X. Xxxxxxxx, Inc.
00000 Xxxxxxx Xxxx 00X
Xxxxxxx, Xxxxxxxxxx 00000
XXX
Attention: Chairman of the Board
Fax : (000) 000-0000
B. If to Executive:
Xxxx Xxxxxxxx
00000 Xxxxxxx Xxxx 00X
Xxxxxxx, Xxxxxxxxxx 00000
XXX
9.3 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of California.
9.4 ARBITRATION. All disputes, controversies, or claims which may
arise between the parties hereto out of or in relation to or connection with
this Agreement or Executive's employment hereunder (including, but not limited
to, breach of contract, wrongful termination, invasion of privacy, defamation,
harassment or discrimination based on race, color, religion, sex, national
origin, sexual orientation, HIV status, and/or disability, as well as any claim,
demand, dispute or cause of action concerning the Americans with Disabilities
Act, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act
of 1964, the California Fair Employment & Housing Act, the California Family
Rights Act, the Family and Medical Leave Act, and all other claims whether
arising by statute, contract or common law) shall be finally determined by
arbitration in accordance with the rules of the American Arbitration Association
(AAA). The number of arbitrators shall be three. Each party shall appoint one
arbitrator, and the two arbitrators thus appointed shall choose the third
arbitrator who will act as chairman of the arbitral tribunal; if the two
arbitrators appointed by the two parties are unable to agree on the third
arbitrator within fifteen (15) days, the third arbitrator shall be appointed by
the AAA. The arbitrators shall be fluent in the English language, both written
and spoken. Any arbitration award shall be final and binding upon the parties,
and judgment upon the award may be entered in any court having jurisdiction
thereof. The place of arbitration shall be San Francisco, California, or other
such place as may be mutually agreed upon by the parties hereto in which there
resides an arbitral institution with whom the AAA has an agreement of
cooperation. The arbitration proceedings shall be conducted in English. The
party which does not prevail in the arbitral decision shall be responsible for
the costs, including attorney's fees, incurred by the parties in
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connection with the arbitration proceedings. During the arbitration, the
Agreement shall be performed continuously by both parties, except for matters
in dispute. Notwithstanding the preceding, nothing in this Section 9.4 shall
be construed or interpreted to prevent the Company from seeking injunctive
relief under Section 8 in any court having jurisdiction thereof for the
violation or potential violation of Sections 6 and 7. By signing this
Agreement, employee understands that he is waiving his right to a court or
jury trial on all claims, demands, disputes or causes of action between
himself and the Company.
9.5 NO WAIVER. A delay or failure by either party to exercise a
right under this Agreement, or a partial or single exercise of that right, shall
not constitute a waiver of that or any other right.
9.6 SEVERABILITY. If any provision of this Agreement or its
application shall be invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of all other applications of that
provision and of all other provisions and applications hereof shall not in any
way be affected or impaired.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the Company and Executive with regard to all
matters of Executive's employment with the Company. This Agreement supercedes
any and all other agreements, conditions or representations, oral or written,
expressed or implied with regard thereto. This Agreement may be amended only in
writing, signed by both parties.
9.8 HEADINGS. The headings in this Agreement have been inserted
solely for convenience of reference and shall not be considered in the
interpretation or construction of this Agreement.
9.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Employment Agreement as of the date set forth in the preamble hereto, but
actually on the date set forth below.
Executive X. X. XXXXXXXX, INC.
_____________________________ By________________________________
Date:________________________ Title:____________________________
Date: ____________________________
12
ANNEX A
X. X. XXXXXXXX, INC.
MANAGEMENT INCENTIVE PLAN
This is the X. X. Xxxxxxxx, Inc. Management Incentive Plan ("MIP") for
Senior Managers of X. X. Xxxxxxxx, Inc. ("Company"). The MIP is designed to
reward Senior Managers of the Company for outstanding performance which results
in increased short-term and long-term earnings of the Company.
OVERVIEW
Senior Managers of the Company may earn bonuses under this MIP under
two possible methods: (A) Annual Bonuses may be paid, with up to $350,000 based
on the Company's attainment of EBITDA goals as described below, including a
Quality Bonus of up to $80,000 paid at the discretion of the Board of Directors
of the Company (the "Board"), and (B) a 5-Year Cumulative Bonus after the five
year period based upon the cumulative earnings of the Company during the period.
Each Senior Manager's individual share of either bonus shall be determined at
the discretion of the Board or specified in a written employment agreement
between the Company and the Senior Manager.
The MIP Annual Bonus shall be based on the Company's performance during
each fiscal year and the Board's discretionary evaluation of qualitative
performance. Currently, the Company's fiscal year ends on each December 31, but
the fiscal year will be changed to an annual period ending each March 31. The
first annual period will end with the 12 month period ending March 31, 2001.
SECTION A -- ANNUAL BONUS
1. DEFINITIONS.
"ANNUAL BONUS" shall mean an amount equal to the percentage of the
Annual Bonus Pool awarded to an individual Senior Manager.
"ANNUAL BONUS POOL" shall mean the annual bonus pool which Senior
Managers of the Company shall be entitled to divide and shall be determined by
multiplying the Applicable Percentage by the Maximum Annual Financial Bonus for
the given Fiscal Year.
"APPLICABLE PERCENTAGE" shall mean the percentage of the Maximum Annual
Financial Bonus available for distribution in any given Fiscal Year.
"EBITDA TARGET" shall mean a specified level of earnings before
interest, tax, depreciation and amortization ("EBITDA"), computed in accordance
with Generally Accepted Accounting Principles consistently applied, to be
achieved by the Company in a given year. The EBITDA Target must be achieved net
of the Annual Bonus Pool (I.E., the Senior Managers of the Company will be
eligible for an Annual Bonus under this MIP only if the Company's total earnings
for the Fiscal Year exceed the sum of the EBITDA Target for the Fiscal Year plus
the Annual Bonus Pool). The EBITDA Targets for Fiscal Years ending March 31,
2001 through March 31, 2005, prior to any adjustments as described in Section C,
are:
FISCAL YEAR END EBITDA TARGET
March 31, 2001 $10,380,000
March 31, 2002 $12,515,000
March 31, 2003 $14,219,000
March 31, 2004 $18,570,000
March 31, 2005 $22,800,000
The sum of the 5 years of EBITDA targets amounts to $78,484,000 and is used for
the Cumulative EBITDA Target described in Section B. The Company's EBITDA for
any year will be determined based upon the audited financial statements of the
Company.
"FISCAL YEAR" shall mean an accounting period of one year which ends on
March 31.
"MAXIMUM ANNUAL FINANCIAL BONUS POOL" means $350,000, the amount which
is available to be awarded based on the annual EBITDA Target to the entire class
of Senior Managers of the Company for any Fiscal Year.
"QUALITY BONUS" shall mean that percentage of the Quality Bonus Pool
awarded to an individual Senior Manager, except the Chief Executive Officer and
Co-Chief Executive Officer who are not eligible for a Quality Bonus payment.
"QUALITY BONUS POOL" shall be a portion of the Maximum Annual Financial
Bonus Pool designated as such by the Board, limited to no more than $80,000 to
be awarded annually in the complete discretion of the Board. The Board in
awarding this bonus shall consider any non-quantitative factors as the Board, in
its sole discretion, believes contributes to the success of the Company, but
based on the attainment of objectives established prior to the Fiscal Year by
the CEO in consultation with the Board.
"SENIOR MANAGER" shall mean the Chief Executive Officer (the "CEO"),
the Co-Chief Executive Officer (the "Co-CEO"), the Chief Financial Officer, the
National Sales Manager, the Winemaker, the Director of Public Relations, and any
other executive employees of the Company determined by the Board in its sole
discretion to be Senior Managers eligible for bonuses under this MIP from time
to time. Each Senior Manager's share of the Annual Bonus Pool shall be
determined annually by the Board, in their sole and complete discretion,
considering the recommendation of the CEO, subject to any written employment
agreements between the Company and the Senior Manager.
2. COMPUTING THE ANNUAL BONUS POOL FOR A FISCAL YEAR.
The Applicable Percentage shall be determined as follows:
APPLICABLE PERCENTAGE TARGET ATTAINED
100% 100% of EBITDA Target
50% 90% of EBITDA Target
0% less than 90% of EBITDA Target
If the EBITDA for a Fiscal Year is greater than 90% but less than 100% of the
EBITDA Target, then the Applicable Percentage shall be equal to a percentage
between 50% and 100% to be determined as follows:
50 + 5 * (Percentage of EBITDA Target achieved - 90)
For example, if 95% of the EBITDA Target is achieved for the Fiscal
Year ending March 31, 2001, then the Applicable Percentage would be 75%. [50 + 5
* (95 - 90)]. As a result, the Annual Bonus Pool would be equal to $202,500.
Alternatively, if 99% of the EBITDA Target is achieved for the Fiscal Year
ending March 31, 2001, then the Applicable Percentage would be 95% [50 + 5 * (99
- 90)], and the Annual Bonus Pool would be equal to $256,500.
3. AWARDING INDIVIDUAL ANNUAL BONUSES.
Only Senior Managers of the Company are eligible to receive any bonuses
under this MIP. The Annual Bonus Pool shall be divided among Senior Managers of
the Company by the Board, in their sole and complete discretion, considering the
recommendation of the CEO, and subject to any provision in an employment
agreement between a Senior Manager and the Company. In no event is any provision
of this MIP to be construed to require the Board to accept the recommendation of
the CEO when awarding respective bonuses to Senior Managers. The percentage of
the Annual Bonus Pool paid to the CEO and Co-CEO is defined by the respective
Employment
A - 2
Agreements. The amount of the Annual Bonus Pool after payments to the CEO and
Co-CEO will be reduced by the amount of the Quality Bonus Pool to be paid out
and the balance allocated among the remaining Senior Managers at the
discretion of the Board. Additionally, the Board may allocate the Quality
Bonus Pool, if any, among the individual Senior Managers in its complete
discretion. The entire Annual Bonus Pool for each Fiscal Year shall be
distributed among the Senior Managers of the Company; however, the individual
share of the Annual Bonus Pool paid to each individual Senior Manager may not
necessarily be equal. The Board may choose not to designate any portion of
the Maximum Annual Financial Bonus Pool as a Quality Bonus and may allocate
the Quality Bonus differently among the Senior Managers, in its complete
discretion.
A determination of the individual Annual Bonus payments will be made as
soon as practicable after the completion of the audit of the Company's Fiscal
Year financial statements with respect to which the bonus is payable. Only
Senior Managers who (i) are employed on the payment date or (ii) have been
involuntary terminated without cause either (x) during the Fiscal Year or (y)
between the Fiscal Year end and the payment date, shall be eligible to share in
the Annual Bonus for that year, unless a written agreement between the Company
and the Senior Manager specifically provides otherwise. A Senior Manager who is
involuntarily terminated without cause either prior to Fiscal Year or between
the Fiscal Year end and the payment date, is eligible to receive a pro-rata
portion (based upon days employed during the Fiscal Year divided by 365) of his
or her share for that year (as recommended by the CEO and approved by the Board
in their sole discretion), unless a written agreement between the Company and
the Senior Manager specifically provides otherwise.
Section B -- 5-YEAR CUMULATIVE BONUS
1. DEFINITIONS.
"5-YEAR CUMULATIVE BONUS" shall mean an amount equal to the percentage
of the 5-Year Cumulative Bonus Pool awarded to an individual Senior Manager.
"5-YEAR CUMULATIVE BONUS POOL" shall mean a bonus pool from which
Senior Managers of the Company shall receive cash bonus payments. The 5-Year
Cumulative Bonus shall be based on the Company's attainment of the Cumulative
EBITDA Target over a five year period as further described below.
"CUMULATIVE EBITDA TARGET" shall mean the sum of the EBITDA Targets for
the five Fiscal Years ending March 31, 2001 through March 31, 2005. The
Cumulative EBITDA Target must be achieved net of the cumulative Annual Bonus
Pools (I.E., the Senior Managers of The Company will be eligible for a 5-Year
Cumulative Bonus under this MIP only if the Company's total earnings for the
period exceed the sum of the Cumulative EBITDA Target plus the cumulative Annual
Bonus Pools). The Cumulative EBITDA Target, prior to any adjustments as
described in Section C, is $78,484,000.
2. COMPUTATION OF THE 5-YEAR CUMULATIVE BONUS.
The 5-Year Cumulative Bonus, if any, shall be equal to 20% of the
excess of the sum of actual EBITDA from Fiscal Years 2000-2001 through 2004-2005
less the Annual Bonuses actually paid for Fiscal Years 2000-2001 through
2004-2005, over the Cumulative EBITDA Target. For example, if:
Actual realized EBITDA (Before Annual Bonuses) $82,000,000
Fiscal Years 2000-2001 through 2004-2005
Less Annual Bonuses actually paid for - $ 1,750,000
Fiscal Years 2000-2001 through 2004-2005 -------------
Net actual realized EBITDA $80,250,000
Less Cumulative EBITDA Target -$78,484,000
-------------
Overage $ 1,766,000
A - 3
X 20%
-----------
5-Year Cumulative Bonus $ 353,200
3. AWARDING INDIVIDUAL 5-YEAR CUMULATIVE BONUSES.
Only Senior Managers of the Company are eligible to receive any bonuses
under this MIP. The 5-Year Cumulative Bonus Pool shall be divided among Senior
Managers of the Company, including any Senior Managers who are employed after
the date of this MIP, by the Board, in their sole and complete discretion,
considering the recommendation of the CEO, and subject to any provision in an
employment agreement between a Senior Manager and the Company. In no event is
any provision of this MIP to be construed to require the Board to accept the
recommendation of the CEO when awarding respective bonuses to Senior Managers.
The entire 5-Year Cumulative Bonus Pool shall be distributed among the Senior
Managers; however, the individual share of the 5-Year Cumulative Bonus Pool paid
to each individual Senior Manager may not necessarily be equal.
All individual 5-Year Cumulative Bonus payments will be made as soon as
practicable after the completion of the audit of the Company's 2004-2005 Fiscal
Year financial statements. Senior Managers who have remained in continuous
employment of the Company from Fiscal Year 2000-2001 through Fiscal Year
2004-2005 and Senior Managers employed subsequent to Fiscal Year 2000-2001 are
eligible to receive a bonus from the 5-Year Cumulative Bonus pool at the
discretion of the Board, or pursuant to the terms of an employment agreement, if
any. Any Senior Manager of the Company who is employed for some period from
Fiscal Year 2000-2001 through Fiscal Year 2004-2005 and who dies prior to Fiscal
Year end March 31, 2005 or who is involuntarily terminated without cause prior
to Fiscal Year end March 31, 2005 is eligible to receive a pro-rata portion
(based upon days employed during the Fiscal Year divided by 365) of his or her
share (as recommended by the CEO and approved by the Board in their sole
discretion) of the 5-Year Cumulative Bonus Pool based upon the excess of the
cumulative EBITDA to the end of the Fiscal Year prior to such death or
involuntary termination. Senior Managers who cease to be employed for any reason
not otherwise listed in this paragraph, including but not limited to voluntary
termination or termination for cause, shall not be eligible to share in the
5-Year Cumulative Bonus Pool.
SECTION C -- ADJUSTMENTS TO EBITDA
The EBITDA targets for the purposes of both the Annual Cash Bonus Pool
and the 5-Year Cumulative Bonus Pool shall be adjusted by excluding any
management fees or corporate overhead charges unrelated to the rendering of
specific services payable by the Company to Vincor International, Inc., any
costs associated with the Acquisition of the Company including asset writeoffs
and balance sheet adjustments pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") between the Company, Vincor International Inc., Vincor
Holdings, Inc., and Toast Acquisition Company, Inc. (the "Vincor Group"), and
any costs associated with the integration of the Company into the Vincor Group.
The Planned Expenditures, as shown below, are the projected capital
expenditures as included in the five (5) year strategic plan of the Company. If
the difference between actual capital expenditures, including acquisitions, and
Planned Expenditures, (the "Expenditure Difference"), is greater or less than
$1,300,000, the EBITDA and the Cumulative EBITDA targets for the purposes of
both the Annual Bonus Pool and the 5-Year Cumulative Bonus Pool shall also be
adjusted as follows:
The Expenditure Difference will be multiplied by the pre-tax cost of capital of
Vincor to calculate the adjustment. If expenditures were higher than Planned
Expenditures, then the adjustment will be added to the annual EBITDA Target for
that year and subsequent years. If expenditures were lower than Planned
Expenditures, then the adjustment will be deducted from the annual EBITDA Target
for that year and subsequent years. The Cumulative EBITDA Target will be
adjusted by the sum of the adjustments to the annual EBITDA Targets. The pre-tax
cost of capital of Vincor will be mutually agreed to by the CEO and the Board.
In the event the parties are unable to reach agreement, the parties will
designate an independent third party by mutual agreement, whose determination of
the pre-tax cost of capital will be binding. The initial pre-tax cost of capital
is agreed to be 21% for the Fiscal Year ending March 31, 2001. Notwithstanding
anything to the contrary, actual capital expenditures over Planned Expenditures
shall require prior written approval of the Board.
A - 4
YEAR ENDED PLANNED EXPENDITURES
March 31
2001 $5,499,000
2002 $4,473,000
2003 $6,096,000
2004 $4,971,000
2005 $5,316,000
The EBITDA and the Cumulative EBITDA targets shall also be adjusted
using the same formula, if working capital exceeds or is lower than, by more
than five percent (5%), the planned levels as determined annually with the
approval of the Board.
An example of the EBITDA adjustment is:
Assume that in the fiscal 2003 year an capital investment of $5,000,000 is made
and all other Planned Expenditures and working capital remain unchanged.
Vincor's pre-tax cost of capital remains at 21%. The Expenditure Difference is
$5,000,000 and the EBITDA adjustment is $1,050,000.
Fiscal Year end EBITDA Target (as adjusted)
March 31, 2001 $10,380,000
March 31, 2002 $12,515,000
March 31, 2003 $15,269,000
March 31, 2004 $19,620,000
March 31, 2005 $23,850,000
The Cumulative EBITDA Target therefore becomes $81,634,000.
If any actions caused by Vincor result in a deviation in the strategic
plan of the Company which materially affects the Company's ability to reach the
Annual EBITDA Targets, the CEO may notify the Board in writing within 30 days of
the affect. Upon presentation of a written financial summary which explains the
affect of the change (the "Change Summary"), the Board will evaluate the Change
Summary provided and may adjust the Annual EBITDA Targets in its sole and
complete discretion, considering the recommendation of the CEO. Acquisitions
will also result in an EBITDA change to be calculated by adding the EBITDA
impact of the acquisition as approved by the Board in its acquisition proposal
to the respective Annual EBITDA Targets.
Section D -- ADDITIONAL PROVISIONS
This MIP replaces all incentive plans currently or previously
maintained by the Company on the date this MIP is adopted. Notwithstanding the
forgoing, if any incentive or bonus is payable pursuant to Xxx Xxxx'x Employment
Agreement dated August 2, 1999 (the "PK Agreement"), Xxx Xxxx'x Annual Bonus
calculated under this MIP plan shall be reduced by the bonus received pursuant
to PK Agreement and such funds returned to the Company. It being understood that
Xxx Xxxx will receive an amount equal to the greater of the Annual bonus
calculated under this MIP plan or the bonus calculated pursuant to the PK
Agreement.
Bonuses will be taxable to employees when paid. The Company will
withhold the required amounts for federal and state income taxes, Social
Security and Medicare taxes and any other taxes from all bonuses.
The CEO of the Company will administer the MIP, except to the extent
that a specific function is reserved to the Board. Where necessary, the Board
shall interpret the Plan in its sole and absolute discretion and its decisions
shall be final, conclusive and binding on all persons having any interest in the
MIP.
This MIP is effective only for the Fiscal Years specifically referenced
herein and ends in 2005.
This MIP does not confer on any employee any right to continue in the
employment of the Company, nor does it affect in any way the Company's right to
terminate any employee's employment at any time.
A - 5
*****
A - 6
ANNEX B
Employee Benefits Plans include:
1. X. X. Xxxxxxxx, Inc. 401(k) Profit Sharing Plan
2. X. X. Xxxxxxxx, Inc. Flexible Benefits Plan
3. X. X. Xxxxxxxx, Inc. Group Health Plan - through BC Life and Health
Insurance Company Xxxxxx Foundation Health Plan, Inc.
4. X. X. Xxxxxxxx, Inc. Group Insurance - through UNUM Life Insurance
Company of America for Long Term Disability
Life Insurance
Accidental Death & Dismemberment
5. X. X. Xxxxxxxx, Inc. Dental Plan - through Principal Financial Group
6. Automobile -- So long as Company may recover the cost of that
automobile over a three-year period in accordance with Section 168 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder,
Company will, at no expense to Executive, provide Executive with an automobile,
either leased or purchased, and pay for all maintenance, insurance, registration
fees, and gas, subject to the Company's policy on personal use. Executive will
account for any personal use of the automobile in the manner prescribed by the
Company from time to time, and acknowledges that the value of that personal use
will be reflected as taxable income on his W-2 form from the Company
7. House -- Company will provide Executive the use of the Company's
house as previously provided, subject to any withholding if required under
applicable tax rules.
00
XXXXX X
Xxxxxxxx Xxxxx
Xxx Xxxx Xxxxxx/Xxxxx Xxxxxxx
Monterey
Paso Xxxxxx
Mendocino
Lake County
14
