EXHIBIT 10.69
Execution Copy
- 21 -
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of March 1,
1997, among SPECIALTY FOODS ACQUISITION CORPORATION, a Delaware
corporation ("SFAC"), SPECIALTY FOODS CORPORATION, a Delaware
corporation ("SFC"), and XXXXXX X. XXXXX, XX. (the "Executive").
SFAC and SFC are each sometimes herein referred to individually
as an "Employer" and are sometimes referred to collectively as
the "Employers."
The Employers wish to employ the Executive, and the
Executive wishes to accept such employment, on the terms and
conditions set forth in this Agreement.
Accordingly, the Employers and the Executive hereby agree as
follows:
1. Employment, Duties and Acceptance.
1.1 Employment Duties. The Employers hereby employ
the Executive for the Term (as defined in Section 2), to render
exclusive and full-time services to the Employers, as Vice
President and General Counsel of each of SFAC and SFC, and to
perform such other duties (consistent with the customary duties
of a corporate officer) as may be assigned to the Executive by
the Board of Directors (collectively, the "Boards"), Chief
Executive Officer or Chief Operating Officer of either Employer.
1.2 Acceptance. The Executive hereby accepts such
employment and agrees to render the services described above.
During the Term, the Executive agrees to devote the Executive's
entire business time, energy and skill to such employment, and to
use the Executive's best efforts, skill and ability to promote
the Employers' interests. The Executive further agrees to accept
election, and to serve during all or any part of the Term, as an
officer or director of either Employer, or any subsidiary of
either Employer, without any compensation therefor other than
that specified in this Agreement, if elected to any such position
by the shareholders of either Employer, the Boards or the
shareholders or Board of Directors of any such subsidiary, as the
case may be.
2. Terms of Employment.
2.1 The Term. The term of the Executive's employment
under this Agreement (the "Term") shall commence as of February
3, 1997 (the "Effective Date") and shall, unless sooner
terminated pursuant to Section 2.3 hereof, end on December 31,
1998 or on such later December 31 to which the Term is extended
pursuant to Section 2.2.
2.2 Extension. On June 30 of 1998, the then scheduled
expiration date of the Term shall automatically be extended,
without any action required of either the Executive or the
Employers, for twelve additional months, unless the Executive, on
the one hand, or the Employers, on the other hand, shall have
given written notice of non-extension to the other no later than
such June 30. If such written notice of non-extension is given,
the Term shall end on the then-scheduled termination date (taking
into account any previous extensions pursuant to this Section
2.2). By way of example, unless written notice of non-extension
is given by June 30, 1998, the otherwise scheduled expiration
date of December 31, 1998 shall be extended to December 31, 1999.
If the Executive remains employed by the Employers after December
31, 1999, then the Term shall be deemed to be ended and the
Executive's employment shall be "employment-at-will" unless the
parties otherwise agree in writing.
2.3 Early Termination. The Term shall end earlier
than the December 31 termination date scheduled in accordance
with the foregoing provisions of this Article 2, if sooner
terminated pursuant to Article 4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be
rendered pursuant to this Agreement, the Employers agree to pay
the Executive during the 12 months of the Term ending on December
31, 1997, a base salary at an annual rate of $275,000 (the "Base
Salary"); provided, that payment of Base Salary shall commence as
of February 3, 1997, and shall not be payable in respect of any
period prior to such date. The annual Base Salary rate may be
increased from time to time, in the sole discretion of the
Boards.
3.2 Bonus. In addition to the amounts to be paid to
the Executive pursuant to Section 3.1, the Executive will be
eligible to receive with respect to each fiscal year of the
Employers commencing with their fiscal year ending December 31,
1997, an incentive bonus (the "Incentive Bonus") equal to a
percentage of Base Salary for such fiscal year based on the
achievement of the Employers of performance targets ("Performance
Targets") to be set in the beginning of such fiscal year by the
compensation committee of the Boards, such that if the minimum
Performance Target is not achieved, the Incentive Bonus shall be
zero; if the intermediate Performance Target is achieved, the
Incentive Bonus shall be equal to 50% of Base Salary; and if the
maximum Performance Target is achieved, the Incentive Bonus shall
be equal to 100% of Base Salary (provisions for pro rata
Incentive Bonus amounts for achievements between the minimum
Performance Target and the intermediate Performance Target or
between the intermediate Performance Target and the maximum
Performance Target, as the case may be, shall also be
established). The Incentive Bonus for each fiscal year shall be
paid to the Executive within 30 days of the receipt by the
Employers of their audited financial statements for such fiscal
year. Notwithstanding anything herein to the contrary, Executive
shall, subject to the Employers meeting required performance
objectives, receive a bonus for the year ended December 31, 1997
calculated in a manner as if the Executive had been employed by
the Employers pursuant to the terms of this Agreement beginning
on January 1, 1997.
3.3 Business Expenses. The Employers shall pay or
reimburse the Executive for all reasonable expenses actually
incurred or paid by the Executive during the Term in the
performance of the Executive's services under this Agreement,
upon presentation of expense statements or vouchers or such other
supporting information as the Employers customarily require of
their other senior executives.
3.4 Vacation. During the Term, the Executive shall be
entitled to a paid vacation period or periods taken in accordance
with the vacation policy of the Employers during each year of the
Term; provided, that the Executive shall be entitled to not less
than four (4) weeks paid vacation for each year of the Term.
3.5 Fringe Benefits; Securities Investment; Stock
Options.
3.5.1 Benefits. During the Term, the
Executive shall be entitled to all benefits for which the
Executive shall be eligible under any long term incentive plan,
qualified pension plan, 401(k) plan, annuity plan, group
insurance plan or other so-called "fringe" benefit plan which
SFAC or SFC provides to its executive officers generally,
including, without limitation, the SFC Executive Retirement
Annuity Plan. In addition, the Employers shall pay the
reasonable fees in connection with personal financial counseling
on behalf of the Executive, including fees relating to tax return
preparation beginning for the 1997 tax year.
3.5.2 Securities Investment. Section not
applicable. (See Executive Securities Purchase Agreement dated as
of December 15, 1994, and Stock Purchase Agreement dated as of
June 15, 1995).
3.5.3 Management Option and Bonus. The
Executive shall continue to participate in the management stock
option plan (the "Option Plan") of the Employers. The number of
additional stock options to be granted to the Executive under the
Option Plan shall be 100,000, at an exercise price as agreed to
by the Parties.
3.6 Automobile. In addition, the Executive will
receive an automobile allowance of $1,100.00 per month during the
term of this Agreement.
3.7 Withholding. All compensation of the Executive by
the Employers provided for in this Agreement, whether in the form
of cash, securities or "fringe" benefits, shall be subject to
such deductions or amounts to be withheld as required by
applicable law and regulations. Whenever compensation provided
for under this Agreement is to be delivered to the Executive in a
form other than cash, the Employers may require as a condition of
delivery that the Executive remit to the Employers an amount
sufficient to satisfy all federal, state and other governmental
withholding tax requirements related thereto. If the
compensation referred to in the preceding sentence is in the form
of securities (whether by the vesting of securities or
otherwise), the Employers shall, if the Executive so requests and
the Employers consent (such consent not to be withheld
unreasonably), satisfy the requirements of the preceding
sentence, to the extent permitted by applicable law, by deducting
from the number of securities otherwise deliverable to the
Executive, a number of securities having a fair market value
equal to the amount required to satisfy all federal, state and
other governmental withholding tax requirements related thereto.
3.8 Source of Payment; Nature of Certain Payments.
Any amounts payable to or on behalf of the Executive under this
Agreement may be paid by either Employer, as determined by the
Employers in their exclusive discretion. No payment made to the
Executive pursuant to Section 3.9 shall be deemed, for any
purpose, a payment of purchase price for Common Stock or
Subordinated Debentures.
3.9 Certain Additional Payments by the Employers.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that (i) a Section 280G Change (as
defined below) occurs and (ii) any payment, distribution, other
compensation or benefit by either Employer to (or for the benefit
of) the Executive pursuant to the terms of this Agreement, as now
in effect or as amended from time to time (hereinafter, a
"Payment"), is determined (as hereinafter provided) to be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code
(or any similar tax that may hereafter be imposed), the Employers
shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments (as
defined below) and any federal, state and local income tax and
Excise Tax upon the additional amount provided for by this
paragraph (a), shall be equal to the Total Payments; provided,
however, that the aggregate payments required to be paid to or
for the benefit of the Executive pursuant to this Section 3.9
shall not exceed 400% of the Base Salary in effect pursuant to
Section 3.1 in the year in which the Section 280G Change occurs,
plus an amount equal to the interest and penalties, if any,
attributable to the portion of the Excise Tax for which the Gross-
Up Payment, as limited by this provision, reimburses the
Executive.
(b) Subject to the provisions of Section 3.9(c),
all determinations required to be made under this Section 3.9
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and, subject to the provisions
below, the assumptions to be utilized in arriving at such
determination, shall be made by KPMG Peat Marwick (or other
independent auditor of the Employers at the time) (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Employers and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment with respect to which a Gross-Up Payment
is owing, or such earlier time as is requested by the Employers.
All fees and expenses of the Accounting Firm shall be paid solely
by the Employers. Any Gross-Up Payment, as determined pursuant
to this Section 3.9, shall be paid by the Employers to the
Executive within five business days of the receipt of the
Accounting Firm's determination. The parties acknowledge that
unless the Accounting Firm is able to provide the Executive with
the opinion described in the third following sentence with
respect to such Payment, the Accounting Firm shall determine the
amount of the Gross-Up Payment that is due at the time of any
Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result
in the imposition of the negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the
Employers and the Executive. The parties hereto acknowledge
that, as a result of uncertainty in the application of Section
4999 of the Code, it is possible that Gross-Up Payments will not
have been made by the Employers that should have been made
(hereinafter, an "Underpayment"), consistent with the provisions
of this Section 3.9. In the event that the Executive is required
to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Employers to
or for the benefit of the Executive, unless the Executive has
failed to comply with Section 3.9(c) and such failure has
materially deprived the Employers of the right to contest any
claim by the Internal Revenue Service with respect to such
payments.
For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is
to be made and the applicable state and local taxes at the
highest marginal rate of taxation for the calendar year in which
the Gross-Up Payments is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of
such state and local taxes.
(c) The Executive shall notify the Employers in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Employers of a Gross-
Up Payment. Such notification shall be given as soon as
practicable but, in any event, no later than ten business days
after the Executive is informed in writing of such claim and
shall apprise the Employers of the nature of such claim and the
date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the
Employers (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Employers notify the Executive in writing prior to the expiration
of such period that they desire to contest such claim, and if the
Employers acknowledge in writing their liability, subject to the
limitations set forth in Section 3.9(a), to the Executive
pursuant to this Section 3.9 with respect to any amounts payable
in connection with such claim, the Executive shall:
(i) give the Employers any information
reasonably requested by the Employers and reasonably
available to the Executive relating to such claim;
(ii) take all such actions in connection
with contesting such claim as the Employers shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney selected by the Employers and agreeing to
extend the statute of limitations as requested by the
Employers;
(iii) cooperate with the Employers
in good faith in order to effectively contest such
claim; and
(iv) permit the Employers to participate
in any proceeding relating to such claim,
provided, however, that the Employers shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation of the foregoing provisions of this Section 3.9(c),
the Employers shall control all proceedings taken in connection
with such contest and, at their sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at their sole option, either direct the Executive to pay
the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Employers shall determine; provided, however, that
if the Employers direct the Executive to pay such claim and xxx
for a refund, the Employers shall advance the amount of such
payment to the Executive, on an interest-free, after-tax basis.
Furthermore, the Employers' control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Employers pursuant to Section 3.9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Employers'
complying with the requirements of Section 3.9(c)), promptly pay
to the Employers the amount of such refund (together with any
interest received or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Employers pursuant to Section 3.9(c), a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Employers do not
notify the Executive in writing of their intent to contest such
denial of refund prior to the expiration of 30 days after such
determination, then to the extent of the Gross-Up Payment such
advance shall be forgiven and shall not be required to be repaid
and shall, to such extent, offset the amount of Gross-Up Payment
required to be paid, and the remaining portion of such advance
shall forthwith become due and payable.
(e) For purposes of this Agreement:
A "Section 280G Change" shall mean a "change
. . . in the ownership or effective control" of either Employer
or a "change . . . in the ownership of a substantial portion of
the assets" of either Employer, in each case within the meaning
of Section 280G(b)(2)(A)(i) of the Code.
A "Public Offering" shall mean an initial
public offering of stock of either Employer if at any time
thereafter stock of either Employer is "readily tradable on an
established securities market or otherwise" (within the meaning
of Section 280G(b)(5)(A)(ii) of the Code).
"Total Payments" shall mean any payments or
benefits received or to be received by the Executive under this
Agreement or the plans discussed in Section 3.5.3, as now in
effect or as amended from time to time.
3.10 Performance Based Compensation. It is the
intention of the parties that, if Section 162(m) of the Code is
or will be applicable with respect to one or more payments
hereunder, the Executive will consider in good faith any requests
by the Employers to take actions to cause such payments to meet
the requirements of Section 162(m)(4)(B) or (C) of the Code, and
thus to be excluded from the definition of "applicable employee
remuneration" within the meaning of Section 162(m)(4) of the
Code.
4. Termination.
4.1 Death. If the Executive shall die during the
Term, upon the date of the Executive's death:
(a) the Term shall terminate and no further
amounts or benefits shall be payable hereunder, except that the
Employers shall be obligated to pay to the Beneficiary (as
defined below) in exchange for a release in form and substance
acceptable to the Employers acting reasonably, within 60 days of
the date of the Executive's death, (i) all unpaid Base Salary
accrued through and including the date of the Executive's death,
(ii) a lump sum amount equal to Base Salary for one year, at the
rate in effect on the date of the Executive's death (the "Annual
Base Salary Upon Death"), and (iii) an additional lump sum bonus
amount equal to the sum of (x) 50% of Annual Base Salary Upon
Death and (y) 50% of Annual Base Salary Upon Death pro rated for
the period commencing on the first day of the fiscal year during
which the Executive's death occurred and ending on the date of
Executive's death; it being understood that such 50% bonus level
has been agreed to because it is impossible to determine the
performance of the Employers for future periods. The
"Beneficiary" shall be (i) the beneficiary designated by the
Executive on a form prescribed for such purpose by the Employers,
or (ii) in the absence of such designation, the Executive's
executor or legal representative, in such capacity;
(b) for the 180 days following such date, the
Employers shall have the right to purchase (i) all but not less
than all of the Vested Securities (as defined below), at a price
equal to the Full Value (as defined below) thereof on the date of
the Executive's death, and/or (ii) all but not less than all
other Initial Securities (as defined below), at cost, plus, in
the case of the Subordinated Debentures, accreted discount
thereon through and including the date of such purchase;
provided, that Initial Securities that would have vested within
the six-month period following the date of the Executive's death
shall be treated, for all purposes under this Section 4.1, as
Vested Securities. "Full Value" means (i) in the case of the
Subordinated Debentures, the then accreted value thereof
(calculated assuming an 11% annual implied rate of return), and
(ii) in the case of the Common Stock, the Fair Market Value (as
defined in Section 10.2 hereof) thereof;
(c) for the 180 days following such date, the
Beneficiary shall have the right to require the Employers to
purchase (subject to Section 4.6 hereof) all but not less than
all of the Vested Securities, at a price equal to the Full Value
thereof on the date of the Executive's death, together with all
but not less than all of the other Initial Securities, at cost,
plus, in the case of the Subordinated Debentures included among
such other Initial Securities, accreted discount thereon through
and including the date of such purchase; and
(d) for purposes of this Agreement, the term
"Vested Securities" shall mean the combination of (i) "Vested
Securities", as defined in that certain Executive Securities
Purchase Agreement dated as of December 15, 1994 by and among the
Parties (the "Securities Purchase Agreement"), and (ii) "Vested
Purchased Shares", as defined in that certain Stock Purchase
Agreement dated as of December 15, 1995 by and between the
Executive and SFAC (the "Stock Purchase Agreement"); and the term
"Initial Securities" shall mean the combination of (i) "Initial
Securities", as defined in the Securities Purchase Agreement and
(ii) "Initial Purchased Shares", as defined in the Stock Purchase
Agreement.
4.2 Disability.
4.2.1 If during the Term the Executive shall
become physically or mentally disabled, whether totally or
partially, such that the Executive is unable to perform the
Executive's services hereunder for (i) a period of six
consecutive months, or (ii) for shorter periods aggregating six
months during any twelve month period, the Employers may on any
day (the "Disability Termination Date") after the last day of the
six consecutive months of disability or the day on which the
shorter periods of disability shall have equaled an aggregate of
six months (but, in each case, before the Executive has recovered
from such disability), by written notice to the Executive,
terminate the Term (a "Disability Termination") and no further
amounts or benefits shall be payable hereunder, except that the
Employers shall be obligated to pay to the Executive in exchange
for a release in form and substance acceptable to the Employers
acting reasonably, within 60 days of the Disability Termination
Date, (i) all unpaid Base Salary accrued through and including
the Disability Termination Date, (ii) a lump sum amount equal to
Base Salary for one year, at the rate in effect on the Disability
Termination Date (the "Annual Base Salary Upon Disability"), and
(iii) an additional lump sum bonus amount equal to the sum of (x)
50% of Annual Base Salary Upon Disability and (y) 50% of Annual
Base Salary Upon Disability prorated for the period commencing on
the first day of the fiscal year during which the Disability
Termination occurred and ending on the Disability Termination
Date; it being understood that such 50% bonus level has been
agreed to because it is impossible to determine the performance
of the Employers for future periods. If the Executive shall die
before receiving all amounts required to be paid by the Employers
in accordance with the foregoing, such amounts shall be paid to
the Beneficiary.
4.2.2 In the event of a Disability
Termination:
(a) for the 180 days following the
Disability Termination Date, the Employers shall have the right
to purchase (i) all but not less than all of the Vested
Securities, at a price equal to the Full Value thereof on the
Disability Termination Date, and/or (ii) all but not less than
all other Initial Securities, at cost, plus, in the case of the
Subordinated Debentures, accreted discount thereon through and
including the date of such purchase; provided, that Initial
Securities that would have vested within the six-month period
following the Disability Termination Date shall be treated, for
all purposes under this Section 4.2.2, as Vested Securities; and
(b) for the 180 days following the
Disability Termination Date, the Executive shall have the right
to require the Employers to purchase (subject to Section 4.6
hereof) all but not less than all of the Vested Securities, at a
price equal to the Full Value thereof on the Disability
Termination Date, together with all but not less than all of the
other Initial Securities, at cost, plus, in the case of the
Subordinated Debentures included among such other Initial
Securities, accreted discount thereon through and including the
date of such purchase.
4.3 Cause; Voluntary Termination.
4.3.1 In the event of the conviction of the
Executive of any felony involving intentional conduct on the part
of the Executive, the conviction of the Executive of any lesser
crime or offense involving the illegal use or conversion of
property of the Employers or any of their subsidiaries or
affiliates, the willful misconduct by the Executive in connection
with the performance of the Executive's duties hereunder (which
shall not be deemed to include an action by the Executive taken
in good faith in the best interest of the Employers) or the
continued breach by the Executive of any material provision of
this Agreement after notice of such breach has been actually
received by the Executive from the Employers (the "deemed
receipt" provisions of Article 8 hereof being inapplicable to
this Section 4.3.1), the Employers may at any time, by written
notice to the Executive, terminate the Term (a "Termination For
Cause") and, upon such Termination For Cause, the Term shall
terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive within 60
days of the date of termination, all unpaid Base Salary accrued,
and provide the Executive with all benefits and expense
reimbursement to which the Executive would otherwise be entitled,
through and including the date of termination.
4.3.2. Upon a voluntary termination of the term
by the Executive (a "Voluntary Termination") without Good Reason
(as defined in Section 4.4.2), the Term shall terminate and the
Executive shall be entitled to receive no further amounts or
benefits hereunder; provided, that the Employers shall be
obligated to pay to the Executive in exchange for a release in
form and substance acceptable to the Employers acting reasonably,
within 60 days of the date of termination, all unpaid Base Salary
accrued, and provide the Executive with all benefits and expense
reimbursement to which the Executive would otherwise be entitled,
through and including the date of termination.
4.3.3 Upon either a Termination For Cause or a
Voluntary Termination without Good Reason, for the 180 days
following the date of termination, the Employers shall have the
right to purchase (i) all but not less than all of the Vested
Securities, at a price equal to the Full Value thereof on the
date of termination, and/or (ii) all but not less than all other
Initial Securities, at cost, plus, in the case of the
Subordinated Debentures, accreted discount thereon through and
including the date of such purchase; the Executive shall not have
the right to require the Employer to repurchase such Vested
Securities or other Initial Securities.
4.4 Termination by Employers Without Cause;
Termination by the Executive for Good Reason.
4.4.1 Upon a Termination Without Cause (as
defined below) or a Voluntary Termination with Good Reason (as
defined below):
(a) the Employers shall pay to the
Executive, within 60 days of the date of termination, all unpaid
Base Salary accrued, and provide the Executive with all benefits
and expense reimbursement to which the Executive would otherwise
be entitled, through and including the date of termination,
(b) subject to Sections 4.4.4 and 4.4.6, the
Employers shall, in exchange for a release in form and substance
acceptable to the Employers acting reasonably, pay the following
to the Executive:
(i) the Employers shall continue
payments of Base Salary to the Executive (the
"Continued Salary"), at the rate and at such times as
are in effect on the date of termination (the "Base
Salary Upon Termination"), for the 12 month period
following the date of termination (the "Payment
Period"), except as provided in Section 4.4.4,
(ii) the Employers shall continue
health and life insurance benefits during the Payment
Period (the "Continued Benefits"), and
(iii) the Employers shall pay
to the Executive, at the end of the Payment Period, a
bonus (the "Continued Bonus," and together with the
Continued Salary and the Continued Benefits, the
"Continued Payments") in an amount equal to 50% of the
aggregate base salary paid to the Executive during the
period commencing on the day after the last day of the
last fiscal year completed prior to the date of
termination and ending on the last day of the Payment
Period; it being understood that such 50% bonus level
has been agreed to because it is impossible to
determine the performance of the Employers for future
periods,
(c) for the 180 days following the date of
termination, the Employers shall have the right to purchase (i)
all but not less than all of the Vested Securities, at a price
equal to the Full Value thereof on the date of termination,
and/or (ii) all but not less than all other Initial Securities,
at cost, plus, in the case of the Subordinated Debentures,
accreted discount thereon through and including the date of such
purchase, and
(d) for the 180 days following the date of
termination, the Executive shall have the right to require the
Employers to purchase (subject to Section 4.6 hereof) all but not
less than all of the Vested Securities, at a price equal to the
Full Value thereof on the date of termination, together with all
but not less than all of the other Initial Securities, at cost,
plus, in the case of the Subordinated Debentures included among
such other Initial Securities, accreted discount thereon through
and including the date of such purchase.
4.4.2 Definitions:
(a) "Termination Without Cause" means the
termination of the Term by the Employers for reasons other than
those described in Sections 4.1, 4.2 or 4.3.
(b) "Good Reason" means the continuation of
any of the following (without the Executive's express prior
consent) after written notice provided by the Executive and the
failure by the Employers to remedy such event within thirty (30)
days after receipt of such notice:
(i) a reduction in the Executive's
Base Salary, as in effect at the date hereof pursuant
to Section 2.2 or as in effect pursuant to increases
from time to time made during the Term;
(ii) failure by the Employers to
pay to the Executive an Incentive Bonus, as provided
for in this Agreement;
(iii) a failure by the
Employers to provide any benefit or compensation plan
(including any pension, profit sharing, annuity, life
insurance, health, accidental death or dismemberment or
disability plan), or any substantially similar benefit
or compensation plan, which has been made available to
other comparable executives of the Employers on terms
no less favorable to the Executive than the terms
offered to such other executives; provided, however,
that nothing in this clause (iii) shall be construed to
mean that the Employers shall be constrained from
amending or eliminating any benefit or compensation
plan as such is applied to the Executive and to other
comparable executives of the Employers; provided,
further, that a failure by the Employers to include the
Executive in any stock option plan or bonus plan shall
not constitute Good Reason hereunder;
(iv) the assignment to the
Executive of any duties materially inconsistent with
the Executive's position as Vice President and General
Counsel of the Employers;
(v) a materially adverse change in
the Executive's title or the line of authority through
which the Executive is required to report, it being
understood that the Executive shall at all times report
to either the Chief Executive Officer of the Employers;
(vi) failure by the Employers to
obtain the written agreement of any successor in
interest to the business of the Employers to assume and
perform the obligations of the Employers under this
Agreement;
(vii) a relocation of the
corporate headquarters of the Employers requiring the
Executive to relocate to a place other than the greater
Chicago, Illinois metropolitan area; or
(viii) any material breach of
this Agreement by the Employers.
4.4.3 In the event of a Termination Without
Cause or a Voluntary Termination for Good Reason, the Executive
shall not be required to mitigate his damages hereunder;
provided, however, that, notwithstanding the foregoing, if there
are any damages hereunder by reason of the events of termination
described above which are "contingent on" a Section 280G Change
within the meaning of Section 280G(b)(2)(A) of the Code after a
Public Offering (i) the Executive shall be required to mitigate
such damages hereunder, including any such damages theretofore
paid, but not in excess of the extent, if any, necessary to
prevent the Employers from losing any tax deductions to which
they would otherwise be entitled in connection with such damages
if they were not so "contingent on" a Section 280G Change
(provided, that, the parties agree that this clause (i) shall not
require the Executive to violate Section 5.2 hereof) and (ii) in
addition to any obligation under the preceding clause (i), and
without duplication of any amounts required to be paid to the
Employers thereunder, if any such termination occurs and the
Executive, whether or not required to mitigate his damages under
clause (i) above, thereafter obtains other employment, the total
compensation received in connection with such other employment,
whether paid to the Executive or deferred for his benefit, for
services prior to the end of the Modified Payment Period (as
defined below) (up to the aggregate amount of damages described
in Section 4.4.1(b)) shall be paid over to the Employers as
received with respect to such period. Notwithstanding the
provisions of this Section 4.4.3, the Employers shall not have
the right to enforce their rights under this Section 4.4.3 by set
off against or by otherwise withholding any amounts receivable by
the Executive (or payable on the Executive's behalf) under this
Agreement upon or following the time at which they are required
to be paid under this Agreement.
4.4.4 In the event that any amounts or other
benefit payable pursuant to Section 4.4 or 4.5 (other than
Section 4.4.6) (including, but not limited to, the Continued
Payments, the receipt of any security upon the exercise of any
Option, or the lapse of any direct or indirect restriction on the
ability to transfer any such security for the fair market value
thereof) would be deemed "contingent on" a Section 280G Change
(within the meaning of Section 280G(b)(2)(A) of the Code) that
occurs subsequent to a Public Offering:
(a) the Continued Salary shall be paid, the
Continued Bonus shall be calculated by reference to and the
Continued Benefits shall be provided for the shorter of (i) 12
months following the date of termination, and (ii) the remainder
of the Term (even if such remaining period is less than twelve
months) (the "Modified Payment Period"), and
(b) the Continued Salary and the Continued
Bonus (as modified in clause (a) of this Section 4.4.4) shall be
paid to the Executive by the Employers, within 60 days of the
date of termination, in a lump sum, which lump sum shall be
discounted to the present value, on the date of payment, of the
Continued Salary (as if paid at the times the Base Salary would
have been paid to the Executive under Section 2.2 if the
Executive had been employed by the Employers during the Modified
Payment Period) and the Continued Bonus (as if paid on the last
day of the Modified Payment Period) at the Discount Rate.
"Discount Rate" shall mean the discount rate described in Section
280G(d)(4) of the Code. The parties hereby elect, to the extent
permitted for purposes of such Section 280G(d)(4), to base the
Discount Rate on the applicable federal rate in effect on the
date hereof.
4.4.5 It is the intention of the parties that,
if there has been a Public Offering and a Section 280G Change
occurs, payments to be made to the Executive in the event of a
Termination Without Cause or a Voluntary Termination for Good
Reason qualify as "reasonable compensation for personal services
to be rendered on or after the date of the change" within the
meaning of Section 280G(b)(4)(A) of the Code and Q&A 42(b) of
Proposed Regulation Section 1.280G-1 thereunder (as amended from
time to time), and the provisions of this Agreement shall, in the
event of any ambiguity, be interpreted in a manner consistent
with the foregoing.
4.4.6 Upon a Termination Without Cause or a
Voluntary Termination with Good Reason that occurs both (i) prior
to a Public Offering, and (ii) following a Change of Control (as
defined below) all unvested Initial Securities shall become
Vested Securities. A "Change of Control" shall, for the purposes
of this Section 4.4.6, be deemed to have occurred upon the date,
if any, at which a person or group (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) other than Acadia Partners, L.P., Keystone, Inc., HWP
Partners, L.P. and their respective Affiliates (as defined in
Section 2.1(a) of the Principal Stockholders Agreement) has the
collective ability to directly or indirectly designate a majority
of the members of the SFAC Board (whether by contract or
otherwise).
4.5 Termination by Non-Extension of Term. Upon a
termination of the Term by reason of Section 2.2:
(a) without regard to whether such termination of
the Term occurs by reason of a notice of non-extension or by the
expiration of the Term on December 31, 1999, the Term shall
terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive all unpaid
Base Salary accrued, and provide the Executive with all benefits,
bonuses and expense reimbursement to which the Executive would
otherwise be entitled, through and including the date of
termination of the Term;
(b) if such termination occurs by reason of the
giving by any party of a notice of non-extension, for the 180
days following the date of termination of the Term, the Employers
shall have the right to repurchase all but not less than all of
the Vested Securities, at a price equal to the Full Value thereof
on the date of termination, and all, but not less than all, of
the Initial Securities, at cost, plus, in the case of the
Subordinated Debentures, accreted discount thereon through and
including the date of such purchase; and
(c) in addition to the provisions of clauses (a)
and (b) above, if the Employers give notice of non-extension
pursuant to Section 2.2:
(i) unless the notice of non-extension
would be deemed "contingent on" a Section 280G Change
(within the meaning of Section 280G(b)(2)(A) of the
Code) that occurs subsequent to a Public Offering, the
Employers shall, in exchange for a release in form and
substance acceptable to the Employers acting
reasonably, continue payments of Base Salary to the
Executive, at the rate and at such times as are in
effect on the date of the termination of the Term, for
the 180 day period following the date of termination,
and
(ii) for the 180 days following the date
of termination of the Term, the Executive shall have
the right to require the Employers to purchase (subject
to Section 4.6 hereof) all but not less than all of the
Vested Securities, at a price equal to the Full Value
thereof on the date of termination of the Term, and
all, but not less than all, other Initial Securities,
at cost, plus, in the case of the Subordinated
Debentures, accreted discount thereon through and
including the date of such purchase.
4.6 Certain Provisions Regarding Repurchase
Obligations. The rights of the Executive (or the Beneficiary, as
the case may be) to require the Employers to purchase Initial
Securities from the Executive pursuant to Article 4 hereof ("Put
Rights") shall be limited by this Section 4.6. The Executive (or
the Beneficiary) shall not have the right to require the
Employers to purchase any securities pursuant to Article 4 to the
extent that such purchase (i) would constitute or cause a breach
or violation of or a default (whether immediately or with notice
or lapse of time or both) under any debt agreement of either
Employer or of any of their subsidiaries (whether currently in
existence or entered into subsequent to the date hereof) or (ii)
would violate any law applicable to the Employers. If the
Employers can buy some but not all of the securities that the
Executive (or the Beneficiary) have requested the Employers to
purchase (the "Put Securities"), the Employers shall purchase as
many Put Securities as can be purchased without causing such
breach, default or violation. Thereafter, at the time it becomes
possible for the Employers to repurchase all (but not less than
all) remaining Put Securities without causing such breach,
default or violation, the Employers shall promptly purchase all
such remaining Put Securities. In the event that either the Term
Loan Agreement, dated as of July 17, 1995, as amended, among SFC,
certain lenders listed therein and Chemical Bank, as
administrative agent, or the Revolving Credit Agreement dated as
of August 16, 1993, as amended, among the Revolving Credit
Borrowers signatory thereto, the lenders named therein and
Chemical Bank, as administrative agent, imposes restrictions on
the Employers' ability to satisfy the Executive's Put Rights, the
Employers shall, at the time such Put Rights are required to be
satisfied, use all commercially reasonable efforts to obtain
amendments to or waivers from such agreements that have the
effect of removing such restrictions.
5. Protection of Confidential Information: Non-
Competition; No Solicitation.
5.1 In view of the fact that the Executive's work for
the Employers will bring the Executive into close contact with
many confidential affairs of the Employers not readily available
to the public, and plans for future developments, the Executive
agrees:
5.1.1 To keep and retain in the strictest
confidence all confidential matters of the Employers, including,
without limitation, to the extent the following are confidential,
trade "know how," secrets, customer lists, pricing policies,
operational methods, technical processes, formulae, inventions
and research projects, and other business affairs of the
Employers, learned by the Executive heretofore or hereafter, and
not to disclose them to anyone outside of the Employers, either
during or after the Executive's employment with the Employers,
except in the course of performing the Executive's duties
hereunder or with the Employers' express written consent; and
5.1.2 To deliver promptly to the Employers on
termination of the Executive's employment by the Employers, or at
any time the Employers may so request, all memoranda, notes,
records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) relating to the Employers'
business and all property associated therewith, which the
Executive may then possess or have under the Executive's control
unless such information is necessary to enable the Executive to
file any federal or state tax return or make any other report or
filing or take any other action required by any law, regulation
or order of any court or regulatory commission, department or
agency.
Notwithstanding the foregoing, nothing contained
in this Section 5.1 shall restrict the Executive from using,
disclosing or retaining any information (i) which is in the
public domain or could readily be known or determined without
being employed by the Employers or which enters the public domain
through no breach of the Executive's obligations to the
Employers, (ii) which the Executive acquired prior to his
employment by the Employers, (iii) which the Executive properly
acquired or acquires from parties independent of the Employers,
(iv) which the Executive is required to disclose by law,
regulation, order or legal process, (v) which is desirable to
establish the Executive's claim or defense in any litigation
between the parties, provided that the Executive uses his best
efforts to ensure that confidential treatment will be afforded
such information.
5.2 During the term of the Executive's employment by
the Employers and, in the event of the termination of the
Executive's employment for any reason, for the 180-day period
immediately following the date of termination, the Executive
shall not, directly or indirectly, enter the employ of, or render
any services to, any person, firm or corporation engaged in any
business competitive with the business of the Employers or of any
of their subsidiaries; in any state in which any such business is
conducted or in which the Employers have specific plans to
conduct business at the time of such termination, the Executive
shall not engage in such business on the Executive's own account;
and the Executive shall not become interested in any such
business, directly or indirectly, as an individual, partner,
shareholder, director, officer, principal, agent, employee,
trustee, consultant, or in any other relationship or capacity;
provided, however, that nothing contained in this Section 5.2
shall be deemed to prohibit the Executive from acquiring, solely
as an investment, up to one percent (1%) of the outstanding
shares of capital stock of any public corporation. The Executive
shall not be deemed to be in breach of this Section 5.2 because
(i) a public corporation of which he owns more than 1% of the
outstanding capital stock begins to engage in any such prohibited
activities or (ii) his ownership interest in a public corporation
engaged in such activities increases to more than 1% of such
corporation's issued and outstanding capital stock in either case
without any volitional act on the part of the Executive, if, in
the case of either clause (i) or (ii) above, within sixty (60)
days of learning of such event, the Executive disposes of the
amount of capital stock necessary to cause his ownership to be
less than 1% of the amount of such capital stock issued and
outstanding.
5.3 When the Executive's employment by the Employers
terminates for any reason whatsoever, then during the period
commencing on the date of such termination and ending on the
second anniversary thereof, the Executive shall not without the
express written consent of SFAC, directly or indirectly, (i)
solicit any employee of the Employers or of any of their
subsidiaries to terminate his employment with the Employers or
with such subsidiary or (ii) hire any such employee.
5.4 If the Executive commits a breach, or threatens to
commit a breach, of any of the provisions of Sections 5.1, 5.2 or
5.3 hereof, the Employers shall have, in addition to any other
remedies they may have, the following rights and remedies:
5.4.1 The right and remedy to have the
provisions of this Agreement specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable
injury to the Employers and that money damages will not provide
an adequate remedy to the Employers; and
5.4.2 The right and remedy to require the
Executive to account for and pay over to the Employers all
compensation, profits, monies, accruals, increments or other
benefits (collectively "Benefits") derived or received by the
Executive as the result of any transactions constituting a breach
of any of the provisions of the preceding paragraph, and the
Executive hereby agrees to account for and pay over such Benefits
to the Employers.
5.4.3 Each of the rights and remedies
enumerated above shall be independent of the other, and shall be
severally enforceable, and all of such rights and remedies shall
be in addition to, and not in lieu of, any other rights and
remedies available to the Employers under law or in equity.
5.5 If any of the covenants contained in Section 5.1,
5.2 or 5.3, or any part thereof, hereafter is construed to be
invalid or unenforceable, the same shall not affect the remainder
of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions.
5.6 If any of the covenants contained in Section 5.1,
5.2 or 5.3, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered
thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or
area of such provision and, in its reduced form, said provision
shall then be enforceable.
5.7 The parties hereto intend to and hereby confer
jurisdiction to enforce the covenants contained in Sections 5.1,
5.2 and 5.3 upon the courts of any state within the geographical
scope of such covenants where the Executive is engaged in
activities in violation of such covenants or the Employers are
damaged or harmed in any way by the Executive's violation of such
covenants. In the event that the courts of any one or more of
such states shall hold such covenants wholly unenforceable by
reason of the breadth of such covenants or otherwise, it is the
intention of the parties hereto that such determination not bar
or in any way affect the Employers' right to the relief provided
above in the courts of any other states within the geographical
scope of such covenants as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they
relate to each state being for this purpose severable into
diverse and independent covenants.
6. Inventions and Patents. The Executive agrees that all
processes, technologies and inventions (collectively
"Inventions"), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed,
invented or made by him while employed by the Employers shall
belong to the Employers, provided that such Inventions grew out
of the Executive's work with the Employers or any of their
subsidiaries or affiliates, are related in any manner to the
business (commercial or experimental) of the Employers or any of
their subsidiaries or affiliates or are conceived or made on the
Employers' time or with the use of the Employers' facilities or
materials. The Executive shall further: (a) promptly disclose
such Inventions to the Employers; (b) assign to the Employers,
without additional compensation, all patent and other rights to
such Inventions for the United States and foreign countries; (c)
sign all papers necessary to carry out the foregoing; and (d)
give testimony in support of the Executive's inventorship.
7. Intellectual Property. The Employers shall be the
exclusive owners of all the products and proceeds of the
Executive's services with the Employers, including, but not
limited to, all materials, ideas, concepts, formats, suggestions,
developments, arrangements, packages, programs and other
intellectual properties that the Executive may acquire, obtain,
develop or create in connection with and during the Executive's
employment by the Employers, free and clear of any claims by the
Executive (or anyone claiming under the Executive) of any kind or
character whatsoever (other than the Executive's right to receive
payments hereunder). The Executive shall, at the request of the
Employers, execute such assignments, certificates or other
instruments as the Employers may from time to time deem necessary
or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend their right, title or interest in or to any
such properties.
8. Notices. All notices, requests, consents and other
communications required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given if
delivered personally, sent by overnight courier or mailed first-
class, postage prepaid, by registered or certified mail (notices
mailed shall be deemed to have been given on the date mailed) or
sent by telecopier, as follows (or to such other address as
either party shall designate by notice in writing to the other in
accordance herewith):
If to the Employers, to:
Specialty Foods Acquisition Corporation
Specialty Foods Corporation
0000 Xxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Telecopier: 847/685-1010
Attention: Chief Executive Officer
If to the Executive, to:
Mr. Xxxxxx Xxxxx
0000 X. Xxxxxxxx Xxx.
Xxxxxxxx, XX 00000
9. General.
9.1 This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Illinois
applicable to agreements made and to be performed entirely in
Illinois; provided, that all provisions of this Agreement
governing the issuance and rights in respect of securities of
SFAC, including, without limitation, Initial Securities and
Vested Securities, shall be governed by and construed in
accordance with the laws of the State of Delaware.
9.2 The section headings contained herein are for
reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, relating to the subject matter
hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and
neither party shall be bound by or liable for any alleged
representation, promise of inducement not so set forth.
9.4 This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive. The
Employers may assign their rights, together with their
obligations, hereunder (i) to any subsidiary of or successor-in-
interest to any of them, or (ii) to third parties in connection
with any sale, transfer or other disposition of all or
substantially all of the business or assets of any of them; in
any event the obligations of the Employers hereunder shall be
binding on their successors or permitted assigns, whether by
merger, consolidation or acquisition of all or substantially all
of either of their businesses or assets.
9.5 This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or
covenants hereof may be waived, only by a written instrument
executed by the parties hereto, or in the case of a waiver, by
the party waiving compliance. The failure of a party at any time
or times to require performance of any provision hereof shall in
no manner affect the right at a later time to enforce the same.
No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in
this Agreement.
9.6 This Agreement or any amendment hereto may be
signed in any number of counterparts, each of which shall be an
original, but all of which taken together shall constitute one
agreement (or amendment as the case may be).
9.7 This Agreement shall be of no force or effect
until it has been approved by the Boards.
10. Certain Definitions.
10.1 As used herein the term "subsidiary" shall mean
any corporation or other business entity controlled directly or
indirectly by the corporation or other business entity in
question, and the term "affiliate" shall mean and include any
corporation or other business entity directly or indirectly
controlling, controlled by or under common control with the
corporation or other business entity in question.
10.2 As used herein, the "Fair Market Value" of the
Common Stock shall mean the fair market value of the Common Stock
determined by the SFAC Board in good faith on a going concern
basis without regard to any minority discount (the "Initial
Value"), which determination shall be evidenced by a resolution
of the SFAC Board and the Initial Value shall be the Fair Market
Value of the Common Stock for all purposes; provided, that
following the termination of the Executive's employment by the
Employers, for any reason, pursuant to Article 4 hereof, if the
Executive or the Beneficiary disagrees with the SFAC Board's
determination that the Initial Value is the fair market value of
the Common Stock and delivers written notice of such disagreement
to the Employers within 30 days after the date on which the SFAC
Board's determination of the Initial Value is communicated to the
Executive or the Beneficiary, the Fair Market Value of the Common
Stock shall be determined in a binding arbitration proceeding,
the arbitrator for which shall be a nationally recognized
investment banking firm selected jointly by the Employers and the
Executive (or the Beneficiary, as the case may be); provided,
that if the Employers and the Executive (or the Beneficiary, as
the case may be) cannot agree on an arbitrator, an arbitrator
shall be selected in accordance with the rules of the American
Arbitration Association. Notwithstanding the foregoing, (i) if
the Fair Market Value, as determined by the Arbitrator (the
"Arbitration Value"), does not deviate from the Initial Value by
an amount equal to more than 10% of the Initial Value then the
Fair Market Value shall equal the Initial Value for all purposes,
and (ii) if the Arbitration Value deviates from the Initial Value
by an amount equal to more than 10% of the Initial Value (whether
such deviation is higher or lower than the Initial Value) then
the Fair Market Value shall equal the Arbitration Value for all
purposes. If, following an arbitration proceeding, the
Arbitration Value exceeds an amount equal to the sum of (x) the
Initial Value plus (y) an amount equal to 10% of the Initial
Value, the Employers shall pay all costs associated with the
arbitration; in all other cases, the Executive (or the
Beneficiary, as the case may be) shall pay all of such costs.
10.3 Survival. The provisions of Sections 5, 6 and 7
shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of March 1, 1997.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxx
Name: Xxxxxxxx X. Xxxxxxxx
Title: President & CEO
SPECIALTY FOODS CORPORATION
By: /s/ Xxxx X. Xxxxxxxxxx
Name: Xxxx X. Xxxxxxxxxx
Title: Vice President
Xxxxxx X. Xxxxx, Xx.
XXXXXX X. XXXXX, XX
