Exhibit 10.9
FORM OF SEVERANCE AGREEMENT
---------------------------
THIS AGREEMENT (this "Agreement") is entered into as of _____________, ____
by and between Peapod, Inc., a Delaware corporation (the "Company"), and
___________________________________________________ (the "Executive");
W I T N E S S E T H
WHEREAS, the Executive is being employed or is currently employed
as_________________________________________of the Company and his services and
knowledge are valuable to the Company; and
WHEREAS, concurrently with the execution hereof, Executive and the Company
are entering into an employment agreement ("Employment Agreement"), which
Employment Agreement provides for substantial benefits; and
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and the Executive hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
-----------
have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a willful refusal by the Executive to perform
or substantial disregard of those duties and responsibilities properly assigned
to the Executive, and if a Change in Control has occurred, if those duties and
responsibilities do not differ in any material respect from the duties and
responsibilities of the Executive during the ninety (90) day period immediately
prior to a Change in Control (other than as a result of incapacity due to
physical or mental illness), in any case, which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying such
breach, (2) embezzlement or misappropriation of corporate funds by the
Executive, other act of dishonesty by the Executive, or significant activities
by the Executive harmful to the reputation of the Company, or (3) significant
violation by the Executive of any statutory or common law duty of loyalty to the
Company.
(c) "Change in Control" means:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of twenty percent (20%) or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
-------- -------
the following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company (excluding any acquisition resulting from
the exercise of an exercise, conversion or exchange privilege in respect of
outstanding convertible or exchangeable securities unless the security being so
exercised, converted or exchanged was acquired directly from the Company) (B)
any acquisition by the Company, (C) any acquisition by an Exempt Person, (D) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, (E) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation involving the Company, if, immediately after such reorganization,
merger or consolidation, each of the conditions described in clauses (i), (ii)
and (iii) of subsection (3) of this Section (1)(c) shall be satisfied; and
provided further that, for purposes of clause (B), if any Person (other than
----------------
the Company or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company) shall
become the beneficial owner of twenty percent (20%) or more of the Outstanding
Company Common Stock or twenty percent (20%) or more of the Outstanding Company
Voting securities by reason of an acquisition by the Company and such Person
shall, after such acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Company Common Stock or any additional
Outstanding Company Voting Securities and such beneficial ownership is publicly
announced, such additional beneficial ownership shall constitute a Change in
Control;
(2) individuals who, as of the date of the consummation of the
Company's initial public offering of Common Stock, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided, however, that any individual who becomes a director of
-------- -------
the Company subsequent to the date hereof whose appointment, or whose nomination
for election by the Company's stockholders, was approved by the vote of at least
sixty six and two-thirds percent (66-2/3%) of the directors then comprising the
Incumbent Board shall be deemed to have been a member of the Incumbent Board;
and provided further, that no individual who was initially elected as a director
----------------
of the Company as a result of an actual or threatened election contest, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act, or any other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board shall be deemed to have been a
member of the Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate Transaction");
excluding, however, a Corporate Transaction pursuant to which (i) all or
substantially all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than sixty percent (60%) of,
respectively, the outstanding shares of common stock, and the combined voting
power of the outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either
2
directly or indirectly) in substantially the same proportions relative to each
other as their beneficial ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (ii) no Person (other than an Exempt
Person; the Company; any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; the
corporation resulting from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate Transaction, directly or
indirectly, twenty percent (20%) or more of the Outstanding Company Common Stock
or the Outstanding Company Voting Securities, as the case may be) will
beneficially own, directly or indirectly, twenty percent (20%) or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote generally in the
election of directors and (iii) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporation Transaction; or
(4) approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company.
(d) "Company" shall have the meaning set forth in the introduction to
this Agreement.
(e) "Date of Termination" means (1) the effective date on which the
Executive's employment by the Company terminates as specified in a prior written
notice by the Company or the Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (2) if the Executive's employment by the
Company terminates by reason of death, the date of death of the Executive.
(f) "Employment Agreement" means the Employment Agreement of even
date hereof between Executive and Peapod, as it may be amended from time to
time.
(g) "Exempt Person" means each of Xxxxxx X. Xxxxxxxxx and Xxxxxx X.
Xxxxxxxxx and any Affiliate (as such term is defined in Rule 12b-1 under the
Securities Exchange Act of 1934, as in effect on the date hereof, "Affiliate")
thereof.
(h) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(1) any of (i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position(s), duties,
responsibilities or status with the Company as provided under the Employment
Agreement or, if the Employment Agreement is no longer in effect, immediately
prior to the termination thereof or, if a Change in Control has occurred,
immediately prior to such Change in Control, (ii) a change in the Executive's
reporting responsibilities, titles or offices with the Company inconsistent with
the Employment Agreement or, if the Employment Agreement is no longer in effect,
as in effect immediately prior to the termination thereof, or, if a Change in
Control has occurred, as in effect
3
immediately prior to such Change in Control, or (iii) any removal or involuntary
termination of the Executive from the Company otherwise than as expressly
permitted by this Agreement or any failure to re-elect the Executive to any
position with the Company held by the Executive as provided under the Employment
Agreement or, if the Employment Agreement is no longer in effect, as in effect
immediately prior to the termination thereof, or, if a Change in Control has
occurred, immediately prior to such Change in Control;
(2) a reduction by the Company in the Executive's rate of annual
base salary as provided under the Employment Agreement or a change to
Executive's bonus compensation that is adverse to the Executive and is
inconsistent with the Employment Agreement, or, if the Employment Agreement is
no longer in effect, such annual base salary or bonus compensation plan as in
effect immediately prior to the termination thereof, or, if a Change in Control
has occurred, such annual base salary or bonus compensation plan as in effect
immediately prior to such Change in Control or as the same may be increased from
time to time thereafter;
(3) any requirement of the Company that the Executive (i) be
based anywhere other than at the facility where the Executive is located or to
be located at the date of this Agreement (or a new headquarters within a thirty
(30) mile radius of the Company's current headquarters) or, if a Change in
Control has occurred, at the time of the Change in Control, or (ii) travel on
Company business to an extent substantially more burdensome than the travel
obligations of the Executive immediately prior to the date hereof, or, if a
Change in Control has occurred, at the time of such Change in Control;
(4) if a Change in Control has occurred, the failure of the
Company to (i) continue in effect any employee benefit plan or compensation plan
in which the Executive is participating immediately prior to such Change in
Control, unless the Executive is permitted to participate in other plans
providing the Executive with substantially comparable benefits, or the taking of
any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any such
plan, (ii) provide the Executive and the Executive's dependents welfare benefits
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive immediately prior to such Change in
Control, (iii) provide fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive immediately prior to such Change in
Control, (iv) provide an office or offices of a size and with furnishings and
other appointments, together with secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the Executive by the
Company and its affiliated companies immediately prior to such Change in
Control, (v) provide the Executive with paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive immediately prior such
Change in Control, or (vi) reimburse the Executive promptly for all reasonable
employment expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its affiliated
companies in effect for the Executive immediately prior to such Change in
Control; or
4
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 9(b).
Notwithstanding the above, an isolated action taken in good faith and which is
remedied by the Company promptly after receipt of notice from the Executive
shall not constitute Good Reason.
(i) "Nonqualifying Termination" means a termination of the
Executive's employment (1) by the Company for Cause, (2) by the Executive for
any reason other than a Good Reason, (3) as a result of the Executive's death or
(4) by the Company due to the Executive's absence from his duties with the
Company on a full-time basis for at least one hundred eighty (180) consecutive
days as a result of the Executive's incapacity due to physical or mental
illness; provided, however, that a termination of the Executive's employment
-------- -------
for any reason whatsoever during the "Window Period" (hereinafter defined) shall
not constitute a Nonqualifying Termination.
(j) "Term" means the period of time beginning with the date hereof
and ending on the earliest to occur of (1) ten years after the date hereof, (2)
Executive's death, and (3) two years following a Change in Control (the
"Agreement Termination Date").
(k) "Window Period" means the thirty (30) day period commencing one
(1) year after the date of a Change in Control.
2. Obligations of the Executive. The Executive agrees that in the event
----------------------------
any person or group attempts a Change in Control, he shall not voluntarily leave
the employ of the Company without Good Reason (a) until such attempted Change in
Control terminates or (b) if a Change in Control shall occur, until ninety (90)
days following such Change in Control. For purposes of the foregoing subsection
(a), Good Reason shall be determined as if a Change in Control had occurred when
such attempted Change in control became known to the Board.
3. Payments Upon Termination of Employment.
---------------------------------------
(a) If the employment of the Executive shall terminate other than by
reason of a Nonqualifying Termination, the Company shall pay to the Executive
(or the Executive's beneficiary or estate) as compensation for services rendered
to the Company:
(1) a cash amount payable within 30 days following the Date of
Termination equal to the sum of (i) the Executive's base salary due from the
Company through the Date of Termination (ii) the Executive's annual bonus in an
amount equal to the average of the Executive's annual bonus for the last three
(3) fiscal years (or such portion thereof during which the Executive was
employed) immediately preceding the fiscal year in which such termination
occurs, multiplied by a fraction, the numerator of which is the number of days
in the fiscal year through the Date of Termination and the denominator of which
is 365 or 366, as applicable, and (iii) any compensation previously deferred by
the Executive and any accrued vacation pay, in each case to the extent not
theretofore paid; plus
5
(2) an amount equal to six (6) months of the Executive's highest
base salary in effect during the six (6) month period prior to the Date of
Termination payable at such intervals and times as the Executive's base salary
would otherwise be paid; provided, however, that any amount paid pursuant to
--------- -------
this Section 3(a)(2) shall be paid in lieu of any other amount of severance
relating to salary or bonus continuation to be received by the Executive upon
termination of employment of the Executive under any severance plan, policy or
arrangement of the Company.
(b) If the employment of the Executive shall terminate by reason of a
Nonqualifying Termination, then the Company shall pay to the Executive within
thirty (30) days following the Date of Termination, a cash amount equal to the
sum of (1) the Executive's base salary due from the Company through the Date of
Termination and (2) any compensation previously deferred by the Executive and
any accrued vacation pay, in each case to the extent not theretofore paid.
4. Withholding Taxes. The Company may withhold from all payments due to
-----------------
the Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. Reimbursement of Expenses. If any contest or dispute shall arise
-------------------------
under this Agreement involving termination of the Executive's employment with
the Company after a Change in Control or involving the failure or refusal of the
Company to perform fully in accordance with the terms hereof after a Change in
Control, the Company shall reimburse the Executive, on a current basis, for all
legal fees and expenses incurred by the Executive in connection with such
contest or dispute, together with interest in an amount equal to the prime rate
of The Northern Trust Company from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives the Executive's statement
for such fees and expenses through the date of payment thereof; provided,
--------
however, that in the event the resolution of any such contest or dispute
-------
includes a finding denying, in total, the Executive's claims in such contest or
dispute, the Executive shall be required to reimburse the Company, over a period
of twelve (12) months from the date of such resolution, for all sums advanced to
the Executive pursuant to this Section 5.
6. Termination of Agreement. This Agreement shall be effective as of the
------------------------
date hereof and shall terminate upon the Agreement Termination Date.
7. Scope of Agreement. Nothing in this Agreement shall be deemed to
------------------
entitle the Executive to continued employment with the Company or its
subsidiaries.
8. Directors and Officers Liability Insurance; Indemnification. The
-----------------------------------------------------------
Company agrees that, notwithstanding a termination of Executive's employment
with the Company, the Company shall, for at least three (3) years after the Date
of Termination, use all reasonable efforts to have Executive included as a named
insured or otherwise covered for actions or failures to act by Executive in his
capacity as a director or officer of the Company to at least the same extent as
other executive officers or directors, as the case may be, of the Company under
any directors and officers liability insurance policies maintained by the
Company; provided that
--------
6
the additional cost of providing coverage with a retroactive date including
Executive's period of service or with an extended reporting period or a
combination of both does not materially increase the cost of the Company's
directors and officers insurance. The Company agrees that it will not alter the
indemnification provisions in its charter or by-laws so as to give Executive
less protection thereunder with respect to periods during which Executive served
the Company as an executive officer or other employee than is afforded to other
executive officers or peer employees, as the case may be, with respect to
periods during which they serve the Company.
9. Successors; Binding Agreement.
-----------------------------
(a) This Agreement shall not be terminated by any merger or
consolidation of the Company whereby the Company is or is not the surviving or
resulting corporation or as a result of any transfer of all or substantially all
of the assets of the Company. In the event of any such merger, consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon the
surviving or resulting corporation or the person or entity to which such assets
are transferred.
(b) The Company agrees that concurrently with any merger,
consolidation or transfer of assets referred to in paragraph (a) of this Section
9, it will cause any successor or transferee unconditionally to assume, by
written instrument delivered to the Executive (or his beneficiary or estate),
all of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Agreement and
shall entitle the Executive to compensation and other benefits from the Company
in the same amount and on the same terms as the Executive would be entitled
hereunder if the Executive's employment were terminated following a Change in
Control other than by reason of a Nonqualifying Termination. For purposes of
implementing the foregoing, the date on which any such merger, consolidation or
transfer becomes effective shall be deemed the Date of Termination.
(c) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts would be payable to the Executive hereunder had the
Executive continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to such person or
persons appointed in writing by the Executive to receive such amounts or, if no
person is so appointed, to the Executive's estate.
10. Notice.
------
(a) All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
delivered or three (3) days after deposit in the United States mail, certified
and return receipt requested, postage prepaid, addressed (1) if to the
Executive, at his address shown on the Company records, and if to the Company,
to Peapod, Inc., 0000 Xxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000-0000, attention
President with a copy to the Secretary, or (2) to such other address as either
party may have furnished to
7
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
(b) A written notice of termination of the Executive's employment by
the Company or the Executive, as the case may be, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) specify the Date of Termination (which date
shall be not less than fifteen (15) days after the giving of such notice). The
failure by the Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
11. Employment with Subsidiaries. Employment with the Company for
----------------------------
purposes of this Agreement shall include employment with any corporation or
other entity in which the Company has a direct or indirect ownership interest of
fifty percent (50%) or more of the total combined voting power of the then
outstanding securities of such corporation or other entity entitled to vote
generally in the election of directors.
12. Governing Law; Validity. The interpretation, construction and
-----------------------
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Illinois without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which other provisions shall remain in
full force and effect.
13. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
14. Miscellaneous. No provision of this Agreement may be modified or
-------------
waived unless such modification or waiver is agreed to in writing and signed by
the Executive and by a duly authorized officer of the Company. No waiver by
either party hereto of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. Failure by the Executive or the
Company to insist upon strict compliance with any provision of this Agreement or
to assert any right the Executive or the Company may have hereunder, shall not
be deemed to be a waiver of such provision or right or any other provision or
right of this Agreement. The rights of, and benefits payable to, the Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, the Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
15. Dispute Resolution. Any controversy or claim arising out of or
------------------
relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American
8
Arbitration Association ("AAA") in accordance with its National Rules for the
Resolution of Employment Disputes, to the extent not inconsistent with this
provision. Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. Such arbitration shall be conducted in
Chicago, Illinois before a single arbitrator. The parties shall select an
arbitrator by mutual agreement from a panel of arbitrators experienced in
arbitrating employment disputes proposed by AAA. If the parties are unable to
agree on an arbitrator, AAA shall select an arbitrator in accordance with its
procedures.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PEAPOD, INC.
By:_______________________________________
Title:
EXECUTIVE
_________________________________________
[Name]
9
