EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Agreement made as of this 26th day of November, 1996 by and
between Annie's Homegrown, Inc., a Delaware corporation with its principal place
of business at 000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the
"Company") and Xxxx Xxxxxxx an individual whose mailing address is 00 Xxxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (the "Employee").
WITNESSETH
WHEREAS, Employee is a senior executive of the Company and has made and
is expected to continue to make major contributions to the Company; and
WHEREAS, the Company desires Employee to serve as President and Chief
Operating Officer and Employee is willing to provide such services under
mutually satisfactory terms and conditions as set forth herein;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Company and Employee
agree as follows:
1. Term. Subject to the terms and conditions hereof, the term of this
Agreement will commence on November 1, 1996 and expire on December 31, 1998 (the
"Term"). The terms and conditions hereof shall be reviewed by the parties at
least ninety (90) days prior to the expiration of the Term and this Agreement
shall be either extended or amended upon mutual agreement of the parties, and if
the parties fail to agree, the Agreement shall be terminated upon the expiration
of the Term.
2. Budget/Projections. The 1997 Budget Projections ("1997 Budget")
attached hereto as Exhibit A shall serve as the benchmark for performance for
the first year of the Term. The 1998 Budget Projections ("1998 Budget") will be
mutually agreed to by the parties and included in this Agreement prior to
November 1, 1997, and will serve as the benchmark for performance in the second
year of the Term.
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The 1997 Budget and the 1998 Budget are collectively referred to herein as the
"Budget/Projections."
3. Duties and Responsibilities.
(a) During the Term, the Employee shall serve as the President
and Chief Operating Officer of the Company. In the performance of his
responsibilities as the President and Chief Operating Officer, the Employee
shall be subject to all of the Company's policies, rules and regulations
applicable to its Employees of comparable status and shall report directly to,
and shall be subject to the direction and control of, the Board of Directors of
the Company (the "Board"), and shall perform such duties as shall be assigned to
him by the Board. In performing such duties, the Employee will be subject to and
will substantially abide by, and will use reasonable efforts to cause employees
of the Company to be subject to and substantially abide by, all policies and
procedures developed by the Company.
(b) During the Term, the Employee shall devote all of his
business time, energies, skills and attention to the affairs and activities of
the Company. The Employee shall provide the services to the Company described in
this Agreement in a professional and diligent manner and in a manner consistent
with the highest standards of performance in the retail food industry. During
the Term, the Employee shall not devote any of his business time, energies,
skills or attention to the affairs or activities of any other business or
organization, without the prior approval of the Board (which approval shall not
be unreasonably withheld). The Employee shall provide to the Board, on a
quarterly basis, a description of any involvement with any other business or
organization, such description to include (i) the name of the company or
organization; (ii) type of involvement; and (iii) type of product; provided,
however, that no description is required for a quarter where there has been no
change from the description last provided to the Board.
(c) To induce the Company to enter into this Agreement, the
Employee represents and warrants to the Company that: (i) the Employee is not a
party or subject to any employment agreement or arrangement with any other
person, firm, company, corporation or other business entity
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and the Employee is subject to no restraint, limitation or restriction by virtue
of any agreement or arrangement, or by virtue of any law or rule of law or
otherwise which would impair the Employee's right or ability (A) to enter the
employ of the Company, or (B) to perform fully his duties and obligations
pursuant to this Agreement, and (ii) to the Employee's knowledge, no material
litigation is pending or threatened against any business or business entity
owned or controlled or formerly owned or controlled by the Employee.
4. Insurance and Indemnification. The Company agrees that during the
Term of this Agreement, without the consent of the Employee, it shall not amend
the provisions of Article VII Section 7 (Indemnification) of its By-laws.
5. Compensation.
(a) Base Salary: So long as Employee remains employed, during the Term
of this Agreement, Employee shall receive a monthly gross salary (the "Base
Salary"),which shall be paid in equal installments on the 15th and final day of
each month, equal to: (i) five thousand five hundred dollars ($5,500.00) for
each month during the period November 1, 1996 through December 31, 1996 (ii) six
thousand five hundred dollars ($6,500.00)for each month during the period from
January 1, 1997 through December 31, 1997, ; and (iii) seven thousand five
hundred dollars ($7,500.00) for each month during the period from January 1,
1998 through December 31, 1998.
(b) Bonuses: (i) So long as Employee remains employed, for each
calendar quarter beginning with the quarter starting January 1, 1997, in
addition to any and all other amounts payable to Employee hereunder, Employee
shall receive a bonus payment, payable within forty-five (45) days of the end of
the quarter, as follows:
(A) If the Company has achieved less than fifty
percent (50%) of the "net income before operating expenses" as
described in the Budget/Projections for such quarter, the Employee
shall receive no bonus for such quarter;
(B) If the Company has achieved fifty percent (50%)
or more, but less than one hundred
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percent (100%) of the "net income before operating expenses" as
described in the Budget/Projections for such quarter, the Employee
shall receive a bonus payment for such quarter equal to one and
one-half percent (1 1/2%) of the gross profit after "selling expenses"
for such quarter;
(C) If the Company has achieved one hundred percent
(100%) or more of the "net income before operating expenses" as
described in the Budget/Projections for such quarter, the Employee
shall receive a bonus payment for such quarter equal to two and
one-half percent (2 1/2%) of the gross profit after "selling" expenses
for such quarter.
(ii) In addition to any bonus paid pursuant to Section 5(b)(i)
above, if the actual gross profit after selling expenses for any calendar year
during the Term exceeds one million dollars ($1,000,000), the Employee shall
receive a bonus payment equal to one percent (1%) of the gross profit after
"selling expenses". Such additional annual bonus shall be paid within forty-five
(45) days following the end of the calendar year.
(iii) For purposes of this Agreement, "selling expenses"
include the costs outlined in the Budget/Projections and shall include, without
limitation, price reductions, account advertising, trade advertising, ordinary
consumer marketing expenses, trade show expenses, brokerage expenses and other
ordinary selling expenses.
6. Expense Reimbursement. The Employee is authorized to incur
reasonable expenses in the performance of his duties hereunder during the Term.
The Company shall reimburse the Employee for all such expenses upon the
presentation by the of signed, itemized accounts of such expenditures and
vouchers, all in accordance with the Company's procedures and policies as
adopted and in effect from time to time and applicable to its employees of
comparable status.
7. Vacation Time. The Employee shall be entitled to paid vacation,
personal and sick leave during the Term in accordance with the Company's
policies regarding such vacation and leaves.
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8. Grant of Stock Options. The Company shall grant Employee a stock
option, which option shall be fully vested on the date of grant, to purchase
twelve thousand five hundred (12,500) shares of the Company's Common Stock (such
number of shares to be adjusted based on changes in capitalization) for each
calendar quarter during the Term, beginning with the quarter January 1, 1997
through March 31, 1997, that the Company has achieved one hundred percent (100%)
or more of the "net income before operating expenses" as defined in the
Budget/Projections, provided, however, that the aggregate number of shares of
the Company's Common Stock granted to Employee pursuant to this Section 8 shall
not exceed 100,000 shares. Each option shall be granted pursuant to a stock plan
maintained by the Company in compliance with Section 16b-3 under the Securities
Exchange Act of 1934, if applicable. The options shall be granted at an exercise
price equal to the fair market value of the Company's Common Stock on the date
of grant and such options shall be subject to the other terms and conditions
provided in the Company's stock option plan, provided, however, that such
options granted pursuant to this Section 8 shall remain exercisable for a period
of five (5) years, subject to the terms and conditions of this Agreement,
regardless of whether Employee remains employed with the Company.
9. Listing on an Exchange.
(a) In the event the Common Stock of the Company is listed on a
national or regional exchange or on the Nasdaq Small Cap or Nasdaq National
Market, then the Company shall, at the request of the Employee, agree to lend
the Employee, for the sole purpose of exercising vested stock options, an amount
not to exceed $100,000, such loan to be evidenced by a full recourse note in the
form attached hereto as Exhibit B, bearing interest at a rate equal to the prime
rate as published by The First National Bank of Boston on the date the loan is
made, and for a term not to exceed the Term of this Agreement regardless of any
extension thereto. The note shall be secured by all of the capital stock of the
Company owned, at the time of the loan and in the future, by the Employee and
any proceeds from the sale thereof.
(b) The Employee agrees to execute and deliver, upon the request of the
Company, such instruments, including, but not limited to a pledge agreement, and
take such further
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actions, as may be necessary or desirable to evidence the security interest
being granted to the Company pursuant to this Section 9.
10. Payment in Connection with a Merger or Sale of the Company. So long
as Employee remains employed, upon consummation of a Change in Control (as
hereinafter defined), Employee shall be entitled to receive from the Company an
amount equal to two percent (2%) of the Consideration (as hereinafter defined)
paid in connection with the Change in Control less (i) the amount due, including
all accrued interest, on all notes due to the Company from the Employee and (ii)
any gain received by Employee upon the exercise and sale of the Company's Common
Stock underlying the stock options (the "Change in Control Payment"). In order
to receive the Change in Control Payment, Employee must agree to terminate or
otherwise cancel all stock options to purchase shares of Company's Common Stock
Employee currently holds or is entitled to receive pursuant to this Agreement.
For purposes hereof, "Change in Control" means the occurrence of any of the
following events during the Term: (a) The Company is merged or consolidated or
reorganized into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less than a majority of
the combined voting power of the then-outstanding securities of such surviving,
resulting or reorganized corporation or person immediately after such
transaction is held in the aggregate by the holders of the then-outstanding
securities entitled to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such transaction; or (b) the
Company sells or otherwise transfers all or substantially all of its assets to
any other corporation or other legal person, and as a result of such sale or
transfer less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer. For purposes hereof,
"Consideration" shall mean cash and securities paid to the Company and/or its
shareholders upon consummation of the Change in Control and shall exclude (a)
any amount to be paid after the
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consummation of the Change in Control and (b) any debt assumed by the acquiror.
11. Termination of Employment.
(a) Voluntary Termination. The Employee may voluntarily terminate his
employment with the Company upon sixty (60) days written notice to the Company.
In the event that Employee voluntarily terminates his employment with Company,
any and all of Employee's right to payment under this Agreement will terminate
as of the effective date of such termination; provided, however, that Company
will pay Employee any sums which accrued to Employee prior to the effective date
of termination, including any accrued bonus earned but not yet paid, and Company
will grant Employee options pursuant to Section 8 that have accrued, but not yet
been granted.
(b) Involuntary Termination. Employee may be terminated by the Company
before the expiration of this Agreement with or without cause by a majority vote
of the Board of Directors. "Cause" shall be defined as: (a) the Employee's
conviction of any crime (whether or not involving the Company) which constitutes
a felony in the jurisdiction involved; (b) any intentional act of theft, fraud
or embezzlement by the Employee in connection with his work with the Company; or
(c) the Employee's continuing, repeated and willful failure or refusal to
perform his duties and services under this Agreement (other than due to his
incapacity due to illness or injury). In the event that Employee is terminated
for any reason other than Cause as defined herein, Company shall continue to pay
Employee the Base Salary, as then in effect, and bonus sums, without any
adjustments, for a period of six (6) months following such termination.
(c) Nonrenewal. If the Company does not extend or amend this Agreement
for the period of January 1, 1999 through December 31, 1999, the Company shall
pay the Employee severance equal to six (6) months Base Salary, then in effect.
12. Non-Competition.
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(a) During the term of this Agreement and for a period of two
years following the voluntary termination of the Employee pursuant to Section
11(a) above, the Employee shall not, directly or indirectly, perform any
services in the United States for any person or entity other than the Company
that is in the business, directly or indirectly, of selling pasta or other
specialty pasta products of the type the Company is selling, or developing at
the time of the Employee's voluntary termination; or, without limiting the
generality of the foregoing, be or become or agree to be or become, interested
in or associated with, in any capacity (whether as a partner, shareholder,
owner, officer, director, employee, principal, agent, creditor, trustee,
consultant, co-venturer or otherwise) any individual, corporation, firm,
association, partnership, joint venture or other business entity that competes
with the Company; provided, however, that the Employee may own, solely as an
investment, not more than one percent (1%) of any class of securities of any
corporation that is publicly traded on any national securities exchange in the
United States of America or reported on the National Association of Securities
Dealers, Inc.'s Automated Quotation System.
(b) During the term of this Agreement and for a period of two (2)
years following any termination, the Employee shall not, directly or indirectly,
(i) induce or attempt to influence any employee of the Company to leave its
employ, (ii) aid or agree to aid any competitor, customer or supplier of the
Company in any attempt to hire any person who shall have been employed by the
Company within the one-year period preceding such requested aid, or (iii) induce
or attempt to influence any person or business entity who was a customer of the
Company during any portion of the Term of this Agreement and for a period of two
(2) years following any termination, to transact business with a competitor of
the Company in the Company's business. Notwthstanding the previous sentence,
this section 12(b) shall not apply if Employee is terminated without cause
during the Term of this Agreement.
13. Non-disclosure. During the term of this Agreement and thereafter,
except pursuant to his duties to the Company hereunder, the Employee shall not
disclose to anyone any material or confidential information about the affairs of
the Company, including trade secrets, recipes, trade "know-
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how," inventions, customer lists, business plans, operational methods, pricing
policies, marketing plans, sales plans, identity of customers, sales, profits or
other financial information which is confidential to the Company or is not
generally known in the relevant trade.
14. Notices. Notices will be sent by registered or certified mail, postage
prepaid, return receipt requested, or by a recognized expedited delivery service
to the address set forth on page one hereof, unless specifically changed by
either party by written notice to the other.
15. Miscellaneous.
(a) This Agreement is a personal contract, and the rights and
interests of the Employee hereunder may not be sold, transferred, assigned,
pledged or hypothecated, except as otherwise expressly permitted by the
provisions of this Agreement. Except as otherwise expressly provided herein, the
Employee shall not have any power of anticipation, alienation or assignment of
payments contemplated hereunder, and all rights and benefits of the Employee
shall be for the sole personal benefit of the Employee, and no other person
shall acquire any right, title or interest hereunder by reason of any sale,
assignment, transfer, claim or judgment or bankruptcy proceedings against the
Employee; provided, however, that in the event of the Employee's death, the
Employee's estate, legal representative or beneficiaries (as the case may be)
shall have the right to receive all of the benefits that accrued to the Employee
pursuant to, and in accordance with, the terms of this Agreement prior to the
date of the Employee's death.
(b) The Company shall have the right to assign this Agreement
to any successor of substantially all of its business or assets, and any such
successor shall be bound by all of the provisions hereof.
(c) This Agreement may not be changed, amended, terminated or
superseded orally, but only by an agreement in writing, nor may any of the
provisions hereof be waived orally, but only by an instrument in writing, in any
such case signed by the party against whom enforcement
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of any change, amendment, termination, waiver, modification, extension or
discharge is sought.
(d) Except as otherwise provided herein, this Agreement shall
be governed by and construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to the principles of
conflict of laws thereof.
(e) All descriptive headings of the several Sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(f) If any provision of this Agreement, or part thereof, is
held to be unenforceable, the remainder of this Agreement and provision, as the
case may be, shall nevertheless remain in full force and effect.
(g) Each of the parties hereto shall, at any time and from time
to time hereafter, upon the reasonable request of the other, take such further
action and execute, acknowledge and deliver all such instruments of further
assurance as necessary to carry out the provisions of this Agreement.
(h) This Agreement contains the entire agreement and
understanding between the Company and the Employee with respect to the subject
matter hereof. No representations or warranties of any kind or nature relating
to the Company or its affiliates or their respective businesses, assets,
liabilities, operations, future plans or prospects have been made by or on
behalf of the Company to the Employee; nor have any representations or
warranties of any kind or nature been made by the Employee to the Company,
expect as expressly set forth in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above first written.
ANNIE'S HOMEGROWN, INC.
s/ Xxxxxx Xxxxxx
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By:
Title:Chairman
s/Xxxx X. Xxxxxxx
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Xxxx Xxxxxxx
