EXHIBIT 10.38
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement"), effective as of March 15, 1999, among
SPECIALTY FOODS ACQUISITION CORPORATION, a Delaware
corporation ("SFAC"), SPECIALTY FOODS CORPORATION, a
Delaware corporation ("SFC"), XXXX BAKING COMPANY, a
Delaware corporation ("Xxxx"), MOTHER'S CAKE AND COOKIE CO.,
a California corporation ("Mother's"), ARCHWAY COOKIES,
L.L.C., a Delaware Limited Liability corporation ("Archway")
and ANDRE-BOUDIN BAKERIES, INC., a California corporation
("Boudin"), and XXXXXXXX X. XXXXXXXX (the "Executive").
This Agreement replaces that certain Amended and Restated
Executive Employment Agreement dated as of January 1, 1997
among SFAC, SFC, and the Executive. SFAC and SFC are
sometimes referred to herein as the "Parent Companies" and
SFAC, SFC, Xxxx, Mother's, Archway, and Boudin are 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 President and Chief Executive Officer of each of the
Parent Companies and as a member of the Board of Directors
of the Parent Companies, 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 of the Parent Companies (collectively, the
"Boards").
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 Employer's 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 any Employer or any subsidiary of any Employer,
without any compensation therefor other than that specified
in this Agreement, if elected to any such position by the
shareholders of any 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 January 1, 1999 (the "Effective Date") and shall,
unless sooner terminated pursuant to Section 2.3 hereof, end
on June 30, 2001 or on such later December 31 to which the
Term is extended pursuant to Section 2.2.
2.2 Extension. On December 31 of each calendar
year starting with December 31, 2000, 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 December 31. 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 December 31, 2000, the otherwise scheduled expiration
date of June 30, 2001 shall be extended to June 30, 2002.
2.3 Early Termination. The Term shall end
earlier than the June 30, 2001 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, 1999, a base salary at an annual rate of
$655,000 (the "Base Salary"). 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, 1999, 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 75% of Base Salary; and if the
maximum Performance Target is achieved, the Incentive Bonus
shall be equal to 150% 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. If, in a given fiscal
year, the Employers achieve Performance Targets such that an
Incentive Bonus exceeding 50% of Base Salary is to be paid
to the Executive for such year, the Executive may, in his
sole discretion, elect to receive the amount (the "Excess
Amount") by which such Incentive Bonus exceeds 50% of the
Base Salary for such year either: (1) in cash, or (ii) in a
combination of 11% Senior Subordinated Discount Debentures
due 2006 of SFAC ("Subordinated Debentures") and common
stock, par value $0.01 per share, of SFAC ("Common Stock").
Such combination shall consist of Subordinated Debentures
with a then accreted value (calculated assuming an 11%
annual implied rate of return) (the "Accreted Value") equal
to 63% of the Excess Amount and shares of Common Stock with
a then Fair Market Value (as defined in Article 11 hereof)
equal to 37% of the Excess Amount. At Executive's request,
the Employers will inform the Executive of such Fair Market
Value reasonably in advance of the time the Executive must
make such election. All Subordinated Debentures and Common
Stock issued to the Executive as part of an Incentive Bonus
under this Section 3.2 shall hereafter be referred to as
"Bonus Securities". Bonus Securities shall vest immediately
upon issuance and accordingly shall for all purposes under
this Agreement be treated as and included in the definition
of Vested Securities (as defined below in Section 3.5.2).
3.3 Business Expenses. The Employer 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 the Parent Companies provide to their executive
officers generally, including, without limitation, the SFC
Executive Retirement Annuity Plan. In addition, the
Employers shall (i) pay dues and normal operating
assessments relating to the Executive's membership at a
Chicagoland Country Club (it being understood that
initiation fees will not be paid by the Employers) and
reimburse the Executive for any business entertainment and
meeting fees incurred by the Executive at such club, (ii)
pay for a full comprehensive annual physical examination of
the Executive, (iii) pay the reasonable fees in connection
with personal financial counseling on behalf of the
Executive, including fees relating to tax return
preparation, and (iv) pay all charges in connection with the
use of an AT&T calling card (the use of which shall be
restricted to the Executive and the Executive's spouse).
3.5.2 Securities Investment. Pursuant to
an Executive Securities Purchase Agreement dated as of
December 15, 1994 (the "Closing Date"), between the
Executive and the Employers, the Executive purchased from
SFAC a combination of 11% Senior Subordinated Discount
Debentures of SFAC due 2006 (the "Subordinated Debentures")
and common stock, par value $0.01 per share, of SFAC (the
"Common Stock") for an aggregate purchase price of $10,000.
The Subordinated Debentures and Common Stock purchased
pursuant to this Section 3.5.2 (the "Initial Securities")
shall be considered vested securities ("Vested Securities")
as follows: (i) 25% of the Initial Securities shall become
Vested Securities on the Closing Date, (ii) an additional
25% of such Initial Securities shall become Vested
Securities on the 181st day following the Closing Date,
(iii) an additional 25% of the Initial Securities shall
become Vested Securities on the first anniversary of the
Closing Date, and (iv) the remaining 25% of such Initial
Securities shall become Vested Securities on the 181st day
following the first anniversary of the Closing Date; each
such 25% block of Initial Securities to be comprised of 25%
of the Subordinated Debentures sold to the Executive under
this Section 3.5.2 and 25% of the shares of Common Stock
sold to the Executive under this Section 3.5.2. Vested
Securities shall be transferable by the Executive, subject
only to restrictions ("Transfer Restrictions") on the
transfer of Initial Securities set forth in (i) the
Stockholders Agreement, dated as of August 16, 1993, among
SFAC and its principal stockholders, as amended (the
"Principal Stockholders Agreement"), (ii) the Stockholders
Agreement, dated as of August 16, 1993, among SFAC and all
of its stockholders, as amended (the "Investors Stockholders
Agreement"), and (iii) the Securities Purchase Agreement,
dated as of August 16, 1993, among SFAC, its principal
Stockholders and all holders of the Subordinated Debentures,
as amended (the "Securities Purchase Agreement"); provided,
that any Vested Securities transferred pursuant to an
exemption from Transfer Restrictions for transfer to
Affiliates provided for in Section 2.1(a)(ii) of the
Principal Stockholders Agreement or Section 6.4(a) of the
Securities Purchase Agreement shall remain subject to the
Employers' repurchase rights, and shall be benefited by the
Executive's (or his Beneficiary's) right to require
repurchase, under Article 4 hereof. Initial Securities not
yet vested shall not be transferable; except, that the
Executive may transfer such Initial Securities (i) in
connection with the Executive's exercise of rights as an
Other Stockholder (as defined in the Principal Stockholders
Agreement) under Section 2.1(b) of the Principal
Stockholders Agreement or as an Other Holder (as defined in
the Securities Purchase Agreement) under Section 6.4(a) of
the Securities Purchase Agreement, so long as the Executive
has previously transferred all of his Vested Securities as a
"Transferor" or an "Other Stockholder" under Section 2.1(b)
of the "Principal Stockholders" Agreement, as a "Transferor"
or "Other Holder" under Section 6.4(a) of the Securities
Purchase Agreement or in a registered public offering; or
(ii) to the Executive's spouse or children or a trust
established for their benefit (so long as such trust is
controlled by the Executive or his estate), which Initial
Securities, notwithstanding such transfer to the Executive's
spouse or children or to such trust, shall remain subject to
the Employers' repurchase rights, and shall be benefited by
the Executive's (or his Beneficiary's) right to require
repurchase, under Article 4 hereof; (iii) in a registered
public offering in which the Executive has a right to
participate pursuant to Article 1 of Exhibit A to the
Principal Stockholders Agreement, so long as the Executive
is not an "Initiating Holder" (as defined herein); provided,
that this clause (iii) shall apply only if the Executive has
previously transferred all Vested Securities in the manner
described in clause (i) above or will transfer all of such
Vested Securities in connection with such public offering;
or (iv) in order to comply with the requirements of
Section 2.2 of the Principal Stockholders Agreement.
3.5.3 Management Option and Bonus. The
Executive shall continue to participate in the management
stock option plan (the "Option Plan").
3.5.4 Tax Equalization Amounts. If in
any calendar year (the "Exercise Year"), the Executive
exercises one or more Options, the Employers shall make a
payment to the Executive equal to the Tax Equalization
Amount, computed in the manner set forth below. Except as
provided in paragraph (d) below, the Tax Equalization Amount
shall be paid no later than April 15 of the year following
the Exercise year.
(a) The Tax Equalization Amount shall
equal the lesser of (i) the Employers' Tax Benefit Amount,
or (ii) the Executive Tax Rate Differential Amount.
(b) The Employers' Tax Benefit Amount
shall equal the excess, if any, of (i) the amount of
consolidated Federal income tax liabilities that the
Employers would have had for the taxable year of the
Employers that includes the last day of the Exercise Year
(the "Applicable Employer Taxable Year"), without taking
into account any deduction to which the Employers are
entitled directly by reason of the exercise of such Options,
over (ii) the amount of consolidated Federal income tax
liability of the Employers for the Applicable Employer
Taxable Year, taking into account any deduction to which the
Employers are entitled directly by reason of the exercise of
such Options. The amount of the Employers' Tax Benefit
Amount shall be determined by the Accounting Firm (as
defined in Section 3.9).
(c) The Executive's Tax Rate
Differential Amount shall equal the amount obtained by
dividing "x" by "y," where "x" equals the excess, if any, of
(i) the Executive's Federal income tax liability for the
Exercise Year, over (ii) the amount of Federal income tax
liability that the Executive would have had for the Exercise
Year if income recognized directly by reason of the exercise
of the Options exercised in the Exercise Year ("Option
Income") had been treated as long-term capital gain, and "y"
equals the number obtained by subtracting the Executive's
marginal Federal income tax rate for ordinary compensation
income under Subtitle A and Section 3101 of the Code
(expressed by a decimal) (the "Income Tax Rate") from one;
such that, by way of example, if the Executive's Option
Income for the Exercise Year were $100,000 and the Income
Tax Rate were 40% and the Federal tax rate applicable to
long-term capital gains were 28%, the Tax Rate Differential
Amount would equal $20,000, calculated as follows: The
amount described in clause (i) above would, in such case, be
$40,000 and the amount described in clause (ii) above would,
in such case, be $28,000, and therefore the excess of the
clause (i) amount over the clause (ii) amount would, in such
case, be $12,000 --- $12,000 divided by 0.6 equals $20,000
($12,000/1-0.4 = $20,000). The amount of the Executive's
Tax Rate Differential Amount shall be determined by the
Accounting Firm.
(d) If (i) for any Exercise Year, the
Employers' Tax Benefit Amount is less than the Executive's
Tax Rate Differential (a "Shortfall"), and (ii) in any of
the seven following taxable years of the Employer
immediately following the Applicable Employer Taxable year
(a "Subsequent Year"), there is a Subsequent Year Employers'
Tax Benefit Amount (as defined below) attributable to such
Exercise Year, then the Employers shall make a payment to
the Executive no later than April 15 of the year following
such Subsequent Year equal to the lesser of (A) the
Subsequent Year Employers' Tax Benefit Amount with respect
to such Exercise Year, or (B) the excess, if any, of (I) the
Shortfall with respect to such Exercise Year, over (II) any
amounts previously paid to the Executive pursuant to this
Section 3.5.5(d) with respect to such Exercise Year. For
purposes of this Section 3.5.5(d), the Subsequent Year
Employers' Tax Benefit Amount with respect to a particular
Exercise Year and Subsequent Year shall equal the excess, if
any, of (x) the amount of Federal income tax liability that
the Employers would have had for the Subsequent Year (the
"Applicable Employer Subsequent Taxable Year"), without
taking into account any deduction to which the Employers are
entitled directly by reason of the exercise of Options by
the Executive during the Exercise Year or any subsequent
taxable year of the Executive (including by way of a net
operating loss carryover), over (y) the amount of Federal
income tax liability of the Employers for the Applicable
Employer Subsequent Taxable Year taking into account any
deduction to which the Employers are entitled (in any year)
directly by reason of the exercise of Options exercised by
the Executive in the Exercise Year but not in any subsequent
taxable year of the Executive (including by way of a net
operating loss carryover). The amount of the Subsequent
Year Employers' Tax Benefit Amount shall be determined by
the Accounting Firm.
(e) For purposes of this Section 3.5.5,
the Federal income tax liability of any person shall mean
all liabilities of such person under Subtitle A and
Section 3101 of the Code.
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; Joint and Several
Obligations; Nature of Certain Payments. Any amounts
payable to or on behalf of the Executive under this
Agreement shall be paid by the Employers on an allocated
basis in accordance with the services rendered by the
Executive to each Employer; provided that the Employers
shall be jointly and severally liable for all amounts
payable to or on behalf of the Executive hereunder. No
payment made to the Executive pursuant to Section 3.5.4 or
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 any
Employer to (or for the benefit of) the Executive pursuant
to the terms of this Agreement or any other plan or
agreement in which the Executive participates, 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 $5 million, 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 proviso, reimburses the
Executive. Thus, by way of example, if a Gross Up Payment
equal to $10 million would be due, but for the proviso set
forth in the preceding sentence the Employers' obligation
with respect to interest and penalties imposed on the
Executive with respect to the Excise Tax shall be limited to
an amount equal to 50% of such Interest and penalties.
(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 Employer 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
payable.
(e) For purposes of this Agreement:
A "Section 280G Change" shall mean a
"change in 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 payment
or benefits received or to be received by the Executive
under this Agreement or any other plan or agreement in which
the Executive participates, as now in effect or as amended
from time to time, including the plans discussed in Section
3.5.3 and benefits granted the Executive under that certain
Stock Purchase Agreement dated as of June 15, 1995 by and
among the Executive and the Employers (the "Stock Purchase
Agreement").
3.10 Performance Based Competition. 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), 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 18 months,
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) 75%
of 1.5 x Annual Base Salary Upon Death and (y) 75% 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 75% bonus
level has been agreed to because it is impossible to
determine the performance of the Employers for future
periods; provided that the amounts to be paid by the
Employers under (ii) and (iii) above shall be reduced by any
payments received by the Beneficiary under life insurance
policies the premiums for which have been paid by the
Employers. 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 and of the Vested
Acquired Securities (as defined in that certain Securities
Purchase Agreement dated as August 1, 1995 (the "August
Purchase Agreement"), 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 and Initial Acquired Securities (as defined in
the August Purchase Agreement), 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 and Initial Acquired 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 or as
Vested Acquired Securities, as the case may be. "Full
Value" means (i) 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 no less than all of the Vested Securities and the Vested
Acquired 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 and the Initial
Acquired Securities, accreted discount thereon through and
including the date of such purchase, and
(d) for the 180 days following such date,
the Employers shall have the right to repurchase all but not
less than all of the Purchased Shares, as defined in the
Stock Purchase Agreement, at a price equal to the Fair
Market Value thereof as of the date of the Executive's
death, provided, that the proceeds shall first be used to
pay any outstanding principal of and interest accrued but
not paid under the Note (as defined in the Stock Purchase
Agreement); and
(e) for the 180 days following such date,
the Beneficiary shall have the right to require the
Employers to repurchase all but not less than all of the
Purchased Shares (subject to Section 4.6 hereof), at a price
equal to the Fair Market Value thereof on the date of the
Executive's death, provided that the proceeds shall first be
used to pay any outstanding principal of and interest
accrued but not paid under the Note.
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 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 18
months, 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)
75% of 1.5 x Annual Base Salary Upon Disability and (y) 75%
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
75% 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 and the Vested Acquired 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 and Initial Acquired 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 and Initial
Acquired 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 or as Vested Securities, as the case may
be;
(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 and the Vested Acquired 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 and Initial Acquired
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;
(c) for the 180 days following the
Disability Termination Date, the Employers shall have the
right to repurchase all but not less than all of the
Purchased Shares at a price equal to the Fair Market Value
thereof on the Disability Termination Date; provided, that
the proceeds shall first be used to pay any outstanding
principal of and interest accrued but not paid under the
Note; and
(d) for the 180 days following the
Disability Termination Date, the Executive shall have the
right to require the Employers to repurchase all but not
less than all of the Purchased Shares (subject to Section
4.6 hereof), at a price equal to the Fair Market Value
thereof on the Disability Termination Date; provided, that
the proceeds shall first be used to pay any outstanding
principal of and interest accrued but not paid under the
Note.
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, 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,
and/or (iii) all but not less than all of the Vested
Purchased Shares, at a price equal to the Fair Market Value
thereof on the date of termination, and/or (iv) all but not
less than all other Purchased Shares which are unvested on
the date of such termination, at cost, provided, that the
proceeds shall first be used to pay any outstanding
principal of and interest accrued but not paid under the
Note. The Executive shall not have the right to require the
Employer to repurchase such Vested Securities, Initial
Securities, Vested Purchased Shares and Initial Purchased
Shares.
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 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 18 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 75% 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 75% 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 and the Vested Acquired 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 and Initial Acquired Securities, at cost, plus,
in the case of the Subordinated Debentures, accreted
discount thereon through and including the date of such
purchase;
(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
and the Vested Acquired 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
and Initial Acquired 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;
(e) within 180 days of the date of
termination, the Employers shall have the right to
repurchase all but not less than all of the Purchased Shares
at a price equal to the Fair Market Value thereof on the
date of termination; provided, that the proceeds shall first
be used to pay any outstanding principal of and interest
accrued but not paid under the Note; and
(f) for the 180 days following the date
of termination, the Executive shall have the right to
require the Employers to repurchase (subject to Section 4.6
hereof) all but not less than all of the Purchased Shares at
a price equal to the Fair Market Value thereof on the date
of termination; provided, that the proceeds shall first be
used to pay any outstanding principal of and interest
accrued but not paid under the note.
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:
(i) 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:
(A) 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;
(B) failure by the
Employers to pay to the Executive an Incentive
Bonus, as provided for in this Agreement;
(C) 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 Employees 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;
(D) the assignment to the
Executive of any duties materially inconsistent with
the Executive's position as President and Chief
Executive Officer of the Parent Companies;
(E) 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 the Boards;
(F) 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;
(G) 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
(H) any material breach of
this Agreement by the Employers; or
(ii) termination at the election of the
Executive within 180 days following a Change of Control
(as defined in Section 4.4.6).
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 damage 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)
18 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 or termination, in a lump sum, which lump
sum shall be discounted to the present value, on the date of
payment, if 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 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 Agreement, be deemed to have
occurred upon the date, if any, at which (i) with respect to
SFAC, 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)
(such person or group being a "Non-Affiliate") has the
collective ability to directly or indirectly designate a
majority of the members of the SFAC Board (whether by
contract or otherwise) or (ii) with respect to SFC, a
transaction (including a sale, merger or other similar
transaction, but excluding any transaction among only SFAC,
SFC and or their subsidiaries) (x) pursuant to which all or
substantially all of the assets of SFC (as exist on the date
hereof) are sold to Non-Affiliates, (y) pursuant to which
Non-Affiliates acquire the collective ability to designate
directly or indirectly a majority of the Board of Directors
of SFC (by contract or otherwise) or (z) which the
compensation committee of the Board of Directors of SFC
determines, in its discretion, to be a change in control.
4.5 Termination by Non-Extension of Term. Upon a
termination of the Term by reason of the non-extension of
the Term pursuant to Section 2.2:
(a) without regard to whether notice of such
termination is given by the Employers or the Executive, 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 Base Salary, 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 (i) all but not
less than all of the Vested Securities and the Vested
Acquired Securities, at a price equal to the Full Value
thereof on the date of termination of the Term and/or (ii)
all but not less than all other Initial Securities and
Initial Acquired Securities, at cost, plus, in the case of
the Subordinated Debentures, accreted discount thereon
through and including the date of such purchase; and
(c) for the 180 days following the date of
termination, the Employers shall have the right to
repurchase all but not less than all of the Purchased Shares
at a price equal to the Fair Market Value thereof on the
date of termination of the Term; provided that the proceeds
shall first be used to pay any outstanding principal of and
interest accrued but not paid under the Note.
(d) in addition to the provisions of clauses (a),
(b) and (c) above, if the Employers give notice of non-
extension pursuant to Section 2.2:
(i) unless the notice on 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 continue payments of Base Salary to the Executive
(the "Non-Renewal Continued Salary"), at the rate and
at such times as are in effect on the date of the
termination of the Term (the "Non-Renewal Base
Salary"), for the 18 month period following the date of
termination of the Term (the "Non-Renewal Payment
Period");
(ii) the Employers shall provide the
Continued Benefits during the Non-Renewal Payment
Period; and
(iii) 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) (i) all but not less than all of
the Vested Securities and the Vested Acquired
Securities, at a price equal to the Full Value thereof
on the date of termination of the Term, and/or (ii) all
but not less than all of the Initial Securities and
Initial Acquired Securities, at cost, plus, in the case
of the Subordinated Debentures, accreted discount
thereon through and including the date of such
purchase.
(e) for the 180 days following 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 Purchased Shares at a price
equal to the Fair Market Value thereof on the date of
termination of the Term; provided, that any proceeds from
any such purchase and sale shall first be used to pay any
outstanding principal of and interest accrued but not paid
under the Note.
4.5.1 Certain Provisions Regarding Termination
by Non-Extension. Following a notice of termination of the
term by reason of the non-extension of the Term pursuant to
Section 2.2, the Executive shall remain entitled to the
protection of Sections 4.1, 4.2 and 4.3 of this Agreement
and shall receive the benefits payable under such Sections
in the event the Executive's death or disability or a
Termination Without Cause or a Voluntary Termination with
Good Reason occurs between the time the notice of non-
extension occurs pursuant to Section 2.2 and the end of the
Term.
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 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 the Employers 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 March 16, 1998, among
SFC, certain lenders listed therein and DLJ Capital Funding,
Inc., as Syndication Agent, or the Revolving Credit
Agreement dated as of March 16, 1998, among the Revolving
Credit Borrowers signatory thereto, the lenders named
therein and DLJ Capital Funding, Inc., as Syndication 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 amendment 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 secrets, "know how", 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 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 an
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 Employer's 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
Xxxx Baking Company
Mother's Cake and Cookie Co.
Archway Cookies
Andre-Boudin Bakeries
c/o Specialty Foods Corporation
000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telecopier: 847/405-5310
Attention: Vice President and General Counsel
with copies to:
Xxxx Wheat & Partners Incorporated
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopier: 214/871-8317
Attention: Xxxxxx X. Xxxx and Xxxxxxx X.
Xxxxx
and:
Keystone, Inc.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxx, Xxxxx 00000
Telecopier: 817/338-2064
Attention: X. Xxxxxx Xxxxxxxx
and:
Oak Hill Partners, Inc.
Park Avenue Tower
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 212/754-5685
Attention:Xxxxxxx X. Xxxxxx
If to the Executive, to:
Xx. Xxxxxxxx X. Xxxxxxxx
000 X. Xxxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxxxxx 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 Compensation Committees
of 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 the day and year first above written.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
Title: Vice President
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
SPECIALTY FOODS CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
Title: Vice President
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
XXXX BAKING COMPANY
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
MOTHER'S CAKE &COOKIE CO.
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
ARCHWAY, L.L.C.
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
ANDRE-BOUDIN BAKERIES, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
/s/ Xxxxxxxx X. Xxxxxxxx
----------------------------------
XXXXXXXX X. XXXXXXXX
::ODMA\PCDOCS\CHICAGO4\811901\3 March 23,1999 16:57
