EXHIBIT 10.40
SALARY CONTINUATION AGREEMENT
This Employment Agreement (the "Agreement") is made effective as of August
11, 1995 by and between Sparta Foods, Inc. ("Sparta"), a Minnesota corporation,
and A. Xxxxxxx Xxxxx ("Employee").
RECITALS:
1. Employee has been employed by Sparta since 1994 as Chief Financial
Officer and has performed such other duties as a key employee of Sparta as the
parties have agreed to from time to time, and Employee has extensive knowledge
and experience relating to Sparta's business.
2. Sparta and Employee desire to set forth in this Agreement their
understandings and agreements with respect to the continuation of Employee's
salary and the payment of certain other benefits in the event of a Change of
Control of Sparta and Employee's employment terminates.
DEFINITION:
1. Change of Control. Change of Control shall mean:
(a) The merger or consolidation of Sparta with or into another
corporation or other entity, other than a merger or consolidation in
which a majority in interest of the shareholders of Sparta immediately
prior to such merger or consolidation own a majority in interest of the
equity of the surviving entity.
(b) The sale of all or substantially all of Sparta's assets to
a corporation or other entity other, than a sale to a corporation or
other entity with respect to which a majority in interest of the
shareholders of Sparta immediately prior to such sale own a majority in
interest of the equity of the purchasing corporation or entity.
(c) The sale of all or substantially all of Sparta's stock to
an individual, corporation or other entity, other than to persons who
are shareholders of Sparta as of the date hereof and their affiliates
and other than sales of securities as part of the private placement or
public offering of Sparta's stock to investors.
AGREEMENTS:
1. Termination of Employment. Either Sparta or Employee may terminate
Employee's employment at any time and for any reason, with or without cause.
a. In the event of a Change of Control of Sparta and either
(i) Sparta or any successor entity (collectively referred to as
"Sparta") terminates Employee's employment for any reason, but
excluding a termination "for cause" as defined in Section 1(b) below,
or (ii) Employee terminates his employment with Sparta for "any
reason," Employee, or in the event of Employee's death, Employee's
estate, shall continue to receive Employee's base salary, payable
bi-weekly, for a period of twenty-four (24) months after the date of
Employee's termination. Employee shall also receive payment for any
unpaid reimbursements of Employee's out-of-pocket business expenses
incurred by Employee during the regular performance of his duties upon
providing receipts or other written verification of such business
expenses to Sparta, and shall be entitled to such bonuses, incentive
compensation or other employee benefits that may be available under the
terms and conditions of any benefit plans or programs adopted by Sparta
in which Employee participates.
Nothing in this Section 1(a) shall obligate Sparta to employ
Employee after the date of this Agreement for any period of time nor
interfere with Sparta's right to terminate Employee's employment for
any reason, including termination for "cause" pursuant to Section 1(b),
at any time during the Employee's employment, including any period
after the date of any written notice of termination provided
by Sparta to Employee but prior to the date of termination specified in
such notice. If Employee dies or Employee's employment is terminated by
Sparta for "cause" under Section 1(b) after Sparta provides Employee
with written notice of termination, the terms of Section 1(b) shall
control.
b. Sparta may terminate Employee's employment immediately for
"cause." In the event of Employee's death or termination of Employee's
employment by Sparta for cause, Employee (or, in the case of death,
Employee's estate) shall not be entitled to receive any base salary,
bonuses, incentive compensation or other employee benefit payments
following such termination, except for any unpaid reimbursements of
Employee's out-of-pocket business expenses incurred by Employee during
the regular performance of his duties upon providing receipts or other
written verification of such business expenses to Sparta, and except as
may be otherwise provided in this Section 1(b) or under the terms and
conditions of any benefit plans or programs adopted by Sparta in which
Employee participates.
For purposes of this Section 1(b), "cause" shall mean:
(i) Employee's conviction of a felony under federal or state
law, any act of dishonesty or disloyalty (including, but not limited
to, the willful misappropriation of Sparta's funds), or the commission
of any act involving moral turpitude;
(ii) Employee's willful and material breach of Sparta's
policies, or his willful and material failure, neglect or refusal to
perform any of the duties that may be assigned to him by mutual
agreement of the parties or to comply with any of the obligations set
forth in this Agreement;
(iii) Employee's willful failure to act subject to and in
accordance with the Confidential Information provisions set forth in
Section 2 of this Agreement;
(iv) Employee's willful misconduct that: (A) materially and
adversely effects the reputation of Sparta's business, (B) is contrary
to the best interests of Sparta or (C) conflicts with or is competitive
with the business activities of Sparta; or
(v) Employee's (A) physical or mental inability to
substantially perform his duties that has continued or can reasonably
be expected to continue for a period of sixty (60) consecutive days, as
determined by Sparta's Board of Directors in its sole discretion, or
(B) adjudication as an incompetent and the appointment of a conservator
for Employee's person or property by a court of competent jurisdiction;
provided, however, that, if Employee's employment is terminated for
cause pursuant to this Section 1(b)(v), Employee shall continue to
receive his base salary payable bi-weekly for a period of twelve (12)
months and benefits which Employee participates after the date of such
termination.
An act or failure to act by Employee shall not be "willful" unless it is
done, or omitted to be done, in bad faith and without any reasonable belief that
Employee's action or omission was in the best interests of Sparta. With respect
to the events listed in clause (ii), (iii) or (iv), Employee's employment shall
not be deemed to have been terminated for cause unless and until Sparta provides
Employee with a written notice that describes in detail the conduct supporting
such termination for cause and that grants Employee a period of at least ten
(10) days from the date of such notice to take whatever steps are necessary to
discontinue the conduct described therein or to correct the effects of
Employee's prior conduct to the satisfaction of Sparta. If Employee fails to
discontinue such conduct described in such written notice or cannot correct the
effects of such prior conduct within such ten-day period, Employee's employment
shall immediately terminate upon the expiration of such ten-day period, and such
termination shall be deemed to be for cause.
2. Confidential Information. The Employee recognizes that Sparta is engaged
in a competitive business, and that Sparta has and will develop and acquire
valuable, Confidential Information. Employee further recognizes that during the
course of his employment he will necessarily have access to and be required to
use Confidential Information, and that it is anticipated that his duties will
include the development and refinement of Confidential Information. Employee
further recognizes and acknowledges that Sparta will suffer irreparable harm if
Employee, after developing or becoming familiar with any such Confidential
Information, makes any unauthorized
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disclosure or communication of any such Confidential Information to any third
party or uses such Confidential Information wrongfully or in competition with
Sparta while employed by Sparta. Having recognized and acknowledged the
foregoing facts and circumstances, Employee hereby agrees as follows:
(a) For purposes of this Agreement, "Confidential Information"
means any information not generally known or held in the public domain
and proprietary to Sparta, and includes, without limitation, trade
secrets, purchasing, marketing, advertising, selling, accounting and
licensing. By way of illustration, but not a limitation, Confidential
Information may be contained in Sparta's marketing plans or proposals,
customer lists, the particular needs or requirements of customers and
the identity of customers and potential customers. Information shall be
treated as Confidential Information irrespective of its source.
However, the Company acknowledges that Employee has substantial
knowledge and expertise in accounting and financial management and that
such knowledge and expertise acquired to the date of Employees
employment with Sparta shall not be deemed to be Sparta's Confidential
Information.
(b) The parties acknowledge and agree that Confidential
Information not generally known or held in the public domain is the
sole and exclusive property of Sparta. During the term of this
Agreement, Employee shall hold in its strictest confidence and shall
never, without the prior written authorization of Sparta, disclose,
divulge, assign, transfer, convey, communicate or use any Confidential
Information for his own or any third party's benefit or permit the same
to be used in competition with Sparta.
(c) Upon termination of Employee's employment with Sparta for
any reason, Employee shall promptly deliver to Sparta all records,
memoranda, notes, plans, records, reports or other documents and any
copies thereof obtained or prepared during a course of Employee's
employment and which contain or disclose any Confidential Information
or which pertain in any materially way to Sparta's business.
3. Vesting Stock Options. In the event of a Change of Control of Sparta,
all outstanding stock options granted to Employee shall vest immediately prior
to the effective date of such Change of Control and Employee shall have the
right to dispose of the shares Common Stock received upon exercise of such stock
options, subject to the federal and state securities and tax laws,
notwithstanding the restrictions imposed on optionees after exercise of stock
options under Section 7(g) of Sparta Foods, Inc. Incentive Stock Option Plan (as
amended on July 8, 1993 and March 18, 1994).
4. Withholding. Sparta shall have the right to deduct from any amounts
payable under this Agreement any state or federal taxes required by law to be
withheld with respect to such payments.
5. Severability. If the final determination of a court of competent
jurisdiction declares, after the expiration of the time within which judicial
review (if permitted) may be perfected, that any term or provision hereof is
invalid or unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.
6. Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto, any successor to or assigns of Sparta, and
Employee's heirs and the personal representative of Employee's estate. The
parties agree that the rights and obligations contained in this Agreement may
not be delegated or assigned except as specifically provided herein.
7. Amendment; Waiver. This Agreement may not be modified, amended or waived
in any manner except by an instrument in writing signed by both parties hereto.
The waiver by either party of compliance with any provision of this Agreement by
the other party shall not operate or be construed as a waiver of any other
provision of this Agreement, or of any subsequent breach by such party of a
provision of this Agreement.
8. Specific Enforcement. Sparta and Employee acknowledge that, in the event
of a breach of this Agreement by Employee, money damages would be inadequate and
Sparta would have no adequate remedy at law. Accordingly, in the event of any
controversy concerning the rights or obligations under this Agreement, such
rights or obligations shall be enforceable in a court of equity by a decree of
specific performance. Employee further
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consents to the specific enforcement of this Agreement by Sparta through an
injunction or restraining order issued by the appropriate court. The remedies
provided in this Section 8 shall be cumulative and nonexclusive and shall be in
addition to any other remedy to which Sparta may be entitled.
9. Supersedes Previous Agreements. This Agreement supersedes all prior or
contemporaneous negotiations, commitments, agreements (written or oral) and
writings between Sparta and Employee with respect to the subject matter hereof.
All such other negotiations, commitments, agreements and writings will have no
further force or effect, and the parties to any such other negotiation,
commitment, agreement or writing will have no further rights or obligations
thereunder.
10. Governing Law. All matters affecting this Agreement, including the
validity thereof, are to be governed by, interpreted and construed in accordance
with the laws of the State of Minnesota.
11. Notices. Any notice hereunder by either party to the other shall be
given in writing by personal delivery, by telecopy (with confirmation of
transmission) or by certified mail, return receipt requested. If addressed to
Employee, the notice shall be delivered or mailed to Employee at the address
specified under Employee's signature hereto, or if addressed to Sparta, the
notice shall be delivered or mailed to Sparta at its executive offices to the
attention of its President and to the attention of its General Counsel. A notice
shall be deemed given, if by personal delivery or by telecopy, on the date of
such delivery or, if by certified mail, on the date shown on the applicable
return receipt.
12. Headings. The headings of Sections and paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
IN WITNESS WHEREOF, Sparta has caused the Agreement to be signed by its
officer pursuant to the authority of its Board of Directors, and Employee has
executed this Agreement, as of the day and year first above written.
SPARTA FOODS, INC.
By:
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Xxxx Xxxxxx, President and CEO
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A. Xxxxxxx Xxxxx
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