EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this ___ day of [ ] effective as of [ ] by and between SHERWOOD BRANDS, INC.,
a Maryland corporation (the "Company"), and XXXX XXXXXXX (hereinafter called
the "Executive").
R E C I T A L S
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A. The Executive is currently employed as the _________________ of the
Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the Company,
and desires to assure the Company of the Executive's continued employment and
to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment.
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1.1 Employment and Term. The Company hereby agrees to
employ the Executive and the Executive hereby agrees to serve the Company on
the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this
Agreement, the Executive shall serve as the ____________________ of the
Company, shall diligently perform all services as may be assigned to him by
the Board (provided that such services shall not materially differ from the
services currently provided by the Executive), and shall exercise such power
and
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authority as may from time to time be delegated to him by the Board. The
Executive shall devote his full time and attention to the business and affairs
of the Company, render such services to the best of his ability, and use his
best efforts to promote the interests of the Company.
2. Term.
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2.1 Initial Term. The initial term of this Agreement, and
the employment of the Executive hereunder, shall commence on April 1, 1998
(the "Commencement Date") and shall expire on July 31, 2001, unless sooner
terminated in accordance with the terms and conditions hereof (the "Initial
Term").
2.2 Renewal Terms. Unless written notice stating otherwise
is received by the Company or the Executive within six months prior to the
Expiration Date (as described in Section 2.3), this Agreement shall
automatically renew for successive three-year terms.
2.3 Expiration Date. The date on which the term of this
Agreement shall expire (including the date on which any renewal term shall
expire), is sometimes referred to in this Agreement as the Expiration Date.
3. Compensation.
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3.1 Base Salary. For the period April 1, 1998 through July
31, 1998, the Executive shall receive a base salary at the annual rate of
$150,000 (the "Base Salary"), with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to applicable
withholding and other taxes. For the fiscal year beginning April 1, 1998, the
Executive's Base Salary shall increase to an annual rate of $194,000. For all
subsequent years that this Agreement is in effect, the Base Salary shall be
reviewed, at least annually, for merit increases and may, by action and in the
discretion of the Compensation Committee or the Board, be increased at any
time or from time to time. In addition, on August 1, 1999, and each subsequent
August 1 prior to the Expiration Date, the Base Salary shall be increased, but
shall not be decreased, by the greatest of: (i) five percent (5%); (ii) that
percentage by which the net sales of the Company for the immediately preceding
fiscal year exceeds such net sales for the next preceding fiscal year; or
(iii) that percentage by which the Consumer Price Index, for the Rockville,
Maryland area published by the United States government (the "Index") for the
immediately preceding fiscal year exceeds such index for the next preceding
fiscal year. If publication of the Index is discontinued, the parties hereto
shall accept comparable statistics on the cost of living for the Rockville,
Maryland area as computed and published by an agency of the United States
government, or if no such agency computes and publishes such statistics, by
any regularly published national financial periodical that does compute and
publish such statistics. For this purpose, "net sales" shall mean the net
sales of the Company, as reflected on the Company's financial statements for
the fiscal year.
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3.2 Awards. During the term of this Agreement, the
Executive shall be eligible to receive performance and annual incentive awards
(the "Awards") payable in cash in accordance with Section 8 of the SHERWOOD
FOODS, INC. 1998 EXECUTIVE COMPENSATION PLAN, as may be amended from time to
time (the "Executive Plan"). Except as otherwise provided for in this Section
3.2, the Awards, if any, shall be determined pursuant to such formulae as the
Committee or the Board, in its sole and absolute discretion, shall set forth
from time to time in accordance with the Executive Plan. Notwithstanding the
foregoing, no Awards shall be payable to the Executive under the Executive
Plan for a fiscal year if the pre-tax profits of the Company for such fiscal
year do not exceed one million dollars ($1,000,000). If the pre-tax profits of
the Company for a fiscal year exceed one million dollars ($1,000,000), then
the following shall apply:
(i) for the fiscal year ending July 31, 1998, in no
event shall the Awards payable to the Executive under the Executive Plan be less
than twenty-nine percent (29%) of the sum of (x) the first one hundred fifty
thousand dollars ($150,000) of the pre-tax profits in excess of one million
dollars ($1,000,000), and (y) fifteen percent (15%) of the amount, if any, by
which the pre-tax profits exceeds one million one hundred fifty thousand dollars
($1,150,000);
(ii) for the fiscal year ending July 31, 1999, in
no event shall the Awards payable to the Executive under the Executive Plan be
less than twenty-nine percent (29%) of the product of (x) fifteen percent (15%),
and (y) the amount, if any, by which the pre-tax profits exceeds one million two
hundred seventy thousand dollars ($1,270,000); and
(iii) for the fiscal years ending July 31, 2000 and
July 31, 2001, in no event shall the Awards payable to the Executive under the
Executive Plan be less than twenty-nine percent (29%) of the product of (x)
fifteen percent (15%), and (y) of the amount, if any, by which the pre-tax
profits exceeds one million four hundred thousand dollars ($1,400,000).
For this purpose, "pre-tax profits" shall mean those profits of the Company
for any fiscal year determined prior to the reduction for any federal or state
income taxes and prior to the grant of any Awards to the Executive or any
other individual under the Executive Plan and determined in accordance with
generally accepted accounting principles as consistently applied. Any Awards
payable pursuant to this Section 3.2 are sometimes hereinafter referred to as
"Incentive Compensation." Each period for which Incentive Compensation is
payable under the Executive Plan is sometimes hereinafter referred to as a
Bonus Period. Unless otherwise specified by the Committee or the Board
pursuant to the Executive Plan, the Bonus Period shall be the fiscal year of
the Company.
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4. Expense Reimbursement and Other Benefits.
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4.1 Reimbursement of Expenses. During the term of the
Executive's employment hereunder, upon the submission of proper substantiation
by the Executive, and subject to such rules and guidelines as the Company may
from time to time adopt, the Company shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive in the course
of and pursuant to the business of the Company. The Executive shall account to
the Company in writing for all expenses for which reimbursement is sought and
shall supply to the Company copies of all relevant invoices, receipts or other
evidence reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all medical,
dental, hospitalization, accidental death and dismemberment, disability,
travel and life insurance plans, and any and all other plans as are presently
and hereinafter offered by the Company to its executives, including savings,
pension, profit-sharing and deferred compensation plans, subject to the
general eligibility and participation provisions set forth in such plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other facilities and
services suitable to his position and adequate for the performance of his
duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive with an automobile comparable to the existing automobile provided by
the Company to Executive, together with reimbursement of the reasonable
operating expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options (the "Stock Options") to
purchase common stock (the "Common Stock") of Sherwood Brands, Inc. under (and
therefore subject to all terms and conditions of) the Company's Executive Plan
as amended, and any successor plan thereto, and all rules of regulation of the
Securities and Exchange Commission applicable to such plans then in effect.
The number of Stock Options and terms and conditions of the Stock Options
shall be determined by the Committee appointed pursuant to the Executive Plan,
or by the Board, in its discretion and pursuant to the Executive Plan.
4.6 Other Benefits. The Executive shall be entitled to
eight (8) weeks of vacation each calendar year during the term of this
Agreement, to be taken at such times as the Executive and the Company shall
mutually determine and provided that no vacation time shall interfere with the
duties required to be rendered by the Executive hereunder. Any vacation time
not taken by Executive during any calendar year may not be carried forward
into any succeeding calendar year. The Executive shall receive such additional
benefits, if any, as the Board of the Company shall from time to time
determine.
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5. Termination.
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5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, for Cause. For purposes of this Agreement,
the term "Cause" shall mean (i) an action or omission of the Executive which
constitutes a willful and material breach of this Agreement which is not cured
within sixty (60) days after receipt by the Executive of written notice of
same, (ii) fraud, embezzlement, misappropriation of funds or breach of trust
in connection with his services hereunder, (iii) conviction of any crime which
involves dishonesty or a breach of trust, (iv) gross negligence in connection
with the performance of the Executive's duties hereunder, or (v) the material
and willful or knowing failure or refusal (other than as a result of a
disability) by the Executive to perform his duties hereunder. Any termination
for cause shall be made in writing to the Executive, which notice shall set
forth in detail all acts or omissions upon which the Company is relying for
such termination. The Executive shall have the right to address the Board
regarding the acts set forth in the notice of termination. Upon any
termination pursuant to this Section 5.1, the Company shall (i) pay to the
Executive his Base Salary to the date of termination and (ii) pay to the
Executive his accrued but unpaid Incentive Compensation, if any, for any Bonus
Period ending on or before the date of the termination of Executive's
employment with the Company. The Company shall have no further liability
hereunder (other than for (x) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1, and (y) payment of compensation for unused vacation days that
have accumulated during the calendar year in which such termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the Executive's
employment hereunder if the Executive shall as the result of mental or
physical incapacity, illness or disability, become unable to perform his
obligations hereunder for a period of 180 days in any 12-month period. The
Company shall have sole discretion based upon competent medical advice to
determine whether the Executive continues to be disabled. Upon any termination
pursuant to this Section 5.2, the Company shall (i) pay to the Executive any
unpaid Base Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive his accrued but unpaid Incentive
Compensation, if any, for any Bonus Period ending on or before the date of
termination of the Executive's employment with the Company, (iii) pay to the
Executive a severance payment equal to twelve months, or if greater the total
months that would otherwise remain under the term of this Agreement but for
this Section 5.2, of the Executive's Base Salary at the time of the
termination of the Executive's employment with the Company, and (iv) pay to
the Executive (within 45 days after the end of the fiscal quarter in which
such termination occurs) a prorata portion (based upon the period ending on
the date of termination of the Executive's employment hereunder) of the
Incentive Compensation, if any, for the Bonus Period in which such termination
occurs, as calculated pursuant to Section 3.2 hereof and the Executive Plan;
provided that the goals under Section 3.2 hereof and the Executive Plan for
each period used in the calculation of the Executive's Incentive Compensation,
shall be based on (1) the portion of the Bonus Period through the end of the
fiscal quarter in which such termination occurs and (2)
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unaudited financial information prepared in accordance with generally accepted
accounting principles, applied consistently with prior periods, as approved
and reviewed by the Board. The Company shall have no further liability
hereunder (other than for (x) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions
of Section 4.1, and (y) payment of compensation for unused vacation days that
have accumulated during the calendar year in which such termination occurs).
5.3 Death. In the event of the death of the Executive
during the term of his employment hereunder, the Company shall (i) pay to the
estate of the deceased Executive any unpaid Base Salary through the
Executive's date of death, (ii) pay to the estate of the deceased Executive
his accrued but unpaid Incentive Compensation, if any, for any Bonus Period
ending on or before the Executive's date of death, (iii) pay to the estate of
the deceased Executive (within 45 days after the end of the fiscal quarter in
which his death occurs) a prorata portion (based upon the period ending on the
date of death) of the Incentive Compensation, if any, for the Bonus Period in
which his death occurs, as calculated pursuant to the terms of Section 3.2
hereof and the Executive Plan; provided that, the goals under Section 3.2
hereof and the Executive Plan for each period used in the calculation of the
Executive's Incentive Compensation shall be based on (1) the portion of the
Bonus Period through the end of the fiscal quarter in which the Executive's
death occurs, and (2) unaudited financial information prepared in accordance
with generally accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board. The Company shall have no
further liability hereunder (other than for (x) reimbursement for reasonable
business expenses incurred prior to the date of the Executive's death,
subject, however to the provisions of Section 4.1, and (y) payment of
compensation for unused vacation days that have accumulated during the
calendar year in which such termination occurs).
5.4 Termination Without Cause. At any time the Company
shall have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to this Section
5.4 (that is not a termination under any of Sections 5.1, 5.2, 5.3 or 5.5),
the Company shall (i) pay to the Executive any unpaid Base Salary through the
effective date of termination specified in such notice, (ii) pay to the
Executive the accrued but unpaid Incentive Compensation, if any, for any Bonus
Period ending on or before the date of the termination of the Executive's
employment with the Company, (iii) pay to the Executive a lump sum amount
equal to thirty-six (36) months of the Executive's Base Salary at the time of
termination of employment with the Company, (iv) pay to the Executive (within
45 days after the end of the fiscal quarter in which such termination occurs)
a prorata portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive Compensation, if any,
for the Bonus Period in which such termination occurs, as calculated pursuant
to Section 3.2 hereof and the Executive Plan; provided that the goals under
Section 3.2 hereof and the Executive Plan for each period used in the
calculation of the Executive's Incentive Compensation, shall be based on (1)
the portion of the Bonus Period through the end of the fiscal quarter in which
such termination occurs and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
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consistently with prior periods, as approved and reviewed by the Board, (v)
continue to provide the Executive with the benefits he was receiving under
Sections 4.2 and 4.4 hereof (the "Benefits") in the manner and at such times
as the compensation or Benefits otherwise would have been payable or provided
to the Executive, and (vi) pay to the Executive as a single lump sum payment,
within 30 days of the termination of his employment hereunder, a lump sum
benefit equal to the value of the portion of his benefits under any savings,
pension, profit sharing or deferred compensation plans that are forfeited
under such plans by reason of the termination of his employment hereunder
prior to the Expiration Date. In the event that the Company is unable to
provide the Executive with any Benefits required hereunder by reason of the
termination of the Executive's employment pursuant to this Section 5.4, then
the Company shall pay the Executive cash equal to the value of the Benefit
that otherwise would have accrued for the Executive's benefit under the plan,
for the period during which such Benefits could not be provided under the
plans, said cash payments to be made within 45 days after the end of the year
for which such contributions would have been made or would have accrued. The
Company's good faith determination of the amount that would have been
contributed or the value of any Benefits that would have accrued under any
plan shall be binding and conclusive on the Executive. For this purpose, the
Company may use as the value of any Benefit the cost to the Company of
providing that Benefit to the Executive. Further, the Executive shall become
immediately fully vested in his or her Stock Options as of the date of such
termination of employment. The Company shall have no further liability
hereunder (other than for (x) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1, and (y) payment of compensation for unused vacation days that
have accumulated during the calendar year in which such termination occurs.
5.5 Termination by Executive.
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a. The Executive shall at all times have the right,
upon sixty (60) days written notice to the Company, to terminate the
Executive's employment hereunder.
b. Upon any termination pursuant to this Section
5.5 by the Executive without Good Reason, the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of termination
specified in such notice and (ii) pay to the Executive his accrued but unpaid
Incentive Compensation, if any, for any Bonus Period ending on or before the
termination of Executive's employment with the Company. The Company shall have
no further liability hereunder (other than for (x) reimbursement for
reasonable business expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 4.1, and (y) payment of
compensation for unused vacation days that have accumulated during the
calendar year in which such termination occurs.
c. Upon any termination pursuant to this Section
5.5 by the Executive for Good Reason, the Company shall pay to the Executive
the same amounts that would have been payable by the Company to the Executive
under Section 5.4 of this Agreement if the Executive's employment had been
terminated by the Company without Cause. The Company
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shall have no further liability hereunder (other than for (x) reimbursement
for reasonable business expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 4.1, and (y) payment of
compensation for unused vacation days that have accumulated during the
calendar year in which such termination occurs).
d. For purposes of this Agreement, "Good Reason"
shall mean (i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 1.2 of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive; (ii) any
failure by the Company to comply with any of the provisions of Article 3 of
this Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; (iii) the Company's
requiring the Executive to be based at any office or location more than fifty
(50) miles outside of City limits of Rockville, Maryland, except for travel
reasonably required in the performance of the Executive's responsibilities;
(iv) any purported termination by the Company of the Executive's employment
otherwise than for Cause pursuant to Section 5.1, or by reason of the
Executive's disability pursuant to Section 5.2 of this Agreement prior to the
Expiration Date.
5.6 Change in Control of the Company.
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a. Unless otherwise provided in Section 5.7 hereof,
in the event that (i) a Change in Control (as defined in paragraph (b) of this
Section 5.6) in the Company shall occur prior to the Expiration Date, and (ii)
either (A) prior to the earlier of the Expiration Date and one year after the
date of the Change in Control, either (x) the Executive's employment with the
Company is terminated by the Company without Cause, as defined in Section 5.1
(and other than pursuant to Section 5.2 by reason of the Executive's
disability or Section 5.3 by reason of the Executive's death) or (y) the
Executive terminates his employment with the Company for Good Reason, as
defined in Section 5.5(d) hereof, or (B) within the thirty (30) day period
beginning one year after the date of the Change in Control, the Executives
terminates his employment with the Company for any reason, the Company shall
pay to the Executive those amounts Executive would be entitled to under
Section 5.4 hereof as if his employment was terminated without Cause. Further,
upon the Change in Control, any stock options granted to the Executive by the
Company that were outstanding as of the date of the Change in Control shall
become immediately exercisable. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1, and (2) payment of compensation for unused vacation days that
have accumulated during the calendar year in which such termination occurs).
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b. For purposes of this Agreement, the term "Change
in Control" shall mean:
(i) Approval by the shareholders of the
Company of (x) a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, other than a public offering
of the Company's securities, in each case, with respect to which persons who
were the shareholders of the Company immediately prior to such reorganization,
merger or consolidation or other transaction do not, immediately thereafter,
own more than 50% of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (y) a liquidation or dissolution of the
Company or (z) the sale of all or substantially all of the assets of the
Company (unless such reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is subsequently abandoned); or
(ii) Individuals who, as of the date
hereof, constitute the Board (as of the date hereof the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act) shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent Board; or
(iii) The acquisition (other than from the
Company and other than pursuant to a public offering of the Company's
securities) by any person, entity or "group", within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act, (excluding, for this
purpose, the Frydman Family, the Company or its Subsidiaries, or any employee
benefit plan of the Company or its Subsidiaries which acquires beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act) of 30% or more of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the election of
directors. For this purpose, "Frydman Family" shall mean Xxxxx Xxxxxxx, his
spouse, his ancestors, his lineal descendants, and the spouses of his
ancestors and lineal descendants.
5.7 Certain Additional Payments by the Company.
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a. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or other action by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise) (a "Payment") would be subject to an
excise tax
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imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by the Executive with
respect to any such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), the Company shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the Payments.
b. Subject to the provisions of paragraph (c) of
this Section 5.7, all determinations required to be made under this Section
5.7, including whether and when a Gross-Up Payment is required and the amount
of such Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by BDO Xxxxxxx, LLP (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of
Control, the Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 5.7, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. 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 a negligence
or similar penalty. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 5.7 and the Executive thereafter 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
Company to or for the benefit of the Executive.
c. The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and
shall apprise the Company 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 it
gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
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(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in
any proceedings relating to such claim;
provided, however, that the Company 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 on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings taken in
connection with such contest and, at its 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 its 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 Company
shall determine; provided, however, that if the Company directs the Executive
to pay such claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension
of the statute of limitations relating to payment of taxes for the taxable
year of the Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the
Company's 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 Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
Section 5.7(c)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5.7(c), a
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determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.
5.8 Resignation. Upon any termination of employment pursuant
to this Article 5, the Executive shall be deemed to have resigned as an
officer, and if he or she was then serving as a director of the Company, as a
director, and if required by the Board, the Executive hereby agrees to
immediately execute a resignation letter to the Board.
5.9 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
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6.1 Non-competition. At all times while the Executive is
employed by the Company and for a twelve (12) month period after the
termination of the Executive's employment with the Company for any reason, the
Executive shall not, directly or indirectly, engage in or have any interest in
any sole proprietorship, partnership, corporation or business or any other
person or entity (whether as an employee, officer, director, partner, agent,
security holder, creditor, consultant or otherwise) that directly or
indirectly (or through any affiliated entity) engages in a Competitive
Business; provided that such provision shall not apply to the Executive's
ownership of Common Stock of the Company or the acquisition by the Executive,
solely as an investment, of securities of any issuer that is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
that are listed or admitted for trading on any United States national
securities exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control or, more
than five percent of any class of capital stock of such corporation. For these
purposes, "Competitive Business" shall mean the marketing of any Restricted
Product to any Restricted Class of Accounts. For purposes of this Agreement,
"Restricted Product" means butter toffees, tea biscuits, wafers or any item
from which the Company derives more than thirty percent (30%) of its net
sales, as defined in Section 3.1 hereof, for any fiscal year of the Company
during the term of this Agreement. For purposes of this Agreement, "Restricted
Class of Accounts" shall mean, with respect to any Restricted Product, any of
the following classes of accounts if more than thirty percent (30%) of the
Company's net sales from the Restricted Product for any fiscal year during the
term of this Agreement are derived from sales to that class of account: (1)
mass merchandisers; (2) dollar stores; (3) groceries; (4) grocery wholesalers;
(5) candy and tobacco jobbers; (6) gift baskets; (7) specialty food
distributors; (8) food distributors; (9) vending operators; and (10) vending
distributors. Upon the expiration of the term of this
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Agreement, the Company shall deliver to the Executive within ninety (90) days
a list of the Restricted Products and the classes of accounts relating to such
Restricted Products.
6.2 Nondisclosure. The Executive shall not at any time
divulge, communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the
Company. Any Confidential Information or data now or hereafter acquired by the
Executive with respect to the business of the Company (which shall include,
but not be limited to, information concerning the Company's financial
condition, prospects, technology, customers, suppliers, sources of leads and
methods of doing business) shall be deemed a valuable, special and unique
asset of the Company that is received by the Executive in confidence and as a
fiduciary, and Executive shall remain a fiduciary to the Company with respect
to all of such information. For purposes of this Agreement, "Confidential
Information" means information disclosed to the Executive or known by the
Executive as a consequence of or through his employment by the Company
(including information conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof, and not generally known, about
the Company or its business. Notwithstanding the foregoing, nothing herein
shall be deemed to restrict the Executive from disclosing Confidential
Information to the extent required by law.
6.3 Ownership of Developments. All copyrights, patents,
trade secrets, or other intellectual property rights associated with any
ideas, concepts, techniques, inventions, processes, or works of authorship
developed or created by Executive during the course of performing work for the
Company or its clients (collectively, the "Work Product") shall belong
exclusively to the Company and shall, to the extent possible, be considered a
work made by the Executive for hire for the Company within the meaning of
Title 17 of the United States Code. To the extent the Work Product may not be
considered work made by the Executive for hire for the Company, the Executive
agrees to assign, and automatically assign at the time of creation of the Work
Product, without any requirement of further consideration, any right, title,
or interest the Executive may have in such Work Product. Upon the request of
the Company, the Executive shall take such further actions, including
execution and delivery of instruments of conveyance, as may be appropriate to
give full and proper effect to such assignment.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company, whether
prepared by the Executive or otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and shall be returned
immediately to the Company on termination of the Executive's employment
hereunder or on the Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Article 6, the term "Company" also shall include any existing or future
subsidiaries of the Company that are operating during the time periods
described herein.
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6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that (a) the restrictive covenants contained in this Article 6
are reasonably necessary to protect the legitimate business interests of the
Company, and (b) the restrictions contained in this Article 6 (including
without limitation the length of the term of the provisions of this Article 6)
are not overbroad, overlong, or unfair and are not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges that the
restrictions contained in this Article 6 are intended to be, and shall be, for
the benefit of and shall be enforceable by, the Company's successors and
assigns.
6.7 Reformation by Court. In the event that a court of
competent jurisdiction shall determine that any provision of this Article 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Article 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced
as if it provided for the maximum restriction permitted under such governing
law.
6.8 Extension of Time. If the Executive shall be in
violation of any provision of this Article 6, then each time limitation set
forth in this Article 6 shall be extended for a period of time equal to the
period of time during which such violation or violations occur. If the Company
seeks injunctive relief from such violation in any court, then the covenants
set forth in this Article 6 shall be extended for a period of time equal to
the pendency of such proceeding including all appeals by the Executive.
6.9 Survival. The provisions of this Article 6 shall survive
the termination of this Agreement, as applicable.
7. Mediation. In the event a dispute arises out of or relates to this
Agreement, or the breach thereof, and if the dispute cannot be settled through
negotiation, the parties hereby agree first to attempt in good faith to settle
the dispute by mediation administered by the American Arbitration Association
under its Employment Mediation Rules before resorting to litigation or some
other dispute resolution procedure. Any mediation procedures in regard to this
Agreement shall be instituted and maintained in Rockville, Maryland.
8. Section 162(m) Limits. Notwithstanding any other provision of this
Agreement to the contrary, if and to the extent that any remuneration payable
by the Company to the Executive for any year would exceed the maximum amount
of remuneration that the Company may deduct for that year under Section 162(m)
("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year that would
not be so deductible under Section 162(m) shall, in the sole discretion of the
Board, be deferred and become payable at such time or times as the Board
determines that it first would be deductible by the Company under Section
162(m), with interest at the "short-term applicable rate" as such term is
defined in Section 1274(d) of the Code. The limitation set forth under this
Section 8 shall not apply with respect to any amounts payable to the Executive
pursuant to Article 5 hereof.
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9. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion thereof, to any
other person.
10. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Maryland. Any action in regard to
this Agreement or arising out of its terms and conditions shall be instituted
and litigated in the courts of Rockville, Maryland and in no other. In
accordance, the parties hereby submit to the jurisdiction of the courts of
Maryland.
11. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This Agreement may
not be modified in any way unless by a written instrument signed by both the
Company and the Executive.
12. Notices: All notices required or permitted to be given hereunder
shall be in writing and shall be personally delivered by courier, sent by
registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed
given on the date of delivery and notices mailed in accordance with the
foregoing shall be deemed given upon the earlier of receipt by the addressee,
as evidenced by the return receipt thereof, or three (3) days after deposit in
the U.S. mail. Notice shall be sent (i) if to the Company, addressed to
Sherwood Brands, Inc., 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxxxxx,
Xxxxxxxx 00000, Attention: President, and (ii) if to the Executive, to his
address as reflected on the payroll records of the Company, or to such other
address as either party hereto may from time to time give notice of to the
other.
13. Benefits; Binding Effect. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including, without limitation, any successor to the Company, whether
by merger, consolidation, sale of stock, sale of assets or otherwise.
14. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be
reduced to a period or area which would cure such invalidity.
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15. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
16. Damages. Nothing contained herein shall be construed to prevent
the Company or the Executive from seeking and recovering from the other
damages sustained by either or both of them as a result of its or his breach
of any term or provision of this Agreement. In the event that either party
hereto brings suit for the collection of any damages resulting from, or the
injunction of any action constituting, a breach of any of the terms or
provisions of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
17. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
18. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any
person other than the Company, the parties hereto and their respective heirs,
personal representatives, legal representatives, successors and assigns, any
rights or remedies under or by reason of this Agreement.
19. Indemnification.
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a. Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent permitted by
law from and against any and all claims, damages, expenses (including
attorneys' fees), judgments, penalties, fines, settlements, and all other
liabilities incurred or paid by him in connection with the investigation,
defense, prosecution, settlement or appeal of any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative and to which the Executive was or is a party or is threatened
to be made a party by reason of the fact that the Executive is or was an
officer, employee or agent of the Company, or by reason of anything done or
not done by the Executive in any such capacity or capacities, provided that
the Executive acted in good faith, in a manner that was not grossly negligent
or constituted wilful misconduct and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The Company also shall pay any and all expenses
(including attorney's fees) incurred by the Executive as a result of the
Executive being called as a witness in connection with any matter involving
the Company and/or any of its officers or directors.
b. The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other liabilities
incurred by the Executive in investigating, defending, settling or appealing
any action, suit or proceeding described in this Section 19 in
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advance of the final disposition of such action, suit or proceeding. The
Company shall promptly pay the amount of such expenses to the Executive, but
in no event later than 10 days following the Executive's delivery to the
Company of a written request for an advance pursuant to this Section 19,
together with a reasonable accounting of such expenses.
c. The Executive hereby undertakes and agrees to repay to
the Company any advances made pursuant to this Section 19 if and to the extent
that it shall ultimately be found that the Executive is not entitled to be
indemnified by the Company for such amounts.
d. The Company shall make the advances contemplated by this
Section 19 regardless of the Executive's financial ability to make repayment,
and regardless whether indemnification of the Indemnitee by the Company will
ultimately be required. Any advances and undertakings to repay pursuant to
this Section 19 shall be unsecured and interest-free.
e. The provisions of this Section 19 executed this Agreement
as of the date first above written.
COMPANY:
SHERWOOD BRANDS, INC.
By: ____________________________________
Name:
Title:
EXECUTIVE:
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Xxxx Xxxxxxx
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