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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of July 1, 1998,
by and between AmeriServe Food Distribution, Inc., a Delaware corporation (the
"Company"), and Xxxxxx X. Highland (the "Employee").
RECITALS
WHEREAS, ProSource Services Corporation and the Employee are
parties to an Amended and Restated Employment Agreement, dated as of November
15, 1996 (the "Prior Agreement"); and
WHEREAS, pursuant to that certain Agreement and Plan of
Merger dated as of January 29, 1998, by and among AmeriServe Food Distribution,
Inc., Steamboat Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of AmeriServe, and ProSource, Inc., a Delaware corporation
("ProSource"), the operations of ProSource and the Company will be combined;
and
WHEREAS, the parties hereto desire to enter into this
Agreement to set forth the terms and conditions for the employment relationship
of the Employee with the Company and to replace and supersede the Prior
Agreement.
NOW, THEREFORE, the parties agree as follows:
1. EFFECTIVENESS AND EMPLOYMENT. The Company shall employ the
Employee and the Employee shall be employed by the Company as of the date of
this Agreement (the "Commencement Date").
2. TERM. The term of this Agreement and the employment of the
Employee hereunder shall commence as of the Commencement Date, continue until
July 1, 2001, and automatically shall be extended for additional one-year
periods commencing on July 1, 2001, unless terminated (a) by the Company or the
Employee effective as of July 1, 2001 or any subsequent anniversary thereof,
upon the giving of written notice of such party's intention to terminate on or
before April 1 of the year in which such employment is to terminate, or (b) as
provided in Section 5.
3. POSITIONS AND DUTIES; PLACE OF PERFORMANCE.
(a) POSITIONS AND DUTIES. The Employee shall be employed as
Executive Vice President - Chain Management and Vice Chairman of the Company
and shall have the duties, responsibilities and authority as may from time to
time be assigned to him by the Company's Board of Directors (the "Board")
and/or the Chief Executive Officer of the Company that are consistent with and
normally associated with such position and, without additional compensation,
shall serve as a member of the Board. The Employee shall devote substantially
all of his business time, effort, and energies exclusively to the business of
the Company and its subsidiaries, and shall not serve as an active principal or
a director or officer of any other company or entity without the prior written
consent of the Board, except that the Employee may serve, without such consent,
as a director or officer of any company on the board of which he is currently
serving and of any trade association, civic, educational or charitable
organization unless the Board determines that such service interferes with the
performance of the Employee's duties hereunder.
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(b) PLACE OF PERFORMANCE. Except for required travel on the
Company's business, the Employee shall be based in the Miami, Florida
metropolitan area until July 1, 2001 and, thereafter, in a location as shall be
mutually agreed upon between the parties.
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. Effective as of the Commencement Date,
the Company shall pay the Employee a base salary at the rate of no less than
$475,000 per year (the "Base Salary"), payable in accordance with the Company's
normal payroll practices for senior executives. The Board shall review the Base
Salary annually; the Employee shall be entitled to such increases in his Base
Salary as may be determined from time to time by the Board or pursuant to its
delegation. If the Base Salary is increased, the new salary shall thereafter
constitute the "Base Salary" for purposes of this Agreement.
(b) BONUSES. In addition to Base Salary, the Employee may
receive a cash bonus. The bonus shall be determined by the Board or the
appropriate committee thereof, in its sole discretion.
(c) OTHER BENEFIT PLANS AND FRINGE BENEFITS. The Employee
shall be eligible to (i) participate in the Nebco Xxxxx Holding Company 1998
Management Stock Option Plan and the 1998 AmeriServe SERP, (ii) participate in
the employee benefit plans maintained by ProSource that the Employee currently
participates in until such plans are integrated with the Company's plans, and,
after such integration during the employment term, the Employee shall
participate in the Company's employee benefit plans for its senior management
executives, (iii) except as expressly provided herein, receive all fringe
benefits for which his status and level of employment qualify him in accordance
with the Company's usual plans, policies, and arrangements, and (iv) be
reimbursed for up to $7,500 for actual expenses incurred for, among other
things, financial consulting and tax planning and preparation services and
legal advice. Notwithstanding anything to the contrary contained herein, in no
event shall the Employee be entitled to receive duplicate benefits under this
Agreement or any plan or program of ProSource or the Company.
(d) VACATION. The Employee shall be entitled to four weeks
of paid vacation annually. The Employee shall determine, in his reasonable
discretion, the timing of such vacation.
(e) AUTOMOBILE. During the term of his employment, the
Company shall pay to the Employee on a monthly basis an amount equal to $1,750
to cover the monthly cost of an automobile of his choice and related expenses,
including insurance on, maintenance of, and fuel for, the automobile.
(f) INITIATION FEES/CLUB DUES. The Employee shall be
eligible to join a country club in the Miami Area and be reimbursed his
initiation fee and monthly dues during
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the term of employment. In the event the Employee is relocated, the Company
agrees to review the benefits provided by this Section 4(f) with the Employee
and to consider in good faith any change hereto that may be required to
preserve the economic purposes of this Agreement.
(g) OFFICE. During the term, the Employee shall be
provided with office space, secretarial and other staff support, and
communication equipment substantially similar to those currently made available
to the Employee.
(h) EXPENSES. The Company will promptly reimburse the
Employee for all business expenses incurred by him in connection with the
performance of his duties to the Company and its subsidiaries.
(i) RELOCATION POLICY. If the Employee is requested to
relocate his principal residence for the Company's benefit and the Employee
agrees to relocate, the Employee shall be reimbursed for all expenses in
accordance with the Company's relocation policy as in effect from time to time.
5. TERMINATION.
(a) COMPENSATION AND BENEFITS. Except as otherwise
provided in this Section 5 or Section 7, upon termination of the Employee's
employment hereunder, his right to compensation hereunder shall cease except
that the Employee shall be entitled to receive his Base Salary and benefits up
to the Date of Termination (as defined in Section 5(e)) or for the period
required by law.
(b) DEATH AND DISABILITY. The Employee's employment
hereunder shall terminate upon his death and may be terminated by the Company
due to the Employee's Disability or by the Employee for Good Reason. For
purposes of this Agreement, "Disability" shall mean the determination by a
qualified physician that the Employee is physically or mentally incapacitated
and has been unable for a period of six consecutive months, or for shorter
periods aggregating six months in any period of 12 consecutive months, to
perform the duties for which he was responsible immediately before the onset of
his incapacity, followed by his failure to return to performance of his duties
with the Company within thirty (30) days after written Notice of Termination
due to Disability is given to him. To assist the physician in making such a
determination, the Employee shall, as reasonably requested by the physician,
(i) make himself available for medical examinations, without cost to the
Employee, by such physician chosen by the Board and approved by the Employee,
whose approval shall not unreasonably be withheld, and (ii) grant for purposes
of this Agreement such physician access to all relevant medical information
concerning him, arrange to furnish copies of medical records to such physician,
and use his best efforts to cause his own physicians to be available to discuss
his health with such physician. The determination of the physician chosen in
accordance with the preceding sentence shall be made in writing to the Company
and the Employee and be final and binding on the Company and the Employee for
purposes of this Agreement.
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(c) TERMINATION BY THE COMPANY FOR CAUSE. The Employee's
employment hereunder may be terminated by the Company for Cause. For purposes
of this Agreement, the term "Cause" shall mean (i) the Employee's conviction of
a crime involving actual dishonesty against the Company or any of its
affiliates, (ii) gross negligence or gross misconduct by the Employee against
the Company or another employee, or in carrying out his duties and
responsibilities, or (iii) a breach of the provisions of Section 6(a) or (b)
hereof that is harmful to the Company or any of its affiliates. In any case
described in this Section 5(c), the Board shall give the Employee written
notice, in accordance with Section 5(e), that the Company intends to terminate
his employment for Cause (the "Preliminary Cause Notice"). The Preliminary
Cause Notice shall specify the particular act or acts or failure to act that is
or are the basis for the decision to so terminate the Employee's employment for
Cause. The Board shall give the Employee, together with counsel, an opportunity
to meet with the Board to defend such act or acts or failure to act within 30
calendar days of the Employee's receipt of such notice and to correct such act
or failure to act within 30 business days following such meeting. If the
Employee fails to correct such act or failure to act within the 30 business
days following the meeting, the Employee's employment by the Company shall be
terminated under this Section 5(c) for Cause as of the Date of Termination.
(d) COMPENSATION UPON TERMINATION WITHOUT CAUSE OR FOR
DISABILITY.
(i) On or Prior to July 1, 2001. If the Company terminates
the Employee's employment hereunder on or before July 1, 2001 other than for
Cause (excluding non-renewal of this Agreement in accordance with Section 2
hereof) or for the Employee's Disability (in accordance with Section 5(b)
hereof):
(A) In addition to the amounts paid to the Employee
pursuant to Section 5(a) and a cash bonus in an amount equal to the
pro rata portion of the actual incentive payment that the Employee
would have received for the year in which the Date of Termination
occurs but for such termination, in lieu of any further salary
payments to the Employee for any period subsequent to the Date of
Termination, the Company shall pay to the Employee the greater of (1)
the amount equal to the Employee's annual Base Salary in effect as of
the Date of Termination for the period equal to the number of months
(and portions thereof) from the Date of Termination until July 1, 2001
(the "Remaining Term"), or (2) the amount equal to the product of (x)
1.5 and (y) 18 months' Base Salary. For purposes of this Section
5(d)(i), the "Continuation Period" shall be the Remaining Term or the
18 month period referred to in clause 2, as applicable. Except as
provided in Section 7, the applicable amount described in this
Paragraph (A) shall be paid in substantially equal monthly payments
during the Continuation Period, except that the Company may determine,
in its sole discretion, to pay such amount (or any portion remaining
during such period if periodic payments have commenced) in a single
lump sum in cash or, if so requested by the Employee, in two lump
sums.
(B) For the Continuation Period, the Company shall
continue to provide the Employee (and his eligible dependents, if any)
with (1) group health and life insurance benefits and long-term
disability insurance coverage (or the economic equivalent thereof)
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at the level in effect on the Date of Termination, (2) the perquisite
allowance referred to in Section 4(c) (iv), and (3) the benefits
referred to in Sections 4(e) and 4(f); provided that if the Employee
is employed by another employer during the Continuation Period such
benefits and insurance coverage shall cease on the date of employment
by an employer other than the Company, and further provided that, at
the expiration of the Continuation Period, the Employee (and his
eligible dependents, if any) shall be entitled to the full period of
coverage provided him under Section 4980B of the Internal Revenue Code
of 1986, as amended, unless other employment has been obtained.
(C) The Company shall reimburse the Employee for actual
costs incurred in seeking reemployment, including costs of
outplacement services up to a maximum of $25,000.
(ii) After July 1, 2001. If the Company terminates the
Employee's employment hereunder after July 1, 2001 other than for Cause
(including non-renewal of this Agreement in accordance with Section 2 hereof)
or for the Employee's Disability (in accordance with Section 5(b) hereof), in
addition to the amounts paid to the Employee pursuant to Section 5(a), in lieu
of any further salary payments to the Employee subsequent to the Date of
Termination, the Company shall continue to pay the Employee that year's
prorated bonus and his Base Salary and to provide the benefits described in
Section 5(d)(i)(B) above for the 15-month period following the Date of
Termination.
(e) NOTICE OF TERMINATION; DATE OF TERMINATION. Any
termination of the Employee's employment, other than by reason of his death,
shall be communicated by the terminating party by a written notice of
termination (the "Notice of Termination"). The Notice of Termination shall (i)
indicate the specific termination provision in this Agreement upon which the
termination is based, (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated, and (iii) specify the Date of
Termination. For purposes of this Agreement, "Date of Termination" shall mean
(i) if the Employee's employment is terminated by his death, the date of his
death, and (ii) in all other cases, the later of the date of actual receipt of
the Notice of Termination and the date specified in such notice. The Date of
Termination shall not occur prior to the completion of the cure period
described in Section 5(c) if termination is for Cause.
(f) During any period in which the Employee is receiving
payments from the Company following the Employee's termination of employment,
the Employee will be available from time to time as may be reasonably requested
by the Company to provide consulting services to the Company.
6. COVENANTS
(a) CONFIDENTIALITY. The Employee acknowledges that he has
acquired and will acquire confidential information respecting the business of
the Company. Accordingly, the Employee agrees that he will not willfully
disclose, at any time (during the employment term or thereafter), any such
confidential information to any unauthorized third party without the consent of
the Company as authorized by the Board. For this purpose, information shall
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be considered confidential only if such information is proprietary to the
Company and has not been made publicly available prior to its disclosure by the
Employee.
(b) COMPETITIVE ACTIVITY. (i) If the Employee's employment
hereunder is terminated, the Employee shall not, without the written consent of
the Board, during (A) the Continuation Period (in the case of a termination
entitling the Employee to severance under Section 5(d)(i)), (B) the fifteen
month period following the Date of Termination (in the case of a termination
entitling the Employee to severance under Section 5(d)(ii)) or (C) the eighteen
month period following the Date of Termination (in the case of all other
terminations of employment), directly, individually or as an employee, agent,
partner, shareholder, consultant or in any other capacity, participate in,
engage in or have a financial interest or management position or other interest
in any business operation or any enterprise that engages in the business(es) of
the Company or any of the affiliated companies or operating companies of the
Company, which is in direct competition with the Company or its affiliates,
including, without limitation, a purchasing cooperative of the Company or its
affiliated companies that engages in the food service distribution business or
fast food vending (whether retail or wholesale) business. The ownership of an
interest constituting not more than 5% of the outstanding debt or equity in a
corporation the shares of which are traded on a recognized stock exchange or
trade in the over-the-counter market, even though that corporation may be a
competitor of the Company or any of its subsidiaries, shall not be deemed
financial participation in a competitor or from being employed by any person or
entity where the services performed by the Employee are not in furtherance of
such person or entity's competition with the Company.
(ii) The Employee shall not, without the written consent
of the Board, during the employment term and for eighteen months following the
Date of Termination, directly or indirectly, either for his own benefit or for
the benefit of any other person, solicit to take away, or take away any
customers doing business with the Company on the Date of Termination or who
were being solicited to become customers as of the Date of Termination or
recruit, induce, or encourage any employee of the Company or any affiliate of
the Company to terminate such employee's employment with the Company or such
affiliate, except that nothing herein shall prohibit the Employee from giving a
reference or a recommendation to any third party with respect to any such
employee.
(c) REMEDY FOR BREACH AND MODIFICATION. The Employee
acknowledges that the confidentiality and competitive activities provisions of
this Section 6 are reasonable and necessary for the protection of the Company
and that the Company will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, the Employee agrees that, in addition to
any other relief or remedies available to the Company, the Company shall be
entitled to seek and obtain an appropriate injunction or other equitable remedy
from a court with proper jurisdiction for the purposes of restraining the
Employee from any actual or threatened breach of such provisions, and no bond
or security will be required in connection therewith. If any provision of this
Section 6 is deemed invalid or unenforceable, such provision shall be deemed
modified and limited to the extent necessary to make it valid and enforceable.
(d) Any termination of the Employee's employment or of
this Agreement shall have no effect on the continuing operation of this Section
6.
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SECTION 280G PAYMENTS. If the aggregate present value of the Employee's
payments under this Agreement, and any plan, program, or arrangement maintained
by the Company constitutes an "excess parachute payment" (within the meaning of
Section 280G(b) (1) of the Internal Revenue Code of 1986, as amended (the
"Code")) and the excise tax on such payment would cause the net parachute
payments (after taking into account federal, state and local income and excise
taxes) to which the Employee otherwise would be entitled to be less than what
the Employee would have netted (after taking into account federal, state and
local income taxes) had the present value of his total parachute payments
equaled $1.00 less than three times his "base amount" (within the meaning of
Code Section 280G(b)(3)(A)), the Employee's total "parachute payments" (within
the meaning of Code Section 280G(b)(2)(A)) shall be reduced (by the minimum
possible amount) so that their aggregate present value equals $1.00 less than
three times such base amount. For purposes of this calculation, it shall be
assumed that the Employee's tax rate will be the maximum marginal federal,
state and local income tax rate on earned income, with such maximum federal
rate to be computed with regard to Code Section 1(g), if applicable. If the
Employee and the Company are unable to agree as to the amount of the reduction
described above, if any, the Employee shall select a law firm or accounting
firm from among those regularly consulted (during the twelve-month period
immediately prior to the change in control that resulted in the
characterization of the payments as parachute payments) by the Company
regarding federal income tax or employee benefit matters and such law firm or
accounting firm shall determine the amount of such reduction and such
determination shall be final and binding upon the Employee and the Company.
7. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Employee harmless, to the maximum extent permitted by law, from any
and all claims, litigation, or suits arising out of the activities of the
Employee reasonably taken in the performance of his duties hereunder, including
all reasonable expenses and professional fees that may relate thereto. The
Company shall obtain a directors and officers liability insurance policy
covering the Employee in a sufficient amount to provide such indemnification if
such coverage is available on commercially reasonable terms and shall maintain
such policy during the employment term (and for so long thereafter as is
practicable in the circumstances taking into account the availability of such
insurance). If a policy cannot be obtained or upon the lapse of such policy, to
the fullest extent permitted by law, the Company will retain counsel to defend
the Employee or will advance legal fees and expenses to the Employee for
counsel select by the Employee in connection with any litigation or proceeding
relating to his service to or for the Company and its affiliates. The Company's
indemnification obligations shall cover the Employee's activities consulting
for the Company and shall survive the expiration of this Agreement.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and to be performed in that State.
(b) NOTICE. Any notice, consent, request or other
communication made or given in connection with this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
registered or certified mail, return receipt requested, to those listed below
at their following respective addresses or at such other address as each may
specify by notice to the others:
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To the Employee, to his attention at:
0000 Xxxx Xxxxx Xxxx
Xxxxx Xxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To the Company:
AmeriServe Food Distribution, Inc.
00000 Xxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With copies (in the case of notice to the
Employee) to:
Xxxx X. Xxxxxxxxx, Esq.
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement shall
supersede any and all existing agreements and understandings between the
Employee and the Company or any of its affiliates and between the Employee and
ProSource, Inc. or any of its affiliates relating to the terms of the
Employee's employment, including without limitation, the Prior Agreement. This
Agreement may not be amended except by a written agreement signed by both
parties.
(d) WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(e) ASSIGNMENT. Except as otherwise provided in this
Section 9(e), this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by the Employee and shall be
assignable by the Company only to any corporation or other entity resulting
from the reorganization, merger, or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged, or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange, or
transfer (the provisions of this sentence also being applicable to any
successive such transaction).
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(f) HEADINGS. Section headings are used herein for
convenience of reference only and shall not affect the meaning of any provision
of this Agreement.
(g) RULES OF CONSTRUCTION. Whenever the context so
requires, the use of the masculine gender shall be deemed to include the
feminine and vice versa, and the use of the singular shall be deemed to include
the plural and vice versa.
(h) ATTORNEY'S FEES. The Company shall reimburse the
Employee, to the extent permitted by law, for the reasonable attorney's fees
and expenses which the Employee may reasonably incur as a result of any contest
by the Employee in enforcing his rights under this Agreement, provided that the
Employee is the prevailing party. The Company shall promptly reimburse the
Employee for all amounts due under this Paragraph.
(i) NO MITIGATION, REDUCTION OR OFFSET. The Employee shall
not be required to mitigate the amount of any severance or termination payment
provided for in this Agreement by seeking other employment or otherwise. Except
as expressly provided in Section 5(d)(i)(B) and provided that the Employee
complies with Section 6 hereof during all relevant time periods, the amount of
any payment of benefit provided for in this Agreement shall not be reduced by
any compensation earned by the Employee as the result of employment by another
employer or by any compensation or benefits paid by the Company or any other
employer. No payments to the Employee under this Agreement may be subject to
any manner of offset or setoff or shall be reduced by any amounts the Employee
may owe to the Company or its subsidiaries or by any claims that the Company
may have against the Employee.
(j) All payments provided under this Agreement, other than
payments made pursuant to a plan which provides otherwise, shall be paid in
cash or cash equivalents and shall be the responsibility of the Company and its
Parent.
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
By and on behalf of
AMERISERVE FOOD DISTRIBUTION, INC.
By: /s/XXXXXX XXXXXXXXX
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Name: Xxxxxx Xxxxxxxxx
Title: Vice President
XXXXXX X. HIGHLAND
/s/XXXXXX X. HIGHLAND
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