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EXHIBIT 10.41
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement") is made as of January 1, 1999,
by and between SUIZA FOODS CORPORATION, a Delaware corporation (together with
its subsidiaries, the "Company"), and Xxxxxxx Xxxxx (the "Executive").
RECITALS
A. The Board of Directors of the Company (the "Board") has determined that
the interests of the Company will be advanced by providing the key executives of
the Company with certain benefits in the event of the termination of employment
of any such executive in connection with or following a Change in Control (as
hereinafter defined).
B. The Board believes that such benefits will enable the Company to
continue to attract and retain competent and qualified executives, will assure
continuity and cooperation of management and will encourage such executives to
diligently perform their duties without personal financial concerns, thereby
enhancing shareholder value and ensuring a smooth transition.
C. The Executive is a key executive of Franklin Plastics, Inc. ("Franklin")
a subsidiary of the Company.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, including the mutual
covenants set forth herein, the parties hereto agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
purposes of this Agreement.
"AFFILIATE" means any entity controlled by, controlling or under common
control with, a person or entity.
"ANNUAL PAY" means the sum of (i) an amount equal to the annual base salary
rate payable to the Executive by the Company at the time of termination of his
or her employment plus (ii) an amount equal to the target bonus established for
the Executive for the Company's fiscal year in which his or her termination of
employment occurs.
"CAUSE" means the Executive's (i) willful and intentional material breach
of this Agreement, (ii) willful and intentional misconduct or gross negligence
in the performance of, or willful neglect of, the Executive's duties, which has
caused material injury (monetary or otherwise) to the Company, or (iii)
conviction of, or plea of nolo contendere to, a felony; provided, however, that
no act or omission shall constitute "Cause" for purposes of this Agreement
unless the Board or the Chairman of the Board provides to the Executive (a)
written
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notice clearly and fully describing the particular acts or omissions which the
Board or the Chairman of the Board reasonably believes in good faith constitutes
"Cause" and (b) an opportunity, within thirty (30) days following his or her
receipt of such notice, to meet in person with the Board or the Chairman of the
Board to explain or defend the alleged acts or omissions relied upon by the
Board and, to the extent practicable, to cure such acts or omissions. Further,
no act or omission shall be considered as "willful" or "intentional" if the
Executive reasonably believed such acts or omissions were in the best interests
of the Company.
"CHANGE IN CONTROL" means:
1. (A) any "person" (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the
"beneficial owner" (as determined pursuant to Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing thirty
percent (30%) or more of the combined voting power of the Company's then
outstanding securities; or (B) individuals who currently serve on the Board, or
whose election to the Board or nomination for election to the Board was approved
by a vote of at least two-thirds (2/3) of the directors who either currently
serve on the Board, or whose election or nomination for election was previously
so approved, cease for any reason to constitute a majority of the Board; or (C)
the Company or any subsidiary of the Company shall merge with or consolidate
into any other corporation, other than a merger or consolidation which would
result in the holders of the voting securities of the Company outstanding
immediately prior thereto holding immediately thereafter securities representing
more than sixty percent (60%) of the combined voting power of the voting
securities of the Company or such surviving entity (or its ultimate parent, if
applicable) outstanding immediately after such merger or consolidation; or (D)
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, or such a plan is commenced;
OR
2. (A) any "person" (as such term is used in Section13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) other than the Company or
an affiliate of the Company (as that term is defined in the Exchange Act),
becomes the "beneficial owner" (as determined pursuant to Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Franklin representing
fifty percent (50%) or more of the combined voting power of Franklin's then
outstanding securities; or (B) Franklin or any subsidiary of Franklin shall
merge with or consolidate into any other entity other than an affiliate of
Franklin or the Company, other than a merger or consolidation which would result
in the holders of the voting securities of Franklin outstanding immediately
prior thereto holding immediately thereafter securities representing more than
fifty percent (50%) of the combined voting power of the voting securities of
Franklin or such surviving entity (or its ultimate parent, if applicable )
outstanding immediately after such merger or consolidation; or (C) the
stockholders of Franklin approve a plan of complete liquidation of Franklin or
such a plan is commenced; or (D) any merger, consolidation, sale of stock or
other transaction or series of related transactions, that results in Xxxx and
Xxxxx Xxxxxx and their affiliates, personal representatives and heirs (the
"Bernons") and the Company or an affiliate of the
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Company owning an aggregate of less than 50% of the combined voting power of the
outstanding securities of Franklin, other than an underwritten public offering
for cash of Franklin's securities or a distribution of Franklin's securities
held by the Company to the stockholders of the Company; or (E) any sale of all
or substantially all of the assets of Franklin other than to an affiliate of
Franklin or the Company, unless the Company, the Bernons and their affiliates
own at least 50% of the combined voting power of the purchaser.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means all information, whether oral or written,
previously or hereafter developed, acquired or used by the Company or its
subsidiaries and relating to the business of the Company and its subsidiaries
that is not generally known to others in the Company's area of business,
including without limitation trade secrets, methods or practices developed by
the Company or any of its subsidiaries, financial results or plans, customer or
client lists, personnel information, information relating to negotiations with
clients or prospective clients, proprietary software, databases, programming or
data transmission methods, or copyrighted materials (including without
limitation, brochures, layouts, letters, art work, copy, photographs or
illustrations). It is expressly understood that the foregoing list shall be
illustrative only and is not intended to be an exclusive or exhaustive list of
"Confidential Information."
"GOOD REASON" means any of the following events occurring, without the
Executive's prior written consent specifically referring to this Agreement,
within two (2) years following a Change in Control:
(1) (A) Any reduction in the amount of the Executive's Annual Pay, (B)
any reduction in the amount of Executive's other long-term aggregate
incentive compensation opportunities, or (C) any significant reduction in
the aggregate value of the Executive's benefits as in effect from time to
time (unless in the case of either B or C, such reduction is pursuant to a
general change in compensation or benefits applicable to all similarly
situated employees of the Company and its Affiliates);
(2) (A) the removal of the Executive from the Executive's position as
President - Suiza Packaging Group (or as President of any successor to the
operations of Suiza Packaging Group) or (B) any other significant reduction
in the nature or status of the Executive's duties or responsibilities;
(3) transfer of the Executive's principal place of employment to a
metropolitan area other than that of the Executive's place of employment
immediately prior to the Change in Control without the Executive's consent;
or
(4) failure by the Company to obtain the assumption agreement referred
to in Section 7 of this Agreement prior to the effectiveness of any
succession referred to therein, unless the purchaser, successor or assignee
referred to therein is bound to perform this Agreement by operation of law.
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"TERMINATION PAY" means a payment made by the Company to the Executive
pursuant to Section 2(a)(ii) or Section 2(b)(ii) hereof.
2. CHANGE IN CONTROL TERMINATION PAYMENT AND BENEFITS.
(a) Involuntary or Constructive Termination. In the event that the
Executive's employment with the Company or its successor is terminated by the
Company or its successor without Cause or by the Executive for Good Reason in
connection with or within two years after a Change in Control, the Executive
shall be entitled to the following payments and other benefits:
(i) A cash payment in an amount equal to the sum of (A) the
Executive's accrued and unpaid salary as of his or her date of termination
of employment, plus (B) his or her accrued and unpaid bonus, if any, for
the Company's prior fiscal year. This amount shall be paid on the date of
the Executive's termination of employment.
(ii) A cash payment in an amount equal to three (3) times the
Executive's Annual Pay. This amount shall be paid by the Company in
accordance with Section 2(d) hereof.
(iii) A cash payment in an amount equal to the Executive's unvested
account balance under the Company's 401(k) plan.
(iv) The Executive and his or her eligible dependents shall be
entitled for a period of two (2) years following his or her date of
termination of employment to continued coverage, on the same basis as
similarly situated active employees, under the Company's group health,
dental, long-term disability and life insurance plans as in effect from
time to time (but not any other welfare benefit plans or any retirement
plans); provided that coverage under any particular benefit plan shall
expire with respect to the period after the Executive becomes covered under
another employer's plan providing for a similar type of benefit. In the
event the Company is unable to provide such coverage on account of any
limitations under the terms of any applicable contract with an insurance
carrier or third party administrator, the Company shall pay the Executive
an amount equal to the cost of such coverage.
(v) All of the Executive's unvested options to purchase shares of
Franklin's common stock shall be automatically vested and shall remain
exercisable by the Executive on the same terms (other than vesting
provisions) and for the same periods as were in effect prior to termination
of the Executive's employment. In the event of any conflict between this
provision and the provisions of any stock option award agreements entered
into before or after the effective date of this Agreement, the foregoing
provision shall control.
(b) Voluntary Termination. If, at any time during the period beginning
12 months after a Change in Control and ending 24 months after a Change in
Control, the Executive
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voluntarily terminates his or her employment with the Company for any reason
(other than for Good Reason), the Executive shall be entitled to receive the
following payments and benefits:
(i) A cash payment in an amount equal to the sum of (A) the
Executive's accrued and unpaid salary as of his or her date of
termination of employment, plus (B) his or her accrued and unpaid
bonus, if any, for the Company's prior fiscal year. This amount shall
be paid on the date of the Executive's termination of employment.
(ii) A cash payment in an amount equal to one and one-half (1
1/2) times the Executive's Annual Pay. This amount shall be paid by
the Company in accordance with Section 2(d) hereof.
(c) No Duplication; Other Severance Pay. There shall be no duplication
of severance pay in any manner. In this regard, the Executive shall not be
entitled to Termination Pay hereunder for more than one position with the
Company and its Affiliates. If the Executive is entitled to any notice or
payment in lieu of any notice of termination of employment required by Federal,
state or local law, including but not limited to the Worker Adjustment and
Retraining Notification Act, the severance compensation to which the Executive
would otherwise be entitled under this Agreement shall be reduced by the amount
of any such payment, in lieu of notice. If Executive is entitled to any
severance or termination payments under any employment or other agreement with
the Company or any of its Affiliates, the severance compensation to which
Executive would otherwise be entitled under this Agreement shall be reduced by
the amount of such payment. Except as set forth above, the foregoing payments
and benefits shall be in addition to and not in lieu of any payments or benefits
to which the Executive and his or her dependents may otherwise be entitled to
under the Company's compensation and employee benefit plans. Nothing herein
shall be deemed to restrict the right of the Company from amending or
terminating any such plan in a manner generally applicable to similarly situated
active employees of the Company and its Affiliates, in which event the Executive
shall be entitled to participate on the same basis (including payment of
applicable contributions) as similarly situated active executives of the Company
and its Affiliates.
(d) Mutual Release. Termination Pay shall be conditioned upon the
execution by the Executive and the Company of a valid mutual release to be
prepared by the Company pursuant to which the Executive and the Company shall
each mutually release each other, to the maximum extent permitted by law, from
any and all claims either party may have against the other that relate to or
arise out of the employment or termination of employment of the Executive,
except such claims arising under this Agreement, any employee benefit plan, or
any other written plan or agreement (a "Mutual Release"). The full amount of
Termination Pay shall be paid in a lump sum in cash to the Executive within ten
(10) days following receipt by the Company of a Mutual Release which is properly
executed by the Executive; provided, however, that in the event applicable law
allows the Executive to revoke the Mutual Release for a period of time, and the
Mutual Release is not revoked during such period, the full amount of Termination
Pay shall be paid to the Executive following the expiration of such period.
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3. EXCISE TAXES.
(a) Gross-Up Payment. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if it is determined that any
payment or distribution (a "Payment") 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, but determined without regard to
any additional payments required under this Section 3) including, without
limitation, vesting of options, would be subject to the excise tax imposed by
Section 4999 of the Code, or if any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount sufficient to pay all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment.
(b) Calculation of Gross-Up Payment. Subject to the provisions of
paragraph (c) of this Section 3, all determinations required to be made under
this Section 3, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be used in arriving
at such determination, shall be made by a certified public accounting firm
selected by the Company and reasonably acceptable to the Executive (the
"Accounting Firm"), which shall be retained to provide detailed supporting
calculations both to the Company and the Executive. If the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Executive shall have the right to 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 paid
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 3, shall be paid by the Company to the Executive within five (5) days of
the receipt of the Accounting Firm's determination. 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 should have been made will not have been made by the
Company ("Underpayment"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to paragraph (c) of
this Section 3 and the Executive thereafter is required to pay an Excise Tax in
an amount that exceeds the Gross-Up Payment received by the Executive 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) Contested Taxes. The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would result
in an Underpayment. Such notification shall be given as soon as practicable but
no later than ten (10) 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 or appealed. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date
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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:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claims
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 to
effectively 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 paragraph (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 to 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 the amount of the
Gross-Up Payment, 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) Refunds. If, after the receipt by the Executive of an amount
advanced by the Company pursuant to this Section 3, the Executive becomes
entitled to receive any refund
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with respect to such claim, the Executive shall promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto).
4. CERTAIN COVENANTS BY THE EXECUTIVE.
(a) Covenant Not to Compete. In consideration of the payments made to
the Executive pursuant to this Agreement, the Executive shall not during the
term of his or her employment with the Company and for a period of two years
after termination of the Executive's employment with the Company, directly or
indirectly, engage (whether as owner, partner, stockholder, joint venturer,
manager, investor, employee, consultant, independent contractor or agent) in any
business that competes, directly or indirectly, with the Company in any
jurisdiction in which the Company is conducting business at the time (provided
that the Executive shall not be restricted hereby from owning or acquiring 5% or
less of the outstanding voting securities of a public company), provided that,
the foregoing restriction will terminate immediately if the Executive's
employment with the Company is terminated by the Company without Cause or by the
Executive for Good Reason. The foregoing provision is not intended to override,
supercede, reduce, modify or affect in any manner any other noncompetition
covenant or agreement entered into between Executive and the Company or any of
its Affiliates. Any such covenant or agreement shall remain in full force and
effect in accordance with its terms.
(b) Protection of Confidential Information. The Executive agrees that
he or she will not at any time during or following his or her employment by the
Company, without the Company's prior written consent, divulge any Confidential
Information to any other person or entity or use any Confidential Information
for his or her own benefit. Upon termination of employment, for any reason
whatsoever, regardless of whether either party may be at fault, the Executive
will return to the Company all physical Confidential Information in the
Executive's possession. (c) Nondisclosure of Agreement. The Executive agrees, at
all times during his or her employment by the Company, not to disclose or
discuss in any manner (whether to individuals inside or outside the Company),
the existence or terms of, this Agreement without the prior written consent of
the Company, except to the extent required by law.
(d) Non-Solicitation of Employees. The Executive agrees, for so long
as the Executive remains employed by the Company, and for a period of two years
following the termination of the Executive's employment, that the Executive
shall not, either for the Executive's own account, or on behalf of any other
person or entity, solicit, suggest or request that any other person employed by
the Company or one of its Affiliates leave such employment for the purpose of
becoming employed by the Executive or any other person or entity.
(e) Extent of Restrictions. The Executive acknowledges that the
restrictions contained in this Section 4 correctly set forth the understanding
of the parties at the time this Agreement is entered into, are reasonable and
necessary to protect the legitimate interests of the Company, and that any
violation will cause substantial injury to the Company. In the event of any such
violation, the Company shall be entitled, in addition to any other remedy, to
preliminary or permanent injunctive relief. If any court having jurisdiction
shall find that any part of the
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restrictions set forth in this Agreement are unreasonable in any respect, it is
the intent of the parties that the restrictions set forth herein shall not be
terminated, but that this Agreement shall remain in full force and effect to the
extent (as to time periods and other relevant factors) that the court shall find
reasonable.
5. TAX WITHHOLDING. All payments to the Executive under this Agreement
will be subject to the withholding of all applicable employment and income
taxes.
6. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
7. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company. The Company will
require any successor to all or substantially all of the business and/or assets
of the Company to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
if no succession had taken place.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. This
Agreement may not be modified in any manner except by a written instrument
signed by both the Company and the Executive.
9. NOTICES. Any notice required under this Agreement shall be in
writing and shall be delivered by certified mail return receipt requested to
each of the parties as follows:
To the Executive:
Xxxxxxx Xxxxx
Suiza Packaging Group
0000 XxXxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
To the Company:
SUIZA FOODS CORPORATION
0000 XxXxxxxx Xxxxxx, Xxxxx 0000, XX 00
Xxxxxx, Xxxxx 00000
Attn.: General Counsel
Tel.: 000-000-0000
Fax: 000-000-0000
10. GOVERNING LAW. The provisions of this Agreement shall be construed
in accordance of the laws of the State of Delaware, except to the extent
preempted by ERISA or other federal laws, as applicable, without reference to
the conflicts of laws provisions thereof.
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IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the date and year first above written.
SUIZA FOODS CORPORATION
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Xxxxx X. Xxxxxx
Chairman of the Board and Chief Executive Officer
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Xxxxxxx Xxxxx
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