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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made and entered
into as of September _____, 1997, by and between American Italian Pasta
Company, a Delaware corporation (the "Company") and Xxxxx X. Xxxxxxxxx ("Xx.
Xxxxxxxxx"), will become effective on the date that the Company's initial
public offering of common stock is consummated (hereinafter the "Effective
Date").
WITNESSETH:
WHEREAS, the Company and Xx. Xxxxxxxxx are parties to an
Employment Agreement dated as of January 1, 1996 (the "1996 Employment
Agreement") and the parties desire, as of the Effective Date, to terminate and
supersede the 1996 Employment Agreement in its entirety; and
WHEREAS, prior to the Effective Date the Company desires to
continue to employ Xx. Xxxxxxxxx and he desires to continue to be employed by
the Company on the terms set forth in the 1996 Employment Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:
1. Term. The Company hereby employs Xx. Xxxxxxxxx for
an initial term commencing on the Effective Date, and terminating three (3)
years from the Effective Date, but in no event later than December 31, 2000;
unless the initial term is extended or renewed by mutual agreement in writing
of the parties hereto or this Agreement is earlier terminated pursuant to
Section 5 hereof (collectively the "Term"). In the event one of the parties
wishes to extend or renew the Term it will so notify the other party at least
ninety (90) days prior to the date on which the Agreement would otherwise
terminate so that the parties may enter into discussions regarding such renewal
or extension.
2. Position and Responsibilities. Xx. Xxxxxxxxx will
serve as a Director and the Chairman of the Board of the Company and render
such advice and services to the Company during the Term as may be reasonably
required by the Company in accordance with this Agreement, including but not
limited to the following:
a. Serve on all key committees of the Board of
Directors, except as may be prohibited, deemed inadvisable or as may create
adverse consequences to the Company or its employees under applicable
securities laws, tax laws, stock exchange regulations, or any other applicable
law, rule or regulation, as determined by the Company's legal counsel.
b. Counsel and assist the Company's management in the
development, implementation and control of the Company's business objectives
and strategies to further the profitable growth of the Company.
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c. Assist in developing and implementing operational and
marketing strategies which will support the Company's business growth plan.
d. Assist and counsel the Company's management in all
matters related to the implementation of the Company's business plan.
The Company agrees to give reasonable advance notice to Xx.
Xxxxxxxxx regarding the anticipated timing and duration of the services needed
and understands and agrees that in no event shall Xx. Xxxxxxxxx'x physical
presence be required to render services to the Company for more than an
aggregate of fifty (50) days in each calendar year during the Term. It is
expressly understood and agreed by the parties hereto that any request for
services in addition to the foregoing limitations shall be subject to Xx.
Xxxxxxxxx'x availability. In rendering his services to the Company, Xx.
Xxxxxxxxx shall report directly to the Company's Board of Directors.
3. Compensation.
a. Base Compensation. As base compensation ("Base
Compensation"), the Company shall pay Xx. Xxxxxxxxx $4,000.00 per day ("the
Daily Rate") for each day of service rendered to the Company; provided,
however, that in the event Xx. Xxxxxxxxx is willing and able to render services
but the Company does not request services which aggregate thirty (30) days for
any given calendar year, then, the Company shall pay Xx. Xxxxxxxxx for a
minimum of thirty days in said calendar year. Within a reasonable time after
the end of each calendar quarter, Xx. Xxxxxxxxx will provide the Company a
written statement describing the services rendered during the said calendar
quarter and within fifteen (15) days after receipt of said written statement,
the Company shall pay Xx. Xxxxxxxxx for said services. In the event the
Company does not request at least thirty (30) days of service from Xx.
Xxxxxxxxx during a given calendar year, then, on or before the last business
day of said calendar year, the Company shall pay Xx. Xxxxxxxxx an amount equal
to the Daily Rate times the number of days fewer than thirty for which services
were not rendered because they were not requested by the Company.
b. Signing Bonus. Upon execution of the 1996 Employment
Agreement, the Company paid a signing bonus to Xx. Xxxxxxxxx in the amount of
Three Hundred Thirty Thousand Dollars ($330,000). In the event that Xx.
Xxxxxxxxx does not fulfill his obligation to render services to the Company for
the full term of the 1996 Employment Agreement, which commenced on January 1,
1996, and would have expired on December 31, 1998 (the "Original Term"),
because: (i) he voluntarily terminates this Agreement (for a reason other than
those permitted in Section 5(c) hereof) or breaches this Agreement by refusing
to provide the services to be rendered hereunder, or (ii) he is terminated for
Cause as defined in this Agreement, then he shall repay to the Company that
portion of the signing bonus which relates to the period of the Original Term
for which he does not render services. The amount of the repayment shall be
based on the assumption that Xx. Xxxxxxxxx will render a minimum of thirty (30)
days of services in each calendar year during the Original Term. Therefore,
for each day of service rendered less than thirty in each year during the
Original Term, Xx. Xxxxxxxxx will repay $3,666.67 to the Company. As an
example and solely for purposes of illustration: If Mr.
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Xxxxxxxxx is terminated for Cause after rendering ten (10) days of service in
1998, then he would repay the sum of $73,333.40 ($3,666.67 x 20 days for 1998).
For purposes of this Section 3(b), the cessation of services by Xx. Xxxxxxxxx
because of his death or Disability (as defined in Section 5(a) below) shall not
be deemed to be a voluntary termination of this Agreement or a refusal to
provide the services to be rendered hereunder and therefore would not create a
repayment obligation by him or his estate.
c. Bonuses. During the Term of this Agreement, Xx.
Xxxxxxxxx will be entitled to participate in an equitable manner with other
senior executive employees of the Company in discretionary bonuses authorized
and declared from time to time by the Board of Directors or its Compensation
Committee. In addition, Xx. Xxxxxxxxx will be entitled to participate in the
Company's 1996 Salaried Employee Bonus Plan (the "Bonus Plan") attached hereto
as Exhibit A, as the same may be amended, modified or terminated. The "norm
bonus" under the Bonus Plan will be in an amount equal to 50% of Xx.
Xxxxxxxxx'x Base Compensation and the Bonus Plan will have a "target bonus"
equal to up to 75% of Xx. Xxxxxxxxx'x Base Compensation.
d. Withholdings. All payments due under this Agreement
will be subject to the required and customary employment tax and income tax
withholdings.
4. Expense Reimbursement. The Company shall reimburse
Xx. Xxxxxxxxx for necessary and reasonable business expenses incurred in
connection with the performance of duties hereunder. Xx. Xxxxxxxxx shall
provide an invoice to the Company for such expenses at the end of the quarter
in which such expenses were incurred. The Company shall, subject to its normal
review and approval policies and procedures, pay such invoice of Xx. Xxxxxxxxx
not later than on the due date stated therein which date shall not be less than
fifteen (15) days after the date such invoice was provided to the Company.
5. Termination.
a. Death or Disability. If Xx. Xxxxxxxxx is prevented
from providing the services or performing the assignments herein contemplated
due to his illness, incapacity or injury for a period of sixty (60) consecutive
days or sixty (60) days in the aggregate in any 6 month period ("Disability")
or his death, the Company may terminate this Agreement immediately by giving
written notice to such effect. Upon the death or Disability of Xx. Xxxxxxxxx,
the Company shall pay to him or his designated beneficiary or estate all
amounts due and unpaid for services rendered prior to his death or Disability.
b. Termination of Employment by Company for Cause. The
Company may also terminate this Agreement for "Cause" (as defined below). Upon
termination for Cause, the Company will pay to Xx. Xxxxxxxxx all amounts due
and unpaid for services rendered prior to termination. The Term shall be
terminated effective the date of such termination for Cause and, except as
provided in the foregoing sentence, no further amounts shall be payable
hereunder. For purposes of this Agreement, "Cause" shall mean (i) Xx.
Xxxxxxxxx'x willful and continued failure substantially to perform its or his
duties hereunder (other than as a result of Disability
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or death of Xx. Xxxxxxxxx); (ii) an act or acts on Xx. Xxxxxxxxx'x part
constituting a felony under the laws of the United States or any state thereof;
(iii) the willful engaging by Xx. Xxxxxxxxx in conduct that is significantly
injurious to the Company, monetarily or otherwise, after a written demand for
cessation of such conduct is delivered to him by the Board, which demand
specifically identifies the manner the Board believes he has engaged in such
conduct and the injury to the Company resulting therefrom; or (iv) the breach
by Xx. Xxxxxxxxx of any of the covenants in Sections 6 and 7 of this Agreement.
c. Termination of Employment by Xx. Xxxxxxxxx for Good
Reason. Xx. Xxxxxxxxx may resign and terminate this Agreement for "Good
Reason" by giving written notice to the Company. For purposes of this
Agreement, "Good Reason" shall mean any of the following reasons: (i) the
Company willfully fails to pay an amount due under this Agreement after Xx.
Xxxxxxxxx has provided written notice to the Company of such failure; (ii) the
occurrence without Xx. Xxxxxxxxx'x written consent of a Change of Control (as
defined in the October 30, 1992 Shareholders Agreement by and among the
Company, Xx. Xxxxxxxxx, The Xxxxxx Xxxxxxx Leveraged Equity Fund, L.P. and the
other parties thereto); or (iii) there occurs a significant strategic
disagreement between Xx. Xxxxxxxxx and a majority of the members of the Board
of Directors of the Company involving: (a) the CEO position, (b) a Significant
Strategic Alliance (as defined below) or other fundamental change in the nature
of the Company's business, (c) removal by the Company of Xx. Xxxxxxxxx as
Chairman of Board of Directors other than for Cause, or (d) removal by the
Company of Xx. Xxxxxxxxx from any key committee of the Board of Directors other
than for Cause (except as provided in Section 2(a) hereof).
If Xx. Xxxxxxxxx terminates this Agreement for Good Reason,
Xx. Xxxxxxxxx shall no longer be obligated to provide any services to the
Company and shall be entitled to receive a prompt payment of all amounts due
for service rendered but not yet paid, and an amount equal to: (ii) the unpaid
balance due for the remainder of the Term; and (iii) an additional payment
equal to $2,000 multiplied by the number of days of service remaining under the
Term (but in no event shall such number of days of service exceed thirty (30)
days for any calendar year during the Term). As an example and solely for
purposes of illustration: If Xx. Xxxxxxxxx terminates employment for Good
Reason after rendering ten (10) days of service in 1998, the Company will pay
Xx. Xxxxxxxxx the additional sum of $120,000 (the sum of $4,000 x 20 days, and
$2,000 x 20 days for 1998), plus an additional sum for each additional year
remaining under the Term of this Agreement, calculated based upon the formula
set forth in this paragraph and based upon a minimum of thirty (30) days of
service in each year.
Furthermore, upon termination of this Agreement for Good Reason by Xx.
Xxxxxxxxx, the unvested portion of the Options granted pursuant to the Plans
shall accelerate and become immediately vested ("Options" and "Plans" are
defined in Section 12(b)).
For purposes of this Agreement, the parties agree that "Significant
Strategic Alliance" shall mean a significant strategic alliance of a magnitude
similar to the recently completed long term supply agreement and related
financing with CPC International Inc.
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6. Non-Competition. During, and for the two year period
following termination of the Term Xx. Xxxxxxxxx will not, without the prior
written consent of the Board, directly or indirectly be or remain employed or
retained by, or consult with or render any services for any person, firm,
partnership, joint venture, limited liability company, association, corporation
or other business organization, entity or enterprise engaged in any business,
which is competitive with the business in which the Company or any of its
subsidiaries or affiliates is engaged at any time during the Term, it being
expressly understood and agreed by the Company that (i) the foregoing
limitation shall not prohibit or otherwise constrain or apply to Xx.
Xxxxxxxxx'x provision of consulting and other business advisory services to any
affiliate of Xxxxxx Xxxxxxx, Xxxx Xxxxxx, Discover & Co., and (ii) to the
extent consistent with the foregoing, Xx. Xxxxxxxxx may provide consulting
services to other clients which do not compete, directly or through one or more
subsidiaries or affiliates, in any way with any business in which the Company
or any of its affiliates or subsidiaries is engaged provided such services do
not interfere with the services to be provided hereunder.
7. Confidentiality. During and after the Term, Xx.
Xxxxxxxxx will not disclose or use for his own benefit or purposes or the
benefit or purposes of any other person, firm, partnership, joint venture,
limited liability company, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or
affiliate of the Company; provided that the foregoing shall not apply to
information which is not unique to the Company or which is generally known to
the industry or the public other than as a result of Xx. Xxxxxxxxx'x breach of
this Agreement. Xx. Xxxxxxxxx agrees that upon termination of the Term for any
reason, he will return to the Company immediately all memoranda, books,
manuals, training materials, records, computer software, papers, plans,
information, letters and other data, and all copies thereof or therefrom, in
any way relating to the business of the Company and its affiliates, except that
Xx. Xxxxxxxxx may retain personal notes, notebook and diaries. Xx. Xxxxxxxxx
further agrees that he will not retain or use for his account at any time any
trade names, trademark or other proprietary business designation used or owned
in connection with the business of the Company or its affiliates.
8. Specific Performance; Other Actions. Xx. Xxxxxxxxx
acknowledges and agrees that the Company's remedies at law for a breach or
threatened breach of any of the provisions of Section 6 or Section 7 would be
inadequate and, in recognition of this fact, Xx. Xxxxxxxxx agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at
law, the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available.
9. Employee Benefit. The Company agrees to seek to have
Xx. Xxxxxxxxx included and covered by the Company's medical and other employee
benefit plans to the extent he satisfies the eligibility requirements of the
applicable plans and insurers.
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10. Indemnity; Fees and Expenses. The Company agrees to
hold harmless Xx. Xxxxxxxxx for all acts or decisions made by him in good faith
related to his performance of services hereunder. The Company agrees to pay
any and all reasonable legal fees and related expenses incurred by Xx.
Xxxxxxxxx in connection with entering into and performing services under this
Agreement. The Company will use its reasonable best efforts to obtain coverage
for Xx. Xxxxxxxxx under any insurance policy now in force or hereinafter
obtained during the term of this Agreement covering the Company against
liability from claims or causes of action which arise as a result of or with
respect to this Agreement; provided, however, it is understood by each of the
parties hereto that the Company does not currently have insurance coverage for
its directors and officers and is not required to obtain such insurance. If,
however, the Company obtains such insurance coverage and Xx. Xxxxxxxxx serves
as a director or officer of the Company, Xx. Xxxxxxxxx will be included as an
insured party in his capacity as such.
11. Stock Options. Upon the Effective Date of this
Agreement, the Company shall grant Xx. Xxxxxxxxx additional Options under the
1997 Plan (as defined in Section 12b) to acquire additional shares of the
Company's common stock, said additional shares to be equal to at least 2.0% of
the Company's aggregate outstanding common stock (on a fully diluted basis)
immediately prior to the public offering (the "Additional Options"). The
exercise price of the Additional Options shall be the price at which the
Company's common stock is sold to the public in the public offering.
Three-fourths (3/4) of the Additional Options will vest on the first
anniversary date of the Effective Date of this Agreement; provided that, in no
event will such three-fourths (3/4) portion of the Additional Options vest
later than December 31, 1998. The remaining one-fourth (1/4) of the Additional
Options will vest as follows: One-eighth (1/8) of the Additional Options will
vest on the second and third anniversary date of the Effective Date of this
Agreement. The Additional Options will be exercisable over a ten-year period
following each portion of the Additional Option's respective vesting dates.
The Additional Options shall be adjustable for any recapitalization which is a
part of the public offering.
12. Miscellaneous.
a. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Missouri.
b. Entire Agreement; Amendments. This Agreement
supersedes any and all prior understandings and agreements between the parties
with respect to the subject matter referred to herein, it being understood that
all Option Agreements granting Options (the "Option Agreements") to Xx.
Xxxxxxxxx pursuant to the American Italian Pasta Company 1992 Stock Option Plan
or the American Italian Pasta Company 1997 Stock Option Plan (the "1997 Plan")
(collectively, the "Plans") shall remain in full force and effect. This
Agreement contains the entire understanding of the parties with respect to the
Company's employment of Xx. Xxxxxxxxx. Except as provided in the Plans, the
Option Agreements, and the Shareholder's Agreement between the Company and the
shareholders thereto, dated ____________________________, 1997, there are no
restrictions, agreements, promises, warranties, covenants or undertakings
between the parties with respect to the subject matter herein other than those
expressly set forth
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herein. This Agreement may not be altered, modified or amended except by
written instrument signed by each of the parties hereto.
c. No 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 of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
d. Severability. If any one or more of the provisions
of this Agreement are or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
e. Assignment. This Agreement may not be assigned by
Xx. Xxxxxxxxx except with respect to his rights to receive payments under
Section 3 hereof and may be assigned by the Company only with the consent of
Xx. Xxxxxxxxx; provided that no such assignment by the Company shall relieve
the Company of any liability hereunder, whether accrued before or after such
assignment.
f. Arbitration. Any dispute between the parties to this
Agreement arising from or relating to the terms of this Agreement or any
dispute between the Company and Xx. Xxxxxxxxx shall be submitted to arbitration
in Missouri under the auspices of the American Arbitration Association.
g. Successors; Binding Agreement. The Company shall
seek to cause any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
the 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 it if no such succession had taken place. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, representatives, successors and assigns.
h. Notice. For the purposes of this Agreement, notices
and all other communications (including invoices) provided for in the Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the execution page
of this Agreement; provided that all notices to the Company shall be directed
to the attention of the Secretary, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
i. Headings. The headings used in this Agreement are
for convenience only and shall not affect the meaning of or be used to
interpret any provisions herein.
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j. Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.
AMERICAN ITALIAN PASTA COMPANY
___________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: President
0000 Xxxxxxx Xxx
Xxxxxxxxx Xxxxxxx,
Xxxxxxxx 00000
XXXXX X. XXXXXXXXX
___________________________________
00 Xxxxxxx Xxxx
Xxxxxx Xxxx, Xxxxx Xxxxxxxx 00000
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