Exhibit 10.3
EMPLOYMENT AGREEMENT
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AGREEMENT, dated as of the 20th day of November, 2003, by and among Xxxxxxx
Foods, Inc., a Delaware corporation having its principal executive offices in
Minnetonka, Minnesota (the "Company"), Xxxxx X. Xxxxxxxxx (the "Executive"), and
for the purposes of Section 6 hereof, THL Food Products Holding Co., a Delaware
corporation and controlling entity of the Company ("Holdings").
WHEREAS, Executive currently serves as a senior executive officer of the
Company;
WHEREAS, the Company recognizes the Executive's substantial contribution to
the growth and success of the Company, desires to provide for the continued
employment of the Executive and to make certain changes in the Executive's
employment arrangements with the Company, which the Board has determined will
reinforce and encourage the continued attention and dedication to the Company of
the Executive as a member of the Company's senior management in the best
interests of the Company and its shareholders;
WHEREAS, the Executive is willing to continue to serve the Company on the
terms and conditions set forth below;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. Subject to the terms and conditions of this
Agreement, including Section 3, the Company hereby agrees to continue to employ
the Executive, and the Executive hereby agrees to continue in the employ of the
Company, for the period commencing on the date hereof (the "Effective Date") and
ending on the second anniversary of such Effective Date (the "Employment
Period"), provided, however, that commencing on the first anniversary of the
Effective Date and each subsequent anniversary thereafter, the Employment Period
shall automatically be extended for one additional year.
2. Terms of Employment.
a. Position and Duties.
i. During the Employment Period, the Executive shall serve as
Chairman of the Board of Directors, President and Chief Executive Officer
of the Company with the appropriate authority, duties and responsibilities
attendant to such positions. Executive shall also serve, at the request of
the Company, as a Director of the Company and each of its subsidiaries.
ii. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote substantially all of his attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities.
b. Compensation.
i. Annual Base Salary. Effective immediately, and during the
Employment Period, the Executive shall receive an annual base salary
("Annual Base Salary") of at least $715,000, the competitiveness of which
shall be periodically reviewed and adjusted in accordance with Company
policy. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual
Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased.
ii. Annual Bonus. During the Employment Period, the Executive shall
participate in such bonus arrangements as may be approved by the
Compensation Committee of the Board (the "Compensation Committee") (the
aggregate of all payments made under such bonus arrangements being herein
referred to as the "Annual Bonus"). Executive's aggregate bonus opportunity
will be no less than 100% of Annual Base Salary and the "Target Bonus" will
be no less than 75% of Annual Base Salary or greater as determined by the
Compensation Committee. The Annual Bonus shall be paid within two and
one-half months of the end of the fiscal year of the Company to which it
relates. If a Change in Control occurs, the Executive shall be paid at
least the Target Bonus for the year in which such Change in Control occurs
and in each subsequent year of continuing employment until the end of the
Employment Period.
iii. Long-Term Incentive Plans. The Executive shall participate in
long-term incentive plans including all stock option plans and other
long-term incentive plans the Company may adopt from time to time on a
basis no less favorable than that provided to any other executive officer
of the Company.
iv. Other Employee Benefit Plans. During the Employment Period,
except as otherwise expressly provided herein, the Executive shall be
entitled to participate in all compensation, incentive, employee benefit,
welfare and other plans, practices, policies and programs and fringe
benefits on a basis no less favorable than that provided to any other
executive officer of the Company.
v. Other Benefits. During the Employment Period, the Company shall
reimburse the Executive for $1,500 per month for expenses related to the
lease, maintenance, taxes and upkeep of an automobile of the Executive's
choice.
3. Termination of Employment.
a. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the
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Executive shall not have returned to full-time performance of the Executive's
duties; provided that, in the event the Executive has been unable to perform his
job responsibilities as a result of chronic illness, physical, mental or any
other disability for 240 or more days in any consecutive 12 month period or 270
or more days in any consecutive 24 month period, then the Company shall be able
to terminate the Executive's employment without providing the written notice
referred to above (and the "Disability Effective Date" shall be the date of such
termination). For purposes of this Agreement, "Disability" shall mean a
determination by the Company in its sole discretion that Executive is unable to
perform his job responsibilities as a result of chronic illness, physical,
mental or any other disability for a period of six months or more.
b. With or Without Cause. The Company may terminate the Executive's
employment during the Employment Period with or without Cause. For purposes of
this Agreement, "Cause" shall mean:
i. the continued failure of the Executive to perform substantially
the Executive's duties with the Company or one of its affiliates (other
than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered
to the Executive by the Board which specifically identifies the manner in
which the Board believes that the Executive has not substantially performed
the Executive's duties, or
ii. the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company,
or
iii. conviction of a felony or guilty or nolo contendere plea by the
Executive with respect thereto.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that
the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the
Chief Executive Officer (while the Executive does not serve as such) or
based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith
and in the best interests of the Company. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than 75% of the entire
membership of the Board (excluding the Executive) at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board) finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i), (ii) or (iii) above, and specifying the particulars
thereof in detail.
c. Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean in the absence of a written consent of the Executive:
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i. the assignment to the Executive of any duties inconsistent with
the Executive's title and position (including status, offices and reporting
requirements), authority, duties or responsibilities as contemplated by
Section 2(a)(i) 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;
provided that it is specifically understood that within six months of a
Change in Control the Company shall have the flexibility to appoint the
Executive to a reporting relationship different from that which existed
prior to the Change in Control, to make an immaterial change in Executive's
duties, or to change the Executive's title provided that Executive shall
not have a stature less than that of a Divisional President, and it is
understood that equivalent positions may have different titles;
ii. any failure by the Company to comply with any of the provisions
of Section 2(b) of this Agreement or the failure by the Company to increase
such base salary each year after a Change in Control by an amount which at
least equals on a percentage basis, the mean average percentage increase in
base salary for all employees similarly situated during the two (2) full
calendar years immediately preceding a Change in Control, 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 failure of the Company upon a Change in Control to (A)
continue in effect any employee benefit plan, compensation plan, welfare
benefit plan or material fringe benefit plan in which Executive is
participating immediately prior to such Change in Control or the taking of
any action by the Company which would adversely affect Executive's
participation in or reduce Executive's benefits under any such plan, unless
Executive is permitted to participate in other plans providing Executive
with substantially equivalent benefits, or (B) provide Executive with paid
vacation in accordance with the most favorable past practice of the Company
as in effect for Executive immediately prior to such Change in Control;
iv. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement for
Cause, death or Disability;
v. any failure by the Company to comply with and satisfy Section
9(c) of this Agreement;
vi. any requirement that the Executive (A) be based anywhere more
than fifty (50) miles from the office where the Executive is currently
located or (B) travel on Company business to an extent substantially
greater than the Executive's current travel obligations; or
vii. any failure of the Executive to be elected to, or to remain a
member of, the Company's Board of Directors; provided, however, that after
a Change in Control, failure
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of the Executive to be nominated to the Board of Directors of a successor
that is a publicly traded company shall not constitute Good Reason.
d. Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
e. Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company other than for Disability,
the date of receipt of the Notice of Termination or any later date specified
therein within 30 days of such notice, (ii) if the Executive's employment is
terminated by reason of death or Disability, the date of death of the Executive
or the Disability Effective Date, as the case may be, and (iii) if the
Executive's employment is terminated by the Executive, thirty days after the
giving of such notice by the Executive provided that the Company may elect to
place the Executive on paid leave for all or any part of such 30-day period.
f. Change in Control. "Change in Control" means the consummation of
a transaction, whether in a single transaction or in a series of related
transactions that are consummated contemporaneously (or consummated pursuant to
contemporaneous agreements), with any other party or parties on an arm's-length
basis, pursuant to which (a) such party or parties, directly or indirectly,
acquire (whether by merger, stock purchase, recapitalization, reorganization,
redemption, issuance of capital stock or otherwise) more than 50% of the voting
stock of the Company, (b) such party or parties, directly or indirectly, acquire
assets constituting all or substantially all of the assets of the Company and
its subsidiaries on a consolidated basis, or (c) prior to an initial public
offering of the Company Common Stock pursuant to an offering registered under
the 1933 Act, Xxxxxx X. Xxx Equity Fund V, L.P. a Delaware limited partnership
and its affiliates cease to have the ability to elect, directly or indirectly, a
majority of the Board of Directors of the Company.
4. Obligations of the Company upon Termination.
a. Death or Disability. If, during the Employment Period, the
Executive's employment shall terminate on account of death or Disability:
i. the Company shall pay to the Executive or his estate or
beneficiaries in a lump sum in cash within 30 days after the Date of
Termination the sum of (x) the Executive's Annual Base Salary through the
Date of Termination to the extent not
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theretofore paid, and (y) the product of (1) the Target Bonus and (2) a
fraction, the numerator of which is the number of whole and partial months
in the fiscal year in which the Date of Termination occurs through the Date
of Termination and the denominator of which is 12, to the extent not
theretofore paid (the sum of the amounts described in clauses (x) and (y)
shall be hereinafter referred to as the "Accrued Obligations");
ii. to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive or his estate or beneficiaries any
other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or
practice of or contract or agreement with the Company and its affiliated
companies through the Date of Termination (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits"); and
iii. the Company shall pay to the Executive or his estate or
beneficiaries in a lump sum in cash within 30 days after the Date of
Termination an amount equal to the product of (x) three (3) and (y) the sum
of the Executive's current Annual Base Salary and Target Bonus.
b. By the Company for Cause; By the Executive Other than for Good
Reason. If the Executive's employment is terminated for Cause or the Executive
terminates his employment without Good Reason during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (i) his Annual Base Salary through
the Date of Termination to the extent theretofore unpaid and (ii) the Other
Benefits.
c. By the Company Other than for Cause, Death or Disability; By the
Executive for Good Reason. If, during the Employment Period, the Executive's
employment is terminated by the Executive for Good Reason or by the Company
other than for Cause and other than on account of death or Disability:
i. the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of:
1. the Accrued Obligations; and
2. the amount equal to the product of (x) three (3) and (y) the sum
of the Executive's current Annual Base Salary and Target Bonus;
ii. the Company shall provide the Executive with the Other Benefits;
and
d. Welfare Benefits. In the event of a termination described in
Section 4(a) or 4(c), for a period of three (3) years following Executive's Date
of Termination the Company shall continue to provide medical, dental and life
insurance benefits to the Executive, his spouse and children under age 25 on the
same basis, including without limitation employee contributions, as such
benefits are then currently provided to the Executive ("Welfare Benefits");
provided that the provision of such Welfare Benefits shall cease in the event
Executive becomes eligible to receive comparable benefits from another employer
(either because he becomes employed by, or becomes an independent contractor
with respect to such employer).
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5. Noncompetition and Nonsolicitation. Executive acknowledges that in the
course of his employment with the Company he will become familiar with the
Company's and its subsidiaries' trade secrets and other confidential information
concerning the Company and such subsidiaries and that his services will be of
special, unique and extraordinary value to the Company and its subsidiaries.
Therefore, Executive agrees that:
a. Noncompetition. During the period commencing on the Effective
Date and ending on the second anniversary of the date Executive's employment
with the Company terminates (such period the "Restricted Period"), Executive
shall not, for himself or on behalf of any other person, firm, partnership,
corporation, or other entity, engage, directly or indirectly, as an executive,
agent, representative, consultant, partner, shareholder or holder of any other
financial interest, in any business that competes with the Company in the
business of the production, distribution or sales of eggs or egg products,
refrigerated potato products or branded cheese products (a "Competing
Business"), it being understood and agreed that Executive shall not be in
violation of this restriction where Executive is employed by a person, firm,
partnership, corporation, or other entity engaged in a variety of activities,
including the Competing Business, so long as Executive is not engaged in or
responsible for the Competing Business of such entity. Nothing herein shall
prohibit Executive from being a passive owner of not more than 2% of the
outstanding publicly traded stock of any class of a Competing Business so long
as Executive has no active participation in the business of such entity, except
to the extent permitted above. Executive acknowledges that this Agreement, and
specifically, this Section 5, does not preclude Executive from earning a
livelihood, nor does it unreasonably impose limitations on Executive's ability
to earn a living. In addition, Executive agrees and acknowledges that the
potential harm to the Company of its non-enforcement outweighs any harm to
Executive of its enforcement by injunction or otherwise.
b. Nonsolicitation. During the Restricted Period, Executive shall
not directly or indirectly through another entity (i) induce or attempt to
induce any employee of the Company or its subsidiaries to leave the employ of
the Company or its subsidiaries, or in any way interfere with the relationship
between the Company or any of its subsidiaries and any employee thereof, (ii)
knowingly hire any person who was an employee of the Company or any of its
subsidiaries within 180 days prior to the time such employee was hired by
Executive, (iii) induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any of its subsidiaries to cease doing
business with the Company or its subsidiaries or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any subsidiary or (iv) directly or indirectly acquire or
attempt to acquire an interest in any business relating to the business of the
Company or any of its subsidiaries and with which the Company or any of its
subsidiaries has entertained discussions or has requested and received
information relating to the acquisition of such business by the Company or its
subsidiaries in the one-year period immediately preceding Executive's
termination of employment with the Company.
c. Enforcement. The parties to this Agreement hereby agree and
stipulate that (i) the restrictions contained in this Agreement are reasonable
and necessary in order to protect the Company's and its subsidiaries' legitimate
business interests and (ii) in the event of any breach or violation of this
Agreement or of any provision hereof by Executive, the Company and its
subsidiaries will have no adequate remedy at law and will suffer irreparable
loss and damage
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thereby. The parties hereby further agree and stipulate that in the event of any
such breach or violation, either threatened or actual, the Company's and its
subsidiaries' rights shall include, in addition to any and all other rights
available to the Company and its subsidiaries at law or in equity, the right to
seek and obtain any and all injunctive relief or restraining orders available to
it in courts of proper jurisdiction, so as to prohibit, bar, and restrain any
and all such breaches or violations by Executive. The prevailing party to any
legal action, arbitration or other proceeding commenced in connection with
enforcing any provision of this Section 5, including without limitation,
obtaining the injunctive relief provided by this Section 5 shall be entitled to
recover all court costs, reasonable attorneys' fees, and related expenses
incurred by such party. Executive further agrees that no bond need be filed in
connection with any request by the Company and its subsidiaries for a temporary
restraining order or for temporary or preliminary injunctive relief.
d. Additional Acknowledgments. Executive acknowledges that the
provisions of this Section 5 are in consideration of: (i) employment with the
Company, (ii) the issuance by THL-MF Investors, LLC, a Delaware limited
liability company and affiliate of the Company ("Investors"), to Executive of
Investors' Class A Units, Investors' Class B Units and Investors' Class C Units
pursuant to the terms of that certain Management Unit Subscription Agreement,
dated as of the date hereof, by and between Investors and Executive (the
"Management Unit Subscription Agreement"), and (iii) additional good and
valuable consideration as set forth in this Agreement. In addition, Executive
acknowledges (i) that the business of the Company and its subsidiaries is
national in scope and without geographical limitation and (ii) notwithstanding
the state of incorporation or principal office of the Company or any of its
subsidiaries, or any of their respective executives or employees (including the
Executive), it is expected that the Company will have business activities and
have valuable business relationships within its industry throughout the United
States. Executive acknowledges that he has carefully read this Agreement and has
given careful consideration to the restraints imposed upon Executive by this
Agreement, and is in full accord as to their necessity for the reasonable and
proper protection of confidential and proprietary information of the Company and
its subsidiaries now existing or to be developed in the future. Executive
expressly acknowledges and agrees that each and every restraint imposed by this
Agreement is reasonable with respect to subject matter, time period and
geographical area.
6. Deferral of Certain Compensation. The Company will defer certain
amounts payable to the Executive in accordance with and pursuant to a Deferred
Compensation Plan in the form attached hereto as Exhibit A, and an election form
attached thereto.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice,
program, contract or agreement except as explicitly modified by this
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Agreement; provided that the Executive shall not be eligible for severance
benefits under any other program or policy of the Company.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) pursued or defended against in
good faith by the Executive regarding the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
9. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution 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 9) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or
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, are 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 such that after payment by the Executive
of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments; provided,
however, that, (i) with respect to the transaction contemplated by that
certain Agreement and Plan of Merger dated October 10, 2003 by and among
THL Food Products Co., M-Foods Holdings, Inc., as amended, and the
Shareholders of M-Foods Holdings, Inc., the Company shall in no event be
required to make any Gross-Up Payment to any employee of the Company or its
Subsidiaries with respect to such transaction, to the extent that, when
taken together with all Gross-Up Payments made to all employees in respect
of such transaction, the Gross-Up Payments would exceed $6,300,000 in the
aggregate and (ii) with respect to any transaction (or series of related
transactions giving rise to such Excise Tax) other than the one described
in clause (i), the Company shall in no event be required to make any
Gross-Up Payment to any employee of the Company or its Subsidiaries with
respect to any such transaction, to the extent that, when taken together
with all Gross-Up Payments made to all other employees in respect of such
transaction, the Gross-up Payments would exceed $16,300,000 in the
aggregate;
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provided further that in the event the aggregate amount of Gross-Up
Payments required to be made by the Company in connection with any
transaction, together with any Gross-Up Payments made in respect of all
previous transactions occurring on or after the date hereof, exceeds the
applicable limitation set forth in the preceding sentence, the Executive
shall be entitled to receive the lesser of (i) the actual amount of
Gross-Up Payment payable to the Executive as calculated above or (ii) a pro
rata portion of the aggregate Gross-Up Payments paid by the Company to all
employees (such pro rata portion to be determined based upon the ratio of
(A) the full Gross-Up Payment the Executive would be otherwise entitled to
receive hereunder but for such limitation, to (B) the full aggregate
Gross-Up Payments to be paid to all employees but for such limitation). For
purposes of this Agreement, the term "Reduced Amount" shall mean the
greatest amount that could be paid to the Executive such that the receipt
of Payments would not give rise to any Excise Tax. Notwithstanding the
foregoing provisions of this Section 9(a), if it shall be determined that
the Executive is entitled to a Gross-Up Payment, but that the Payments do
not exceed 120% of the Reduced Amount, then no Gross-Up Payment shall be
made to the Executive and the Payments, in the aggregate, shall be reduced
to the Reduced Amount.
b. Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, 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 the Company's
independent auditors or such other certified public accounting firm reasonably
acceptable to the Executive as may be designated by the Company (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. 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 9,
shall be paid by the Company to the Executive not later than the due date for
the payment of any Excise Tax. 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 9(c) 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
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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 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 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 Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo 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 9(c), the Executive becomes entitled to receive
any refund 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). If, after
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the receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a 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.
e. Notwithstanding anything contained herein to the contrary, in
connection with any transaction or series of transactions occurring after the
date hereof, the Executive shall not be entitled to any Gross-Up Payment unless
the Executive shall have provided to the Company such documentation as the
Company may reasonably request to permit the Company to claim that a portion of
the Payments do not constitute "parachute payments" under Section 280G of the
Code The Executive shall only be required to deliver such documentation with
respect to an amount of the Payments in excess of the Reduced Amount.
10. Successors.
a. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
b. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
c. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly 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. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid.
11. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of Minnesota, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Xxxxx X. Xxxxxxxxx
00000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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If to the Company:
Xxxxxxx Foods, Inc.
000 Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Secretary
with a copy to:
Xxxxxx X. Xxx Equity Fund V, L.P.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. XxXxxx
Xxxx Xxxxxx
Xxxx Xxxxxxxx
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
c. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
d. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including; without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 3(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
f. From and after the Effective Date this Agreement shall supersede
any other employment agreement between the parties with respect to the subject
matter hereof. Without limiting the foregoing, the parties hereby acknowledge
that certain Employment Agreement dated as of April 10, 2001 between the
Company, Holdings and the Executive is hereby terminated in all respects and
shall have no further force or effect.
g. Subject to the provisions of Section 3(d), there shall be no
limitation on the ability of the Company to terminate the Executive at any time
with or without Cause.
* * * * * * * * * * * *
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
/s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxxxx
XXXXXXX FOODS, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Title:
----------------------------------
THL FOOD PRODUCTS HOLDING CO.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Title:
----------------------------------
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