INDEPENDENT CONTRACTOR AND NONCOMPETITION AGREEMENT
Exhibit 10.22
THIS INDEPENDENT CONTRACTOR AND NONCOMPETITION AGREEMENT (this “Agreement”), dated as of the 1st
day of December 2005, between Xxxx Foods Company (“Xxxx Foods”), a Delaware corporation, having its
principal place of business at 0000 XxXxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx XX 00000, and Xxxx Xxxxxxxx
(“Xx. Xxxxxxxx” or “you").
WHEREAS, the Xxxx Foods Company, or one or more of its affiliates or subsidiaries (the “Company”)
has employed Xx. Xxxxxxxx in an executive capacity for several years;
WHEREAS, Xxxx Foods has offered Xx. Xxxxxxxx to continue his employment, in the position of “Vice
Chairman” of Xxxx Foods, for a period of up to two years, under the terms of a written agreement to
be executed simultaneously herewith, that shall specify the terms and conditions of his employment
and provide commitments to Xx. Xxxxxxxx with regard to the salary and incentive compensation
opportunities to be made available during such continued employment (the “Employment Agreement”),
and to retain access to Xx. Xxxxxxxx’x knowledge and experience as a senior advisor for an
additional two years thereafter, under the terms of this agreement;
WHEREAS, during his employment, Xx. Xxxxxxxx has acquired and will continue to acquire, by reason
of his position, substantial knowledge of the operations and practices of the business of Company;
WHEREAS, the Company desires to assure that, to the extent and for the period of Xx. Xxxxxxxx’x
service to the Company and for a reasonable period thereafter, it may maintain the confidentiality
of its trade secrets and proprietary information, goodwill and other legitimate business interests,
each of which could be compromised if any competitive business were to secure the services of Xx.
Xxxxxxxx; and
WHEREAS, to induce Xxxx Foods to enter into the Employment Agreement, and to provide the
commitments to Xx. Xxxxxxxx in respect of the substantial compensation to be provided thereunder,
the Company has required that Xx. Xxxxxxxx enter into this Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Services. During the period from your Resignation Date, as defined in the
Employment Agreement, to December 31, 2009 (the “Senior Advisory Services Period”), your
responsibilities under this Agreement will be to provide general advice and consultation to the
Chief Executive Officer, Chairman of the Board, and the Dairy Group President on matters of
strategy and execution, as well as to provide assistance with respect to such specific operating
initiatives as may be requested from time to time (“Senior Advisory Services”). The Company and
you intend to have an independent contractor relationship. In performing services for the Company
pursuant to this Agreement, you shall act in the capacity of an independent contractor with respect
to the Company and not as an employee of the Company. You will, however, be considered an agent
for purposes of the Indemnification Agreement dated February 21, 2003 and
entered into by you with Xxxx Foods Company (“Indemnification Agreement”). Notwithstanding
the foregoing, in the event that your employment under the Employment
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Agreement is terminated by
Company with or without Cause or by you for Good Reason (as each such term is defined in the
Employment Agreement), there shall be no Senior Advisory Services Period.
2. Senior Advisory Services Fees. For your Senior Advisory Services you will be paid
a Senior Advisory Services fee at the annual rate of $200,000 (the “Senior Advisory Services Fee”).
Such Senior Advisory Services Fee will be paid in approximately equal monthly installments, in
arrears. In addition, during the Senior Advisory Services Period, Company shall provide you a
continued car allowance, reimbursement of expenses, club membership, office and secretarial
assistance, and other perquisites and benefits provided to you by the Company on the date hereof.
In addition, in the event that your employment under the Employment Agreement is terminated by the
Company without Cause or by you for Good Reason, at any time after you execute the Employment
Agreement, or the Senior Advisory Period is ended by the Company prior to December 31, 2009 and, in
any such case, you have not theretofore breached any of your obligations in Sections 4, 5, or 6,
Company shall pay you a single lump sum payment, six months and one day after your termination of
employment, equal to the aggregate amount of the Senior Advisory Services Fees that would have been
payable during the remainder of the Senior Advisory Services Period.
3. Acknowledgments. You acknowledge that (i) Company is engaged in a
continuous program of research, development and production respecting its business throughout the
United States (the foregoing, together with any other businesses in which Company engages from the
date hereof to the date of the termination of your employment with Company, is hereinafter referred
to as the “Company Business”); (ii) your work for Company allows you access to trade
secrets of, and confidential information concerning, Company; (iii) the Company Business is
national and international in scope; (iv) Company would not have agreed to employ you and
to enter into the Employment Agreement but for the agreements and covenants contained in this
Agreement; and (v) the agreements and covenants contained in this Agreement are necessary
and essential to protect the business, goodwill, and customer relationships that Company has
expended significant resources to develop. The Company agrees and acknowledges that, on or
following the date hereof, it will provide you with one or more of the following: (a)
authorization to access Proprietary Information (as defined below) through a new computer password
or by other means, (b) authorization to represent the Company in communications with
customers and other third parties to promote the goodwill of the business in accordance with
generally applicable Company policies and (c) access to participate in certain restricted
access meetings, conferences or training relating to your position with the Company.
4. Non-Disclosure. You recognize that Company competes in a highly competitive field
and that Company possesses and will continue to possess information of commercial value that
relates to the Company Business, including but not limited to trade secrets, technical and
scientific information, financial business information, processes, recipes, formulas, data,
know-how, improvements, inventions, product concepts, discoveries, developments, designs,
inventions, techniques, marketing plans, strategies, forecasts, new products, blueprints,
specifications, programs, ideas, customer lists, vendor lists, pricing and other structures,
marketing and business strategies, budgets, projections, licenses, costs, financial data, and
plans, proposals and information about Company’s employees and/or consultants (collectively,
"Proprietary Information”). Notwithstanding the foregoing, Proprietary Information shall not
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include information that: (a) is publicly available when received, (b) thereafter
becomes publicly available through no fault of your own, (c) is otherwise disclosed by the
Company to another party without obligation of confidentiality, (d) is in your possession,
or becomes available to you, on a non confidential basis, from a source other than the Company, or
(e) that you are required by law, regulation, court order or discovery demand to disclose;
provided, however, that in the case of clause (e), you give the Company reasonable notice prior to
the disclosure of the Proprietary Information and the reasons and circumstances surrounding such
disclosure to provide the Company an opportunity to seek a protective order or other appropriate
request for confidential treatment of the applicable Proprietary Information. You agree that the
Proprietary Information constitutes a unique and valuable asset which is essential to the Company’s
business success, and that any release of Proprietary Information would be harmful to Company
and/or its customers. To protect Company’s Proprietary Information, you agree that at all times,
including during and after the term of your employment, you will not disclose to any person, firm,
company, or corporation or use for your own benefit or for the benefit of any third party (except
in furtherance of Company Business or affairs of Company) any and all Proprietary Information that
you may have acquired in the course of or as an incident to your employment with Company. You
further agree to take all reasonable precautions to protect against the intentional, negligent, or
inadvertent disclosure by you of Company’s Proprietary Information to any other person, or business
entity, except in furtherance of the Company Business.
5. Non-Competition. You understand and agree that during your employment with the
Company, and during the Senior Advisory Services Period where you are available to provide services
to the Company as a senior advisor following your Resignation Date (as defined in such Employment
Agreement), you have been and will continue to be provided access to specialized information
related to Company Business and trade secrets, as well as Company’s customers and their
confidential information. You further agree that if this information were used in competition
against Company, Company would experience serious harm and the competitor would have a unique
advantage against Company. You hereby covenant and agree that (a) at no time during your
employment with Company, (b) at no time during the Senior Advisory Services Period and
(c) at no time until the second anniversary of the date of your termination of services for
Company (whether as an employee or independent contractor) for any reason (the “Non-Compete
Period”), will you (i) develop, own, manage, operate or otherwise engage in, participate
in, represent in any way or be connected with, whether as officer, director, partner, owner,
employee, agent, independent contractor, consultant, proprietor, stockholder (except for the
ownership of less than five percent equity interest in a publicly traded company) or otherwise, any
company or business engaged primarily, or as a substantial part of its business, in the
manufacture, distribution, sale or marketing of any Relevant Products in any geographic territory
(within or outside the United States) in which Company does business or (ii) act in any
way, directly or indirectly, with the purpose or effect of soliciting, diverting or taking away any
business, Customer, client supplier, or good will of Company. You acknowledge that this covenant
has a unique, substantial, and immeasurable value to Company.
As used, herein, “Relevant Products” means (i) milk and milk based beverages, (ii)
creams and creamers, (iii) ice cream and ice cream novelties, (iv) ice cream mix,
and (v) cultured dairy products.
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Notwithstanding the foregoing, the restrictions of Sections 5 and 6 shall terminate immediately if
your employment with the Company under the Employment Agreement is involuntarily terminated by the
Company without Cause or by you for Good Reason, at any time after you execute the Employment
Agreement, and you will be paid the payments under Sections 2 and 7 in accordance with the terms
therein.
6. Non-Solicitation. (a) Employees. You hereby covenant and agree that at
no time during your employment with the Company and during the Non-Compete Period, will you,
directly or indirectly, other than in the performance of your duties on behalf of the Company
(i) recruit, encourage, solicit or induce any of the Company’s employees to leave the
employ of Company; (ii) hire any of the Company’s employees or (iii) assist any
third party in hiring any of the Company’s employees.
(b) Customers. You hereby covenant and agree that at no time during your employment
with the Company and during the Non-Compete Period, will you solicit any Covered Customer for the
purpose of (i) inducing or otherwise intending to cause such Covered Customer to alter or
end its business relationship with Company or (ii) interfering with Company’s business
relationship with such Covered Customer or (iii) causing such Covered Customer to purchase
products and/or services competitive with those of Company. For purposes of this Agreement, a
“Covered Customer” shall mean any company that is doing business with the Company, or negotiating
to do business with the Company, prior to any act of interference by you, if within the course of
the last two years of your employment with the Company, (a) you or someone under your
direct supervision had contact with such company or (b) you received proprietary
information regarding such company, it being presumed (subject to your right to prove otherwise by
clear and convincing evidence) that by reason of your position with the Company you will have
received proprietary information regarding any significant customer of the Company’s Dairy Group.
7. Payments. In consideration for the covenants provided by you in Sections 4, 5 and
6 hereof, and subject to your continued compliance with the covenants set forth therein, Company
shall pay you (i) two hundred and eighty thousand dollars on January 2, 2006; and
(ii) four hundred and twenty-five thousand dollars on each of January 2, 2007, January 2,
2008, January 2, 2009, January 2, 2010, January 2, 2011 and January 2, 2012. Notwithstanding the
foregoing, in the event of your death prior to the expiration of the Non-Compete Period or in the
event that the Non-Compete Period expires prior to December 31, 2011 due to the termination of your
employment under the Employment Agreement by the Company without Cause or by you for Good Reason,
at any time after you execute the Employment Agreement, and, in either case, so long as you have
not theretofore breached any of your obligations in Sections 4, 5, or 6, any payments remaining to
be paid under this Agreement shall be paid in a single lump sum payment (a) within 30 days
of your death or (b) six months and one day after your termination of employment by the
Company without Cause or you for Good Reason. The Company shall still make the payments required
pursuant to this Section 7, even if there is no Senior Advisory Period by reason of the last
sentence of Section 1 hereof, and even if the Company terminates the Employment Agreement for any
reason whatsoever, or the Employment Agreement expires, at any time after you execute the
Employment Agreement; provided, however, that if the covenants in Section 5 and 6 of this Agreement
are held to be unenforceable (other than because they have automatically terminated pursuant to the
terms of the Employment Agreement or this
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Agreement), the Company will not have received the consideration for which it bargained, and
it shall have no further obligation to make any further payments under this Section 7.
8. Remedies. You acknowledge, understand, and agree that the restrictions contained
in Sections 4, 5, and 6 of this Agreement are necessary to protect the legitimate business
interests and good will of Company, and are a material inducement to Company to employ you and to
enter into this Agreement, and that any breach of such restrictions would cause Company substantial
and irreparable harm for which there is no adequate remedy at law. The parties agree and
acknowledge that one of the reasons for entering into this Agreement is to reach a reasonable
compromise regarding the subject matter hereof to avoid any uncertainty regarding the
enforceability, scope and nature of the restrictions applicable to you and necessary to protect the
Company’s legitimate business interests.
If Company deems such action warranted by the particular circumstances, Company shall be entitled,
to seek equitable relief including, but not limited to, temporary, preliminary, and permanent
injunctive relief, including the issuance of a temporary restraining order, in order to secure the
specific performance of this Agreement. You agree that the rights of Company to obtain injunctive
relief shall not be considered a waiver of Company’s rights to seek any other remedies it may have
at law or in equity. Prior to the Company withholding payment under sections 2 or 7 because of an
alleged breach of Sections 4, 5, or 6 the Company shall give Xx. Xxxxxxxx ten (10) business days
written notice of its intent to withhold payments, which shall include the facts upon which the
Company is relying to withhold payments. Without limiting the generality of the foregoing, any
monies withheld by the Company under this Agreement will be placed in escrow at the Company’s
expense, pending the final resolution by the arbitrator, at which time they shall either be
returned to the Company (and the Company shall be relieved from any obligation to make any further
payments to you or into escrow) or paid to you with interest, in accordance with the decision of
the arbitrator.
The restrictions set forth herein shall be construed as a series of separate and severable
covenants. You agree that if in any proceeding, the tribunal refuses to enforce fully any
covenants contained herein because such covenants cover too extensive a geographic area or too long
a period of time, or for any other reason whatsoever, any such covenant shall be considered
divisible both as to duration, and geographic area so that each month of a specified period shall
be deemed a separate period of time and each county in each particular state (or such other
geographic subdivision as the tribunal determines is reasonable) a separate geographic area,
resulting in an intended requirement that the longest lesser period of time or the largest lesser
geographic area found by such tribunal to be a reasonable restriction shall remain an effective
restrictive covenant specifically enforceable against you. Further, the covenants contained in
Sections 4, 5, and 6 shall be construed as agreements independent of any other provision of this
Agreement and the existence of any claim or cause of action by you against Company or any of its
employees, agents, shareholders, directors, or officers, whether predicated on this Agreement or
otherwise, shall not constitute a defense to enforcement by Company of any of these covenants. You
also agree that, if you are found to have breached any of the time-limited covenants in Section 4,
5 or 6, the time period during which you are subject to such covenant shall be extended by one day
for each day you are found to have violated such restriction, up to a maximum of two years.
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9. Arbitration. The parties agree that any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be resolved by arbitration administered by
the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules, including the
Optional Rules for Emergency Measures of Protection. The arbitration will take place in Dallas,
Texas. The arbitrator will have the authority to award the same remedies, damages, and costs that
a court could award. The arbitrator shall issue a reasoned award explaining the decision, the
reasons for the decision, and any damages awarded where the arbitrator finds you violated any of
Section 4, 5, or 6 hereof or Company failed to comply with its obligations under Sections 2 or 7.
The arbitrator’s decision will be final and binding. The judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. To the extent that any matter
related to this Agreement shall be brought in court, (i) the parties agree that Dallas,
Texas shall be the sole and exclusive venue in which any such action may be heard, (ii)
each party hereby consents to the personal jurisdiction of any court in Dallas, Texas otherwise
having jurisdiction over this matter, and (iii) each party hereby waives any right to a
trial by jury in any such proceeding. If the arbitrator finds that the Company is liable for any
payments under this agreement, any such payments shall be made promptly (but not more that 10
business days) following the entering of such decision, with interest thereon from the date such
payments should have been made hereunder to the date of such payment, at the prime rate specified
in The Wall Street Journal for the date on which such payment was otherwise due, plus 1%. The
arbitration proceedings, any record of the same, and the award shall be confidential. This
provision and any decision and award hereunder is governed by and enforceable under the Federal
Arbitration Act.
10. Return of Records. Upon termination of the Senior Advisory Services Period (or,
if there is no such period, the termination of your employment), you agree to return to Company all
documents (whether electronic or written), notes, drawings data, records, materials and other
property of whatever nature received from or and all copies thereof including, but not limited to,
those documents, records, and materials containing or relating to the Company’s Proprietary
Information. You agree that all such Proprietary Information that is currently in your possession,
or control or which possession or control in the future shall be the property of Company. This
provision shall not apply to Company documents that are personal to you, including documents
reflecting compensation, payroll, benefits, options and awards, and other similar documents.
11. Miscellaneous.
(a) Severability. Nothing in this agreement shall be construed so as to require the
commission of any act contrary to law and wherever there is any conflict between any provision of
this Agreement and any law, statute, ordinance, order or regulation, the latter shall prevail, but
in the event of any conflict, any provision of this Agreement shall be curtailed and limited only
to the extent necessary to bring it within applicable legal requirements. If any provision of this
Agreement should be held invalid or unenforceable, the remaining provisions shall be unaffected by
the holding.
(b) Complete Agreement. This Agreement contains the entire agreement and
understanding between the parties relating to the subject matter hereof, and supersedes any prior
understandings, agreements, or representations by or between, the parties, written or oral,
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relating to the subject matter hereof, including any non-competition and restrictive covenants
in any other agreement between the parties (which include any stock option and restricted and
deferred stock or stock units or other equity award agreements); provided however, that all other
terms and conditions of those agreements will remain in full force and effect and this section
11(b) shall not in any way modify, limit, alter, impair or supercede (i) the Change in
Control Agreement; (ii) the Employment Agreement; (iii) the Indemnification
Agreement; or (iv) Xx. Xxxxxxxx’x existing Executive Medical Agreement, as amended, entered
into with Southern Foods Group, L.P., each of which shall remain in full force and effect in
accordance with its terms. Each party agrees and acknowledges that, except to the extent set forth
in the Employment Agreement, neither party relied on any representation or understanding outside of
the express terms of this Agreement. This Agreement may not be modified, except in a written
document executed by both parties to this Agreement.
(c) Other Agreements. You represent and warrant that you are not a party to or bound
by the provisions of any other agreement which would prevent or impair your ability to render
services to Company and your entering into this Agreement. The parties hereto each represent and
warrant to the other party that the performance of any obligations hereunder by such party will not
violate the provisions of or cause such party to be in default under, any other agreement or
contract to which such party is a party or by which such party is bound.
(d) Section Headings. The section headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the interpretation of this
Agreement.
(e) Governing Law. This Agreement shall be governed by, and this Agreement and any
disputes or controversies related hereto shall be construed in accordance with, the laws of the
State of Texas, excluding any choice of law provisions that would apply the laws of any other
jurisdiction.
(f) Waiver. No delay on the part of either party in exercising any right, power, or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of either
party of any right, power, or privilege hereunder, preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege hereunder, unless in writing and signed by
both parties.
(g) Assignment. This Agreement and your rights and obligations hereunder may not be
assigned by you. Company may, without your consent, assign its rights, together with its
obligations, under this Agreement. This agreement shall be binding on, and enforceable against,
all successors and assignees of Xxxx Foods.
(h) Counterparts. This Agreement may be entered into in two or more counterparts, or
by facsimile, each of which shall be deemed an original, and together shall be deemed to be one and
the same instrument.
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IN WITNESS WHEREOF, the parties have executed and delivered this Independent Contractor and
Noncompetition Agreement as of the date first set forth above.
| XXXX FOODS COMPANY | ||||
| Name: | Xxxxx X. Xxxxxx |
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| Title: | Chairman and Chief Executive Officer |
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