EXHIBIT 10.4
SEVERANCE AND NON-COMPETITION AGREEMENT
AGREEMENT, entered into this __ day of April, 1998
("Effective Date"), between XXXXXX'X, INC., a Wisconsin
corporation ("Xxxxxx'x" or the "Company"), and XXXXXX X.
XXXXXXX ("Xx. Xxxxxxx").
RECITALS:
1. Xx. Xxxxxxx is employed by the Company as its President
and Chief Executive Officer, and is also a member of
its Board of Directors. A change in the ownership or
control of Xxxxxx'x or its business could result in a
displacement of certain key employees, including Xx.
Xxxxxxx, and/or a material change in the methods of
operation of Xxxxxx'x business.
2. In the course of his employment with the Company, Xx.
Xxxxxxx has acquired and will continue to acquire a
great deal of valuable, proprietary and confidential
knowledge and information regarding the Company's
business, its products and services, and its marketing
and business development strategies, and other
proprietary information of potential value to the
Company's competitors.
3. As an incentive for Xx. Xxxxxxx to continue in the
Company's employ and to help secure Xx. Xxxxxxx'x
continued commitment to the Company, and in
consideration for his agreement not to compete with the
Company following the termination of his employment
under certain conditions, the Company wishes to
undertake to make certain payments and provide certain
benefits to Xx. Xxxxxxx upon the termination of his
employment under the circumstances set out herein, and
provide certain financial benefits to Xx. Xxxxxxx in
the event of the termination of his employment
following a "Change of Control" (as hereinafter
defined) of the Company.
AGREEMENT:
In consideration of the premises, and the mutual
covenants and agreements contained herein, the Company and
Xx. Xxxxxxx agree as follows:
1. Termination of Xx. Xxxxxxx'x Employment by the Company
without Good Cause, or by Xx. Xxxxxxx for Good Reason.
Upon the Company's termination of Xx. Xxxxxxx'x
employment (unless such employment is terminated for
"Good Cause" (as that term is defined below)), or Xx.
Xxxxxxx'x termination of his employment for "Good
Reason" (as that term is defined below) (either of
those events being referred to herein as a "Qualifying
Termination"), the Company will pay to Xx. Xxxxxxx the
Severance Benefit (as that term is defined below), pro
rata over a period of two (2) years following the
"Termination Date" (as hereinafter defined), without
interest; provided that in the event such a Qualifying
Termination occurs within a period of three (3) years
following a "Change of Control" (as hereinafter
defined) of the Company, then the entire amount of the
Severance Benefit shall be paid in a lump sum within
thirty (30) days after the Termination Date. The date
upon which Xx. Xxxxxxx'x employment with the Company
ceases is referred to herein as the "Termination Date."
2. Continuation of Certain Fringe Benefits. Upon a
Qualifying Termination, the Company (in addition to the
payment of the Severance Benefit as provided in the
preceding Section 1) will continue to provide to Xx.
Xxxxxxx, at no cost to him, those health and/or life
insurance benefits (if any) to which he was entitled or
which were provided or made available to the him by the
Company as of the Termination Date, for a period of two
(2) years following the Termination Date.
3. Additional Post-Retirement Insurance Benefits. If Xx.
Xxxxxxx ceases to be employed with the Company
(including by reason of his death) at any time after
his attaining age 55 and while he is then an officer
and a director of the Company (unless his employment is
terminated by the Company for Good Cause), the Company
will continue to provide the following benefit:
(a) Until the death of Xx. Xxxxxxx and his spouse
(except as provided below), at no cost to Xx.
Xxxxxxx, but subject to the provisions of this
Section 3, the Company will provide coverage for
Xx. Xxxxxxx and his spouse under the employee
health, medical and life insurance plans
maintained by the Company for its most senior
executive personnel, in accordance with the terms
of such plans as the same may exist and be in
effect from time to time (the "Company Plans"), or
the substantial equivalent thereof.
(b) After either Xx. Xxxxxxx or his spouse
attains age 65, the coverage provided to him or
her under this Section 3 will consist of a
"Medicare Supplement" policy of health insurance,
the benefits of which are secondary to any
benefits available under Medicare, such that the
total benefits available under Medicare and such
Medicare Supplement policy, when combined, are the
substantial equivalent of the benefits available
under the Company Plans.
(c) In the event of Xx. Xxxxxxx'x death, the
benefits to be provided under paragraphs (a) and
(b) this Section 3 will be provided to his spouse
until the date of her remarriage.
(d) Notwithstanding the foregoing, the benefits
to be provided under this Section 3 will cease if
and when Xx. Xxxxxxx (i) accepts other employment
the terms of which include a health or medical
insurance benefit reasonably comparable to that to
be provided under this Section 3 (or would include
such a benefit but for Xx. Xxxxxxx'x election to
forego it), or (ii) accepts other employment in
violation of, or otherwise breaches or violates
the provisions of, Section 5 hereof.
(e) The benefits to be provided under this
Section 3 are not intended to duplicate those
provided under the preceding Section 2.
Accordingly, the Company shall not be obligated to
provide the benefits described in this Section 3
at any time during which the benefits described in
the preceding Section 2 are being provided.
(f) References in this Section 3 to Xx Xxxxxxx'x
"spouse" are intended to refer only to the person
who is his spouse as of the date of this
Agreement, and not to any other person who may be
his spouse at any time in the future.
4. Definitions.
(a) For purposes of this Agreement, the term "Good
Cause" means only (i) the wilful commission by Xx.
Xxxxxxx of a material act of dishonesty or moral
turpitude involving the Company; (ii) Xx.
Xxxxxxx'x conviction of a felony, or his pleading
guilty or nolo contendere to the same; (iii) Xx.
Xxxxxxx'x xxxxx negligence in the performance of
his duties and responsibilities as an officer of
the Company; (iv) the wilful failure of Xx.
Xxxxxxx to carry out the duties and
responsibilities of his office, or to follow a
specific and lawful directive of the Board of
Directors of the Company (provided such directive
is consistent with his position as the President
and Chief Executive Officer of the Company), but
only if such failure continues for ten days after
Xx. Xxxxxxx has been provided with written notice
of such failure (which notice includes a
description of the nature of the failure and
specifies the actions to be taken by Xx. Xxxxxxx
to rectify it); (v) Xx. Xxxxxxx'x wilful
disclosure of material proprietary confidential
information of the Company to or for the benefit
of a competitor of the Company, to the extent such
information was not available publicly; or (vi)
any intentional misrepresentation by Xx. Xxxxxxx
to the shareholders or directors of the Company.
For purposes of the preceding definition, no act,
failure to act, or omission on the part of Xx.
Xxxxxxx will be deemed to have been "wilful" or
"intentional" if done or omitted to be done in
good faith and in the reasonable belief that it
was in or not opposed to the best interests of the
Company. Any such act or omission or failure to
act based upon the advice of counsel for the
Company will be conclusively deemed to have been
done or omitted to be done in good faith and in
the best interests of the Company.
(b) For purposes of this Agreement, the term "Good
Reason" means either of the following (in either
case, effected by the Company, without Xx.
Xxxxxxx'x voluntary concurrence): (i) any material
diminution in the total value of Xx. Xxxxxxx'x
compensation, including for this purpose all
compensation in all forms, whether in cash or
otherwise, and whether current or deferred; or
(ii) the substantial diminution of or adverse
change in the nature or scope of Xx. Xxxxxxx'x
authority, powers, functions, duties or
responsibilities (without regard to any title or
office he may nominally hold), to the point that
he no longer holds a senior executive management
position in the Company or its successor (or,
following a Change of Control, in the business
unit that comprises substantially the business of
the Company as it existed preceding such Change of
Control).
(c) For purposes of this Agreement, the term
"Severance Benefit" means the sum of the
following, multiplied by two (2): (i) Xx.
Xxxxxxx'x annual base salary as established and in
effect as of the Termination Date; plus (ii) the
amount of any bonus and/or incentive compensation
paid or payable to Xx. Xxxxxxx for the fiscal year
preceding the fiscal year of the Company in which
the Termination Date occurs (the "Prior Year
Bonus"), or, if greater, the amount of such bonus
and/or incentive compensation for the fiscal year
of the Company in which the Termination Date
occurs (the "Current Year Bonus"). If the amount
of the bonus or incentive compensation described
in the preceding clause (ii) cannot be determined
as of the date when the benefits to be paid
hereunder are to be paid, then the amount to be
paid at such time shall be determined on the basis
of the Prior Year Bonus, and such amount shall be
adjusted, if necessary, to reflect the Current
Year Bonus, as soon as practical after the amount
of the Current Year Bonus can be determined.
(d) For purposes of this Agreement, a "Change of
Control" of Xxxxxx'x shall be deemed to occur:
(i) If any person or group of persons
(as defined in Rule 13d-5 under the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")), together with its
affiliates (but not including the Xxxxxx'x,
Inc. Voting Trust), becomes the "beneficial
owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of
thirty percent (30%) or more of the then
outstanding Common Stock of Xxxxxx'x, or
thirty percent (30%) of more of the then
outstanding securities of Xxxxxx'x entitled
generally to vote for the election of
Directors of Xxxxxx'x ("Voting Securities");
provided, that if the person so acquiring
such Common Stock or Voting Securities is
itself a corporation or other entity, such
acquisition will constitute a Change of
Control only if less than 70% of the
outstanding common stock or voting securities
of such corporation or other entity are held
by persons who, immediately before such
acquisition, held beneficially Common Stock
or Voting Securities of Xxxxxx'x; or
(ii) Upon the merger or share exchange
of Xxxxxx'x with any other corporation, the
sale or other disposition of substantially
all of the assets of Xxxxxx'x, or the
liquidation or dissolution of Xxxxxx'x,
unless, in any such case, immediately
thereafter at least 70% of the outstanding
Common Stock and 70%of the outstanding Voting
Securities of the corporation or entity
surviving such merger or share exchange, or
acquiring such assets, is held beneficially
by persons who, immediately before such
merger or share exchange or acquisition of
assets, held beneficially Common Stock or
Voting Securities of Xxxxxx'x; or
(iii) If the Board of Directors of
Xxxxxx'x (by the affirmative vote of at least
2/3 of the directors then in office),
immediately prior to any other action
proposed to be taken by Xxxxxx'x or by the
stockholders of Xxxxxx'x, determines that
such proposed action, if taken, would
constitute a Change of Control of Xxxxxx'x,
and such action is thereafter taken.
5. Noncompetition.
(a) Subject to the provisions of paragraph (d) of this
Section 5, for a period of one (1) year following
a Qualifying Termination, Xx. Xxxxxxx will not,
directly or indirectly, as a principal, agent,
owner, employee, trustee, beneficiary, partner, co-
venturer, officer, director, stockholder (other
than as a stockholder of less than 5% of the stock
of a publicly traded corporation) or in any other
capacity, engage in, have an interest in or become
associated with any entity, firm, business,
activity or enterprise which is engaged in the
wholesale distribution of groceries and which
(either directly or through a subsidiary or
affiliate) has a warehouse or distribution
facility in the "Proscribed Territory," as that
term is defined below. The "Proscribed Territory"
means (i) the area consisting of the States of
Wisconsin, Michigan, Illinois, Indiana, and Ohio,
plus (ii) to the extent not included within (i),
the area encompassed within a radius of four
hundred (400) miles of any warehouse or
distribution facility operated by the Company or
any affiliate of the Company as of the Termination
Date.
(b) Xx. Xxxxxxx acknowledges and agrees that the
restrictions set forth in this Section 5 are
founded on valuable consideration and are
reasonable in duration and geographic area in view
of the circumstances under which this Agreement is
entered into, and that such restrictions are
necessary to protect the legitimate interests of
the Company. In the event that any provision of
this Section 5 is determined to be invalid by any
court of competent jurisdiction, the provisions of
this Section 5 shall be deemed to have been
amended and the parties will execute any documents
and take whatever action is necessary to evidence
such amendment, so as to eliminate or modify any
such invalid provision and to carry out the intent
of this Section 5 so to render the terms of this
Section 5 enforceable in all respects as so
modified.
(c) Xx. Xxxxxxx acknowledges and agrees that
irreparable injury will result to the Company in
the event Xx. Xxxxxxx breaches any covenant
contained in this Section 5, and that the remedy
at law for such breach will be inadequate.
Therefore, if Xx. Xxxxxxx engages in any act in
violation of the provisions of this Section 5, the
Company shall be entitled, in addition to such
other remedies and damages as may be available to
it by law or under this Agreement, to injunctive
or other equitable relief to enforce the
provisions of this Section 5.
(d) Notwithstanding the foregoing, this Section 5
shall not apply in the event of a Qualifying
Termination of Xx. Xxxxxxx'x employment within a
period of three (3) years following a Change of
Control.
6. Term and Termination. This Agreement will become
effective as of the Effective Date and continue in
effect thereafter until October 10, 2007, unless sooner
terminated by the mutual agreement of the Company and
Xx. Xxxxxxx; provided that the expiration of the term
of this Agreement shall not impair the obligations of
the Company to make the payments and provide the
benefits under Sections 1, 2 and 3 hereof to the extent
that such obligations relate to a cessation of Xx.
Xxxxxxx'x employment that occurred prior to the
expiration of such term.
7. Severability. The provisions of this Agreement are
severable. If any part of this Agreement is held to be
void or unenforceable or contrary to law, the Company
shall have the option to either terminate this
Agreement in its entirety, in which case it shall be
entitled to the return of (or be relieved of the
obligation to pay) any amounts paid (or which would
otherwise be payable) to Xx. Xxxxxxx hereunder, or it
may require that the balance of the Agreement
nonetheless shall remain in full force and effect.
Notwithstanding the preceding sentence, if any court of
competent jurisdiction shall determine that any
geographic or time restraint provided in this Agreement
is too broad as to the area or time covered, such
restraint may be reduced to whatever extent the court
deems reasonable and such restraint may be enforced as
reduced.
8. Effect on Retiree Health Benefits Policy. Xx. Xxxxxxx
acknowledges that the benefits provided hereunder (in
particular the benefits described in Section 3 hereof)
are intended to be in lieu of any benefits to which he
may now be or hereafter become entitled under the
Company's existing policy relating to the provision of
health insurance benefits to its retired
officer/directors, as embodied in certain resolutions
adopted by the Company's directors on December 10, 1980
(the "1980 Retiree Medical Benefit Policy"). The
Company has not and does not hereby acknowledge any
obligation to Xx. Xxxxxxx or any of its other
employees, officers or directors by reason of the
existence of the 1980 Retiree Medical Benefit Policy,
and reserves the right to modify, limit, cancel or
terminate that Policy at any time.
9. Notices. All notices under this Agreement shall be in
writing and any notice shall be considered to be given
and received in all respects on the day it is
personally delivered or deposited in the United States
mail, first class, postage prepaid, addressed as
follows or to such other address as may be designated
by one party to the other by notice duly given
(provided, that written notice given in any other
manner shall nonetheless be effective when actually
received by the party entitled to receive it):
If to the Company: Xxxxxx'x, Inc.
00000 Xxxxxx Xxxxx
X.X. Xxx 000
Xxxxxxxx, XX 00000
Attn: Secretary
If to Xx. Xxxxxxx: Xxxxxx X. Xxxxxxx
c/x Xxxxxx'x, Inc.
00000 Xxxxxx Xxxxx
X.X. Xxx 000
Xxxxxxxx, XX 00000
10. No Contract of Employment. Nothing contained herein is
intended to create or constitute a contract of
employment between the Company and Xx. Xxxxxxx, or to
impose on the Company any obligation to continue the
employment of Xx. Xxxxxxx or to xxxxxx on Xx. Xxxxxxx
any rights to such continued employment.
11. Assignment. This Agreement may not be assigned by the
Company without the written consent of Xx. Xxxxxxx,
except that if the Company shall transfer substantially
all of its business or assets to another corporation or
other form of business or other entity, this Agreement
may be assigned to such a successor and it shall be
binding upon and inure to such successor's benefit.
Xx. Xxxxxxx may not assign, pledge or encumber this
Agreement or any interest herein.
12. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, the
Company's successors and assigns and Xx. Xxxxxxx'x
heirs and legal representatives. If the Company merges
or consolidates with or into any other corporation or
entity (whether or not the Company is the surviving
entity in such transaction), or transfers all or
substantially all of its business or assets to another
corporation or other form of business or other entity,
all references herein to the Company shall be deemed
references to the corporation or other entity surviving
such merger or consolidation or to which such assets or
business are transferred.
13. Costs of Enforcement. If any action or proceeding is
brought by either party to enforce any provision of
this Agreement, or to recover damages for the breach
hereof, the prevailing party shall be entitled to
recover from the other party its reasonable costs and
expenses (including reasonable attorneys' fees)
incurred in such action or proceeding.
14. Amendment. This Agreement may be amended only by a
written instrument executed by the parties hereto or
their respective successors, assigns, heirs or legal
representatives, as applicable.
15. Effect on Prior Agreements. This Agreement terminates
and cancels in their entirety (a) the Severance and Non-
Competition Agreement between the Company and Xx.
Xxxxxxx dated June 1, 1995, and (ii) the Deferred
Compensation Agreement between the Company and Xx.
Xxxxxxx dated April 16, 1997.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the
State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
XXXXXX'X, INC.
By:
Its:
Xxxxxx X. Xxxxxxx