EXHIBIT 10.21
SEVERANCE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 2nd day of
April 1997, by and between Certified Grocers of California, Ltd., a California
corporation (the "Company" or "Certified") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the
"Executive").
WHEREAS, the Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of the Company and its shareholders; and
WHEREAS, the Executive has been determined to be a vital member of the senior
management team of the Company; and
WHEREAS, the Company recognizes that the possibility of termination due to
Change of Control or without cause may arise and the uncertainty it may raise
among management of the Company may result in the departure or distraction of
management personnel, in each case to the detriment of the Company and its
shareholders.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants
herein contained, it is agreed as follows:
This Agreement sets forth the severance benefits which the Company agrees will
be provided to the Executive in the event the Executive's employment with the
Company is terminated without cause under the circumstances described below.
1. RIGHT TO TERMINATE. Certified or the Executive may terminate the
------------------
Executive's employment at any time, subject to Certified's providing the
benefits hereinafter specified in accordance with the terms thereof.
2. TERM OF AGREEMENT. This Agreement shall commence on April 2, 1997;
------------------
and shall continue in effect until the earlier of April 3, 2000, or
termination of the Executive's employment; provided, however, that
commencing on April 3, 2000 the term of this Agreement shall be extended
for one additional year unless at least 90 days prior to such date,
Certified or the Executive shall have given written notice per Section 9
herein that this Agreement shall not be extended; and provided, further,
that notwithstanding the delivery of any such notice, the term of this
Agreement shall automatically extend for an additional period of twelve
(12) months after a Change of Control of the Company. For the purposes
of this Agreement, "Change of Control" shall mean (i) The acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d)
of the Securities and Exchange Act of 1934, of beneficial ownership of
fifty-one percent (51%) or more of the outstanding Class A Shares of
Certified Grocers of California, Ltd.; or (ii) if the individuals who
presently serve on the Certified Board of Directors no longer constitute
a majority of the members of the Certified Board of Directors; provided,
however, any person who becomes a director subsequent to the
commencement date of this Employment Agreement, who
1
was elected to fill a vacancy by a majority of Certified's members shall
be considered as if a member prior to the commencement date of this
Agreement; or (iii) A liquidation or dissolution of Certified or the
sale of all or substantially all of the assets of Certified.
3. TERMINATION. The Executive shall be entitled to the benefits provided in
-----------
Section 4 hereof upon the termination of the Executive's employment with
Certified during this Agreement period, unless such termination is (i)
because of the Executive's death, Disability, or Retirement, (ii) by
Certified for Cause, or (iii) by the Executive other than for Good
Reason (as all such capitalized terms are hereinafter defined).
(a) Disability. Termination by Certified of the Executive's
----------
employment based on "Disability" shall mean the Executive's incapacity
due to physical or mental illness to substantially perform his duties
on a full-time basis for six (6) consecutive months and, within thirty
(30) days after a notice of termination is thereafter given by the
Company, the Executive shall not have returned to the full-time
performance of the Executive's duties; provided, however, if the
Executive shall not agree with a determination to terminate him
because of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical doctor
agreed to by the Company and the Executive or the Executive's legal
representative, in the event of the Executive's incapacity to
designate a doctor. In the absence of agreement between the Company
and the Executive, each party shall nominate a qualified medical
doctor and the two doctors shall select a third doctor, who shall make
the determination as to Disability.
(b) Retirement. Termination by the Executive or by Certified of
----------
the Executive's employment based on "Retirement" shall mean
termination on or after the Executive's attainment of age sixty-five
(65) or an earlier age mutually agreed to by the Executive and
Certified.
(c) Cause. Termination by Certified of the Executive's
-----
employment for "Cause" shall mean termination upon:
(i) the willful and continued failure by the Executive to
substantially perform his duties (other than any such failure
resulting from the Executive's incapacity due to physical or
mental illness), after demand for substantial performance is
delivered in writing by the Company to the Executive that
specifically identifies the manner in which the Company
believes the Executive has not substantially performed his
duties, or
2
(ii) the willful engaging by the Executive in illegal or
fraudulent misconduct which is materially injurious to the
Company, or
(iii) the willful material breach of the Confidentiality and
Nonsolicitation Agreement set forth in Section 6.
No act, or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company.
(d) Good Reason. Termination by the Executive of the Executive's
-----------
employment for "Good Reason" shall mean termination based on (i) an
adverse change in the Executive's status or position(s), in effect
immediately prior to the date of this Agreement, (ii) a reduction in
the Executive's base salary as in effect immediately prior to the date
of this Agreement, (iii) a Change in Control, or (iv) the requirement
by the Company that the Executive be based at an office greater than
35 miles from where the Executive's office is located on the date of
the Change of Control.
(e) Notice of Termination. Any purported termination by
---------------------
Certified or by the Executive shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied
upon.
(f) Date of Termination. "Date of Termination" shall be the date
-------------------
set forth by written Notice of Termination or, if none, then by mutual
written agreement of the parties or by the arbitrator in a proceeding
as provided in Section 11 hereof. During the pendency of any such
dispute, Certified will continue to pay the Executive the Executive's
full compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved in accordance
with Section 11.
4. COMPENSATION UPON TERMINATION.
-----------------------------
(a) Subject to Section 8 hereof, if, the Executive's employment
with Certified shall be terminated (i) by Certified other than for
Cause, Disability, Death or Retirement or (ii) by the Executive for
Good Reason, then within five business days of the Date of
Termination, Certified shall pay the Executive an amount equal to the
Executive's highest annual base salary during the three year period
immediately prior to the Date of Termination, plus an amount equal to
the average annual incentive bonus paid during the three years prior
to the Date of Termination.
3
(b) Certified shall maintain all benefits for the Executive and
his dependents in substantially the same form as those benefits in
place immediately prior to the Executive's termination for a period
terminating on the earliest of (i) twelve (12) months from the Date of
Termination, (ii) the commencement of similar benefits from a new
employer (but only to the extent that equivalent benefits are offered
by said employer), or (iii) attainment of age 65.
(c) All payments and benefits provided for yet unpaid in this
Section 4 shall be forfeited if the Executive violates any material
provision of this Agreement including, without limitation, the
Confidentiality and Nonsoliciation Agreement specified in Section 6
herein.
(d) In the event of termination of the Executive by the Company
for Cause, death, Disability, Retirement, or by the Executive for
other than Good Reason, no payment shall be provided under this
Agreement. This Agreement does not, and is not intended to, limit any
rights or benefits of the Executive pursuant to any other plan, policy
or written agreement.
5. NO OBLIGATION TO MITIGATE
-------------------------
The Executive is under no obligation to mitigate damages in the amount
of any payment provided for hereunder by seeking other employment or
otherwise.
Subject to paragraph 4(b), the amount of any payment provided for in
this Agreement shall not be reduced, offset or subject to recovery by
Certified by reason of any compensation earned by the Executive as the
result of employment by another employer after the Date of
Termination, or otherwise.
6. CONFIDENTIALITY AND NONSOLICITATION AGREEMENT.
---------------------------------------------
(a) The Executive acknowledges that in the course of his
employment by the Company, he will have access to and become informed
of confidential and secret information which is a competitive asset of
the Company ("Confidential Information"), including (i) the terms of
any agreement between the Company and any employee, customer or
supplier, (ii) pricing strategy, (iii) product development strategies,
(iv) personnel training and development programs, (v) financial
results, (vi) strategic plans and demographic analyses, (vii)
proprietary computer and systems software, and (viii) any confidential
non-public information received from the Company concerning the
Company, its employees, suppliers and customers. The Executive agrees
that he will keep all Confidential Information in strict confidence
during the term of his employment by the Company and thereafter and
will never make known, divulge, reveal,
4
furnish, make available, or use any Confidential Information (except
in the course of his regular authorized duties on behalf of the
Company). The Executive agrees that the obligations of confidentiality
hereunder shall survive termination of his employment at the Company
regardless of any actual or alleged breach by the Company of this
Agreement and shall continue for one year following such termination
provided that such obligation shall terminate earlier (i) as to
specific information that shall have become known through no fault of
the Executive or (ii) as to Confidential Information which the
Executive is required by law to disclose (after giving the Company
notice and an opportunity to contest such requirement). The
Executive's obligations under this Section 6 are in addition to, and
not in limitation or preemption of, all other obligation of
confidentiality which the Executive may have to the Company under
general legal or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of
this Agreement, make or cause to be made, any copies, pictures,
duplicates, facsimiles, or other reproductions or recordings or any
abstracts or summaries including or reflecting Confidential
Information. All such documents and other property furnished to the
Executive by the Company or otherwise acquired or developed by the
Company shall at all times be the property of the Company. Upon
termination of the Executive's employment by the Company, the
Executive will return to the Company any such documents or other
property of the Company which are in the possession, custody or
control of the Executive.
(c) In the event of the Executive's termination of employment at
the Company, the Executive agrees that he will not in any capacity, on
his own behalf or on behalf of any other firm, person, or entity, for
a period of one year, solicit, or assist in the solicitation of, any
employee of the Company to terminate his or her employment with the
Company.
(d) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 6 (referred to collectively as
the Confidentiality and Nonsolicitation Agreement) that results in
material detriment to the Company would cause irreparable harm to the
Company, and that the Company's remedy at law for any such violation
would be inadequate. In recognition of the foregoing, the Executive
agrees that, in addition to any other relief afforded by law or this
Agreement, including damages sustained by a breach of this Agreement
and forfeiture of any and all compensation or benefit otherwise
provided under Section 4, and without any necessity or proof of actual
damages, the Company shall have the right to enforce this Agreement by
specific remedies, which shall include, among other things, temporary
and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the
5
forfeitures described above and injunctions shall all be proper modes
of relief and are not to be considered as alternative remedies.
7. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees,
and legatees. If the Executive should die while any amount would still
be payable to the Executive hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee, or if there be no such designee,
to the Executive's estate.
(c) This Agreement, and all of the provisions hereof, shall be
binding upon Certified and all of its affiliates, successors,
transferees, or surviving or continuing entity.
8. TAXES.
-----
(a) All payments to be made to the Executive under this Agreement
will be subject to required withholding of federal, state, and local
income and employment taxes.
(b) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any
other payments which the Executive have the right to receive from
Certified, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), the payments pursuant to this
Agreement shall be reduced to the largest amount as will result in no
portion of such payments being subject to the excise tax imposed by
Section 4999 of the code; provided, however, that the determination as
to whether any reduction in the payments under this Agreement pursuant
to this provison is necessary shall be made by the Executive in good
faith, and such determination shall be conclusive and binding on
Certified with respect to its treatment of the payment for tax
reporting purposes.
9. NOTICE. For purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered by United
States registered or certified mail, return receipt requested, postage
prepaid and addressed, in the case of
6
Certified, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address
set forth below his signature, provided that all notices to Certified
shall be directed to the attention of the Chief Executive Officer of
the Certified, with a copy to the Secretary of Certified, 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.
10. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and
effect.
11. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be settled exclusively by an
arbitrator selected under the rules of the American Arbitration
Association and the arbitration shall be conducted under the rules of
said association. Any claim must be filed within thirty (30) days of
the Notice of Termination unless extended by mutual written agreement
by both parties. Each party shall be entitled to present evidence and
argument to the arbitrator. The arbitrator shall have the right only
to interpret and apply the provisions of this Agreement and may not
change any of its provisions. The arbitrator shall permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a
claim or a defense to a claim, subject to supervision by the
arbitrator. The hearing shall begin within thirty (30) days of the
filing of the claim, unless extended by mutual written agreement by
both parties, and the arbitrator's decision shall be rendered within
thirty (30) days of the completion of the hearing unless extended by
mutual written agreement by both parties. The determination of the
arbitrator shall be conclusive and binding upon the parties and
judgment upon the same may be entered in any court having
jurisdiction. The Company shall bear all direct costs of the
arbitration proceedings pursuant to this Section 11 (arbitration fees,
transcript expenses, etc.) and pay reasonable legal fees of the
Executive.
12. SURVIVAL OF PROVISIONS. Notwithstanding any other provision of this
----------------------
Agreement, the parties' respective rights and obligations under
Sections 4, 5, 6, and 7, 11 of this Agreement shall survive
termination of this Agreement.
13. MISCELLANEOUS. No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver, modifications or discharge is agreed
to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party
hereto or compliance with any condition or provision of this Agreement
to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Unless otherwise noted, references to "Sections" are
to sections of this Agreement. The captions used
7
in this Agreement are designed for convenient reference only are not
to be used for the purpose of interpreting any provision of this
Agreement.
14. ENFORCEABILITY. Notwithstanding any other provision of this
--------------
Agreement, to the extent that any payment to be made pursuant to this
Agreement is prohibited by applicable federal or state law or
regulation, or by any action of any federal or state regulatory
agencies, unless Certified has obtained prior approval for such
otherwise prohibited payment from the appropriate regulatory
authority, Certified shall not be obligated to make such payments
under this Agreement.
15. GOVERNING LAW. The validity, interpretation, construction and
-------------
performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of California,
without giving effect to the principles of conflict of laws of such
State.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed as of the date set forth below.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By: _____________________________________
Name:
Title:
Agreed to this ______ day
of _______________, 1997.
________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
8
