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EXHIBIT 10.39
SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT
THIS SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT (the "Agreement")
is entered into as of July 12, 1999 among Claremont Restaurant Group, LLC, a
North Carolina limited liability company ("Claremont"), Fresh Foods, Inc., a
North Carolina corporation and the sole member and manager of Claremont ("Fresh
Foods"), and X. Xxxx Xxxxxx (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is a director of Fresh Foods and executive
employee of Claremont, having served in an executive capacity at Fresh Foods and
Claremont, thereby acquiring an intimate knowledge of the business and affairs
of Fresh Foods and Claremont; and
WHEREAS, the Executive and Fresh Foods entered into a certain
Employment Agreement dated as of January 29, 1998 (the "Employment Agreement");
and
WHEREAS, the Executive and Fresh Foods entered into a certain Change in
Control Agreement dated as of January 29, 1998 (the "Change in Control
Agreement"); and
WHEREAS, the Executive and Fresh Foods desire to terminate the
Employment Agreement and to set forth their agreement with respect to such
termination; and
WHEREAS, the Executive and Fresh Foods desire to terminate the Change
in Control Agreement and to set forth their agreement with respect to such
termination; and
WHEREAS, Claremont desires to engage the services of the Executive as a
consultant in the event of a sale or other disposition of Claremont by Fresh
Foods and the Executive desires to be so engaged upon the terms and conditions
provided herein; and
WHEREAS, the Executive and Claremont desire to set forth their
agreement with respect to certain noncompete obligations of the Executive; and
WHEREAS, Fresh Foods desires to provide incentives for the Executive to
remain with Claremont in the event of a sale or other disposition of Claremont
by Fresh Foods and to assist in the planning and execution of such sale or other
disposition;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. CHANGE IN CONTROL AGREEMENT TERMINATED. The parties agree that the
Change in Control Agreement shall terminate in its entirety, immediately prior
to the Effective Date (as defined in Section 3), without liability on the party
of any party as a consequence thereof. Without limiting the generality of the
foregoing, neither Fresh Foods nor Claremont shall have
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any liability to the Executive, upon the sale of Claremont or Fresh Foods (or
otherwise), pursuant to the Change in Control Agreement.
2. EMPLOYMENT AGREEMENT TERMINATED. The parties agree that the
Employment Agreement shall terminate in its entirety, immediately prior to the
Effective Date, without liability on the part of any party as a consequence
thereof.
3. CONSULTING SERVICES. Claremont agrees to engage the Executive as a
consultant as of the Effective Date, and the Executive hereby accepts such
engagement, in each case upon the terms and conditions set forth in this
Agreement. Throughout the term of this Agreement, the Executive shall report to
the President of Claremont (or, if none exists, then the Manager(s) of
Claremont) and shall perform such Consulting Services (as defined in Section 4)
as the President or such Manager(s), as the case may be (the "Superior
Officer"), may reasonably request. As used in this Agreement, the term
"Effective Date" shall mean the date of consummation of the sale or other
disposition by Fresh Foods of all of the issued and outstanding membership
interests in Claremont.
4. DUTIES. The Executive shall, to the extent reasonably requested by
the Superior Officer, at reasonable times and places (a) consult with and advise
Claremont on management of Claremont's restaurant operation and franchising
business and (b) market and promote Claremont's restaurant operation and
franchising business in the southeastern United States (collectively,
"Consulting Services"). The Executive need not devote more than twenty hours per
calendar week or 500 hours per calendar year to Consulting Services. Except as
otherwise provided in this Agreement, the Executive is not entitled to payment
of any fee or other compensation for his Consulting Services, but Claremont
shall reimburse him for the reasonable out-of-pocket expenses that he incurs
while performing Consulting Services upon presentation of receipts or other
documentation in reasonable detail.
5. INDEPENDENT CONTRACTOR. Claremont and the Executive hereby agree
that the Executive is an independent contractor, solely responsible for the
manner and form in which he performs Consulting Services. Nothing contained
herein shall be construed as creating an employer/employee, master/servant,
principal/agent, partnership, joint venture or other similar kind of
relationship. The Executive agrees that he will not take any action on behalf of
Claremont without specific instructions from, and the prior approval of, the
Superior Officer and that he does not have any right or power in any manner to
bind or commit Claremont to any contract or other obligation with any individual
or entity except upon the specific prior written approval of the Superior
Officer.
6. TERM. This Agreement shall terminate five years from the Effective
Date, unless it is terminated earlier in as provided elsewhere in this Section.
Claremont may, by written notice to the Executive, terminate this Agreement at
any earlier date, it being understood that no termination of this Agreement
shall affect (1) the Executive's obligations under Sections 8 and 9 of this
Agreement, which shall remain in full force and effect, or (2) the obligations
of Fresh Foods and Claremont under Section 7. This Agreement shall in any event
terminate upon the death of the Executive.
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7. COMPENSATION.
(a) Fresh Foods shall pay to the Executive, as a lump sum payment,
an amount equal to the sum of
(i) $825,000 plus
(ii) an amount equal to the aggregate of any and all federal,
state and local income tax and excise tax liabilities of the
Executive resulting from the payments due pursuant to clauses (i)
and (ii) hereof; provided, however, that, if Fresh Foods determines
that the total of all payments to or for the benefit of the
Executive under this Agreement after reduction for any and all
federal, state and local income tax and excise tax liabilities of
the Executive resulting therefrom (the "After-Tax Payments") would
be increased by the limitation or elimination of any payment under
this Section 7, then amounts payable under this Section 7 shall be
reduced to the extent, and only to the extent, determined necessary
by Fresh Foods to maximize the After-Tax Payments; and provided
further that Fresh Foods shall withhold from all payments to be
made to the Executive pursuant to this Agreement all taxes that, by
applicable federal, state or local law, Fresh Foods determines that
it is required to withhold.
Each payment required to be made to the Executive pursuant to the
foregoing provisions of this Section 7 shall be made by bank check or
other good funds on the Effective Date. The compensation payable
pursuant to this Section 7 is allocated as set forth on EXHIBIT A
hereto among: (i) consideration for the Executive's consulting
obligations, (ii) consideration for the Executive's noncompete
obligations, (iii) a transaction success bonus and (iv) severance.
(b) COMPANY CAR. On the Effective Date, Fresh Foods and Claremont
will transfer and convey to the Executive all of their right, title and
interest in and to the motor vehicle currently used by the Executive
for business purposes. Upon request by the Executive, Fresh Foods and
Claremont will execute and deliver all such documents and take all such
other actions as the Executive may reasonably request to better
evidence such transfer and conveyance.
8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During the
Executive's prior positions with Claremont and Fresh Foods and during the term
of this Agreement, the Executive has and will become acquainted with
confidential information of Claremont, Fresh Foods and their affiliates,
including, but not limited to, customer files, customer lists, special customer
matters, sales methods and techniques, merchandising concepts and plans,
business plans, sources of supply and vendors, special business relationships
with vendors, agents and brokers, promotional materials and information,
financial matters, mergers, acquisitions, personnel matters and confidential
processes, designs, formulas, ideas, plans, devices and materials and other
similar matters that are kept confidential (any and all such information being
referred to herein as "Confidential Information"). The use of Confidential
Information against Claremont or Fresh Foods would seriously damage its
business. Accordingly, the Executive agrees:
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(a) He shall not, directly or indirectly, use, divulge, publish or
otherwise reveal or allow to be revealed any Confidential Information
to any individual or entity except with the prior, express and written
consent of either Claremont or Fresh Foods, as applicable, or as
required by law;
(b) He shall refrain from any action or conduct that might
reasonably or foreseeably be expected to compromise the confidentiality
or proprietary nature of any Confidential Information; and
(c) He shall have no right to apply for, or to obtain any patent,
copyright or other form of intellectual property protection regarding,
any Confidential Information.
9. COVENANT NOT TO COMPETE.
(a) COVENANT. The Executive hereby stipulates, covenants and agrees
that, during the Restrictive Period (as defined below), he shall not,
directly or indirectly, other than on behalf of Claremont, without
Claremont's prior, express and written consent:
(i) Engage in Competition (as defined below) with Claremont or
any of its successors or assigns; or
(ii) Employ or solicit the employment of any individual who
is, or has been, at any time during the Restrictive Period or
during the twelve complete calendar months immediately preceding
the Effective Date, an employee of Claremont.
(b) DEFINITIONS. As used in this Section, the following terms shall
have the following meanings:
(i) "Business" shall mean the business conducted by Claremont
at the Effective Date, including the business of restaurant
operation and restaurant franchising, but excluding the business
conducted or proposed to be conducted by Fairgrove Restaurants, LLC
or any other entity in which the Executive has an equity interest
at the Effective Date.
(ii) "Competition" shall mean:
(1) Engaging in the Business within the Territory;
(2) Assisting any individual or entity, whether in a
financial, managerial, employment, advisory or other material
capacity, to engage in the Business within the Territory;
provided, however, that nothing herein shall preclude the
Executive, directly or indirectly, from leasing restaurant
property to a tenant as a bona fide lessor; or
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(3) Owning any interest in, or organizing an entity that
engages in, the Business within the Territory; provided,
however, that nothing herein shall preclude the Executive,
directly or indirectly, from holding not more than one percent
of the outstanding shares of common stock of any company whose
shares of common stock are listed on a national securities
exchange or authorized for quotation by NASDAQ.
(iii) "Restrictive Period" shall mean the five-year period
beginning on the Effective Date.
(iv) "Territory" shall mean the 25-mile radius from (A) any
restaurant owned or franchised directly or indirectly by Claremont
or (B) any other site used directly or indirectly by Claremont, to
the extent that the business of the restaurant or site was assisted
by the Executive during the term of his service to Fresh Foods or
Claremont.
10. COVENANT TO USE BEST EFFORTS TO CONSUMMATE TRANSACTION. The
Executive hereby covenants and agrees that he will not resign his position with
Claremont without the consent of Fresh Foods until the consummation of a sale or
other disposition of Claremont by Fresh Foods. The Executive further covenants
and agrees to use his best efforts to consummate any such sale or disposition
recommended or approved by Fresh Foods.
11. ENFORCEMENT. In the event of any breach of this Agreement,
Claremont, Fresh Foods and their successors and assigns shall be entitled to any
and all of the following remedies in addition to such other remedies as they may
have in equity or at law:
(a) In that a breach or anticipatory breach by the Executive of
Section 8 or 9 of this Agreement will cause irreparable damage to
Claremont or Fresh Foods, Claremont or Fresh Foods, as applicable,
shall be entitled to an injunction restraining the Executive from
attempting to violate, violating or continuing a violation of Section 8
or 9 of this Agreement. The existence of any claim or cause of action
on the part of the Executive against Claremont, Fresh Foods or their
successors or assigns, whether arising from this Agreement or
otherwise, shall in no way constitute a defense to the enforcement of
Sections 8 and 9.
(b) The Restrictive Period shall be extended by any time period
during which the Executive is in violation of this Agreement.
12. ACKNOWLEDGEMENT OF ADEQUATE CONSIDERATION. The parties stipulate
and agree that the payments and other benefits owed to the Executive by Fresh
Foods and Claremont under this Agreement and the performance of Fresh Foods' and
Claremont's obligations hereunder constitute sufficient consideration to support
enforcement of the covenants of this Agreement.
13. ACKNOWLEDGEMENT OF REASONABLENESS. The Executive has carefully read
and considered the provisions of this Agreement in consultation with attorneys
of his choice and agrees that the restrictions set forth herein are fair and
reasonably required for Claremont's
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protection. In the event that any provision relating to the Restrictive Period
or the Territory (or both) shall be declared by a court of competent
jurisdiction to exceed the maximum time period or geographical area such court
deems reasonable and enforceable under applicable law, the time period or area
of restriction considered reasonable and enforceable by the court shall
thereafter be the applicable Restrictive Period or Territory under this
Agreement.
14. ATTORNEYS' FEES. Should it become necessary for Claremont or Fresh
Foods to institute legal proceedings as a result of a breach of any terms or
covenants contained in this Agreement, Claremont or Fresh Foods, as applicable,
shall, if it is the prevailing party in such litigation, be entitled to have and
recover from the non-prevailing party reasonable attorneys' fees plus court
costs in addition to any and all relief otherwise available to it, either at law
or in equity. Should it become necessary for the Executive to institute legal
proceedings as a result of a breach of any terms or covenants contained in this
Agreement, the Executive shall, if he is the prevailing party in such
litigation, be entitled to have and recover from the non-prevailing party
reasonable attorneys' fees plus court costs in addition to any and all relief
otherwise available to him, either at law or in equity.
15. SEVERABILITY. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
16. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
17. ENTIRE AGREEMENT; NO EFFECT ON OPTIONS. This Agreement sets forth
the entire understanding between the parties relating to the subject matter
hereof and supersedes all previous and contemporaneous understandings or
agreements, written and oral. This Agreement may be modified only by an
agreement in writing, signed by all parties, purporting to modify it. This
Agreement shall not be construed as having any effect on the rights of the
Executive under the stock option agreements and related stock option plans that
govern stock options that have been granted by Fresh Foods to the Executive and
may be held by the Executive at the Effective Date.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
19. NOTICES. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses listed below:
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If to Claremont: Claremont Restaurant Group, LLC
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
If to Fresh Foods: Fresh Foods, Inc.
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
If to Executive: X. Xxxx Xxxxxx
000 Xxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
or, in any case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other parties.
20. SUCCESSORS, HEIRS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
21. DIRECTOR. Nothing in this Agreement shall affect the Executive's
position as a member of the Fresh Foods Board of Directors.
22. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CLAREMONT RESTAURANT GROUP, LLC
By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ XXXXX X. XXXXX
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Xxxxx X. Xxxxx
President
FRESH FOODS, INC.
By: /s/ XXXXX X. XXXXX
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Xxxxx X. Xxxxx
President
THE EXECUTIVE:
/s/ X. XXXX XXXXXX (SEAL)
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X. Xxxx Xxxxxx
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EXHIBIT A
Percentage of Total Payments
Pursuant to Sections
Allocation Category Dollar Amount 7(a) and 7(b) of this Agreement
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Consulting $ 94,615 11%
Noncompete 567,690 69%
Transaction Success Bonus 57,788 7%
Severance 104,906 13%
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TOTAL $825,000 100%
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