EXHIBIT 10.16
EMPLOYMENT AGREEMENT
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This Agreement made as of the 21st day of December, 1998 by and
between Annie's Homegrown, Inc., a Delaware corporation with its principal place
of business at 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Company")
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and Xxxx X. Xxxxxxx, an individual whose mailing address is 000 Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Employee").
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W I T N E S S E T H:
WHEREAS, Employee is President and Chief Operating Officer of the
Company and has made and is expected to continue to make major contributions to
the Company; and
WHEREAS, the Company desires Employee to continue to serve as
President and Chief Operating Officer and Employee is willing to provide such
services under mutually satisfactory terms and conditions as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Company and Employee
agree as follows:
1. TERM. Subject to the terms and conditions hereof, the term of this
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Agreement will commence on the date hereof and expire on December 31, 1999,
unless earlier terminated as provided herein (the "Term"). The terms and
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conditions hereof shall be reviewed by the parties at least ninety (90) days
prior to the expiration of the term and this Agreement shall be either extended
or amended upon mutual agreement of the parties, and if the parties fail to
agree, the Agreement shall be terminated upon the expiration of the Term.
2. BUDGET/PROJECTIONS. The Confidential 1998 Budget Projections ("1998
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Budget") and the Confidential 1999 Budget Projections ("1999 Budget") approved
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by the Company's Board of Directors and the Employee shall serve as the
benchmark for performance for the periods ending December 31, 1998 and December
31, 1999, respectively. Confidential Budget Projections for any renewal period
will be mutually agreed to by the parties and will serve as the benchmark for
performance in the appropriate period. The 1998 Budget, 1999 Budget and the
Budget Projections for any such renewal period are collectively referred to
herein as the "Budget/Projections."
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3. DUTIES AND RESPONSIBILITIES.
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(a) During the Term, the Employee shall serve as the President and
Chief Operating Officer of the Company. In the performance of his
responsibilities as the President and Chief Operating Officer, the Employee
shall be subject to all of the Company's policies, rules and regulations
applicable to its Employees of comparable status and shall report directly to,
and shall be subject to the direction and control of, the Board of Directors of
the Company (the "Board"), and shall perform such duties as shall be assigned to
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him by the Board. In performing such duties, the Employee will be subject to,
and will substantially abide by, and will use reasonable efforts to cause
employees of the Company to be subject to, and substantially abide by, all
policies and procedures developed by the Company.
(b) During the Term, the Employee shall devote substantially all of
his business time, energies, skills and attention to the affairs and activities
of the Company. The Employee shall provide the services to the Company
described in this Agreement in a professional and diligent manner and in a
manner consistent with the highest standards of performance in the retail food
industry. During the Term, the Employee shall not devote a material portion of
his business time, energies, skills or attention to the affairs or activities of
any other business or organization, without the prior approval of the Board
(which approval shall not be unreasonably withheld). The Employee shall provide
to the Board, on a quarterly basis, a description of any involvement with any
other business or organization, such description to include (i) the name of the
company or organization; (ii) type of involvement; and (iii) type of product;
provided, however, that no description is required for a quarter where there has
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been no change from the description last provided to the Board.
(c) To induce the Company to enter into this Agreement, the Employee
represents and warrants to the Company that, except as set forth herein: (i) the
Employee is not a party or subject to any employment agreement or arrangement
with any other person, firm, company, corporation or other business entity and
the Employee is subject to no restraint, limitation or restriction by virtue of
any agreement or arrangement, or by virtue of any law or rule of law or
otherwise which would impair the Employee's right or ability (A) to enter the
employ of the Company, or (B) to perform fully his duties and obligations
pursuant to this Agreement, and (ii) to the Employee's knowledge, no material
litigation is pending or threatened against any business or business entity
owned or controlled or formerly owned by the Employee.
4. INSURANCE AND INDEMNIFICATION. The Company agrees that during the Term of
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this Agreement, without the consent of the Employee, it shall not amend the
provisions of Article VII, Section 7 (Indemnification) of its By-laws.
5. COMPENSATION.
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(a) Base Salary: So long as Employee remains employed, during the
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Term of this Agreement, Employee shall receive a monthly gross salary (the "Base
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Salary"), which shall be paid in equal installments on the 15th and final day of
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each month, equal to seven thousand five hundred dollars ($7,500) for each month
through December 31, 1998 and ten thousand dollars ($10,000) for each month
during the period January 1, 1999 through December 31, 1999. Compensation for
any renewal term shall be as mutually agreed by the parties.
(b) Bonuses:
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(i) So long as Employee remains employed, for each calendar
quarter beginning with the quarter starting January 1, 1997, in addition to any
and all other amounts payable to Employee hereunder, Employee shall receive a
bonus payment payable within forty-five (45) days of the end of quarter, as
follows:
(A) If the Company has achieved less than fifty percent
(50%) of the "net income before operating expenses" as described
in the Budget/Projections for such quarter, the employee shall
receive no bonus for such quarter.
(B) If the Company has achieved fifty percent (50%) or
more, but less than one hundred percent (100%) of the "net income
before operating
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expenses" as described in the Budget/Projections for such
quarter, the Employee shall receive a bonus payment for such
quarter equal to one and one-half percent (1 1/2%) of the gross
profit after "selling expenses" for such quarter;
(C) If the Company has achieved one hundred percent (100%)
or more of the "net income before operating expenses" as
described in the Budget/Projections of such quarter, the Employee
shall receive a bonus payment for such quarter equal to two and
one-half percent (2 1/2%) of the gross profit after "selling"
expenses for such quarter.
(ii) In addition to any bonus paid pursuant to Section 5(b)(i)
above, if the actual gross profit after selling expenses for any calendar year
during the Term exceeds one million dollars ($1,000,000), the Employee shall
receive a bonus payment equal to one percent (1%) of the gross profit after
"selling expenses." Such additional annual bonus shall be paid within forty-five
(45) days following the end of the calendar year.
(iii) For purposes of this Agreement, "selling expenses"
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includes the costs outlined in the Budget/Projections and shall include, without
limitation, price reductions, account advertising, trade advertising, ordinary
consumer marketing expenses, trade show expenses, brokerage expenses and other
ordinary selling expenses.
6. EXPENSE REIMBURSEMENT. The Employee is authorized to incur reasonable
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expenses in the performance of his duties hereunder during the Term. The
Company shall reimburse the Employee for all such expenses upon the presentation
by the Employee of signed, itemized accounts of such expenditures and vouchers,
all in accordance with the Company's procedures and policies as adopted and in
effect from time to time and applicable to its employees of comparable status.
7. VACATION TIME. The Employee shall be entitled to paid vacation, personal
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and sick leave during the Term in accordance with the Company's policies
regarding such vacation and leaves. Accrued vacation from prior employment
periods or hereunder may be carried forward, and will be paid if employment with
the Company shall cease.
8. GRANT OF STOCK OPTIONS. The Company shall grant Employee a stock option,
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which option shall be fully vested on the date of grant, to purchase twelve
thousand five hundred (12,500) shares of the Company's Common Stock (such number
of shares to be adjusted based on changes in capitalization) for each calendar
quarter during the Term, beginning with the quarter October 1, 1998 through
December 31, 1998, that the Company has achieved one hundred percent (100%) or
more of the "net income before operating expenses" as defined in the
Budget/Projections, provided, however, that the aggregate number of shares of
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the Company's Common Stock granted to Employee pursuant to this Section 8 shall
not exceed 100,000 shares. Each option shall be granted pursuant to a stock
option plan maintained by the Company in compliance with Section 16b-3 under the
Securities Exchange Act of 1934, if applicable. The options shall be granted at
an exercise price equal to the fair market value of the Company's Common Stock
on the date of grant and such options shall be subject to the other terms and
conditions provided in the Company's stock option plan, provided, however, that
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unless canceled pursuant to Section 10, such options granted pursuant to this
Section 8 shall remain exercisable for a period of five (5) years, subject to
the terms and conditions of this Agreement, regardless of whether Employee
remains employed with the Company. Employee acknowledges that options exercised
more than
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ninety (90) days after termination of employment will automatically become non-
qualified stock options, with attendant tax consequences.
9. LISTING ON AN EXCHANGE.
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(a) In the event the Common Stock of the Company is listed on a national
or regional exchange, or on the NASDAQ Small Cap or NASDAQ National Market, then
the Company shall, at the request of the Employee, agree to lend the Employee,
for the sole purpose of exercising vested stock options, an amount not to exceed
$100,000, such loan to be evidenced by a five-year nonrecourse promissory note
(the "Note") bearing interest at a rate equal to the prime rate as published by
BankBoston, N.A. on the date the loan is made, with interest only payable during
the term of the Note and the entire principal payable upon maturity. The Note
shall be secured by all of the capital stock of the Company issued to the
Employee in exercise of such stock options, and any proceeds from the sale
thereof.
(b) The Employee agrees to execute and deliver, upon the request of the
Company, such instruments, including, but not limited to a pledge agreement, and
take such further actions as may be necessary or desirable to evidence the
security interest being granted to the Company pursuant to this Section 9.
10. PAYMENT IN CONNECTION WITH A MERGER OR SALE OF THE COMPANY. If, during the
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Term or any renewal period, or within six (6) months of an Involuntary
Termination without Cause (as hereinafter defined) of Employee's employment with
the Company or a related entity, there shall be a Change of Control (as
hereinafter defined), Employee shall be entitled to receive from the Company an
amount equal to two percent (2%) of the Consideration (as hereinafter defined)
paid in connection with the Change in Control less (i) the amount due, including
all accrued interest, on all notes due to the Company from the Employee, and
(ii) any gain received by Employee upon the exercise and sale of the Company's
Common Stock underlying stock options issued to the Employee by the Company
since January 1, 1996 (the "Change in Control Payment"). In order to receive
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the Change in Control Payment, Employee must agree to terminate or otherwise
cancel all stock options to purchase shares of the Company's Common Stock issued
to the Employee by the Company since January 1, 1996 or that Employee is
entitled to receive pursuant to this Agreement or any renewal hereof. For
purposes hereof, "Change in Control" means the occurrence of any of the
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following events during the Term: (a) the Company is merged or consolidated or
reorganized into or with another corporation or other legal person (including a
purchase or exchange of the Company's stock), and as a result of such merger,
consolidation or any other reorganization or change of ownership of the
Company's stock less than a majority of the combined voting power of the then-
outstanding securities of such surviving, resulting or reorganized corporation
or person immediately after such transaction is held in the aggregate by the
holders of the then-outstanding securities entitled to vote generally in the
election of directors of the Company ("Voting Stock") immediately prior to such
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transaction; or (b) the Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal person,
and as a result of such sale or transfer, less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or transfer is held in the aggregate by the holders
of Voting Stock in the Company immediately prior to such sale or transfer. For
purposes hereof, "Consideration" shall mean cash and securities paid to the
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Company and/or its shareholders upon consummation of the Change in Control and
shall
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exclude (a) any amount to be paid after the consummation of the Change in
Control and (b) any debt assumed by the acquirer.
11. TERMINATION OF EMPLOYMENT.
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(a) Voluntary Termination. The Employee may voluntarily terminate his
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employment with the Company upon sixty (60) days written notice to the Company.
In the event that Employee voluntarily terminates his employment with the
Company, any and all of Employee's right to payment under this Agreement will
terminate as of the effective date of such termination; provided, however, that
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the Company will pay Employee any sums which accrued to Employee prior to the
effective date of termination, including any accrued bonus earned but not yet
paid, and the Company will grant to the Employee options pursuant to Section 8
that have accrued, but have not yet been issued.
(b) Involuntary Termination. Employee may be terminated by the Company
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before the expiration of this Agreement with or without cause by a majority vote
of the Board of Directors ("Involuntary Termination"). "Cause" shall be defined
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as: (a) the Employee's conviction of any crime (whether or not involving the
Company) which constitutes a felony in the jurisdiction involved; (b) any
intentional act of theft, fraud or embezzlement by the Employee in connection
with his work with the Company; or (c) the Employee's continuing, repeated and
willful failure or refusal to perform his duties and services under this
Agreement (other than due to his incapacity due to illness or injury). In the
event of an Involuntary Termination for any reason other than Cause as defined
herein, the Company shall, within thirty (30) days, pay Employee a sum equal to
twelve (12) times the monthly Base Salary, as then in effect, and the Company
shall maintain health insurance and other fringe benefits, if any, for twelve
(12) months following such termination. If Employee shall leave employment
within thirty (30) days of any material involuntary reduction in Employee's Base
Salary, bonus opportunity or responsibilities, any such cessation of employment
shall be deemed to be an Involuntary Termination for any reason other than
Cause, with Employee entitled to the severance payment and continuation of
benefits described above.
(c) Nonrenewal. If the Company does not extend or amend this Agreement
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following December 31, 1999, the Company shall pay to the Employee severance
equal to six (6) months of Base Salary then in effect, payable in the Company's
normal pay periods, unless a Change of Control occurred during the Term, in
which case the Company shall pay the Employee, in a lump sum, severance equal to
twelve (12) months of Base Salary.
12. NON-COMPETITION.
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(a) During the Term and for a period of one (1) year following an
Involuntary Termination for Cause pursuant to Section 11(b) or voluntary
termination pursuant to Section 11(a) above, the Employee shall not directly or
indirectly, perform any services in the United States for any person or entity
other than the Company that is primarily in the business, directly or
indirectly, of selling dinner entree and pasta products of the type the Company
is selling or developing at the time of the Employee's termination; or, without
limiting the generality of the foregoing, be or become or agree to be or become,
interested in or associated with, in any capacity (whether as a partner,
shareholder, owner, officer, director, employee, principal, agent, creditor,
trustee, consultant, co-venturer or otherwise) any individual, corporation,
firm,
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association, partnership, joint venture or other business entity that competes
with the Company as to dinner entree or pasta products; provided, however, that
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the Employee may own, solely as an investment, not more than one percent (1%) of
any class of securities of any corporation that is publicly traded on any
national securities exchange in the United States of America or reported on the
National Association of Securities Dealers, Inc.'s Automated Quotation System.
(b) During the Term and for a period of one (1) year following any
termination, the Employee shall not, directly or indirectly, (i) induce or
attempt to influence any other employee of the Company to leave its employ, (ii)
aid or agree to aid any competitor, customer or supplier of the Company in any
attempt to hire any person who shall have been employed by the Company within
the one-year period preceding such requested aid, or (iii) induce or attempt to
influence any person or business entity who was a customer of the Company during
any portion of the Term of this Agreement and for a period of one (1) year
following any termination, to transact business with a competitor of the Company
in the Company's dinner entree or pasta products business. Notwithstanding the
previous sentence, this Section 12(b) shall not apply if Employee is terminated
without Cause during the Term.
13. NON-DISCLOSURE. During the Term and thereafter, except pursuant to his
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duties to the Company hereunder, the Employee shall not disclose to anyone any
material or confidential information about the affairs of the Company, including
trade secrets, recipes, trade "know-how," inventions, customer lists, business
plans, operational methods, pricing policies, marketing plans, sales plans,
identity of customers, sales, profits or other financial information which is
confidential to the Company or is not generally known in the relevant trade.
14. NOTICES. Notices will be hand delivered or sent by registered or certified
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mail, postage prepaid, return receipt requested, or by a recognized expedited
delivery service with signature required for delivery, to the address set forth
on page one hereof, unless specifically changed by either party by written
notice to the other.
15. MISCELLANEOUS.
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(a) This Agreement is a personal contract, and the rights and interests of
the Employee hereunder may not be sold, transferred, assigned, pledged or
hypothecated, except as otherwise expressly permitted by the provisions of this
Agreement. Except as otherwise expressly provided herein, the Employee shall
not have any power of anticipation, alienation or assignment of payments
contemplated hereunder, and all rights and benefits of the Employee shall be for
the sole personal benefit of the Employee, and no other person shall acquire any
right, title or interest hereunder by reason of any sale, assignment, transfer,
claim or judgment or bankruptcy proceedings against the Employee, provided,
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however, that in the event of the Employee's death, the Employee's estate, legal
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representative or beneficiaries (as the case may be) shall have the right to
receive all of the benefits that accrued to the Employee pursuant to and in
accordance with the terms of this Agreement prior to the date of the Employee's
death.
(b) The Company shall assign this Agreement to any successor of
substantially all of its business or assets, and any such successor shall be
bound by all of the provisions hereof.
(c) This Agreement may not be changed, amended, terminated, or superseded
orally, but only by an agreement in writing, nor may any of the provisions
hereof be waived orally,
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but only by an instrument in writing, in any such case signed by the party
against whom enforcement of any change, amendment, termination, waiver,
modification, extension or discharge is sought.
(d) Except as otherwise provided herein, this Agreement shall be governed
by and construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflict of laws
thereof.
(e) All descriptive headings of the several Sections of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(f) If any provision of this Agreement, or part thereof, is held to be
unenforceable, the remainder of this Agreement and provision, as the case may
be, shall nevertheless remain in full force and effect.
(g) Each of the parties hereto shall, at any time and from time to time
hereafter, upon the reasonable request of the other, take such further action
and execute, acknowledge and deliver all such instruments of further assurance
as necessary to carry out the provisions of this Agreement.
(h) This Agreement contains the entire agreement and understanding between
the Company and the Employee with respect to the subject matter hereof and
supersedes all prior agreements on this subject matter including, without
limitation, the Employment Agreement between the Company and the Employee dated
November 26, 1996. No representations or warranties of any kind or nature
relating to the Company or its affiliates or their respective businesses,
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of the Company to the Employee; nor have any representations or
warranties of any kind or nature been made by the Employee to the Company,
except as expressly set forth in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above first written.
ANNIE'S HOMEGROWN, INC.
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By:
Title:
EMPLOYEE:
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Xxxx X. Xxxxxxx
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