1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated Oct. 31st, 1996, hereinafter referred to as the
"Agreement", is by and between Legacy Brands, Inc., hereinafter referred to as
the "Employer", and Xxxxx X. Xxxxxxxx, hereinafter referred to as the
"Employee".
ARTICLE I
Term
1.1 Term of Employment. The Employer hereby employs the Employee and the
Employee hereby accepts employment as Treasurer and Chief Financial Officer of
the Employer for a period of three (3) years (the "Term") beginning on September
1, 1996 (the "effective date"), and which will be automatically extended on the
anniversary date hereof, for an additional twelve (12) month period, unless
canceled by either party as described herein.
1.2 Notice of Cancellation. Following the expiration of the Term hereof,
the automatic extension of this Agreement may be canceled by either party by
giving written notice to the other party not later than 60 days before the
anniversary date hereof, that the Agreement shall not be extended ("Notice of
Cancellation"). In the event that either party cancels the automatic extension
of this Agreement, such failure to extend the Agreement shall be considered a
termination of the Employee as described in Article 6, herein, and such
termination shall be subject to the termination provisions provided therein.
This Agreement may be terminated earlier as hereinafter provided.
ARTICLE 2
Duties of Employee
2.1 Duties of Employee. As Treasurer and Chief Financial Officer, Employee
shall be responsible for all matters relating to the financial condition,
accounting and treasury activities of the Employer. The Employee shall also lead
the analysis of health, insurance and benefit programs of the Employer. Other
duties shall include, but are not limited to, working towards Employer's future
success, and working closely with the Chief Executive Officer and other
executives in evaluating the acquisition of other licenses and public financing.
Notwithstanding the preceding provisions of this Article 2. 1, Chief Executive
Officer ("CEO") shall have the right to reassign the Employee to such duties as
he deems fit and proper in his sole discretion during the term hereof so long as
such reassignment is consistent with the Employee's general responsibilities
under this Agreement. Such reassignment shall not constitute termination.
2.2 Best Efforts of Employee. Employee agrees that he will at all times
faithfully, industriously, and to the best of his ability, experience, and
talents, perform all of the duties that may be required of and from him pursuant
to the express and implicit terms hereof to the reasonable satisfaction of
Employer. Such duties shall be rendered at the home office of Employer, and at
such other place or places as Employer shall in good faith require or as the
interest, needs, business or
2
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 2
opportunity of Employer shall require.
2.3 Engaging in Other Employment. The Employee shall devote his productive
time, ability, and attention to the business of the Employer during the term of
this Agreement. The Employee shall not, during his employment:
(i) within any jurisdiction or marketing area in which the Employer
or any of its subsidiaries or affiliates is doing business or is qualified to do
business, directly or indirectly own, manage, operate, control, be employed by
or participate in ownership, management operation or control of or be connected
in any manner with any business engaged in and in competition with the business
conducted by Employer or any of its subsidiaries or affiliates. For these
purposes, ownership of securities of not in excess of one (1%) percent of any
class of securities of a public company shall not be considered to be
competition with Employer or any of its subsidiaries or affiliates; or
(ii) solicit for himself or any person other than the Employer or
any of its subsidiaries, the business of any company which is a customer or
client of the Employer, or any of its subsidiaries, or was a customer or client
of Employer within two (2) years prior to the date of this Agreement; or
(iii) persuade or attempt to persuade any employee of the Employer
or any of its subsidiaries to leave the Employer's or subsidiary's employ or to
become employed by any person other than the Employer or subsidiary.
The Employee may perform certain CPA functions unrelated to his position
as Chief Financial Officer outside of the Employer's principal place of business
so long as these functions are approved by the CEO of the Employer and so long
as they do not interfere with the Employee's duties under this Agreement.
2.4 Regulations. The Employee agrees to comply with all federal, state and
local laws, ordinances and regulations in the conduct of his business on behalf
of Employer.
If and when licenses or other registrations become required by law
or pertinent regulatory bodies or agencies, the Employee shall undertake to make
any necessary applications or do what may be required to secure such licenses or
registrations.
ARTICLE 3
Duties of Employer
3.1 Payment of Compensation and Provision of Benefits. During the term
hereof,
3
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 3
Employer agrees to pay all compensation due to Employee on at least a monthly
basis as provided in Article 4, as well as to provide benefits, allowances and
vacation as set forth therein.
2 Advance Costs of Certain Potential Litigation. During the term hereof
and subsequent thereto, Employer agrees to advance and incur any litigation
costs incurred by Employee in connection any act or omission under this
Agreement, or with any product liability, tampering, officer or director
litigation brought by any investor or non-party to this Agreement. In exchange
for the Employer's promise to advance any such costs, the Employee agrees to
cooperate fully in the investigation and defense of any such claims.
ARTICLE 4
Compensation
4.1 Basic Compensation. As compensation for services rendered under this
Agreement, the Employee shall be entitled to receive from the Employer a minimum
annual salary ("Annual Base Salary"), payable to Employee bimonthly on the 1st
and 15th days of each month of the term hereof, as follows:
For the
Period: Amount
----------- ---------
1996-1997........................... $120,000;
1997-1998........................... $132,000;
1998-1999........................... $145,000;
The amount of Employee's actual compensation, including Annual Base
Salary and benefits, may be increased by CEO of Employer at any time above the
minimum Annual Base Salary described herein, and such increase shall not effect
the operation or validity of any other provision of this Agreement.
4.2 Bonus. The Employee is entitled to the payment of a bonus calculated
on a target profit amount for each year. The target profit amount is the amount
approved by the Chief Executive Officer (CEO) and shall be calculated based upon
a formula comprised of earnings from operations before interest, taxes,
depreciation and amortization. If, in any year hereof, the Employer attains 80%
to 99% of the target profit amount, the employee is entitled to a bonus of 30%
of his Annual Base Salary for the year, minus one percentage point for each
percentage point the target profit amount is less than 100%. If the target
profit amount is met exactly, the bonus shall be 30% of the Annual Base Salary.
If the target profit amount is exceeded by 1% to 10%, the bonus shall be 30%
plus 2% of the Annual Base Salary for each percentage point over 100%. If the
target profit amount
4
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 4
is exceeded by 111% up to a ceiling of 150%, the bonus shall be 50% of the
Annual Base Salary plus 3% of the Annual Base Salary for each percentage point
over 110%. Such bonus shall be calculated based upon the Employer's fiscal year.
Bonuses will be paid in three installments, the first payment representing 40%
of the total bonus shall be made no later than seven (7) months after the
beginning of the Employer's fiscal year and will be calculated using Employer's
unaudited budgeted profits, the second payment representing another 40% of the
bonus shall be made no later than thirteen (13) months after the beginning of
the Employer's fiscal year and shall be calculated using Employer's unaudited
actual financial figures, and the third payment representing the final 20% shall
be made no sooner than the date upon which the Employer receives audited
financial statements. Any adjustments will be made at the time of the third
payment. Any overpayments shall be offset in the first and subsequent bonus
payment(s) made in the following and subsequent fiscal year(s) until repaid. Any
retroactive change in accounting principles which might affect any prior year(s)
profit shall not give rise to any claim by the Employer against the Employee for
any bonus payment. Furthermore, any change in accounting principles which was
not contemplated in calculating the budgeted or actual profit shall not apply to
the calculation of the Employee's bonus.
4.3 Employee Benefits. The Employer shall use its best efforts to procure
and maintain a group health insurance policy which shall provide the customary
benefits to the Employee, as well as any other benefits approved by the CEO. If
and when such benefits are provided to the Employee, the Employer agrees to
maintain such benefits for the remaining term of this Agreement.
4.4 Expenses. During the Term, Employee shall be reimbursed for his
reasonable travel, entertainment, business meeting and similar expenditures for
the benefit of Employer, but only in accordance with the policies of Employer as
adopted by the Board from time to time. With respect to any expenses which are
reimbursed by Employer to Employee, Employee shall account to Employer in
sufficient detail to allow Employer to claim an income tax deduction for such
paid item, if such item is deductible.
4.5 Restricted Stock Award. The Employee shall be offered, pursuant to a
separate Restricted Stock Purchase Agreement, an opportunity to purchase shares
of Common Stock of the Employer (the "Shares"). The Employee's right to receive
the full amount of Shares owed under the Restricted Stock Purchase Agreement
shall be contingent on the Employee's continued employment with the Employer. In
the event of a change in control resulting in a merger or acquisition, the
Employee shall be granted securities of the new entity and adjusted to assure an
approximation of value of the Employee's ownership in the Employer.
4.6 Vesting. The Employee is entitled to receive annually, but based on a
quarterly calculation, a certificate of vesting from the Employer representing
the completion of twelve months of service under this Agreement calculated from
February 1, 1996, in the form attached hereto as Exhibit A, which the Employee
shall deliver to the Pledge Holder along with certain other
5
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 5
documents pursuant to the terms of the Restricted Stock Purchase Agreement in
order to transfer, assign or convey Shares purchased under the Restricted Stock
Purchase Agreement. Upon the expiration of one year from February 1, 1996, and
delivery of the certificate of vesting together with other required documents,
the Employee shall have the right to dispose of one-third of the Shares and
shall be obligated to pay, or otherwise satisfy, one-third of the principal
amount of the Promissory Note plus interest pursuant to the Restricted Stock
Purchase Agreement and related Promissory Note. Such right to dispose of a
percentage of Shares and corresponding duty to pay, or otherwise satisfy,
amounts owed shall increase to two-thirds on February 1, 1998. The Employee
shall not have the right to dispose of all of the Shares or the obligation to
pay, or otherwise satisfy, the principal amount and interest thereupon under the
Promissory Note until February 1, 1999.
Once any portion of the Shares has vested and corresponding payments have
been made pursuant to this paragraph, or under the Promissory Note, or the debt
has been forgiven, such Shares are not subject to repurchase by the Employer. In
the event the Employee is terminated without cause pursuant to Article 6.4, or
upon the sale of the business or a change in CEO vesting will be determined
according to Article 6.5. Any corresponding payments under the Promissory Note
that have not been made will be due thirty days from the date of such
termination. Failure to pay within thirty days will subject the Shares to
repurchase by the Employer.
4.7 Vacation. Employee shall be entitled to vacation of up to fifteen (I
5) calendar days per year, for the first year of this agreement and twenty (20)
calendar days per year for years two and three. Such vacation time may accrue if
not taken. Employee shall be entitled to observe all nationally observed
holidays and to take and accrue such vacation time and sick days as determined
by Employer's policy on such accruals for all employees.
4.8 Professional Fees and Continuing Education Costs. The Employer agrees
to pay Employee's annual CPA and association fees. The Employer shall also pay
Employee's reasonable costs and expenses incurred in connection with Employee's
annual education requirements.
ARTICLE 5
Confidentiality
5.1 Confidentiality. During the course of employment, Employee shall
become aware of certain methods, practices and procedures with which Employer
conducts its business, including but not limited to: any trade secrets,
confidential information, knowledge, data or other information of Employer
relating to products, processes, know how, designs, customer lists, business
plans, marketing plans and strategies, and pricing strategies or any subject
matter pertaining to any business of Employer or any of its clients, licensees
or affiliates, all of which Employer and
6
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 6
Employee agree are proprietary information and as such are trade secrets.
Employee agrees to keep confidential, except as Employer may otherwise consent,
and not to disclose, or make any use of except for the benefit of Employer, at
any time either during or subsequent to his employment, any said trade secrets.
5.2 Return of Confidential Material. In the event of Employee's
termination of employment with Employer, for any reason whatsoever, Employee
agrees to promptly surrender and deliver to Employer all records, materials,
equipment, drawings and data of any nature pertaining to any invention or
confidential information of Employer or to his employment. Employee agrees not
take with him any description containing or pertaining to any confidential
information, knowledge or data of Employer which he may produce or obtain
during the course of his employment.
ARTICLE 6
Termination
and
Severance Pay
6.1 Termination by Death or Disability. This Agreement terminates upon the
death or disability of the Employee. Compensation provided in the case of
disability is to be determined as if the Employee had been terminated for cause
per 6.3 below. All compensation ends on the date of the Employee's death.
6.2 Termination by Employee. If the Employee terminates this Agreement
with or without cause, he shall forfeit his compensation and bonuses remaining
in this Agreement, and shall forfeit that portion of his restricted stock award
as provided elsewhere in this Agreement. Any termination by Employee shall be
with 60 days notice to the Employer.
6.3 Termination by Employer for Cause. For purposes of this Agreement, an
event or occurrence constituting "Cause" shall mean, as determined by Employer:
6.3.1 Employee's willful failure or refusal after notice thereof, to
perform specific directives of the Chief Executive Officer of
Employer, when such directives are consistent with the scope and
nature of Employees' duties and responsibilities as set forth in
clause 2.1. hereof; or
6.3.1 Dishonesty of Employee affecting Employer; or
6.3.2 Drunkenness or use of drugs which interferes with the
performance of
7
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 7
Employee's duties and responsibilities under this Agreement; or
6.3.3 Any gross or willful conduct of Employee resulting in
substantial loss to Employer, substantial damage to Employer's
reputation, or theft or defalcation from Employer; or
6.3.4 Gross incompetence on the part of the Employee in the
performance of the duties and responsibilities under this Agreement;
or
6.3.5 Any material breach (not covered by any of subc1auses 6.3.1
through 6.3.5) of Article 2 or Article 5 of this Agreement if such
breach is not cured within 10 days after written notice thereof to
Employee by Employer.
In the event the Employee is terminated pursuant to this Article
6.3, the Employer shall have the option to compensate the Employee pursuant to
this Agreement for a period of up to two months from the date of such
termination. If the Employer decides to compensate the Employee pursuant to this
Article, the Employee shall have the following duties and obligations for the
period so compensated: i) to cooperate with the Employer by providing consulting
services on site at any site reasonably required by the Employer, ii) not engage
in any course of conduct which competes, directly or indirectly, with the
business of the Employer, iii) keep confidential all of the Employer's trade
secrets, confidential information, knowledge or data, and iv) return all
confidential material to the Employer.
6.4 Termination of Employee Without Cause. In the event the Employee is
terminated for any reason other than for cause, the Employee shall be entitled
to the compensation and bonuses he would have been paid had the Employer not
terminated the Employee and the Employee had continued to provide services
hereunder for as long as the CEO shall deem proper which in no event shall be
less than two months from the date of termination. The Employee shall continue
to be bound by Article 5 hereof.
If the Employer compensates the Employee pursuant to this Article
6.4, the Employee shall have the following duties and obligations for the period
so compensated: i) to cooperate with the Employer by providing consulting
services on site at any site reasonably required by the Employer, ii) not engage
in any course of conduct which competes, directly or indirectly, with the
business of the Employer, iii) keep confidentiality all of Employer's trade
secrets, confidential information, knowledge or data, and iv) return all
confidential material, including but not limited to trade secrets, knowledge or
data, to the Employer.
6.5 Termination of Employee Upon Sale of Business; Change in CEO. This
Agreement shall survive a merger, consolidation, or other business combination
or change in the current CEO,
8
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 8
Xxxxxx X. Xxxx, for the longer of the remaining term of this Agreement or one
year. In the event of a merger, consolidation, or other business combination, or
change in the current CEO, the Employer shall:
6.5.1 Pay the Employee salary under the terms of this Agreement and
may choose, at Employer's sole discretion, to utilize the services
of the Employee on a consultant or independent contractor basis;
6.5.2 Waive the vesting requirement as to any unvested Shares such
that the Employee will have the right to dispose of all of the
Shares contemplated by and pursuant to the Restricted Stock Purchase
Agreement; and
6.5.3 Provide the Employee with an Executive Placement Package.
6.6 Effect of Termination on other Employees. In the event of termination,
the Employee shall not for a period of at least three (3) years after
termination persuade or attempt to persuade any employee of the Employer or any
of its subsidiaries to leave the Employer's or subsidiary's employ or to become
employed by any person other than the Employer or subsidiary.
6.7 Effect of Termination on Article 5. In the event of the termination of
this Agreement, Article 5.1 and 5.2 will survive termination of this Agreement.
6.8 Pre-Termination Election. In the event the Employee or the Employer
does not elect to renew this Agreement for a new term, for the last 12 months of
the term hereof, the Employee and the Employer may mutually elect to convert the
Employee's duties and title under this Agreement to the duties and title of
consultant. Upon the expiration of this Agreement, the Employee may continue to
utilize his services as a consultant.
6.9 Administrative Leave. CEO shall have the right to place any Employee
on Administrative Leave for a period of up to four weeks, which shall be paid or
unpaid at the sole discretion of the CEO, during which time the Employee shall
not discharge his duties to the Employer. In the event that the Employee is
placed on unpaid leave pursuant to this Article 6.8, then at the end of thirty
days from the date of effectiveness of such leave CEO shall make a determination
as to Employee's status resulting in either termination or continued employment.
9
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 9
ARTICLE 7
GENERAL PROVISIONS
7.1 Succession. This Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns. The obligations and duties of
Employee hereunder shall be personal and not assignable.
7.2 Notices. Any notices to be given hereunder by either party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Notices
delivered personally shall be deemed communicated as of actual receipt; mailed
notices shall be deemed communicated as of five (5) days after mailing. Mailed
notices shall be addressed to the parties as follows, but each party may change
his address by written notice in accordance with this paragraph:
If to Employer:
Legacy Brands, Inc.
0000-X Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Secretary
If to Employee:
Xxxxx X. Xxxxxxxx
0000 Xxxxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
7. Inclusion of Entire Agreement Herein. This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such employment
in any manner whatsoever with exception of such stock bonus plans, stock options
or other deferred compensation as may from time to time be granted to Employee
by action of the Board of Directors of Employer.
7.4 Law Governing Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
It is the desire and intent of the parties to this Agreement that
the provisions of this
10
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 10
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought; and
that if any particular provisions or portion of this Agreement shall adjudicated
to be invalid or unenforceable, such agreement shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such amendment to apply only with respect to the operation of such provision or
portion in the particular jurisdiction in which such adjudication is made.
The parties to this Agreement recognize that the performance of the
obligations under this Agreement is special, unique and extraordinary in
character and that in the event of the breach by Employee of the terms and
conditions of this Agreement to be performed, the Employer shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement or to enforce the specific performance thereof by Employee or to
enjoin Employee from performing services for any such other person, firm or
corporation.
7.5 Arbitration. In the event of any dispute arising under this Employment
Agreement, including any dispute regarding the nature, scope or quality of
services provided by either party hereto, it is hereby agreed that such dispute
shall be resolved by binding arbitration to be conducted by the American
Arbitration Association (AAA), to be arbitrated in accordance with their rules
and procedures in Sacramento, California. In the event of any such arbitration,
pending resolution of the arbitration and award of costs by the arbitrator, each
party hereto shall advance one-half of the amounts, if any, requested to be
advanced to the arbitrator and/or the sponsoring organization.
7.6 Attorney's Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which may be entitled.
7.7 Payment of Money Due Deceased Employee. If the Employee dies prior to
the expiration of the term of employment, any money that may be due him from the
Employer under this Agreement as of the date of his death shall be paid to his
executors, administrators, heirs, personal representatives, successors, and
assigns.
7.8 Modification or Extension of Agreement. This Agreement may not be
changed, modified, released, discharged, abandoned, or otherwise amended, in
whole or in part, except in writing, signed by the Employee and the Employer,
but only after written approval of the Employer's CEO. Employee agrees that any
subsequent change or changes in his duties, salary or compensation shall not
effect the validity or scope of this Agreement.
11
EMPLOYMENT AGREEMENT
LEGACY BRANDS, INC. AND
XXXXX X. XXXXXXXX
Page 11
If, on the request or with the consent of Employer, Employee continues in
his employment beyond the period described in Article 1, this Agreement shall
remain in effect during continuance of such service.
IN WITNESS WHEREOF, the parties have executed this Agreement at the
Employer's offices in Roseville, California, this 31st day of Oct., 1996.
EMPLOYER:
LEGACY BRANDS, INC.
By: /s/ XXXXXX X. XXXX
------------------------------
Name: Xxxxxx X. Xxxx
Title: Pres. & CEO
EMPLOYEE:
By: /s/ XXXXX X. XXXXXXXX
------------------------------
Xxxxx X. Xxxxxxxx
12
EXHIBIT A
CERTIFICATE OF VESTING
13
CERTIFICATE OF VESTING
The Secretary, or Assistant Secretary of Legacy Brands, Inc.,
("Company") does this _____th of________, certify that____________, an employee
of the Company, has completed_____ quarters of employment. The Employee has the
right to purchase ________ shares of Common Stock of the Company.
The issuance of this certificate creates an obligation in the Employee
to pay such principal amount plus interest as bears relation to the portion of
the shares of Common Stock of the Company which he is entitled to dispose of
pursuant to the terms of the Employment Agreement, Restricted Stock Purchase
Agreement and related Promissory Note.
The undersigned certifies that the foregoing is true and accurate.
By:
--------------------------------
Title:
-----------------------------
