EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated and effective as of the 26th day of October, 2000, by
and among Keebler Foods Company, a Delaware corporation (the "Company"), Xxxxxxx
Company, a Delaware corporation ("Kellogg"), and Xxx Xxxx (the "Executive").
WHEREAS, the Company has entered into an Agreement and Plan of Merger dated
as of October 26, 2000 (the "Merger Agreement"), among the Company, Kellogg, and
FK Acquisition Corp., a Georgia corporation, pursuant to which a subsidiary of
Flowers Industries, Inc., a Georgia Corporation, will merge with and into the
Company, with the Company as the surviving corporation, and the Company will
become an indirect wholly owned subsidiary of Kellogg (the "Transaction," and
references herein to the "Company" refer to the Company both before and after
the Transaction); and
WHEREAS, Kellogg, the Company and the Executive desire to set forth in a
written agreement the terms and conditions under which the Executive will
continue to render services to the Company after the consummation of the
Transaction;
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, agree as follows:
1. EMPLOYMENT PERIOD. (a) This Agreement shall become effective at the
"Effective Time" as defined in the Merger Agreement if, but only if, the
Transaction is consummated and the Executive remains employed by the Company
through the Effective Time. If the Transaction is not consummated, or if the
Executive ceases for any reason to be employed by the Company before the
Effective Time, this Agreement shall be null and void and of no further force or
effect.
(b) The Company shall employ the Executive, and the Executive shall serve
the Company, on the terms and conditions set forth in this Agreement, for the
period beginning at the Effective Time and ending on the date set forth on
Exhibit A hereto (the "Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the Executive
shall serve in the position set forth on Exhibit A hereto, with the duties and
responsibilities customarily assigned to such position and such other duties and
responsibilities as the Board of Directors of the Company (the "Board") shall
from time to time assign to the Executive.
(b) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive shall devote
his full business attention and time to the business and affairs of the Company
and shall use his reasonable best efforts to carry out his duties and
responsibilities hereunder faithfully and efficiently.
(c) The Executive's services shall be performed primarily at the
Company's offices in the Chicago, Illinois metropolitan area.
3. COMPENSATION. (a) SALARY. As compensation for the Executive's services
hereunder during the Employment Period, the Company shall pay to the Executive a
base salary (hereinafter the "Base Salary") at an annual rate not less than the
amount set forth in Exhibit A hereto, payable at such times and intervals as the
Company customarily pays the base salaries of its other executive employees.
During the Employment Period, the Base Salary shall be reviewed annually for
possible increase in accordance with the Company's normal payroll practices for
management personnel. The Base Salary shall not be reduced after any such
increase, and the term "Base Salary" shall thereafter refer to the Base Salary
as so increased.
(b) INCENTIVE COMPENSATION. In addition to the Base Salary, the Executive
shall be eligible to earn an annual bonus (the "Annual Bonus"), with a target
bonus equal to the amount specified in Exhibit A hereto. In addition, the
Executive shall be awarded, as of the Effective Time stock options on the terms
and conditions set forth on Exhibit B hereto, in Section 4(c) hereof, and
otherwise in accordance with the terms and conditions of the Xxxxxxx Company
2001 Long-Term Incentive Plan (the "LTIP"). Further, beginning in 2001, the
Executive shall be eligible for regular option grants under the LTIP on the same
basis as similarly situated executives of the Company. Finally, the Executive
shall be entitled to receive special retention bonuses (the "Retention Bonuses")
in the amounts and on the dates set forth in Exhibit A hereto, if the Executive
remains employed by the Company on those dates.
(c) EMPLOYEE BENEFITS AND FRINGE BENEFITS. During the Employment Period,
the Executive shall be entitled to receive employee benefits, vacation and
fringe benefits (including, without limitation, medical, life insurance and
other welfare benefits and benefits under retirement and savings plans) to the
same extent as, and on the same terms and conditions as, other similarly
situated executives of the Company from time to time.
(d) EXPENSES. The Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses incurred by the Executive
during the Term in carrying out his duties under this Agreement, provided that
the Executive complies with the policies, practices and procedures of the
Company for submission of expense reports, receipts, or similar documentation of
such expenses, as in effect from time to time.
(e) CHANGE OF CONTROL: As soon as practicable after the Effective Time,
Kellogg shall offer to enter into, or shall cause the Company to offer to enter
into, a change-of-control employment agreement with the Executive on the same
terms and conditions as other similarly situated executives of Kellogg and its
subsidiaries (the "Change of Control Agreement").
4. EMPLOYMENT TERMINATION. (a) TERMINATION BY THE COMPANY. (i) The
Executive's employment may be terminated by the Company upon the Disability of
the Executive (as defined below), for Cause (as defined below), or for any other
reason (a termination without Cause). The Company shall give the Executive
notice of termination specifying which of the foregoing provisions is applicable
and, in the case of a termination for Cause, the factual basis therefor, and the
termination shall be effective upon the 5th day after such notice is given or
such later day as may be specified in such notice (such day, the "Date of
Termination").
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(ii) For purposes of this Agreement, "Disability" shall mean a disability
that would entitle Executive to receive benefits under the long-term disability
plan of the Company, Kellogg or any of their affiliates (the Kellogg and such
affiliates are hereinafter referred to as the "Affiliated Companies"),
applicable to Executive, as in effect from time to time, which prevents the
Executive from performing his duties hereunder for 180 consecutive days or more.
(iii) For purposes of this Agreement, "Cause" means any of the following:
(A) malfeasance or gross misconduct by the Executive in connection with
his employment or malfeasance or gross misconduct that produces
material loss or damage to, or has a material adverse effect on the
reputation of, the Company or any of the Affiliated Companies,
which shall include but not be limited to instances of sexual
harassment or violation of the Company's nondiscrimination
policies.
(B) continuing refusal by the Executive to perform his employment
duties or any lawful direction of a senior executive of the Company
or Kellogg, within ten (10) days after written notice of any such
refusal to perform such duties or direction is given to the
Executive;
(C) any breach of the provisions of Section 5 of this Agreement by the
Executive or any other material breach of this Agreement by the
Executive; or
(D) the conviction of the Executive of, or plea of nolo contendere by
the Executive to:
(I) any felony under federal, state or local laws; or
(II)a misdemeanor that involves dishonesty or fraud or produces
material loss or damage to, or has a material adverse effect on
the reputation of, the Company or any of the Affiliated
Companies.
(b) TERMINATION BY EXECUTIVE. (i) The Executive's employment may be
terminated by the Executive for "Good Reason," as defined below, or
without Good Reason. The Executive shall give the Company notice of
termination, which shall, if the termination is for "Good Reason,"
specify the factual basis therefor, and the termination shall be
effective upon the 30th business day after such notice is given
unless the Company agrees to an earlier day (such day, the "Date of
Termination").
(iv) A termination by the Executive shall be for "Good Reason" if it
occurs within 30 days after, and as a result of, one of the
following:
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(A) the assignment to the Executive of any duties inconsistent in any
material adverse respect with the Executive's position, duties or
responsibilities as contemplated by Section 2 of this Agreement, or
any other action by the Company which results in a material
diminishment in such position, duties or responsibilities, other
than action or inaction which is remedied by the Company within 15
days after receipt of written notice thereof given by the
Executive;
(B) any failure by the Company to comply with any of the provisions of
Section 3 of this Agreement in any material respect, other than any
such failure that is remedied by the Company within 15 days after
receipt of written notice thereof given by the Executive; or
(C) any relocation by the Company of the Executive's principal place of
business away from the Chicago, Illinois metropolitan area.
(c) CONSEQUENCES OF TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE FOR GOOD REASON. (i) If, during the Employment Period, the Executive's
employment is terminated by the Company without Cause or by the Executive for
Good Reason, the Executive shall not be entitled to any further compensation
provided for under this Agreement, and shall instead receive from the Company
(A) a lump sum cash payment, within 15 days after the Date of Termination, equal
to (I) the Base Salary, at the rate in effect immediately before the Date of
Termination (but, in the case of a termination by the Executive for Good Reason,
disregarding any reduction thereof that was the basis for such termination),
plus (II) the Annual Bonus Amount, as defined below, plus (III) any Retention
Bonuses that have not yet been paid, plus (IV) $30,000 in lieu of certain
benefits, and (ii) continued health and life insurance benefits on the terms and
conditions set forth in Section 4(c)(iii) below and the other benefits set forth
in Section 4(c)(iv) below.
(ii) The "Annual Bonus Amount" means the sum of:
(A) any earned but unpaid Annual Bonus for the fiscal year ending
immediately before the Date of Termination;
(B) an amount equal to (I) the Recent Bonus (as defined below) times
(II) a fraction, the numerator of which is the number of days in
the fiscal year in which the Date of Termination occurs that
precede the Date of Termination, and the denominator of which is
the total number of days in such fiscal year; plus
(C) the Recent Bonus.
For purposes of clauses (B) and (C) above, the "Recent Bonus" means the greatest
of (I) the amount of the Executive's 1999 fiscal year bonus paid in 2000, (II)
if the Executive's 2000 fiscal year bonus has been determined as of the Date of
Termination, the average of the 1999 fiscal year bonus paid in 2000 and the 2000
fiscal year bonus paid or payable in 2001, and (III) the most recent Annual
Bonus (if any) earned by the Executive under this Agreement.
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(iii) The health and life insurance benefits described above shall
consist of continued coverage for the Executive and, if applicable, his eligible
dependents, under the Company's group health and life insurance plans from the
Date of Termination through the second anniversary thereof (subject to making
all required employee contributions) in the form then available to employees of
the Company. However, such continuation shall no longer be provided when and to
the extent that the Executive is entitled (without regard to any individual
waivers or other arrangements) to receive during such two-year period the same
type of coverage from another employer or another recipient of the Executive's
services (except to the extent that pre-existing conditions would not be
eligible to be covered under such successor coverage). To the extent that such
coverage cannot be provided under the terms of the applicable plans, the Company
may elect instead to provide alternative coverage through the purchase of
insurance (of equal value and coverage) at the Company's expense. After the
period during which such continued health and dental coverage is provided, the
Company may elect to continue coverage under the "COBRA" health benefit
continuation rules and, if he so elects such continuation, he shall pay the
required premiums to maintain such coverage.
(iv) In addition, the Executive shall continue to receive any automobile
allowance to which he was entitled immediately before the Date of Termination
until the second anniversary of the Date of Termination. However, the Executive
must deliver any Company-provided leased vehicles to the Company within ten days
after the Date of Termination. For a period of one year after the Date of
Termination, the Company shall provide outplacement assistance, as appropriate
and necessary to the Executive. The Executive shall not, however, be entitled to
any payment in lieu of accepting outplacement assistance services. Finally, for
purposes of any non-qualified retirement plan in which the Executive is
participating immediately before the Effective Time, the Executive shall be
credited with one additional year of service and the cash amounts payable
pursuant to Section 4(c)(i)(A)(I), (II), and (IV) above shall be treated as
compensation paid during the period of such additional service.
(d) OTHER EMPLOYMENT TERMINATIONS. If, during the Employment Period, the
Executive's employment is terminated for any reason other than by the Company
without Cause or by the Executive for Good Reason, the Executive shall not be
entitled to any compensation provided for under this Agreement, other than (i)
Base Salary through the Employment Termination Date, (ii) benefits under any
long-term disability insurance coverage in the case of termination because of
Disability, (iii) vested benefits, if any, required to be paid or provided by
law, and (iv) any Retention Bonuses that have not yet been paid, in the case of
the Executive's death or termination because of Disability.
(e) COORDINATION OF SEVERANCE BENEFITS. The Executive acknowledges and
agrees that if he enters into the Change of Control Agreement, and if the
"Effective Date" as defined in the Change of Control Agreement (which generally
will occur if there is a Change of Control of Kellogg, as that term is defined
in the Change of Control Agreement) occurs during the Employment Period under
this Agreement, then notwithstanding any other provision of this Agreement, the
Change of Control Agreement shall supersede this Agreement in its entirety. In
addition, the Executive acknowledges and agrees that if he becomes entitled to
the severance pay and benefits provided under Section 4(c) or Section 4(d) of
this Agreement, he will not also be eligible for severance pay or benefits under
any severance plan, program or policy or similar arrangement of Kellogg, the
Company, or any of their affiliates.
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5. COVENANTS. (a) CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and the Affiliated Companies
all secret or confidential information, knowledge or data relating to the
Company or any of the Affiliated Companies and their respective businesses
(including, without limitation, any proprietary and not publicly available
information concerning any processes, methods, trade secrets, research, secret
data, costs or names of users or purchasers of their respective products or
services, business methods, operating procedures or programs or methods of
promotion and sale) that the Executive has obtained or obtains during his
employment by the Company or any of the Affiliated Companies and that is not
public knowledge (other than as a result of the Executive's violation of this
Section 5(a)) ("Confidential Information"). For the purposes of this Section
5(a), information shall not be deemed to be publicly available merely because it
is embraced by general disclosures or because individual features or
combinations thereof are publicly available. The Executive shall not
communicate, divulge or disseminate Confidential Information at any time during
or after the Executive's employment with the Company or any of the Affiliated
Companies, except with the prior written consent of the Company or such
Affiliated Company, as applicable, or as otherwise required by law or legal
process. All records, files, memoranda, reports, customer lists, drawings,
plans, documents and the like that the Executive uses, prepares or comes into
contact with during the course of the Executive's employment shall remain the
sole property of the Company and/or one or more of the Affiliated Companies, as
applicable, and shall be turned over to the Company or such Affiliated Company,
as applicable, upon termination of the Executive's employment.
(b) NO SOLICITATION. The Executive agrees that he will not, at any time
during the Noncompetition Period (as defined in Section 5(c) below), without the
prior written consent of Kellogg, directly or indirectly employ, or solicit the
employment of (whether as an employee, officer, director, agent, consultant or
independent contractor), any person who is or was at any time during the
previous six (6) months an employee, representative, officer or director of the
Company or any of the Affiliated Companies (except for such employment by the
Company or any of the Affiliated Companies).
(c) NONCOMPETITION. During the Noncompetition Period (as defined below),
the Executive shall not become associated with a Competitor. The foregoing
sentence shall not apply, however, if the Executive obtains prior written
permission of Kellogg to become associated with a Competitor. For purposes of
this Section 5(c): (i) the "Noncompetition Period" means (A) the period during
which the Executive is employed by the Company or any of the Affiliated
Companies, plus (B) the period of one year immediately thereafter; (ii) a
"Competitor" means any grain-based convenience foods business of Campbell's,
Danone, General Mills, Kraft, Nabisco, Nestle, Parmalat, PepsiCo, Quaker, or any
of their respective affiliates and successors; and (iii) the Executive shall be
considered to have become "associated with a Competitor" if the Executive
becomes directly or indirectly involved as an owner, principal, employee,
officer, director, independent contractor, representative, stockholder,
financial backer, agent, partner, advisor, lender, or in any other individual or
representative capacity with a Competitor. Notwithstanding the foregoing, the
Executive may make and retain investments in less than one percent of the equity
of any Competitor, if such equity is listed on a national securities exchange or
regularly traded in an over-the-counter market.
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(d) INVENTIONS. All plans, discoveries and improvements, whether
patentable or unpatentable, made or devised by the Executive, whether alone or
jointly with others, from the date of the Executive's initial employment by the
Company and continuing until the end of the Employment Period and any subsequent
period when the Executive is employed by the Company or any of the Affiliated
Companies, relating or pertaining in any way to the Executive's employment with
or the business of the Company or any of the Affiliated Companies, shall be
promptly disclosed in writing to the Board and are hereby transferred to and
shall redound to the benefit of the Company, and shall become and remain its
sole and exclusive property. The Executive agrees to execute any assignments to
the Company or its nominee, of the Executive's entire right, title and interest
in and to any such discoveries and improvements and to execute any other
instruments and documents requisite or desirable in applying for and obtaining
patents or copyrights, at the expense of the Company, with respect thereto in
the United States and in all foreign countries, that may be required by the
Company. The Executive further agrees, during and after the Employment Period,
to cooperate to the extent and in the manner required by the Company, in the
prosecution or defense of any patent or copyright claims or any litigation, or
other proceeding involving any trade secrets, processes, discoveries or
improvements covered by this Agreement, but all necessary expenses thereof shall
be paid by the Company.
(e) ACKNOWLEDGEMENT AND ENFORCEMENT. The Executive acknowledges and
agrees that: (i) the purpose of the foregoing covenants, including without
limitation the noncompetition covenant of Section 5(c), is to protect the
goodwill, trade secrets and other Confidential Information of the Company being
acquired by Kellogg in the Transaction; (ii) because of the nature of the
business in which the Company and the Affiliated Companies are engaged and
because of the nature of the Confidential Information to which the Executive has
access, it would be impractical and excessively difficult to determine the
actual damages of the Company and the Affiliated Companies in the event the
Executive breached any of the covenants of this Section 5; and (iii) remedies at
law (such as monetary damages) for any breach of the Executive's obligations
under this Section 5 would be inadequate. The Executive therefore agrees and
consents that if he commits any breach of a covenant under this Section 5 or
threatens to commit any such breach, the Company shall have the right (in
addition to, and not in lieu of, any other right or remedy that may be available
to it) to temporary and permanent injunctive relief from a court of competent
jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage. With respect to any provision of this
Section 5 finally determined by a court of competent jurisdiction to be
unenforceable, the Executive and the Company hereby agree that such court shall
have jurisdiction to reform this Agreement or any provision hereof so that it is
enforceable to the maximum extent permitted by law, and the parties agree to
abide by such court's determination. If any of the covenants of this Section 5
are determined to be wholly or partially unenforceable in any jurisdiction, such
determination shall not be a bar to or in any way diminish the Company's right
to enforce any such covenant in any other jurisdiction.
6. NO MITIGATION. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
specifically provided in Section 4(c)(iii) above, such amounts shall not be
reduced, regardless of whether the Executive obtains other employment.
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7. TAX GROSS-UP FOR PAYMENTS BY THE COMPANY. (a) Any payment or benefit
provided by the Company or Kellogg for the benefit of the Executive under this
Agreement or otherwise under any other agreement, policy, plan, program or
arrangement, including without limitation any stock option, performance share,
performance unit, stock appreciation right, restricted stock award, executive
incentive award, or similar right, or the lapse or termination of any
restriction on, or the vesting or exercisability of, any of the foregoing
("Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or by any successor
provision) or to any similar excise or penalty tax imposed by state or local
law, or to any interest or penalties with respect to that tax (that tax or those
taxes, together with any interest and penalties, being hereinafter referred to
as the "Excise Tax"), then the Executive will be entitled to receive from the
Company a payment described in the provisions that follow (the "Gross-Up
Payment"). The Gross-Up Payment shall be in an amount such that, after payment
(out of the Gross-Up Payment) by the Executive of all taxes (including any
interest or penalties imposed on the Executive with respect to those taxes),
including any income and excise taxes imposed on the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payment and paid by the Executive.
(b) The determination of whether an Excise Tax is payable by the
Executive and the amount of that Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Executive and the amount of that
Gross-Up Payment, if any, shall be made by a nationally recognized accounting
firm ("Accounting Firm") designated by the Company. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the Company shall
pay the required Gross-Up Payment to the Executive as soon as practicable after
receipt of the determination and calculations with respect to any Payment to the
Executive. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall, at the same time as it makes that determination,
furnish the Company and the Executive an opinion that the Executive has
substantial authority not to report any Excise Tax on his federal, state or
local income or other tax return.
(c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and shall otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and
calculations contemplated by this Section 7. Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment shall be binding on the Company
and the Executive, unless the amount of the Excise Tax or such Gross-Up Payment
is challenged by the IRS or any other taxing authority (in which case the
Gross-Up Payment shall be recalculated after such challenge has been concluded).
(d) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment (or the
recalculation of the Gross-Up Payment). That notification shall be given as
promptly as practicable but no later than ten (10) business days after the
Executive actually receives notice of the claim, and the Executive shall further
apprise the Company of the nature of the claim and the date on which such claim
is requested to be paid (in each case, to the extent known by the Executive).
The Company shall be
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responsible for representing the Executive before any taxing authority and shall
have full authority to defend, compromise or settle any claim, all of such shall
be at the Company's full expense (including any additional required Gross-Up
Payment and any accounting or legal fees incurred by the Company).
8. NOTICES. (a) METHODS. Each notice, demand, request, consent, report,
approval or communication (hereinafter, "Notice") which is or may be required to
be given by any party to any other party in connection with this Agreement and
the transactions contemplated hereby, shall be in writing, and given by
facsimile, personal delivery, receipted delivery services, or by certified mail,
return receipt requested, prepaid and properly addressed to the party to be
served as shown in Section 8(b) below.
(b) ADDRESSES. Notices shall be effective on the date sent via facsimile,
the date delivered personally or by receipted delivery service, or three (3)
days after the date mailed:
If to the Company: Keebler Foods Company
000 Xxxxx Xxx.
Xxxxxxxx, XX 00000
Attn.: Corporate Secretary
Facsimile: (000) 000-0000
If to the Executive: At his residence address most recently filed
with the Company.
In each case, with
a copy to Kellogg:
If to Kellogg: Xxxxxxx Company
Xxx Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 00000-0000
Attn.: General Counsel
Facsimile: (000) 000-0000
(c) CHANGES. Each party may designate by Notice to the other in writing,
given in the foregoing manner, a new address to which any Notice may thereafter
be so given, served or sent.
9. ENTIRE AGREEMENT. If this Agreement becomes effective as provided in
Section 1(a), then as of the Effective Time, this Agreement shall constitute the
entire agreement of the parties with respect to the subject matter hereof and
shall supersede all prior agreements with respect thereto, including, without
limitation, the Employment and Severance Agreement between the Company and the
Executive as amended on September 5, 2000.
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10. SUCCESSORS. (a) EXECUTIVE. This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) THE COMPANY. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) ASSIGNS. The Company and/or Kellogg shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and perform this Agreement in the same manner and to the same
extent that the Company and/or Kellogg would have been required to perform it if
no such assignment had taken place. As used in this Agreement, "Company" shall
mean both the Company as defined above and any such successor by operation of
law or otherwise.
11. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Illinois, without
reference to principles of conflict of laws. This Agreement may not be amended
or modified except by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
(c) TAX WITHHOLDING. Notwithstanding any other provision of this
Agreement, the Company may withhold from amounts payable under this Agreement
all federal, state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
(d) NO WAIVER. The Executive's or the Company's failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(e) HEADINGS. The Section headings contained in this Agreement are for
convenience only and in no manner shall be construed as part of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
the authorization of its Board of Directors, each of the Company and Kellogg has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
EXECUTIVE
/S/ XXX X. XXXX
-------------------------------------
Xxx Xxxx
KEEBLER FOODS COMPANY
By /S/ XXXXXX X. X'XXXXX
-------------------------------------
Name:
Title:
XXXXXXX COMPANY
By /S/ XXXXXX XXXXXXXXX
-------------------------------------
Name:
Title:
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EXHIBIT A
TERMS AND CONDITIONS FOR XXX XXXX
End of Employment Period: first anniversary of Effective Time.
Position: Vice Chairman of Kellogg.
Minimum Annual Rate of Base Salary: $810,000.
Target Annual Bonus: 80% of Base Salary.
Retention Bonus Payments: $4,269,500. Executive shall receive 100% of this
amount upon the first anniversary of the Effective Time.
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EXHIBIT B
OPTIONS TO BE GRANTED TO XXX XXXX (the "Executive")
Number of Options: 500,000 shares of common stock of Kellogg.
Per-share exercise price: The "Fair Market Value," as defined in the LTIP, of a
share of common stock of Kellogg on the grant date.
Vesting schedule before termination of employment as follows: (1) 50% of the
Options vest on January 1, 2002 if all of the following performance conditions
are achieved for calendar year 2001: (a) Net Sales Value (NSV) growth of 3% over
the preceding 12 month period, (b) EBITDA growth of 12% over the same period,
and (c) effective integration and testing of Rice Krispie Treats, Snackums,
Nutrigrain Bars and other Kellogg products, from warehouse to direct store
delivery; and (2) an additional 25% of the Options vest on January 1, 2003 if
both of the following performance conditions are achieved for calendar year
2002: (a) NSV growth of 5% (as measured against an NSV for 2001 that equals the
annualized sales of Kellogg products under the control of the Company plus the
total sales of Company products) and (b) EBITDA growth of 15% over the same
period. If any of the performance conditions are not achieved for a given year,
the Options available for vesting in that year will be made available for
vesting in the subsequent year. All Options will vest on the first anniversary
of the Effective Time regardless of the achievement of the performance
conditions provided the Executive's employment has not previously terminated for
any reason.
Effect of a termination of the Executive's employment:
o Termination of employment by the Company without Cause or by the
Executive for Good Reason: A percentage of the Executive's unvested
Options vest, equal to the percentage determined by dividing (i) the
number of calendar months ending during the period from the Effective
Time to the Date of Termination, by (ii) the number of calendar months
ending in the period between the Effective Time and the first
anniversary thereof. Vested Options shall remain exercisable for one
year from the Date of Termination.
o Termination of employment by the Company for Cause or by the
Executive without Good Reason: all Options (whether vested or not) are
forfeited on the Date of Termination.
o Termination of employment due to the Executive's Retirement (as
defined in the Company pension plan in which the Executive is then
participating, and also including voluntary termination at the end of
the Employment Period): all unvested Options vest as of the Date of
Termination, and all Options remain exercisable until the fifth
anniversary of the date of Retirement.
o Termination of employment due to the Executive's death: all
unvested Options vest as of the Date of Termination, and all Options
remain exercisable until the fifth anniversary of the date of death.
13
o Termination of employment due to the Executive's disability (as
defined in the Company long-term disability plan then covering the
Executive): all unvested Options vest as of the Date of Termination,
and all Options remain exercisable until the fifth anniversary of the
date of disability.
o Notwithstanding the foregoing, in no event will any Options remain
exercisable beyond their original term.
Reloads: The Options will be granted with a reload feature that, as provided in
the LTIP, will be available only to the extent the Options are exercised while
the Executive is an active employee. Reloads are not available for any Options
exercised after a termination of employment for any reason.
14
AMENDMENT
AMENDMENT ("Amendment") dated and effective as of the 22nd day of February,
2001, to the Employment Agreement entered into by Xxx Xxxx (the "Executive"),
Keebler Foods Company ("Keebler"), and Xxxxxxx Company ("Kellogg") dated as of
October 26, 2000 (the "Agreement").
WHEREAS, the parties desire to amend the Agreement;
NOW, THEREFORE: the parties hereto, in consideration of the mutual covenants
contained herein and in the Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, agree as follows:
1. Clause (ii) of the third sentence of Section 5(c) of the Agreement shall be
replaced with the following language, which clarifies the definition of
"Competitor" by adding the words "(including but not limited to
ready-to-eat cereal)":
(ii) a "Competitor" means any grain-based convenience foods
(including but not limited to ready-to-eat cereal) business of
Campbell's, Danone, General Mills, Kraft, Nabisco, Nestle, Parmalat,
PepsiCo, Quaker, or any of their respective affiliates and
successors; and
2. The following text shall be added to your Agreement as a new Section 5(e),
and the existing Section 5(e) shall become Section 5(f):
NONDISPARAGEMENT. The Executive shall not, and the Company and the
Affiliated Companies shall not, in each case except as otherwise
required by applicable law, make or cause to be made any statement to
any person or entity that disparages, casts in a negative light, or
otherwise impugns the other party and/or damages the reputation of
the Company or any of the Affiliated Companies, agents, officers,
directors, managers, or employees, or the Executive, as the case may
be.
3. Exhibit B to the Agreement shall be replaced by the attached Exhibit B. The
grant of Options described in the attached Exhibit B shall be subject to
the terms and conditions of an option agreement in the form of the option
agreement attached to this Amendment (and such Exhibit B shall be deemed to
so provide).
The Agreement shall remain in full force and effect, except to the extent
expressly provided herein. This Amendment may be executed simultaneously or in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
15
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board of Directors, each of Keebler and
Kellogg has caused this Amendment to be executed in its name and on its behalf,
all as of the day and year first written above.
EXECUTIVE
/S/ XXX X. XXXX
-------------------------------------
Xxx Xxxx
KEEBLER FOODS COMPANY
By /S/ XXXXX X. XXXXXXXX
-------------------------------------
Name:
Title:
XXXXXXX COMPANY
By /S/ XXXXXX XXXXXXXXX
-------------------------------------
Name:
Title:
16
[KELLOGG'S LOGO]
XXXXXXX COMPANY
NON-QUALIFIED STOCK OPTION AWARD
Xxxxxxx Company (the Company), pursuant to action of the Compensation
Committee of its Board of Directors, hereby awards to you the right and
option to purchase from the Company all or any part of the number of
options shown below to purchase shares of the Common Stock of the Company,
par value $.25 per share, at the option price per share shown below, in
accordance with and subject to the terms, conditions and provisions of the
plan shown below (the "Plan") and the Option Agreement set forth in the
attachment, which, together with this Non-Qualified Stock Option Award
collectively constitute the Option.
PLAN:
NAME:
NUMBER OF OPTIONS:
AWARD DATE:
OPTION PRICE:
PLEASE RETAIN THIS DOCUMENT FOR YOUR RECORDS
IF YOU ARE A NEW PARTICIPANT IN THE PLAN, YOU WILL
RECEIVE ADDITIONAL MATERIALS FROM XXXXXXX XXXXX, THE
PLAN ADMINISTRATOR, IN MID SUMMER WHICH PROVIDE MORE
DETAILS ON THE STOCK OPTION PROGRAM.
THE OPTION AGREEMENT FOR THE
APPROPRIATE PLAN MUST BE
ATTACHED TO THIS STOCK OPTION AWARD -
SEE YOUR MANAGER IF IT IS NOT.
17
(NOTE: FOR KEEBLER INITIAL RETENTION GRANT ONLY)
XXXXXXX COMPANY
2001 LONG TERM INCENTIVE PLAN
OPTION AGREEMENT
For and in consideration of the agreements set forth below and in the
Non-Qualified Stock Option Award to which this Option Agreement is appended
(which together constitute the "Option") and pursuant to the Employment
Agreement, dated as of October 26, 2000, by and among Xxxxxxx Company (the
"Company"), Keebler Foods Company ("Keebler") and the Optionee (the
"Agreement"), the parties have agreed as follows:
1. The Option and this Option Agreement are subject to the terms and
conditions of the Xxxxxxx Company 2001 Long Term Incentive Plan.
2. The Company awards to the Optionee an the Optionee accepts an Option
to purchase the number of shares of the Common Stock ($0.25 par value) of the
Company at the option price per share on the date of award described in the
Non-Qualified Stock Option Award.
3. The Option is not an Incentive Stock Option under the provisions of
the Internal Revenue Code and it must be exercised prior to the expiration of
ten (10) years and (1) day from the date of this award. The Option vests as
follows: (1) 50% of the Option will vest on January 1, 2002 if all of the
following performance conditions are achieved by Keebler for calendar year 2001:
(a) Net Sales Value (NSV) growth of 3% over the preceding 12 month period, (b)
EBITDA growth of 12% over the same period, and (c) effective integration and
testing of Rice Krispie Treats, Snackums, Nutrigrain Bars and other Company
products, from warehouse to direct store delivery; and (2) an additional 25% of
the Option will vest on January 1, 2003 if both of the following performance
conditions are achieved for calendar year 2002: (a) NSV growth of 5% (as
measured against an NSV for 2001 that equals the annualized sales of Company
products under the control of Keebler plus the total sales of Keebler products)
and (b) EBITDA growth of 15% over the same period. If any of the performance
conditions are not achieved for a given year, the portion of the Option
available for vesting in that year will be made available for vesting in the
subsequent year. The Option will vest in full on the first anniversary of the
Effective Time (as defined in the Agreement) regardless of the achievement of
the performance conditions provided the Optionee's employment has not previously
terminated for any reason.
4. In the event of the Optionee's termination of employment, the
following provisions will apply:
(a) Termination of employment by the Company or Keebler without Cause or
by the Optionee for Good Reason, each as defined by the Agreement: a
percentage of the Option that had not yet vested shall vest in an amount
equal to the percentage determined by dividing (i) the number of calendar
months ending during the period from the Effective Time to the Date of
Termination (as defined in the Agreement), by (ii) the number of cal-
18
endar months ending in the period between the Effective Time and the
first anniversary thereof.
(b) Termination of employment by the Company or Keebler for Cause or by
the Optionee without Good Reason (each as defined in the Agreement): the
Option (whether vested or not) is forfeited on the Date of Termination.
(c) Termination of employment due to the Optionee's Retirement (as
defined in the pension plan in which the Optionee is then participating,
and also including voluntary termination at the "End of Employment
Period" (as defined in Exhibit A to the Agreement): any unvested portion
of the Option will vest as of the Date of Termination, and the Option
will remain exercisable in full until the fifth anniversary of the date
of Retirement.
(d) Termination of employment due to the Optionee's death: any unvested
portion of the Option will vest as of the Date of Termination, and the
Option will remain exercisable in full until the fifth anniversary of the
date of death.
(e) Termination of employment due to the Optionee's disability (as
defined in the long-term disability plan then covering the Optionee): any
unvested portion of the Option will vest as of the Date of Termination,
and the Option will remain exercisable in full until the fifth
anniversary of the date of disability.
(f) Notwithstanding the foregoing, in no event will the Option remain
exercisable prior to the expiration of ten (10) years and one (1) day
from the date of this award.
5. The Option may be exercised, in whole or in part, by contacting
Xxxxxxx Xxxxx at 0 (000) 000-0000 or 0 (000) 000-0000.
6. In the event you exercise this Option and pay the Option price and tax
withholding in whole or in part by surrendering shares of the Company's Common
Stock, then you may be eligible to receive an accelerated ownership feature
("AOF") option to purchase a number of shares of Common Stock equal to the
number of shares delivered to pay the option price or delivered or withheld for
tax withholding obligations. Such AOF will be exercisable for a term ending on
the same date as the Option exercised and the Option price of the AOF will be
the fair market value on the date the AOF is awarded. AOFs will be awarded only
if no other AOF has been awarded to the Optionee within the period prescribed by
the Compensation Committee.
7. This Option Agreement shall be construed according to the laws of the
State of Delaware (regardless of the law that might otherwise govern under
applicable Delaware principles of conflict of laws) to the extent not superseded
by federal U.S. law.
8. (a) If you exercise any portion of the Option and you voluntarily
leave the employment of the Company and its affiliates and within one (1) year
after such exercise you become associated with a Competitor as defined in
paragraph 8(d) below, except as expressly permitted by paragraph 8(d) below,
then (i) the gain represented by the mean market price on the
19
date of exercise over the exercise price, multiplied by the number of shares you
purchased, less any tax withholding or tax obligations ("Option Gain"), without
regard to any subsequent market price decrease or increase, shall be paid by you
to the Company and (ii) any unexercised Options will be immediately cancelable
by the Company at the time of resignation. Your resignation for "Good Reason" as
defined by your Employment Agreement shall not be deemed to be "voluntary" for
purpose of this paragraph 8(a).
(b) The Option shall terminate upon delivery of notice from the Company
at any time during the Noncompetition Period (as defined below), if during the
Noncompetition Period: (i) you become associated with a Competitor as defined in
paragraph 8(d) below, except as expressly permitted by Section 8(d); (ii) you
participate in a hostile takeover attempt against the Company; (iii) you are
convicted of or plead nolo contendere to (x) any felony under federal, state or
local laws, or (y) a misdemeanor that involves dishonesty or fraud or produces
material loss or damage to, or has a material adverse effect on the reputation
of the Company or any of its affiliates, provided that the conduct that is the
basis for such felony or misdemeanor is related to your employment with the
Company or any of its affiliates; or (iv) you commit any breach of Section 5(b)
of your Employment Agreement (PROVIDED, HOWEVER, that such Section shall be
modified solely for purposes of this Option Agreement to prohibit the
solicitation or employment only of persons listed on Schedule A to this Option
Agreement or any other vice president or more senior officer of the Company or
any of its affiliates). Upon delivery of notice from the Company described in
the first sentence of this Section 8(b), the Option shall terminate effective as
of the date on which you first become so associated or you first so participate,
on the date of your conviction or plea, or on the date you commit such breach,
as applicable, in each case unless the Option has terminated sooner by operation
of another term or condition of the Option or the Plan.
(c) Any amounts the Company and/or any of its affiliates owes you from
time to time (including without limitation amounts owed to you as wages or other
compensation, fringe benefits, or vacation pay) may be offset, to the extent of
the amounts you owe the Company under sections 8(a) and 8(e) of this Option
Agreement. Whether or not the Company and its affiliates elect to make any such
set-off in whole or in part, if the Company and its affiliates do not recover by
means of such set-off the full amount you owe them pursuant to Section 8(a) or
8(e), you shall pay the unpaid balance to the Company immediately. You may be
released from your obligations under Sections 8(a), 8(c) and 8(e) only if the
Compensation Committee (or its duly appointed agent) determines in its sole
discretion that such action is in the best interests of the Company.
(d) For purposes of this paragraph 8: (i) the "Noncompetition Period"
means (A) the period during which you are employed by the Company or any of its
affiliates, plus (B) the period of one year immediately thereafter; (ii) a
"Competitor" means any grain-based convenience foods (including but not limited
to ready-to-eat cereal) business of Campbell's, Danone, General Mills, Kraft,
Nabisco, Nestle, Parmalat, PepsiCo, Quaker, or any of their respective
affiliates and successors; and (iii) you shall be considered to have become
"associated with a Competitor" if you become directly or indirectly involved as
an owner, principal, employee, officer, director, independent contractor,
representative, stockholder, financial backer, agent, partner, advisor, lender,
or in any other individual or representative capacity with a Competitor, unless
the Company shall have consented to such involvement pursuant to Section 8(e)
20
below. Notwithstanding the foregoing, you may make and retain investments in
less than one percent of the equity of any Competitor, if such equity is listed
on a national securities exchange or regularly traded in an over-the-counter
market.
(e) You may, from time to time, request in writing that the Company (i)
determine whether a particular activity that you propose to engage in (the
"Proposed Activity") would constitute "becoming associated with a Competitor" as
defined in Section 8(d), or (ii) consent to your involvement in a Proposed
Activity, by providing written notice of such request to the Company, directed
to the Vice President of Human Resources (the "VPHR") and the General Counsel
(the "GC") of the Company (the "Request"). Such request shall include all
information relevant to the Proposed Activity including, but not limited to, the
identity of the party you propose to become associated with and your proposed
relationship with such party. You shall also provide such additional information
("Additional Information") as the Company may reasonably request relating to the
Proposed Activity. The VPHR or the GC of the Company shall advise you in writing
(the "Answer") whether the Company has determined that the Proposed Activity
would constitute "becoming associated with a Competitor," or whether the Company
consents to your involvement in such Proposed Activity, as applicable, within 10
business days after their receipt of your request (the "Answer Period"). In the
event the Answer does not state that the Company has determined that the
Proposed Activity does not constitute "becoming associated with a Competitor"
and does not otherwise consent to your involvement in such Proposed Activity,
you may elect, by written notice to the Company given within 20 business days
after receiving the Answer, to submit the question of whether the Proposed
Activity constitutes "becoming associated with a Competitor" to binding
arbitration as follows. Within 5 business days of delivery of such notice to the
Company, you shall submit the documents you provided to the Company and the
Answer to the AAA (as defined below) with such other documents necessary to
commence the arbitration process. Such arbitration shall be conducted in
Chicago, Illinois, under the rules of the American Arbitration Association (the
"AAA") then in effect for commercial arbitration, by an arbitrator selected by
mutual agreement between you and the Company. If you and the Company are unable
to agree upon an arbitrator, then one arbitrator shall be appointed by the
American Arbitration Association of Chicago, Illinois, as it may determine, in
accordance with the rules and practices of such association then in effect. In
the event of such an arbitration, the Company and you agree to use best efforts
to facilitate a determination by the AAA within 30 days of the submission of
documents to it. The arbitrator shall apply the law of the State of Delaware
(without reference to rules of conflicts of law or statutory arbitration), shall
determine whether the Proposed Activity would constitute "becoming associated
with a Competitor," and shall assess the costs of the arbitration to the
non-prevailing party. Any such arbitration shall be final and binding on you and
the Company, and judgment upon the award rendered in any such arbitration may be
entered in any state or federal court having jurisdiction. You shall immediately
advise the Company in writing if you begin the Proposed Activity after you have
sent a Request. Notwithstanding the foregoing: (i) if you actually begin the
Proposed Activity before receiving the Answer, the Company shall not be
obligated to provide the Answer; and (ii) if you actually begin the Proposed
Activity before the arbitration provided for above is commenced or concluded,
and before the conclusion of the 30-day period described above, you shall
forfeit your right to elect such arbitration and be responsible for all costs
and expenses incurred by the Company with respect to such arbitration (including
reasonable attorneys fees), and any such arbitration shall immediately cease;
and (iii) if you actually begin the Proposed Activity after the conclusion of
such 30-day period, but before the arbitration is com-
21
menced or concluded, you shall forfeit any right to such arbitration and each
party shall be responsible for its respective costs and expenses, as well as for
one half of any fee charged by the AAA in connection with the arbitration, and
any such arbitration shall immediately cease.
(f) You and the Company agree that references in this Option Agreement to
your Employment Agreement with the Company shall mean references to such
agreement as in effect on the date hereof, and that the terms of this Option
Agreement shall not be affected by any subsequent amendment or termination of
the Employment Agreement, unless the Company and you execute a written amendment
to this Option Agreement specifically so providing. In addition, you and the
Company agree that this Option Agreement contains the entire agreement of the
Company and you relating to circumstances under which the Option may be
forfeited or a repayment obligation may arise with respect to the Option, and no
provision contained in any option exercise form, plan, program, policy or other
arrangement may modify such circumstances unless the Company and you execute a
written amendment to this Option Agreement specifically so providing.
22
Schedule A
Xxxxxxx Xxxxx
Xxxx Xxxxx
Xxxxxxx Xxxxxxxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxx Xxxxxxxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxxxxxxx
Xxx Ready
Xxx Xxxx
Xxx Xxxxxxxxxxx
Xxxxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xx.
Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
Xxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
Xxxx Xxxxxx
Xxxxx Xxxxx
Xxxxx Xxxxxxx
A. (Xxxxx) Wollensak
23
