EXHIBIT 10.30
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered
into as of this 4th day of March, 1997 (the "Effective Date") by and between
Farm Fresh, Inc., a Virginia corporation (the "Company"), and Xxxxxx X. Xxxxxxx
(the "Executive").
BACKGROUND
The Company desires to employ Executive, and Executive
is willing to be employed by the Company, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
set forth herein, and intending to be legally bound hereby, the parties agree as
follows:
TERMS
SECTION 1. Employment. The Company hereby employs
Executive, and Executive hereby accepts such employment and agrees to serve as
the Company's President and Chief Executive Officer (the "President and CEO")
during the Employment Period set forth in Section 6, subject to the terms and
conditions hereinafter set forth.
SECTION 2. Management Duties. As President and CEO of
the Company during the Employment Period, Executive shall carry out such
duties as are commensurate and normally associated with the positions of
President and Chief Executive Officer, which duties shall however, in all cases,
be subject to policies set by, and at the direction and control of, the
Company's Board of Directors. The Company shall, subject to applicable fiduciary
duties of the Company's directors as advised by counsel, nominate the Executive
and use its best efforts to have Executive appointed or elected to serve on the
Company's Board of Directors at all times during the Employment Period.
SECTION 3. Extent of Services. During the Employment
Period, Executive shall devote substantially all his working time (during
normal business hours) and attention (other than during any illness and
vacations) and give his best efforts, skills and abilities to the management and
operations of the Company; it being understood and agreed that Executive shall
be permitted to manage his own personal affairs and serve as a director or
officer of any trade association, civic, corporate, educational or charitable
organization or governmental entity, provided that Executive's service does not
materially interfere with Executive's performance of his duties hereunder.
Executive shall report only and directly to the Company's Board of Directors.
Notwithstanding the above, the Executive shall not be required to perform any
duties or responsibilities which would be likely to result in a non-compliance
with or violation of any applicable law or regulation. Executive shall perform
his services hereunder only at the Company's Norfolk, Virginia offices and (with
the consent of the Executive) at such other places as are required for the
effective management of the Company (other than business travel).
SECTION 4. Compensation and Benefits.
(a) Executive shall receive, during the
Employment Period, from the Company as compensation for his services a salary
at the annual rate of Four Hundred Thousand Dollars ($400,000) per annum (the
"Base Salary"). The Base Salary shall be payable in equal installments at such
intervals as the Company pays its employees generally (but in no event less
frequently than once per month).
(b) Subject to Section 4(c), the Executive
shall be eligible to participate in an annual cash bonus program which shall
contain financial performance formulas and criteria to be agreed upon by the
Company and the Executive and pursuant to which the Company and the Executive
intend for Executive to be eligible to earn an amount equal to $200,000 upon
satisfaction of the specified financial performance formulas and criteria (the
"Operations Bonus Program"). The amount of each of the annual cash bonuses to
which Executive is entitled under the Operations Bonus Program shall be
determined and the bonus shall be paid to Executive as soon as the underlying
financial data is available (but in no event later than 90 days following the
end of the year for which the bonus is calculated).
(c) The Company, from time to time, may
consider engaging in one or more transactions involving the sale of the
Company and/or all or a portion of its assets, businesses and operations
(including, without limitation, as a merger, consolidation, sale of all or
substantially all of the capital stock of the Company or sale of all or a
portion of the Company's assets) pursuant to (x) a plan of reorganization which
has been confirmed under chapter 11 of title 11 of the United State Code and for
which an effective date thereunder has occurred (an "Effective POR"), or (y) a
full and complete consensual settlement or other restructuring to which the
Company and all of the Company's holders of indebtedness for borrowed money are
a party, or (z) an acquisition agreement between the Company and any acquiror
which, in the opinion of the Company's Board of Directors, contains
indemnification of third parties which is substantially similar (from the
perspective of third parties) to the releases that are customarily available to
third parties under an Effective POR (any such transaction following any one of
the conditions described in clause (x) or (y) or (z), a "Transaction"). In the
event that the aggregate Net Value (as defined below) of the consideration
received in connection with any Transaction(s) during the Employment Period
equals or exceeds $225,000,000 in the aggregate, the Executive shall be entitled
to receive from the Company a cash bonus (a "Transaction Bonus") equal to
$300,000 plus 1.8% of the positive difference (if any) between the Net Value of
the Transaction(s) and $225,000,000. As used herein, "Net Value" shall mean the
sum of: (i) in the case of any asset sale, the sum of the cash and fair market
value of all securities and other non-cash property received by the Company in
any Transaction, increased dollar-for-dollar by any indebtedness for borrowed
money assumed by the purchaser, and reduced dollar-for-dollar by any liabilities
(other than indebtedness for borrowed money) which are properly allocated to the
business sold in the Transaction but which are retained or paid by the Company;
and (ii) in the case of any Transaction other than an asset sale, the sum of the
cash and fair market value of all securities and other non-cash property
received by securityholders of the Company, reduced dollar-for-dollar by (x) any
proceeds from any other Transactions held or to be received by the Company
and/or its securityholders and (y) any liabilities (other than indebtedness for
borrowed money) which are properly allocated to the business sold in the
Transaction but which are retained or paid by such securityholders, and
increased dollar-for-dollar by the aggregate amount of then-existing
indebtedness for borrowed money (after giving effect to any actual or
contemplated debt forgiveness or other similar compromise of such indebtedness
in connection with such Transaction)(all of the foregoing "Net Value" as
reasonably determined by the Company's Board of Directors or any
nationally-recognized investment banking firm designated by the Company). The
amount of any Transaction Bonus to which Executive is entitled under this
Section 4(c) shall be determined and the bonus shall be paid to Executive as
soon as practicable (but in no event later than 90 days following the occurrence
of the latest Transaction for which a payment is owed under this Section 4(c)).
Notwithstanding anything to the contrary contained in this Agreement: (i)
aggregate Transaction Bonus payments owed under this Section 4(c) shall not
exceed $1,650,000 in the aggregate; and (ii) in the event that any Transaction
Bonus is owed with respect to Transactions occurring during any calendar year in
which a payment is otherwise owed pursuant to Section 4(b) under the Operations
Bonus Program, the Executive only shall receive the Transaction Bonus with
respect to such calendar year and no bonus shall be due or owing to the
Executive under the Operations Bonus Program with respect to such calendar year;
and (iii) if any payments (including Transaction Bonus payments) which the
Executive has the right to receive from the Company or any affiliated entities
under this Agreement would otherwise constitute an "excess parachute payment"
(as defined in Internal Revenue Code Section 280G, but determined without regard
to Section 280G(b)(5)(A)(ii)), such payments shall be reduced (the "Parachute
Reduction") pro rata (but not below zero) to the largest amount that will result
in no portion of any such payment being subject to the excise tax imposed by
Internal Revenue Code Section 4999. The determination of any reduction shall be
determined by the Company in good faith before any payments are due and payable
to the Executive. If "Shareholder Approval" (as defined in the next sentence) is
obtained, the Parachute Reduction shall not apply. Shareholder approval means
approval of the elimination of the Parachute Reduction by persons who own,
immediately before a Transaction, more than 75 percent of the voting power of
the Company's outstanding stock by a vote which satisfies the requirements of
Internal Revenue Code section 280G(b)(5)(B) and the applicable proposed,
temporary or final Treasury Regulations thereunder.
(d) During the Employment Period, Executive
and his eligible dependents shall be entitled to participate in the employee
benefit plans and programs generally offered to any other senior executive
officers of the Company during the Employment Period.
(e) All payments to Executive or his estate
made pursuant to this Agreement shall be subject to such withholding as may
be required by any applicable laws.
SECTION 5. Expense Reimbursements; Automobile
Allowance; Special Long-Term Disability Coverage. During the Employment
Period, the Company shall reimburse Executive for all reasonable or necessary
out-of-pocket expenses incurred by Executive in the performance of his duties
hereunder, provided such expenses are submitted to the Company in accordance
with its accounting procedures. The Company shall provide Executive with an
automobile allowance of $750 per month to enable Executive to obtain an
automobile for the Executive's use. The Executive shall be entitled to
participate in the long-term disability plan described on Exhibit A.
SECTION 6. Term. The period of Executive's employment
under this Agreement (the "Employment Period") shall commence as of the date
hereof and, unless sooner terminated pursuant to Section 7 of this Agreement or
extended pursuant to the proviso to this sentence, shall continue until the
close of business on the second anniversary of the date of this Agreement, and
shall terminate at such time; provided however, that the Employment Period shall
be extended for an additional one-year period on the second anniversary of the
date of this Agreement and on each anniversary thereafter, unless either the
Company or the Executive shall have given written notice to the other, no later
than 180 days prior to the last day of the then-existing Employment Period, that
the term of this Agreement shall not be so extended.
SECTION 7. Termination and Severance.
(a) Notwithstanding anything to the contrary contained
herein, the Employment Period shall terminate upon the earliest to occur of the
following (which may occur at any time as provided below and none of which
are deemed to be breaches of any covenants or agreements under this
Agreement):
(i) the close of business on the last day
of the then-existing Employment Period (as such Employment Period may be
extended from time to time pursuant to Section 6) where either the Company or
the Executive has elected not to extend the Employment Period in
accordance with the proviso contained in Section 6;
(ii) the Executive's death;
(iii) delivery by the Company to Executive
of a written notice of the Company's election to terminate Executive's
employment hereunder because of Executive's Disability (as defined below);
(iv) delivery by the Company to
Executive of a written notice of the Company's election to terminate
Executive's employment hereunder for Cause (as defined below);
(v) the close of business which is 90
days after the date on which Executive delivered to the Company a written
notice of Executive's election to terminate Executive's employment hereunder and
such termination is not for Good Reason (as defined below);
(vi) delivery by the Company to
Executive of a written notice of the Company's election to terminate
Executive's employment hereunder and such termination is not for Cause or as a
result of Executive's death or Disability; or
(vii) delivery by Executive to the
Company of a written notice of Executive's election to terminate
Executive's employment hereunder following a Value Transaction (as defined
below) and such termination is for Good Reason; or
(viii) the earlier to occur, as applicable,
of (x) one day following any one or more Transactions resulting in either a sale
of all or substantially all of the assets or capital stock of the Company
(whether by merger or otherwise), and (y) any effective date of any plan of
reorganization of the Company under chapter 11 of title 11 of the United States
Code (the earlier of the foregoing, a "Value Transaction").
(b) For purposes of this Agreement,
"Disability" shall mean that Executive suffers from a permanent physical or
mental impairment which, in the judgment of an independent medical physician,
even with reasonable accommodations prevents Executive from substantially
performing his duties hereunder for a period of one-hundred eighty (180)
consecutive days. For the purposes of this Agreement, the term "Cause" shall
mean (i) the willful and continuing failure by Executive substantially to
perform his duties with the Company (other than any such failure resulting from
illness) under this Agreement, provided that, solely with respect to any act or
omission by Executive which remains curable without significant out-of-pocket
cost to the Company, "Cause" shall not be deemed to exist under this clause (i)
unless Executive has been provided by the Company with at least thirty (30) days
prior written notice of the Company's intention to terminate Executive's
employment hereunder for Cause and Executive has not cured or corrected such
performance defaults within such thirty-day period, or (ii) the willful and
continuing failure by Executive to perform Executive's obligations under Section
9 hereunder, or (iii) the indictment of Executive for theft, embezzlement or
other felony crimes against the Company. For purposes of the foregoing
definition of "Cause," no act, or failure to act, shall be considered "willful"
unless done, or omitted to be done, in bad faith and without reasonable belief
that the action or omission was in the best interest of the Company.
Notwithstanding the foregoing or any other provision hereof, Executive shall not
be deemed to have been terminated for Cause unless there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board of
Directors of the Company at a meeting of the Board of Directors of the Company
called and held for such purpose (after reasonable notice to Executive and an
opportunity for the Executive, together with his counsel, to be heard before the
Board), finding that, in the reasonable and good faith opinion of the Board of
Directors of the Company, Executive was guilty of conduct set forth above and
specifying the particulars thereof in reasonable detail. For purposes of this
Agreement, "Good Reason" shall mean (i) the willful and continuing failure by
the Company substantially to perform its obligations under this Agreement;
provided that, solely with respect to any act or omission by the Company which
remains curable without significant out-of-pocket cost to the Executive, "Good
Reason" shall not be deemed to exist under this clause (i) unless the Company
has been provided by the Executive with at least thirty (30) days prior written
notice of the Executive's intention to terminate Executive's employment
hereunder for Good Reason and the Company has not cured or corrected such
performance defaults within such thirty-day period, or (ii) any material
alteration or diminution in Executive's responsibilities to the Company as its
chief executive officer under this Agreement (other than changes required by
applicable federal or state laws), or (iii) the Executive's compensation or
employment related benefits (other than with respect to any bonus) are in the
aggregate reduced in any material respect, or (iv) the Executive's place of
employment is moved to a location more than 20 miles from the current Norfolk
location without the Executive's consent.
(c) Following any termination of Executive's
employment hereunder, all obligations of the Company under this Agreement
(other than (x) any obligations with respect to the payment of accrued and
unpaid salary, accrued and unpaid bonus, accrued and unpaid vacation, and
expense reimbursement under Section 5 hereof through the date of Executive's
termination of employment hereunder, and (y) as set forth in Section 7(d)) shall
terminate.
(d) In the event of any termination of
Executive's employment hereunder pursuant to Section 7(a)(vi) or Section
7(a)(vii), the Company shall pay to Executive severance compensation in an
amount equal to 100% of Executive's Base Salary. All cash severance compensation
amounts owed pursuant to this Section 7(d) shall be paid within thirty (30) days
following the effective date of Executive's termination.
(e) Any severance compensation granted in
Section 7 of this Agreement shall be the sole and exclusive compensation or
benefit due to Executive upon termination of Executive's employment.
SECTION 8. Representations, Warranties and Acknowledgments of Executive.
(a) Executive represents and warrants that
he is not a party to or otherwise subject to or bound by the terms of any
contract, agreement or understanding (including without limitation any contract,
agreement or understanding containing terms and provisions similar in any manner
to those contained in Section 9 hereof) which in any manner would limit or
otherwise affect his ability to perform his obligations hereunder. Executive
further represents and warrants that his employment with the Company will not
require him to disclose or use any confidential information belonging to prior
employers or other persons or entities.
(b) Executive represents and warrants that he
acknowledges the Company's belief that it would cause the Company serious and
irreparable injury and cost if Executive were to breach the obligations
contained in Section 9.
(c) Executive recognizes and acknowledges
that: (i) in the course of Executive's employment by the Company it will be
necessary for Executive to acquire information which could include, in whole or
in part, information concerning the Company's experimental and development
plans, trade secrets, secret procedures, information relating to ideas,
improvements, and inventions, disclosures, processes, systems, formulas,
composition, patents, patent applications, machinery, materials research
activities and plans, customers or vendors and prospective customers, the
Company's product costs, the Company's prices, profits and volume of sales, and
future business plans, and other confidential or proprietary information
belonging to the Company or relating to the Company's affairs, even if such
information has been disclosed in confidence to one or more third parties
pursuant to distribution agreements, joint research agreements or other
agreements entered into by the Company or any of its affiliates and which
information is not generally available within the public domain (collectively,
such information is referred to herein as the "Confidential Information"); (ii)
the Confidential Information is the property of the Company; (iii) the use,
misappropriation or disclosure of the Confidential Information would cause
irreparable injury to the Company; and (iv) it is essential to the protection of
the Company's good will and to the maintenance of the Company's competitive
position that the Confidential Information be kept secret and that Executive not
disclose the Confidential Information to others (except as may be necessary for
the performance of Executive's duties hereunder).
SECTION 9. Executive's Covenants and Agreements.
(a) Executive agrees that he shall not,
without the prior written consent of the Board of Directors of the
Company, disclose or make available to anyone for use outside the Company's
organization at any time, either during his employment with the Company or
subsequent to the termination of his employment with the Company for any reason,
any Confidential Information, whether or not developed by Executive, except as
required in the performance of Executive's duties to the Company or as is
otherwise required by law, applicable regulation or any recognized subpoena
power. Notwithstanding anything to the contrary contained herein, the foregoing
confidentiality obligations of the Executive shall not apply to any information
or data that is generally available within the public domain or otherwise
publicly accessible through legal means (in no event, in any case, as a result
of Executive's breach of his obligations hereunder).
(b) Upon the termination of Executive's
employment with the Company for any reason, Executive promptly shall deliver to
the Company all correspondence, drawings, blueprints, manuals, letters, notes,
notebooks, reports, flow-charts, programs, proposals, price lists, customer
lists, company credit cards, company vehicles and any documents concerning the
Company's customers or concerning products or processes used by the Company
containing or constituting Confidential Information.
(c) Executive covenants and agrees that during
the period of Executive's employment hereunder and, if applicable, during the
Non-Compete Period, Executive shall not, directly or indirectly (whether as
principal, agent, officer, director, employee, consultant, shareholder, or
otherwise, whether alone or in association with any other person, corporation or
other entity): (i) engage in, own or otherwise operate any supermarket or retail
grocery business in the Commonwealth of Virginia; or (ii) solicit or induce, or
attempt to solicit or induce, any employee of the Company to leave; it being
understood that Executive shall be permitted to own up to 3% of the outstanding
capital stock of any publicly-traded company listed on a national securities
exchange or quoted on the National Association of Securities Dealers Automated
Quotations System. For purposes of this Agreement, "Non-Compete Period" means
the one-year period following any termination of Executive's employment by
Executive pursuant to Sections 7(a)(iv) or 7(a)(v).
SECTION 10. Remedies. Executive acknowledges that
his promised services hereunder are of a special, unique, unusual,
extraordinary and intellectual character, which give them peculiar value the
loss of which cannot be reasonably or adequately compensated in an action of
law, and that, in the event there is a breach hereof by Executive, the Company
will suffer irreparable harm, the amount of which will be impossible to
ascertain. Accordingly, the Company shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction,
either at law or in equity, to obtain damages for any breach or to enforce
specific performance of the provisions or to enjoin Executive from committing
any act in breach of this Agreement. The remedies granted to the Company in this
Agreement are cumulative and are in addition to remedies otherwise available to
the Company at law or in equity.
SECTION 11. Waiver of Breach. The waiver by the
Company or Executive of a breach of any provision of this Agreement by the
other party (the "Breaching Party") shall not operate or be construed as a
waiver of any other or subsequent breach by the Breaching Party of such or any
other provision. No delay or omission by the Company or Executive in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, and any such right, remedy or power may be
exercised by the Company or Executive from time to time and as often as may be
deemed expedient or necessary by the Company or Executive in its or his sole
discretion.
SECTION 12. Notices. All notices required or
permitted hereunder shall be made in writing by hand-delivery, certified or
registered first-class mail, or air courier guaranteeing overnight delivery to
the other party at the following addresses:
To the Company:
Farm Fresh, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Board of Directors
with a copy to:
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
To Executive:
Xxxxxx X. Xxxxxxx
with a copy to:
Barnett, Bolt, Kirkwood & Long
000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
or to such other address as either of such parties may designate in a written
notice served upon the other party in the manner provided herein. All notices
required or permitted hereunder shall be deemed duly given and received when
delivered by hand, if personally delivered; on the third day next succeeding the
date of mailing if sent by certified or registered first-class mail; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
SECTION 13. Severability. If any term or provision of
this Agreement or the application thereof to any person or circumstance
shall, to any extent, be held invalid or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement or the application of any such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law. If any of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to duration, scope, activity or
subject, it shall be construed by limiting and reducing it, so as to be valid
and enforceable to the extent compatible with the applicable law or the
determination by a court of competent jurisdiction.
SECTION 14. Governing Law. The implementation and
interpretation of this Agreement shall be governed by and enforced in
accordance with the laws of the Commonwealth of Virginia without giving effect
to the conflicts of law provisions thereof.
SECTION 15. Binding Effect and Assignability. The rights and
obligations of both parties under this Agreement shall inure to the benefit of
and shall be binding upon their heirs, successors and assigns. Neither party's
rights under this Agreement shall, in any voluntary or involuntary manner, be
assignable and may not be pledged or hypothecated without the prior written
consent of the other party; it being understood that no merger or consolidation
involving the Company shall be deemed an assignment.
SECTION 16. Attorneys' Fees; Costs. In any action or
proceeding for damages or injunctive relief, the prevailing party, in
addition to other relief, shall be entitled to reasonable attorneys' fees, costs
and the expenses of litigation incurred by such party in securing the relief
granted by the court.
SECTION 17. Counterparts; Section Headings. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument. The section headings of this Agreement are for convenience of
reference only.
SECTION 18. Survival. Notwithstanding the
termination of this Agreement or Executive's employment hereunder for any
reason, Sections 7, 8, 9, 10, 14, 16 and 18 hereof (and any other provisions
that explicitly contemplate extending beyond the termination of this Agreement
or the Employment Period) shall survive any such termination.
SECTION 19. Entire Agreement. This instrument
constitutes the entire agreement with respect to the subject matter hereof
between the parties hereto and replaces and supersedes as of the date hereof any
and all prior oral or written agreements and understandings between the parties
hereto. This Agreement only may be modified by an agreement in writing executed
by both Executive and the Company.
SECTION 20. Representations. The Company represents
that it is authorized and empowered to enter into this contract, and no
contracts or indentures will be breached thereby.
SECTION 21. Arbitration. Subject to the terms and
conditions of this Agreement, any dispute, controversy or claim arising from
or relating to this Agreement (other than for injunctive relief) which the
parties to this Agreement are unable to resolve, shall be resolved only by
arbitration, which may be commenced at any time by notice given by any party to
this Agreement. Arbitration shall be conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") then in
effect. There shall be three arbitrators selected as follows: (i) one arbitrator
shall be selected by the Company, one arbitrator shall be selected by the
Executive, and the third arbitrator shall be selected jointly by the first two
arbitrators, except that if the parties to this Agreement fail to select an
arbitrator within sixty (60) days after initiation of arbitration or if the
first two arbitrators fail to select the third arbitrator within one hundred
twenty (120) days after initiation of arbitration, then the AAA shall make such
selection. The venue of the arbitration shall be New York City, New York.
Expenses of the arbitration proceeding shall be borne by the parties to this
Agreement in such amounts or proportions as the arbitrators may determine. The
decision of the arbitrators shall be by majority vote and shall be delivered in
writing. Any arbitral award shall be final and binding on the parties to this
Agreement and judgment upon any arbitral award may be entered and enforced by
any court or judicial authority of competent jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement the date and year first written above.
Company:
FARM FRESH, INC.
By:/s/ Farm Fresh, Inc.
Executive:
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
