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Exhibit 10.40
Execution Copy
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of March 27, 2000 (the "Effective
Date") among Aurora Foods Inc., a Delaware corporation (the "Company") and James
T. Smith (the "Executive").
WHEREAS, the Executive is possessed of certain experience and expertise in
management; and
WHEREAS, the Company wishes to employ the Executive as its President and
Chief Executive Officer and the Executive wishes to accept such employment.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT.
1.1. Agreement. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, in each case subject to the terms
and conditions set forth herein.
1.2. Term. The employment of the Executive by the Company shall be for the
period commencing on the Effective Date and expiring on the date on which
termination of employment is effective pursuant to the provisions of Section 8
(the "Termination Date"). For all purposes of this Agreement, references to the
"term" of the Executive's employment hereunder shall mean the period commencing
on the Effective Date and ending on the Termination Date.
2. POSITION AND DUTIES. The Executive shall serve as President and Chief
Executive Officer of the Company, and shall be accountable to, and shall have
such powers, duties and responsibilities as may from time to time be prescribed
by, the Board of Directors of the Company (the "Board"). The Executive shall
perform and discharge, faithfully, diligently, competently and in good faith
such duties and responsibilities. In addition, during the term hereof, the
Company shall cause and maintain the election of the Executive as a member of
the Board. The Company shall cause the Board to consider Executive for the
position of Chairman of the Board within two years of the Effective Date. The
Executive (a) shall devote all of his business time and attention and his best
efforts and ability to the business and affairs of the Company and its
Subsidiaries and (b) shall not engage in business activities not related to the
Company whether or not compensated during the term of this Agreement without
prior written consent of the Board. The services of the Executive shall be
performed at the offices of the Company in the Metropolitan Area.
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3. COMPENSATION. Subject to all of the terms and conditions hereof and to the
performance by the Executive of his duties and obligations to the Company:
3.1. Salary. As compensation for services performed from the Effective
Date through December 31, 2001, the Company shall pay the Executive a salary at
a rate of $550,000 per annum, and thereafter such other greater amount as may be
established by the Board annually (such annual rate of salary in effect from
time to time being referred to as the "Salary"). The Salary shall be payable in
accordance with the regular payroll practices of the Company. Except as
otherwise provided in this Agreement, the Salary shall be prorated for any
period less than a full year.
3.2. Signing Bonus. The Executive shall receive a bonus in the amount of
$400,000, payable in equal installments on the first 30, 60 and 90 days after
the Effective Date.
3.3. Annual Bonus. As additional compensation for services hereunder, the
Executive shall receive an annual bonus in an amount based on Board-specified
performance targets set in accordance with an executive bonus plan to be adopted
by the Company (such annual bonus in effect from time to time being referred to
as the "Annual Bonus"). Such bonus plan shall provide for the Annual Bonus to be
equal to 100% of Salary in the event the Company achieves 100% of the Board-
specified performance targets, and shall provide for the Annual Bonus to exceed
100% of Salary in the event the Company exceeds the Board-specified performance
targets. For the Company's fiscal year ending December 31, 2000, the Annual
Bonus shall not be less than 100% of Salary paid in 2000 (the Salary for such
fiscal year shall be prorated since Executive shall have been employed by the
Company for less than a full year, but the Annual Bonus shall not be further
prorated by the following sentence), and for the Company's fiscal year ending
December 31, 2001, the Annual Bonus shall not be less than 50% of Salary paid in
2001. Except as otherwise provided in this Agreement, the Annual Bonus shall be
prorated for any period less than a full year.
3.4. Special Bonus. On July 1, 2001, Executive will be eligible to receive
a cash bonus of $200,000. 50% of such special bonus will be payable based upon
the Company's achievement of Board-specified performance targets and 50% of such
special bonus will be payable based upon Executive's continued employment with
the Company as of June 30, 2001.
3.5. Stock Options.
(a) As soon as practicable after the Effective Date, but in any event
prior to May 5, 2000, the Company shall grant to the Executive under the
Company's 2000 Equity Incentive Plan stock options (the "Stock Options") to
purchase 1,000,000 shares of Common Stock of the Company. Such grant shall
be subject to shareholder approval of the Company's 2000 Equity Incentive
Plan. Stock Options will have an exercise price based on the trading price
of Common Stock on the date of grant. 250,000 Stock
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Options will vest on each of December 31, 2000, 2001, 2002 and 2003,
subject to the terms of a stock option certificate (the "Stock Option
Certificate").
(b) The Company shall have the obligation, upon the written request
of Executive within thirty days of the Termination Date, to repurchase
shares obtained by the Executive pursuant to exercised Stock Options
("Option Shares") in the event that the Executive's employment with the
Company is terminated. In the event the Executive's employment with the
Company is terminated pursuant to Section 8.1 (Death), Section 8.2
(Incapacity), Section 8.4 (Other than for Cause), Section 8.5 (Good Reason)
or Section 8.6 (Other than for Good Reason) the repurchase price (the
"Repurchase Price") shall equal the fair market value of the Option Shares
as of the Termination Date. In the event the Executive's employment with
the Company is terminated pursuant to Section 8.3 (Cause), the Company
shall purchase the Option Shares held by such Executive at a Repurchase
Price equal to the original exercise price for such Option Shares;
provided, that, in the event that Executive's employment with the Company
is terminated pursuant to Section 8.3(d), the Repurchase Price shall equal
the fair market value of the Option Shares as of the Termination Date.
(c) In the event the Executive's employment shall be terminated
pursuant to Section 8.1 (Death), Section 8.2 (Incapacity), Section 8.4
(Other than for Cause) or Section 8.5 (Good Reason), any Stock Options
outstanding on the Termination Date that were not then exercisable shall
become exercisable to the full extent of the original grant, and shall be
deemed to become exercisable immediately before the Termination Date.
(d) In the event of any ambiguity, conflict or inconsistency among or
between this Agreement and the Company's 2000 Equity Incentive Plan, the
terms of this Agreement shall prevail and govern, including, without
limitation, provisions of this Agreement governing vesting and repurchase
of Stock Options and Option Shares.
3.6. Business Expenses. During the term of his employment hereunder, the
Executive shall be entitled to receive prompt reimbursement by the Company for
all reasonable business expenses incurred by him on behalf of the Company or any
of its Subsidiaries or Affiliates (in accordance with the policies and
procedures established by the Board from time to time for the Company's
executive officers) in performing services hereunder; provided, however, that
the Executive shall properly account therefor in accordance with requirements
for federal income tax deductibility and the Company's policies and procedures.
3.7. Benefits. From the period commencing on the Effective Date and
subject to any contribution generally required of executives of the Company,
Executive shall be entitled to participate in any and all employee benefit plans
from time to time in effect for senior executives of the Company generally,
except to the extent such plans are in a category of benefit otherwise provided
to Executive. Such participation shall be subject to (i) the terms of the
applicable plan documents, except that the Company will waive minimum service
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requirements for participation, if possible (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or other
committee provided for in or contemplated by such plan, provided such discretion
must be exercised reasonably for the proper administration of the subject plan
and not for the purpose of denying benefits to the Executive. The Company may
alter, modify or terminate its employee benefit plans at anytime as it, in its
sole discretion, determines to be appropriate, provided such alterations and
modifications adverse to the Executive are applicable generally to other senior
executives of the Company.
3.8. Vacations. During the term of his employment hereunder, the Executive
shall be entitled to 20 paid working days as vacation in each year and shall
also be entitled to all paid holidays given by the Company to its employees. The
paid vacation days shall be prorated for any period of service hereunder less
than a full year. The Executive shall not be entitled to cash compensation for
any vacation time not taken during the term hereof and shall not be entitled to
accrue unused vacation.
3.9. Life Insurance. The Company shall maintain life insurance for the
benefit of Executive in an amount that is three times Salary, with the
beneficiary of such life insurance to be designated by Executive.
3.1. Transition Expenses. Until the earlier of eighteen months from the
Effective Date and Executive moving his primary residence to the Metropolitan
Area, the Company shall reimburse Executive (a) for reasonable travel expenses,
including reasonable expenses for air and ground transportation and incidental
travel related expenses such as meals, parking, and long distance telephone
charges of Executive incurred in connection with travel between his primary
residence in Nebraska and the Metropolitan Area and (b) the cost, up to an
amount to be mutually agreed between the Company and the Executive, of leasing a
furnished apartment in the Metropolitan Area. Executive shall use his best
efforts to relocate to the Metropolitan Area as soon as reasonably possible
after the Effective Date. For each applicable tax year, the Company shall make a
lump-sum cash "gross-up" payment to Executive with respect to taxes paid by
Executive in connection with reimbursement of transition costs pursuant to this
Section 3.10. The gross-up payment will be sufficient, after giving effect to
all federal, state and other taxes and charges (including interest and
penalties, if any, imposed as a result of any action or inaction by the Company)
with respect to the gross-up payment, to make Executive whole for all taxes
(including withholding taxes) and any associated interest and penalties, imposed
in connection with the reimbursement of transition costs.
3.1. Relocation of Residence. Up to two years after the Effective Date,
the Company shall reimburse the Executive for the costs, up to an amount to be
mutually agreed between the Company and the Executive, associated with (i) the
closing of the purchase of a house or condominium in the Metropolitan Area
(including but not limited to, loan origination fees and brokers' fees); (ii)
the relocation of personal property to such house or condominium; (iii) the sale
of the Executive's existing home in Nebraska; and (iv) the reasonable cost of
travel expenses, including expenses for air and ground transportation and
incidental travel-related
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expenses such as meals, parking and long distance telephone charges incurred by
the Executive's spouse and immediate family in connection with travel to the
Metropolitan Area for the purpose of searching for housing in the Metropolitan
Area; provided, however, that the Executive shall properly account therefor in
accordance with the requirements for federal income tax deductibility and the
Company's policies and procedures. For each applicable tax year, the Company
shall make a lump-sum cash "gross-up" payment to Executive with respect to taxes
paid by Executive in connection with reimbursement of relocation costs pursuant
to this Section 3.11. The gross-up payment will be sufficient, after giving
effect to all federal, state and other taxes and charges (including interest and
penalties, if any, imposed as a result of any action or inaction by the Company)
with respect to the gross-up payment, to make Executive whole for all taxes
(including withholding taxes) and any associated interest and penalties, imposed
in connection with the reimbursement of relocation costs.
3.12. Transportation Stipend. During the term of his employment hereunder,
the Executive shall be entitled to a stipend of $1,000, to be paid consistent
with Company practice for senior executives, each month to cover expenses
associated with transportation, including leasing or owning an automobile;
provided, however, that the Executive shall properly account therefor in
accordance with the requirements for federal income tax deductibility and the
Company's policies and procedures.
3.13. Country Club Allowance. Executive shall be entitled to reimbursement
of up to (a) $60,000 to cover initiation fees and (b) $6,500 to cover annual
dues at any country club in the Metropolitan Area; provided, however, that the
Executive shall properly account therefor in accordance with the requirements
for federal income tax deductibility and the Company's policies and procedures.
3.14. Legal Fees. The Company shall reimburse Executive for up to $10,000
of legal fees and related expenses incurred by the Executive in connection with
the negotiation of this agreement.
4. OFFICES; SUBSIDIARIES AND AFFILIATES.
4.1. Generally. The Executive agrees to serve during the term of his
employment hereunder, if elected or appointed thereto, in one or more positions
as an officer or director of the Company or any of its Subsidiaries or
Affiliates, or as an officer, trustee, director or other fiduciary of any
pension or other employee benefit plan of the Company or any of its Subsidiaries
or Affiliates. Service in such additional positions will be without additional
compensation except for reimbursement of reasonably related business expenses on
the same terms as provided elsewhere in this Agreement.
4.2. Indemnification. The Company agrees that in connection with the
Executive's service in additional positions as provided under Section 4.1, the
Executive shall be entitled to the benefit of any indemnification provisions in
the charter and by-laws of the Company and any of its Subsidiaries and
Affiliates for which the Executive serves in such an additional
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position and any director and officer liability insurance coverage carried by
the Company and any of its Subsidiaries and Affiliates for which the Executive
serves as an officer or director.
5. UNAUTHORIZED DISCLOSURE; INVENTIONS.
5.1. Confidential Information. The Executive acknowledges that the Company
and its Subsidiaries and Affiliates continually develop Confidential
Information, that the Executive may develop Confidential Information for the
Company or its Subsidiaries or Affiliates and that the Executive may learn of
Confidential Information during the course of employment. The Executive will
comply with the policies and procedures of the Company and its Subsidiaries and
Affiliates for protecting Confidential Information and agrees not to disclose to
any Person (except as required by applicable law or for the proper performance
of his duties and responsibilities to the Company and its Subsidiaries and
Affiliates), or use for his own benefit or gain, any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company or any of its Subsidiaries or Affiliates. The Executive understands
that this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.
5.2. Protection of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company or its Subsidiaries or Affiliates and any copies, in
whole or in part, thereof (the "Documents"), whether or not prepared by the
Executive, shall be the sole and exclusive property of the Company or its
Subsidiaries or Affiliates. The Executive shall safeguard all Documents and
shall surrender to the Company at the time his employment terminates, or at such
earlier time or times as the Board or its designee may specify, all Documents
then in the Executive's possession or control.
5.3. Proprietary Rights. Any and all inventions, discoveries,
developments, methods, processes, compositions, works, supplier and customer
lists (including information relating to the generation and updating thereof),
concepts and ideas (whether or not patentable or copyrightable) (collectively,
"Inventions") conceived, made, developed, created or reduced to practice
(collectively, "Conceived") by the Executive (whether at the request or
suggestion of the Company or otherwise, whether alone or in conjunction with
others, and whether during regular hours of work or otherwise) during the term
of his employment by the Company, which may be directly or indirectly useful in,
or related to, the business, ventures or other activities of or products
manufactured or sold by the Company or any of its Subsidiaries or Affiliates or
any business or products contemplated by the Company or any of its Subsidiaries
or Affiliates while the Executive was or is an employee, officer or director of
the Company (collectively, "Proprietary Rights"), together with Inventions so
Conceived by the Executive within the six-month period following the Termination
Date and which directly relate to Company work initiated, conducted or observed
prior to the Termination Date, shall be promptly and fully disclosed by the
Executive to the Board and shall be the exclusive property of the Company as
against the Executive and his successors, heirs, devisees, legatees and assigns,
and the Executive hereby assigns to the Company his entire right, title and
interest
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therein and shall promptly deliver to the Company all papers, drawings, models,
data and other material relating to any of the foregoing Proprietary Rights
conceived, made, developed, created or reduced to practice by him as aforesaid.
All copyrightable Proprietary Rights shall be considered "works made for hire."
The Executive shall, upon the Company's request and without any payment therefor
or expense with respect thereto, execute any documents necessary or advisable in
the reasonable opinion of the Company's counsel to assign, and confirm the
Company's title in, his entire right, title and interest in the foregoing
Proprietary Rights and to direct issuance of patents or copyrights to the
Company with respect to such Proprietary Rights as are the Company's exclusive
property as against the Executive and his successors, heirs, devisees, legatees
and assigns under this Section 5.3 or to vest in the Company title to such
Proprietary Rights as against the Executive and his successors, heirs, devisees,
legatees and assigns, the expense of securing any such patent or copyright,
however, to be borne by the Company.
6. RESTRICTED ACTIVITIES. The Executive agrees that some restrictions on his
activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of the Company
and its Subsidiaries and Affiliates:
6.1. Non-Competition. While the Executive is employed by the Company and
for a period of two years immediately following termination of his employment
(the "Non-Competition Period"), the Executive shall not, directly or indirectly,
whether as owner, partner, investor, consultant, agent, employee, co-venturer or
otherwise, compete with the Company or any of its Subsidiaries or Affiliates
within the United States in any Competitive Business or undertake any planning
for any Competitive Business. Without limiting the generality of the foregoing,
during the Non-Competition Period, the Executive will not solicit or encourage
any Person who is or was a customer of the Company or any of its Subsidiaries or
Affiliates to terminate its relationship with any of them, or to conduct with
any other Person any business or activity which such customer conducted with the
Company or any of its Subsidiaries or Affiliates, and which is or would be
detrimental to the Company.
6.2. Outside Activities. The Executive agrees that, during his employment
with the Company, he will not undertake any outside activity, whether or not
competitive with the business of the Company or any of its Subsidiaries or
Affiliates, that could reasonably give rise to a conflict of interest or
otherwise interfere with the performance of his duties and obligations to the
Company or any of its Subsidiaries or Affiliates.
6.3. Non-Solicitation of Employees. Acknowledging the strong interest of
the Company in an undisrupted workplace, the Executive further agrees that while
he is employed by the Company and for a period of two years immediately
following termination of his employment, the Executive will not (a) directly, or
indirectly through agents or other representatives, seek to persuade, solicit or
encourage any employee of the Company or any of its Subsidiaries or Affiliates
to discontinue employment with the Company or any of its Subsidiaries or
Affiliates or (b) solicit or encourage any independent contractor providing
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services to the Company or any of its Subsidiaries or Affiliates to terminate or
diminish its relationship with the Company or any of its Subsidiaries or
Affiliates.
6.4. Ownership of Securities. Notwithstanding the provisions of this
Sections 6, the Executive shall have the right to acquire as a passive investor
(with no involvement in the operations or management of the business) up to 1%
of any class of securities which is (a) issued by any Person engaged in a
Competitive Business and (b) publicly traded on a national securities exchange
or over-the-counter market.
7. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has carefully
read and considered all the terms and conditions of this Agreement, including
the restraints imposed upon him pursuant to Sections 5 and 6. The Executive
agrees that such restraints are necessary for the reasonable and proper
protection of the Company and its Subsidiaries and Affiliates and that each and
every one of the restraints is reasonable in respect to subject matter, length
of time and geographic area. The Executive further acknowledges that, were he to
breach any of the covenants contained in Section 5 or 6, the damage to the
Company would be irreparable. The Executive therefore agrees that the Company,
in addition to any other remedies available to it, shall be entitled to
preliminary and permanent injunctive (or other equitable) relief against any
breach or threatened breach by the Executive of any of such covenants, without
having to post bond. The Company will be entitled to recover from the Executive
any attorneys fees and costs it incurs in connection with the successful
enforcement of its rights under Section 5 and 6, and the Executive will be
entitled to recover from the Company reasonable attorneys fees and costs he
incurs in connection with the successful defense of any such enforcement action
brought by the Company. The parties further agree that, in the event that any
provision of Section 5 or 6 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a time, too large a geographic area or too great a range of activities, such
provision shall be deemed to be modified to permit its enforcement to the
maximum extent permitted by law.
8. TERMINATION.
8.1. Death. The Executive's employment hereunder shall terminate upon his
death.
8.2. Incapacity. If the Executive shall have been unable to perform his
duties hereunder by reason of any physical or mental illness, injury or other
incapacity (collectively, "Incapacity") (a) for any period of 90 consecutive
days or (b) for a total of 150 days in any period of 12 consecutive calendar
months, in the reasonable judgment of the Board, after consultation with such
experts, if any, as the Board may deem necessary or advisable, the Company may
terminate the Executive's employment hereunder by written notice to the
Executive. During any period of Incapacity prior to termination of the
Executive's employment under this Section 8.2, the Company shall continue to pay
and provide to the Executive, as the case may be, all amounts and benefits due
the Executive under Section 3.
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8.3. Cause. The Company may terminate the Executive's employment hereunder
for Cause at any time upon written notice to the Executive. For the purposes of
this Agreement, the Company shall have "Cause" to terminate the Executive's
employment hereunder upon: (a) the Executive's breach of any of his obligations
set forth in this Agreement, which breach is not cured within 15 days after
receipt by the Executive from the Board of written notice of such breach; (b)
the Executive's breach of his fiduciary duties as an officer or director of the
Company or any of its Subsidiaries or Affiliates, or as an officer, trustee,
director or other fiduciary of any pension or employee benefit plan of the
Company or any of its Subsidiaries or Affiliates; (c) the Executive's commission
of a felony involving fraud, personal dishonesty or moral turpitude (whether or
not in connection with his employment); or (d) the Executive's failure to follow
the reasonable instructions of the Board, which failure does not cease within 15
days after receipt by the Executive from the Board of written notice of such
failure, except if such failure shall take place after a Change of Control, in
which case such termination shall, for purposes of this Agreement, be considered
a termination pursuant to Section 8.4.
8.4. Other than for Cause. The Company may terminate the Executive's
employment hereunder other than for Cause at any time upon written notice to the
Executive.
8.5. Good Reason. The Executive may terminate the Executive's employment
hereunder for Good Reason at any time upon 60 days' prior written notice to the
Company. In the event of termination of the Executive pursuant to this Section
8.5, the Board may elect to waive the period of notice or any portion thereof.
For the purposes of this Agreement, the Executive shall have "Good Reason" to
terminate the Executive's employment hereunder upon: (a) material diminution in
the nature or scope of Executive's responsibilities, duties or powers, in each
case except in the event of termination of the Executive's employment pursuant
to Section 8.1, 8.2, 8.3 or 8.6; (b) material failure of the Company to provide
Executive the Salary and benefits in accordance with the terms of Section 3
hereof or (c) subsequent to a Change of Control, the Executive is not the most
senior executive officer of the Company or the successor company, as the case
may be.
8.6. Other than for Good Reason. The Executive may terminate his employment
hereunder at any time upon 60 days' prior written notice to the Company. In the
event of termination of the Executive pursuant to this Section 8.6, the Board
may elect to waive the period of notice, or any portion thereof.
9. COMPENSATION UPON TERMINATION.
9.1. Death. In the event of the Executive's death during the term hereof,
the Company shall pay or transfer, as the case may be, to the Executive's
designated beneficiary or, if no beneficiary has been designated by the
Executive, to his estate, (a) his Salary that is earned and unpaid at the date
of death, (b) all amounts due the Executive as of the date of Executive's death
or becoming due as a result of Executive's death or arising before but payable
or to be provided after said death pursuant to Sections 3.4 through 3.14, (c) to
the extent not already granted, the grant of Stock Options contemplated by
Section 3.5; and (d) at the end of such
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fiscal year, an amount equal to the product of (A) the Annual Bonus that the
Executive would otherwise have earned for such fiscal year if death had not
occurred multiplied by (B) a fraction, the numerator of which is the number of
days from the beginning of such fiscal year until the date of death and the
denominator of which is 365.
9.2. Incapacity. If the Executive's employment shall be terminated by
reason of his incapacity pursuant to Section 8.2, the Company shall (a) continue
through the Termination Date to pay or provide to Executive, as the case may be,
all amounts and benefits due to the Executive through the Termination Date under
Section 3 and continue after the Termination Date to pay or provide to Executive
all amounts and benefits under Section 3 arising before, but payable or to be
provided after, the Termination Date and (b) pay the Executive at the end of the
fiscal year in which the Termination Date occurred, an amount equal to the
product of (A) the Annual Bonus that the Executive would otherwise have earned
for such fiscal year if termination pursuant to Section 8.2 had not occurred
multiplied by (B) a fraction, the numerator of which is the number of days from
the beginning of such fiscal year until the date of termination pursuant to
Section 8.2 and the denominator of which is 365. In addition, the Executive
shall receive disability insurance payments to the extent the Executive is
eligible under the Company's disability insurance policy and applicable law.
9.3. Cause. If the Company shall terminate the Executive's employment for
Cause, the Company shall have no further obligations to the Executive under this
Agreement other than payment or provision to the Executive, as the case may be,
of all amounts and benefits due the Executive through the Termination Date under
Section 3 and payment or provision to Executive of all amounts and benefits
arising under Section 3 before, but payable or to be provided after, the
Termination Date.
9.4. Other than for Cause; Good Reason. If the Company shall terminate the
Executive's employment pursuant to Section 8.4 or the Executive shall terminate
the Executive's employment pursuant to Section 8.5, and if no benefits are
payable to the Executive under a separate severance agreement or an executive
severance plan (acknowledged in writing by the Executive to supersede the
provisions of this Section 9.4) as a result of such termination, then the
Company shall pay or provide to the Executive:
(a) as soon as reasonably practicable after the Termination Date, all
amounts and benefits provided for in Section 3 and due to the Executive
through the Termination Date and all amounts and benefits arising under
Section 3 before the Termination Date but payable or to be provided after
the Termination Date;
(b) Executive's Salary in effect at the time notice of termination is
given until the second anniversary of the Termination Date, payable on a
monthly basis or such other time increment as the Executive and the Company
mutually agree; and
(c) to the extent not previously paid, an Annual Bonus for the fiscal
year ending December 31, 2000 (such Annual Bonus to be prorated for the
period that
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Executive is employed by the Company in 2000) in an amount
equal to 100% of Salary in effect at the time notice of termination is
given, and an Annual Bonus for the fiscal year ending December 31, 2001 in
an amount equal to 50% of Salary in effect at the time notice of
termination is given.
With respect to any termination of employment to which this Section 9.4 applies,
until the earlier to occur of (1) the second anniversary of the Termination Date
or (2) the date on which the Executive receives from another employer (including
self-employment or engaging in an enterprise as a sole proprietor or partner)
medical and dental benefits substantially comparable to those made available by
the Company to the Executive as of the time notice of termination is given (and
without regard to any diminution of such medical and dental benefits made by the
Company in anticipation of such notice of termination) (the "Benefits
Termination Date"), the Company shall, if the Executive was participating in any
Company medical and dental insurance plans pursuant to Section 3.7 immediately
prior to the effectiveness of his termination of employment and subject to any
employee contribution applicable to the Executive immediately prior to such
effectiveness, continue to provide and contribute to the cost of the Executive's
participation in such medical and dental insurance plans so long as the
Executive is entitled to continue such participation under applicable law and
plan terms. The obligations of the Company to the Executive under this Section
9.4 (other than clause (a) of the first sentence of this Section 9.4) are
conditioned upon the Executive's signing a release of claims in the form of
Exhibit A (the "Release") within 28 days of the date on which notice of
termination is given and upon such Release remaining in full force and effect
thereafter. Except as otherwise provided, all severance payments under this
Section 9.4 will be in the form of salary continuation, payable in accordance
with the normal payroll practices of the Company and will begin at the Company's
next regular payroll period following the effective date of the Release, but
shall be retroactive to the Termination Date; provided, that payments to the
Executive under this Section 9.4 shall not be reduced by reason of any
compensation payments Executive receives from employment subsequent to the
Termination Date.
9.5 Other than for Good Reason. If the Executive shall terminate his
employment pursuant to Section 8.6, the Company shall have no further
obligations to the Executive under this Agreement other than payment or
provision of all amounts and benefits provided for in Section 3 and due to the
Executive through the Termination Date and all amounts and benefits arising
under Section 3 before the Termination Date but payable or to be provided after
the Termination Date (provided, that, if, in accordance with Section 8.6, the
Board elects to waive the period of notice, or any portion thereof, the payment
of Salary under this Section 9.5 shall continue through the notice period or any
portion thereof so waived).
9.6 Post-Termination Obligations Generally. Except as expressly set forth
in this Section 9, the Stock Option Certificate and as provided by law, the
Company shall have no further obligations to the Executive following expiration
of the term of the Executive's employment hereunder, and performance by the
Company of any obligation specifically provided in this Section 9 shall
constitute full settlement of any claim that the Executive may have on account
of such termination against the Company and its Subsidiaries and Affiliates
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and all of their respective past and present officers, directors, stockholders,
controlling Persons, employees, agents, representatives, successors and assigns
and all other others connected with any of them, both individually and in their
official capacities.
9.7 Change of Control. If within two years of a Change of Control, the
Executive terminates his employment for Good Reason or the Company terminates
Executive's employment other than for Cause, the Company shall have no further
obligations to the Executive under this Agreement other than (i) a lump sum
payment equal to two times the sum of the Salary and the Annual Bonus paid to
Executive during the preceding twelve months; provided, that if Executive
terminates his employment pursuant to this Section 9.7 during any period prior
to March 27, 2001, the Annual Bonus portion of the calculation shall be fixed at
$550,000; (ii) continued contributions (if the Executive was participating in
any Company medical and dental insurance plans pursuant to Section 3.7
immediately prior to the effectiveness of his termination of employment and
subject to any employee contribution applicable to the Executive immediately
prior to such effectiveness), until the Benefits Termination Date, to the cost
of Executive's participation in such medical and dental insurance plans so long
as the Executive is entitled to continue such participation under applicable law
and plan terms; and (iii) all amounts and benefits provided for in Section 3 and
due to the Executive through the Termination Date and all amounts and benefits
arising under Section 3 before the Termination Date but payable or to be
provided after the Termination Date.
10. CONFLICTING AGREEMENTS. Executive hereby represents and warrants that the
execution of this Agreement and the performance of Executive's obligations
hereunder will not breach or be in conflict with any other agreement to which
Executive is a party or is bound and that Executive is not now subject to any
covenants against competition, nonsolicitation or similar covenants that would
affect the performance of Executive's obligations hereunder or would restrict
the Company in its operations, including hiring any additional executives.
Executive has provided the Company with a true and correct copy of all
agreements having executory obligations on the part of the Executive or the
Company between Executive and Executive's former employer or employers and any
similar agreements governing Executive's rights and obligations relating to any
former employer. Executive will not disclose to or use on behalf of the Company
any confidential or proprietary information of a third party without such
party's consent.
11. WITHHOLDING. All payments made by the Company under this Agreement shall
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
12. NOTICES. All notices, requests and demands to or upon the parties hereto to
be effective shall be in writing, by facsimile, by overnight courier or by
registered or certified mail, postage prepaid and return receipt requested, and
shall be deemed to have been duly given or made upon: (a) delivery by hand, (b)
one business day after being sent by nationally recognized overnight courier; or
(c) in the case of transmission by facsimile, when confirmation of receipt is
obtained. Such communications shall be addressed and directed to
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the parties as follows (or to such other address as either party shall designate
by giving like notice of such change to the other party):
If to the Executive:
James T. Smith
21 Saint Andrews Drive
St. Louis, MO 63124
If to the Company:
Aurora Foods Inc.
1000 St. Louis Union Station, Suite 300
St. Louis, MO 63103
Attention: Board of Directors
Facsimile: (314) 632-5633
with a copy to:
Fenway Partners, Inc.
152 West 57th Street, 59th Floor
New York, NY 10019
Attention: Richard C. Dresdale
Facsimile: (212) 757-0609
and
McCown De Leeuw & Co.
3000 Sand Hill Road
Building 3, Suite 290
Menlo Park, CA 94025
Attention: George E. McCown
Facsimile: (650) 854-0853
and
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton, Esq.
Facsimile: (617) 951-7050
13. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. Certain capitalized terms are
used in this Agreement with the specific meanings defined below in this Section
13. Except
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as otherwise explicitly specified to the contrary or unless the
context clearly requires otherwise, (a) the capitalized term "Section" refers to
sections of this Agreement, (b) the capitalized term "Exhibit" refers to
exhibits to this Agreement, (c) references to a particular Section include all
subsections thereof, (d) the word "including" shall be construed as "including
without limitation" and (e) references to "$" mean United States dollars.
13.1. "AAA" is defined in Section 19.
13.2. "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with the
Company (or other specified Person), (b) any other Person which, together with
its Affiliates (as defined in clause (a) above), shall, directly or indirectly,
own beneficially or control the voting of at least 10% of the ownership interest
in the Company (or other specified Person) and (c) any other Person of which the
Company (or other specified Person) and its Affiliates (as defined in clauses
(a) and (b) above) shall, directly or indirectly, own beneficially or control
the voting of at least 10% of any class of outstanding capital stock or other
evidence of beneficial interest or of any interest as a general partner or joint
venturer.
13.3. "Annual Bonus" is defined in Section 3.3.
13.4. "Beneficial Owner" shall have the meaning in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have a
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.
13.5. "Benefits Termination Date" is defined in Section 9.4.
13.6. "Board" is defined in Section 2.
13.7. "Cause" is defined in Section 8.3.
13.8. "Change of Control" means:
a. any person (used as such term is defined in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the Beneficial Owner, directly or indirectly,
of more than 35% of the total voting power of the Voting Stock of the
Company; provided that the Permitted Holders are Beneficial Owners
of, directly or indirectly, in the aggregate, a lesser percentage of
the total voting power of the Voting Stock of the Company than such
other person (used as such term is defined in Sections 13(d) and
14(d) of the Exchange Act) and do not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the Board; provided, further, that a person
(used as such term is defined in Sections
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13(d) and 14(d) of the Exchange Act) shall be deemed to be the
Beneficial Owner of any Voting Stock of a Person held by any other
Person (the "Parent Corporation") if such other person (used as such
term is defined in Sections 13(d) and 14(d) of the Exchange Act) is
the Beneficial Owner of, directly or indirectly, more than 35% of
the voting power of the Voting Stock of the Parent Corporation and
the Permitted Holders are Beneficial Owners of, directly or
indirectly, in the aggregate, a lesser percentage of the voting
power of the Voting Stock of the Parent Corporation and do not have
the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the board of directors of
the Parent Corporation; or
b. the consummation, through one transaction or a series of
related transactions, of a reorganization, merger or consolidation,
in each case, unless, following such reorganization, merger or
consolidation the shareholders of the Company immediately prior to
such reorganization, merger or consolidation are the Beneficial
Owners, directly or indirectly, of more than 50% of, respectively,
the then outstanding shares of Common Stock resulting from such
reorganization, merger or consolidation and the combined voting
power of the Voting Stock of the Company; or
c. the consummation, through one transaction or a series of
related transactions, of (i) a complete liquidation or dissolution
of the Company or (ii) the sale, disposition or other transfer or
removal of assets of the Company to which 40% of the Company's
annualized revenues as of December 31, 1999 are directly
attributable; provided, that a Change of Control shall not be deemed
to have occurred if the entity or entities acquiring control in such
sale or disposition are the Permitted Holders or their Affiliates.
13.9. "Common Stock" means the common stock, $.01 par value, of the
Company.
13.10. "Company" is defined in the preamble to this Agreement.
13.11. "Competitive Business" means any existing business conducted by the
Company or any of its Subsidiaries during the term of the Executive's employment
with the Company; provided that the phrase "existing business" shall for
purposes of this Section 13.11 be deemed to include any business actively
proposed to be conducted by the Company and for which the Company has developed
a formal business or marketing plan.
13.12. "Confidential Information" means any and all information of the
Company and its Subsidiaries and Affiliates that is not generally known by
others with whom they compete or do business, or with whom they actively plan to
compete or do business, including such information relating to (a) the
development, research, testing, manufacturing, marketing and financial
activities of the Company and its Subsidiaries, (b) the Products, (c) the costs,
sources of supply, financial performance and strategic plans of the Company and
its Subsidiaries and Affiliates, (d) the identity and special needs of the
customers of the Company and its Subsidiaries and Affiliates and (e) the people
and organizations with whom the Company and its Subsidiaries and Affiliates have
business relationships and those relationships, but excluding information which
(i) is generally available to and known by the public or (ii) is or becomes
known on a non-confidential basis from a source other than the Executive.
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13.13. "Documents" is defined in Section 5.2.
13.14. "Effective Date" is defined in the preamble.
13.15. "Executive" is defined in the preamble.
13.16. "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
13.17. "Fenway" means Fenway Capital Partners Fund, L.P., a Delaware
limited partnership, and Fenway Capital Partners Fund II, L.P., a Delaware
limited partnership.
13.18. "Good Reason" is defined in Section 8.5.
13.19. "McCown" means McCown De Leeuw & Co. III, L.P., McCown De Leeuw &
Co. III (Europe), L.P., McCown De Leeuw & Co. III (Asia), L.P., Gamma Fund LLC,
McCown De Leeuw & Co. IV, L.P., McCown De Leeuw & Co. IV Associates, L.P.
13.20. "Metropolitan Area" means the St. Louis, Missouri metropolitan
area.
13.21. "Non-Competition Period" is defined in Section 6.1.
13.22. "Option Shares" is defined in Section 3.5.
13.23. "Permitted Holders" means Fenway, McCown, Delta Fund LLC,
California Public Employees Retirement System, Dartford Partnership L.L.C.,
Tiger Oats Limited and UBS Capital LLC.
13.24. "Person" means any individual, partnership, corporation,
association, trust, joint venture, limited liability company, unincorporated
organization or entity, and any government, governmental department or agency or
political subdivision thereof.
13.25. "Products" means all products planned, researched, developed,
tested, manufactured, sold, licensed, leased or otherwise distributed or put
into use by the Company or any of its Subsidiaries or Affiliates, together with
all services provided or planned by the Company or any of its Subsidiaries or
Affiliates, during the Executive's employment; provided that Products shall not
include products not in distribution and for which there is not active planning,
research, development or testing or for which there is not a current formal
business or marketing plan.
13.26. "Proprietary Rights" is defined in Section 5.3.
13.27. "Release" is defined in Section 9.4.
13.28. "Repurchase Price" is defined in Section 3.5.
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13.29. "Salary" is defined in Section 3.1.
13.30. "Special Bonus" is defined in Section 3.4.
13.31. "Stock Options" is defined in Section 3.5.
13.32. "Subsidiary" means any Person of which the Company (or other
specified Person) shall, directly or indirectly, own beneficially or control the
voting of at least a majority of the outstanding capital stock (or other shares
of beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which the Company (or
other specified Person) or a Subsidiary thereof shall be a general partner or
joint venturer without limited liability.
13.33. "Termination Date" is defined in Section 1.2.
13.34. "Voting Stock" of a Person means all classes of capital stock of
such Person then outstanding and normally entitled to vote in the election of
directors or managers.
14. EXCISE TAXES. (a) In the event that any payment or benefit provided to
Executive by the Company will, as a result of a Change of Control, be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended or any successor provision ("Section 4999"), the Company will make a
lump-sum cash "gross-up" payment to Executive as set forth herein.
(b) The gross-up payment will be sufficient, after giving effect to all
federal, state and other taxes and charges (including interest and penalties, if
any, imposed as a result of any action or inaction by the Company) with respect
to the gross-up payment, to make Executive whole for all taxes (including
withholding taxes) and any associated interest and penalties, imposed under or
as a result of Section 4999.
(c) Determinations regarding the necessity and amount of any gross-up
payments will be made by a nationally recognized accounting firm appointed by
the Company, unless Executive has reasonable objections to the use of that firm,
in which case the determinations will be made by a comparable firm chosen by
mutual agreement of Executive and the Company (the firm making the
determinations to be referred to as the "Firm"). The determinations of the Firm
will be binding upon Executive and the Company, except to the extent that the
determinations are established in connection with the resolution (including by
settlement) of a controversy with the Internal Revenue Service to have been
incorrect. All fees and expenses of the Firm will be paid by the Company.
(d) In the event of any controversy with the Internal Revenue Service
regarding the application of Section 4999 to any payments made to Executive,
Executive will promptly inform the Company and will cooperate fully in resolving
the controversy. The Company will control the conduct of the controversy on the
issue of whether any amount paid to Executive constitutes "excess parachute
payments." The Company will make or advance such gross-up payments as are
necessary, as determined by the Firm, to prevent Executive from having to
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bear the cost of payments made to the Internal Revenue Service in the course of,
or as a result of, the controversy. Executive shall return to the Company all
amounts of any gross-up payment which, upon final resolution of the matter, are
deemed not to be owing to the Internal Revenue Service or are refunded to
Executive by the Internal Revenue Service, together with any interest on such
amount paid by the Internal Revenue Service. The Firm will determine the amount
of such gross-up payments or advances and will determine after resolution of the
controversy whether any advances must be returned by Executive to the Company
and the amount thereof. The Company will bear all expenses of the controversy
and will gross Executive up for any additional taxes that may be imposed upon
Executive as a result of its payment of such expenses. Executive shall not agree
with the Internal Revenue Service on the resolution of any controversy without
the consent of the Company, which consent shall not be unreasonably withheld.
15. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board and agreed to in writing by the Executive and such officer as may be
specifically authorized by the Board in connection with such approval. No
waiver by either party hereto at any time of compliance with or of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement and the legal relations created
thereby shall be governed by the domestic substantive laws of the State of
Missouri without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
16. SEVERABILITY. If any portion or provision of this Agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
17. COUNTERPARTS. This Agreement may be executed in any one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
18. ENTIRE AGREEMENT. This Agreement (together with the Stock Option
Certificate) constitutes the entire agreement between the parties hereto, and
supersedes any and all prior communications, agreements and understandings,
written or oral, with respect to the terms and conditions of the Executive's
employment with the Company.
19. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
upon (a) the Executive, his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees and (b)
the Company and its successors (including by means
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of reorganization, merger, consolidation or liquidation) and permitted assigns.
The Company may assign this Agreement to any of its Subsidiaries or to any
successor of the Company by reorganization, merger, consolidation or liquidation
and any transferee of all or substantially all of the business or assets of the
Company or of any division or line of business of the Company with which the
Executive is at any time associated; provided that, no such assignment shall
operate to release the Company from its payment and benefit obligations
hereunder. The Company requires the personal services of the Executive hereunder
and the Executive may not assign this Agreement.
20. ARBITRATION. With the exception of claims arising under or connected to
Sections 5 and 6, any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted by a single arbitrator in St. Louis, Missouri in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association ("AAA") then in effect; provided, however, that the
parties may agree to use an arbitrator other than those provided by the AAA.
The arbitrator shall not have the authority to add to, detract from, or modify,
any provision hereof nor to award punitive damages to any injured party. The
arbitrator shall have the authority to order back-pay and severance
compensation, and, to the extent deemed reasonable and appropriate by such
arbitrator given the issues involved and the outcome of the arbitration, shall
award to the prevailing party reimbursement of out of pocket costs and expenses
(including legal fees) incurred by such party in connection with such dispute or
controversy, together with interest thereon. A decision by a the arbitrator
shall be final and binding. Judgment may be entered on the arbitrator's award in
any court having competent jurisdiction. Responsibility for bearing the cost of
the arbitration shall be determined by the arbitrator and shall be proportional
to the arbitrator's decision on the merits.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands under
seal, as of the date first above written.
THE COMPANY:
AURORA FOODS INC.
By /s/ Richard C. Dresdale
------------------------------
Richard C. Dresdale
Chairman of the Board
THE EXECUTIVE:
-----------------------------------
James T. Smith
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands under
seal, as of the date first above written.
THE COMPANY:
AURORA FOODS INC.
By
------------------------------
Richard C. Dresdale
Chairman of the Board
THE EXECUTIVE:
/s/ James T. Smith
---------------------------------
James T. Smith
<PAGE>
Exhibit A
---------
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments and benefits to be
provided in connection with the termination of my employment in accordance with
the terms of the Employment Agreement dated as of March 27, 2000 (as amended and
in effect from time to time, the "Employment Agreement") between Aurora Foods
Inc., a Delaware corporation (the "Company"), and me, I, on my own behalf and on
behalf of my personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees and all others connected
with me, hereby release and forever discharge Fenway (as defined in the
Employment Agreement), the Company and their respective Affiliates (as defined
in the Employment Agreement) and all of their respective past and present
officers, directors, stockholders, controlling persons, employees, agents,
representatives, successors and assigns and all others connected with any of
them (all collectively, the "Released"), both individually and in their official
capacities, from any and all rights, liabilities, claims, demands and causes of
action of any type (collectively, "Claims") which I have had in the past, now
have, or might now have, through the date of my signing of this Release of
Claims, in any way resulting from, arising out of or connected with my
employment or its termination or pursuant to any federal, state, foreign or
local employment law, regulation or other requirement (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company, each as amended from time to time); provided, however, that the
foregoing release shall not apply to any future claim to enforce the terms of my
Employment Agreement with the Company or any future claim arising from my status
as a vested beneficiary of an employee benefit or pension benefit plan.
In signing this Release of Claims, I acknowledge that I have had at least
21 days from the date of notice of termination of my employment to consider the
terms of this Release of Claims and that such time has been sufficient; that I
am encouraged by the Company to seek the advice of an attorney prior to signing
this Release of Claims; and that I am signing this Release of Claims voluntarily
and with a full understanding of its terms.
I understand that I may revoke this Release of Claims at any time within
seven days of the date of my signing by written notice to the Company and that
this Release of Claims will take effect only upon the expiration of such seven-
day revocation period and only if I have not timely revoked it.
Intending to be legally bound, I have signed this Release of Claims under
seal as of the date first written above.
Signature: ___________________________________
James T. Smith
Date Signed: _________________________________
