SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
November 23, 1999
Date of Report
(Date of earliest event reported)
LIBERTY GROUP HOLDINGS, INC. (f/k/a BIO-RESPONSE, INC.)
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-9201 59-3453151
--------------- ---------------------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
11 52ND Street Brooklyn, New York 11232
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(Address of registrant's principal executive offices)
(718) 492-1200
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(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
The Escrow Agreement dated November 23, 1999 (the "Escrow
Agreement") by and among Liberty Food Group, LLC ("Liberty"), Ferro Foods
Corporation ("Ferro"), Frank Ferro, Sr., Frank Gambino, and Herrick, Feinstein
LLP, as escrow agent, pursuant to which the 2,000,000 shares of common stock,
par value $.004 per share (the "Common Stock"), of Liberty Group Holdings, Inc.
(the "Issuer"), which were used as consideration for the purchase of the assets
of Ferro were placed in escrow, was amended. Pursuant to Amendment No. 1 to the
Escrow Agreement dated as of February 1, 2000, 67,000 shares of Common Stock
were forfeited by Ferro and released from escrow to various third parties. Since
the financial accommodation to satisfy the debts of the business was not
established, the balance of the shares (1,933,000) are to remain in escrow and
released only upon the written instructions of Liberty. It is the intention of
Ferro, Frank Ferro, Sr. and Frank Gambino that the escrow shares be used, to the
extent possible, to satisfy outstanding debts and liabilities in connection with
the business of Ferro. Accordingly, additional shares may be forfeited by Ferro
in the event that such liabilities and obligations, which were not assumed by
Liberty, are not satisfied. For the terms and conditions of Amendment No. 1 to
the Escrow Agreement, reference is made to such agreement attached hereto as
Exhibit 10.10. All statements made herein concerning the foregoing agreement are
qualified in their entirety by reference to such Exhibit.
On February 22, 2000, F&A Dairy Products, Inc. ("F&A") commenced a
lawsuit against Ferro and Liberty in the United States District Court, Western
District of Wisconsin, seeking a temporary restraining order ordering Ferro and
Liberty to escrow $1,707,310, or in the alternative, to enjoin Ferro and Liberty
from removing the 2,000,000 shares from escrow. F&A is Liberty's largest
supplier of cheeses and other dairy products. The parties have agreed to settle
the lawsuit, and subject to the execution and delivery of definitive
documentation evidencing the settlement agreement (collectively, the "Definitive
Documents"), the lawsuit will be dismissed. The terms of the settlement include
the execution of a 14-month note by Ferro for the amount of the outstanding
balance owed by Ferro to F&A, a guarantee by Liberty of said note thirty days
after the execution thereof, and a pledge by Ferro of 500,000 shares of Common
Stock.
Item 7. Financial Statements and Exhibits.
This Form 8-K/A amends Item 7 of the Current Report on Form 8-K
(Commission File No. 0-201) filed by the Registrant on December 2, 1999, by
providing the financial information required as set forth below.
(a) Financial Statements of Business Acquired.
(b) Pro Forma Financial Information.
(c) 10.1 Agreement and Plan of Merger, dated as of November 23, 1999, by
and among Bio-Response, Inc., BR Acquisition Corp. and Liberty Food
Group, Ltd.*
10.2 Asset Purchase Agreement dated as of November 23, 1999, by and
among Liberty Food Group, LLC, Ferro Foods Corporation, Frank Ferro,
Sr. and Frank Gambino*
10.3 Escrow Agreement, dated as of November 23, 1999, by and among
Liberty Food Group, LLC, Ferro Foods Corporation, Frank Ferro, Sr.,
Frank Gambino, and Herrick, Feinstein LLP, as escrow agent*
10.4 Voting Trust and Proxy Agreement, dated as of November 23, 1999,
by an among Ferro Foods Corporation, Frank Ferro, Sr., Frank Gambino,
and Barry Hawk*
10.5 Employment Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Barry Hawk, as assumed and assigned by BR
Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a Bio-Response,
Inc.
10.6 Employment Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Dennis Lane, as assumed and assigned by
BR Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a
Bio-Response, Inc.
10.7 Option Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Dennis Lane, as assumed and assigned by
BR Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a
Bio-Response, Inc.
10.8 Option Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Barry Hawk, as assumed and assigned by BR
Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a Bio-Response,
Inc.
10.9 Press Release issued by Liberty Group Holdings, Inc. f/k/a
Bio-Response, Inc.*
10.10 Amendment No. 1 to Escrow Agreement dated as of February 1,
2000, by and among Liberty Food Group, LLC, Ferro Foods Corporation,
Frank Ferro, Sr., Frank Gambino, and Herrick, Feinstein LLP, as escrow
agent
* Previously filed
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LIBERTY GROUP HOLDINGS, INC.
By: /s/ Barry Hawk
Barry Hawk
President
Date: March 13, 2000
<PAGE>
<TABLE>
<CAPTION>
CLIENT: FERRO - Ferro Foods Corpoation
PERIOD: 9/30/99
PREPARED BY: PMM
PRINT DATE: 03/09/00
9/30/99 9/30/98
ADJUSTED PRIOR YEAR
ACCOUNT NO. ACCOUNT NAME BALANCE ADJUSTED
- ----------- ----------------------------------- ---------- ----------
<S> <C> <C> <C>
001 CASH/ASIA ......................... 0 8,047
002 FERRO M/M ......................... 0 3,059
003 INVENTORY ......................... 1,065,000 834,485
010 ACCTS REC ......................... 1,505,147 2,189,974
011 ALLOW FOR DOUBTFUL ACCTS .......... (14,000) (45,000)
012 N/G CHECKS ........................ 11,340 87,542
020 PREPAID INS ....................... 72,131 96,735
022 LOANS REC ......................... 7,041 93,567
023 SECURITY DEPOSITS ................. 9,112 9,112
024 DUE FROM MAIN STREET .............. 0 6,842
025 DUE FROM OFFICERS ................. 282,526 131,955
025A LOAN PAYABLE - FRANK FERRO JR ..... 34,665 0
025B LOAN RECEIVABLE - P D'ARPA ........ 15,174 0
026 DUE FROM B&G ...................... 0 125,000
027 CSV OFFICERS LIFR INS ............. 64,330 90,803
030 DELIVERY EQIUP .................... 1,296,752 1,289,011
032 ACCUM DEPRECIATION ................ (1,598,271) (1,510,065)
033 LEASEHOLD INPROV .................. 112,435 74,998
034 OFFICE & WAREHOUSE EQUIP .......... 459,185 436,802
035 DUE FROM FRANKEL .................. 2,323 0
035A F. GAMBINO LOAN ................... (72,412) 0
036 DUE TO/FROM GGFD .................. (79,226) (65,000)
037 DUE FROM FDG ...................... 160,353 108,417
038 REFUNDABLE TAXES .................. 0 0
039 DUE FROM BUSH (RENT) .............. 32,800 32,800
039A BUSH INV. LOAN .................... (45,000) 0
CASH OVERDRAFT (238,095)
040 ACCTS PAYABLE ..................... (2,969,488) (3,015,319)
0430 AUTO LOAN (LEXUS) ................. (17,276) (22,057)
043M N/P 1994 GMC TRUCK ................ 0 0
043P AUTO LOAN (TRAILER) ............... (46,470) (52,901)
043Q AUTO LOAN (TRAILER) ............... (46,470) (52,901)
CURRENT MATURITIES ................ (56,546) (89,627)
CURRENT MATURITIES ................ 56,546 89,627
044 PAYROLL TAXES PAYABLE/SWT ......... 0 (23)
044A LIAB FOR EMPLOYEE DEDUCTIONS ...... (10,028) (5,648)
045 LIABILITY FOR TAX - NYS ........... 0 319
045A LIAB FOR TAXES NYC GEN'L .......... 2,029 1,747
046 ACCRUED EXPENSES .................. (72,176) (300,487)
047 ACCRUED CORPORATION TAX ........... (400) 0
048B LIAB FOR EQUIP UNDERCAP LEASE ..... (39,417) (67,570)
049 LOANS PAYABLE/ASIA ................ (876,500) (604,500)
049A NOTE PAY/ASIA ..................... (272,100) (283,117)
049B LOAN PAYABLE - PHYLLIS FERRO ...... (126,969) 0
050 CAPITAL STOCK ..................... (100,000) (100,000)
050A COMMON STOCK-PAR .................. (30) (30)
052 RETAINED EARNINGS ................. 1,748,977 101,672
053 CAPITAL IN EXCESS OF PAR CAP ...... (26,970) (26,970)
055 OFFICERS INS FUND-FG .............. 5,282 3,850
060 SALES ............................. (13,251,280) (13,881,907)
061 PURCHASES ......................... 11,172,977 11,634,714
061A INVENTORY ADJUSTMENT .............. (167,660) 0
061B INVENTORY-BEGINNING ............... 0 1,148,167
061C INVENTORY-ENDING .................. 0 (834,485)
062A PAYROLL/OFFICERS .................. 250,100 164,500
062B WAREHOUSE/LABOR ................... 436,751 464,204
062C SALES REPS ........................ 241,709 267,741
062D PAYROLL OFFICE .................... 196,971 211,008
065 INS. RECOVERY ..................... (610) 0
069A TRUCK RENTAL/SALEM ................ 48,380 58,783
069C TRUCK RENTAL/BRODY ................ 73,711 152,278
069D MENDON LEASING .................... 0 (9,175)
069E RENTALS/CLERK LIFT ................ 8,791 18,542
069G AUTO LEASE/TOYOTA ................. 1,772 1,590
069H AUTO LEASE/TOYOTA ................. 1,810 1,621
069I AUTO LEASE/JAQUAR ................. 3,931 5,624
070 SALES REP EXPENSE ................. 25,090 20,217
071A AUTO TRUCK DELIVERY ............... 149,490 121,833
071B DEPR EXP- DELIVERY EQUIPMENT ...... 38,115 76,140
071C DEPR EXP-OFFICE & WHSE EQUIP ...... 18,613 13,630
071D AMORTIZATION EXPENSE-LEASEHOLD IMP 1,249 918
072 T&E ............................... 4,336 13,335
073 TELEPHONE ......................... 43,420 37,654
074 LIGHT & HEAT ...................... 44,438 45,321
075 OFFICE SUPPLIES ................... 20,203 16,608
076A MAINT & REPAIR .................... (2,583) (7,464)
076C WAREHOUSE EXP ..................... 20,272 10,133
077A INTEREST EXPENSE .................. 68,172 71,231
077B BANK CHARGES ...................... 22,112 10,575
077C CREDIT CARD CHARGES ............... 2,532 0
077D INTEREST TRUCK AND AUTO LOANS ..... 7,662 12,196
077E INTERSET CAPITAL LEASE EQUIPMENT .. 14,548 28,887
077F FINES & PENALTIES ................. 0 4,193
077G INTEREST EXPENSE-BUSH INVEST ...... 0 7,325
078A GENERAL INS ....................... 73,119 127,229
078B HEALTH INS ........................ 35,499 63,453
079 ACCOUNTING ........................ 3,525 18,450
080 RENT .............................. 66,786 110,303
081 MISC .............................. 8,525 4,907
082 CLEANING .......................... 12,103 7,605
083 ADVERTISING ....................... 13,238 13,598
084 SECURITY ALARM .................... 10,456 9,261
085 HOLIDAY EXPENSE ................... 2,366 1,859
087 COMMISION EXPENSE ................. 25,548 6,520
088 LEGAL FEES ........................ 7,208 7,566
089 PAY TAX EXP/FICA .................. 0 0
089A PAYROLL TAXES-G&A ................. 36,409 39,989
089B PAYROLL TAXES-SELLING ............. 59,405 77,947
089C PAY TAX/NYSUI ..................... 0 0
089D PAY TAX/ NYS DISABILITY ........... 0 0
089E PAY TAX FUI ....................... 0 0
090A LICENSE & PERMITS ................. 235 249
091 FUEL TAXES/IFTA ................... 1,649 2,460
094 INTEREST INCOME ................... (2) (73)
095 CHARITY ........................... 1,034 3,631
096 NYC GEN BUSINESS TAX .............. 257 2,454
096A NYS FRANCHISE TAX ................. 23 (425)
097 CR & COLLECTIONS .................. 5,599 8,958
098 COMPUTER EXPENSE .................. 0 7,806
099 CONSULTING FEES ................... 33,291 0
100 BUILDING MAINTENANCE & COSTS ...... 0 17,670
101 BAD DEBT RECOVERIES ............... 0 0
102 PROVISION FOE DOUBTFUL ACCOUNTS ... (126,601) 7,500
110 DEPRECIATION EXPENSE .............. 0 0
----------- -----------
(0) (0)
=========== ===========
</TABLE>
<PAGE>
FERRO FOODS CORPORATION
Balance Sheets
September 30,
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
1999 1998
Current assets
Cash ............................................. $ 0 $ 11,106
Accounts receivable -net of allowance for doubtful
accounts ....................................... 1,502,487 1,291,145
Loans receivable officers ........................ 210,114 131,955
Loans receivable employees and affiliates ........ 219,556 155,365
Inventories ...................................... 1,065,000 834,485
Prepaid expenses ................................. 74,160 98,801
----------- -----------
Total current assets ................... 3,071,317 2,522,857
Property and equipment - at cost, less accumulated
depreciation and amortization .................. 270,101 290,747
Cash surrender value of officers' life insurance ............. 64,330 90,803
Security deposits ............................................ 9,112 9,112
----------- -----------
$ 3,414,860 $ 2,913,518
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Cash overdraft ................................... $ 238,095 $ 0
Notes payable, bank .............................. 876,500 604,500
Accounts payable ................................. 2,969,488 3,075,319
Accrued expenses and other current liabilities ... 82,604 306,157
Current maturities of notes payable .............. 56,546 89,627
Loans payable, employees and affiliates .......... 218,395
----------- -----------
Total current liabilities .............. 4,441,627 4,075,604
----------- -----------
Notes payable less current maturities ........................ 365,186 388,918
----------- -----------
Stockholders' deficiency
Common stock ..................................... 30 30
Additional paid in capital ....................... 126,970 126,970
Accumulated deficit .............................. (1,518,953) (1,678,003)
----------- -----------
(1,391,953) (1,551,003)
----------- -----------
$ 3,414,860 $ 2,913,518
=========== ===========
</TABLE>
<PAGE>
FERRO FOODS CORPORATION
Statement of Operations and Accumulated Deficit
For the nine month ended September 30,
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net sales .......................................... $ 13,251,280 $ 13,881,907
------------ ------------
Cost of sales ...................................... 11,005,317 11,948,396
------------ ------------
Gross profit .................... 2,245,963 1,933,511
------------ ------------
Operating expenses
Selling ................................ 1,149,766 1,293,465
General and administrative ............. 750,869 932,384
Interest ............................... 115,024 134,333
------------ ------------
2,015,659 2,360,182
------------ ------------
Income (loss) before income taxes 230,304 (426,671)
Income taxes ....................................... 280 2,029
------------ ------------
Net income (loss) ............... 230,024 (428,700)
Accumulated deficit, beginning of the period ....... (1,748,977) (1,249,303)
------------ ------------
Accumulated deficit, end of period ................. $ (1,518,953) $ (1,678,003)
============ ============
</TABLE>
<PAGE>
FERRO FOODS CORPORATION
Schedules of Selling and General and Administrative Expenses
For the nine month ended September 30,
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Selling
Delivery and warehouse salaries $ 436,751 $ 464,204
Sales salaries and commissions . 292,347 294,478
Payroll taxes .................. 59,405 77,947
Truck and delivery ............. 287,885 351,096
Advertising .................... 13,238 13,598
Travel and entertainment ....... 4,336 13,335
Depreciation, Delivery equipment 38,115 76,140
Warehouse supplies and expense . 17,689 2,669
----------- -----------
$ 1,149,766 $ 1,293,465
=========== ===========
General and Administrative
Officers' salaries ............. 250,100 164,500
Office salaries ................ 196,971 211,008
Payroll taxes .................. 36,409 39,989
Professional fees .............. 44,024 26,016
Rent ........................... 66,786 110,303
Insurance ...................... 108,008 190,682
Security ....................... 10,456 9,261
Taxes, other ................... 1,884 2,709
Computer expense ............... 0 7,806
Telephone ...................... 43,420 37,654
Light and heat ................. 44,438 45,321
Cleaning ....................... 12,103 7,605
Building maintenance ........... 0 17,670
Stationery ..................... 20,203 16,608
Depreciation and amortization .. 19,862 14,548
Officers' life insurance ....... 5,282 3,850
Provision for doubtful accounts (126,601) 7,500
Charitable contributions ....... 1,034 3,631
Miscellaneous .................. 16,490 15,725
----------- -----------
$ 750,869 $ 932,384
=========== ===========
</TABLE>
EMPLOYMENT AGREEMENT
Employment Agreement (this "Agreement") made and entered into as of July
1, 1999, by and between Liberty Food Group Ltd., a Delaware corporation (the
"Company"), with offices at 11 52nd Street, Brooklyn, New York 11232, and Barry
Hawk, residing at 638 Willow Road, West Hempstead, New York 11552 ("Executive").
RECITALS:
WHEREAS, the Company desires to employ Executive and Executive desires
to be employed by the Company, upon the terms, covenants and conditions
hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
EMPLOYMENT; TERM. THE COMPANY SHALL EMPLOY EXECUTIVE AS PRESIDENT, CHIEF
OPERATING OFFICER, SECRETARY AND HEAD OF CORPORATE DEVELOPMENT, SUBJECT TO THE
SUPERVISION AND DIRECTION OF THE COMPANY'S CHIEF EXECUTIVE OFFICER AND ITS BOARD
OF DIRECTORS (THE "BOARD"), FROM THE DATE HEREOF UNTIL JUNE 30, 2004 (SUCH
PERIOD, THE "TERM"). THE TERM SHALL BE AUTOMATICALLY EXTENDED FOR ADDITIONAL
PERIODS OF ONE YEAR EACH, UNLESS EITHER PARTY GIVES NOTICE TO THE OTHER OF ITS
INTENTION NOT TO RENEW AT LEAST 60 DAYS PRIOR TO THE EXPIRATION OF THE
THEN-CURRENT TERM.
COMPENSATION; REIMBURSEMENT.
BASE SALARY. FOR SERVICES RENDERED BY EXECUTIVE HEREUNDER, THE COMPANY SHALL PAY
EXECUTIVE A BASE SALARY OF ONE HUNDRED SIXTY THOUSAND DOLLARS ($160,000) PER
ANNUM, IN EQUAL INSTALLMENTS (THE "BASE SALARY"), IN ACCORDANCE WITH THE PAYROLL
PRACTICES OF THE COMPANY IN EFFECT FROM TIME TO TIME. THE AMOUNT OF THE BASE
SALARY SHALL BE INCREASED ANNUALLY BY AN AMOUNT EQUAL TO THE GREATER OF (I) 10%
OF THE THEN CURRENT BASE SALARY AND (II) THE PERCENT CHANGE THE CONSUMER PRICE
INDEX FOR ALL URBAN CONSUMERS FOR REGION II (NEW YORK AND NORTHERN NEW JERSEY)
FOR THE TWELVE MONTH PERIOD ENDING IN MAY OF EACH YEAR DURING THE TERM.
INCENTIVE BONUS. IN ADDITION TO THE BASE SALARY, EXECUTIVE SHALL BE ELIGIBLE TO
RECEIVE AN INCENTIVE BONUS ("INCENTIVE BONUS") EACH YEAR IN AN AMOUNT NOT LESS
THAN 10% OF THE BASE SALARY (THE "MINIMUM INCENTIVE BONUS"), NOR MORE THAN 100%
OF THE BASE SALARY, AS DETERMINED BY THE BOARD CONSIDERING THE OPERATING RESULTS
OF THE COMPANY FOR EACH YEAR OF THE TERM; PROVIDED, THAT IN ORDER TO RECEIVE AT
LEAST THE MINIMUM INCENTIVE BONUS, FOR EACH YEAR OF THE TERM THE COMPANY SHALL
HAVE ACHIEVED EITHER (A) PRE-TAX INCOME OF $100,000.00, OR (B) REVENUE GROWTH OF
10% OR MORE, BASED ON REVENUES FOR THE 12 MONTH PERIOD ENDING EACH JUNE 30. THE
INCENTIVE BONUS SHALL BE PAID WITHIN 30 DAYS AFTER SUCH OPERATING RESULTS HAVE
BEEN DETERMINED BY THE COMPANY'S ACCOUNTANTS, BUT IN ANY CASE, NOT LATER THAN
OCTOBER 15 OF EACH YEAR.
ADDITIONAL BENEFITS. (A) IN ADDITION TO THE BASE SALARY AND THE INCENTIVE BONUS,
EXECUTIVE SHALL BE ENTITLED TO ALL OTHER BENEFITS OF EMPLOYMENT PROVIDED TO THE
OTHER EXECUTIVES OF THE COMPANY OR ITS AFFILIATES, INCLUDING BUT NOT LIMITED TO
RETIREMENT, HEALTH, DISABILITY, AND LIFE INSURANCE.
FROM JULY 1, 1999 THROUGH JUNE 30, 2000, EXECUTIVE SHALL BE ENTITLED TO FOUR
WEEKS PAID VACATION; FROM JULY 1, 2000 THROUGH JUNE 30, 2002, FIVE WEEKS OF
ANNUAL PAID VACATION; FROM AND AFTER JULY 1, 2002, SIX WEEKS OF ANNUAL PAID
VACATION. IN THE EVENT THAT EXECUTIVE IS ABSENT FROM WORK ON ANY DAY WHICH IS A
JEWISH HOLIDAY, SUCH ABSENCE SHALL BE TREATED AS A PAID HOLIDAY AND NOT A
VACATION DAY.
REIMBURSEMENT. EXECUTIVE SHALL BE REIMBURSED FOR ALL REASONABLE OUT OF POCKET
BUSINESS EXPENSES FOR BUSINESS TRAVEL AND ENTERTAINMENT INCURRED IN CONNECTION
WITH THE PERFORMANCE OF HIS DUTIES HEREUNDER (A) SO LONG AS SUCH EXPENSES
CONSTITUTE BUSINESS DEDUCTIONS FROM TAXABLE INCOME FOR THE COMPANY AND ARE
EXCLUDABLE FROM TAXABLE INCOME TO THE EXECUTIVE UNDER THE GOVERNING LAWS AND
REGULATIONS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE");
PROVIDED, THAT EXECUTIVE SHALL NEVERTHELESS BE ENTITLED TO FULL REIMBURSEMENT IN
ANY CASE WHERE THE INTERNAL REVENUE SERVICE MAY, UNDER SECTION 274(N) OF THE
CODE, DISALLOW TO THE COMPANY DEDUCTION OF 50% OF MEALS AND ENTERTAINMENT
EXPENSES; AND (B) TO THE EXTENT SUCH EXPENSES DO NOT EXCEED THE AMOUNTS
ALLOCABLE FOR SUCH EXPENSES IN BUDGETS THAT ARE APPROVED FROM TIME TO TIME BY
THE COMPANY. THE REIMBURSEMENT OF EXECUTIVE'S BUSINESS EXPENSES SHALL BE
MONTHLY, UPON PRESENTATION TO AND APPROVAL BY THE COMPANY OF VALID RECEIPTS AND
OTHER APPROPRIATE DOCUMENTATION FOR SUCH EXPENSES.
DUTIES.
CORPORATE DEVELOPMENT; ACQUISITIONS. (A) THE EXECUTIVE'S PRIMARY DUTIES SHALL BE
(I) TO ACT AS HEAD OF CORPORATE DEVELOPMENT AND (II) MANAGEMENT OF THE DAY TO
DAY OPERATIONS OF THE COMPANY. EXECUTIVE WILL BE RESPONSIBLE FOR IDENTIFYING,
NEGOTIATING, AND STRUCTURING ACQUISITIONS ON BEHALF OF THE COMPANY, AND WILL
CONDUCT THE DUE DILIGENCE ON THE TARGET COMPANIES AS WELL AS ENGAGE OTHER
PROFESSIONALS (I.E. LEGAL, ACCOUNTING, OR ACTUARIAL) TO ASSIST IN SUCH PROCESS.
EXECUTIVE INTENDS TO UTILIZE HIS NETWORK OF CONTACTS WITHIN THE FINANCIAL
COMMUNITY TO IDENTIFY SOURCES OF FINANCING FOR THE CONTEMPLATED TRANSACTIONS,
AND WILL FURTHER WORK WITH COUNSEL ON THE FINANCIAL AND STRATEGIC PUBLIC
RELATIONS, PRESS RELEASES, AND FILINGS FOR THE COMPANY. EXECUTIVE WILL ALSO MEET
WITH WALL STREET ANALYSTS AND INSTITUTIONS TO SEEK RESEARCH COVERAGE AND
INVESTMENT INTEREST IN THE COMPANY.
UPON CONSUMMATION OF ANY ACQUISITION, EXECUTIVE WILL OVERSEE THE INTEGRATION OF
THE ACQUIRED COMPANY INTO THE OPERATIONS OF THE COMPANY.
GENERAL MANAGEMENT. EXECUTIVE'S DUTIES SHALL INCLUDE, BUT NOT BE LIMITED TO, THE
DUTIES DESCRIBED AS FOLLOWS:
EMPLOY, PAY, SUPERVISE AND DISCHARGE ALL EMPLOYEES OF THE COMPANY, AND DETERMINE
ALL MATTERS WITH REGARD TO SUCH PERSONNEL, INCLUDING, WITHOUT LIMITATION,
COMPENSATION, BONUSES AND FRINGE BENEFITS;
ESTABLISH PROCEDURES FOR IMPLEMENTING THE POLICIES ESTABLISHED BY THE COMPANY;
AND
CAUSE THE COMPANY TO BE OPERATED IN COMPLIANCE WITH ALL LEGAL REQUIREMENTS.
ASSIGNMENT OF DUTIES. EXECUTIVE SHALL HAVE SUCH OTHER DUTIES AS MAY BE ASSIGNED
TO HIM FROM TIME TO TIME BY THE COMPANY'S CHIEF EXECUTIVE OFFICER OR BOARD OF
DIRECTORS, COMMENSURATE WITH HIS EXPERIENCE AND RESPONSIBILITIES AS PRESIDENT,
CHIEF OPERATING OFFICER AND SECRETARY.
DEVOTION OF TIME. EXECUTIVE HEREBY AGREES TO DEVOTE HIS FULL TIME, ABILITIES AND
ENERGY TO THE FAITHFUL PERFORMANCE OF THE DUTIES ASSIGNED TO HIM OR HER AND TO
THE PROMOTION AND FORWARDING OF THE BUSINESS AFFAIRS OF THE COMPANY; PROVIDED,
THAT NOTHING CONTAINED HEREIN SHALL PREVENT EXECUTIVE FROM DEVOTING BUSINESS
TIME AND ATTENTION TO (A) CASEXPRESS.COM, LLC, (B) LIBERTY TRADING LLC AND (C)
KNOLLWOOD CONTAINER LLC.
CONFLICTING ACTIVITIES.
EXECUTIVE SHALL NOT, DURING THE TERM OF THIS AGREEMENT, BE ENGAGED IN ANY OTHER
BUSINESS ACTIVITY WITHOUT THE PRIOR CONSENT OF THE BOARD OF DIRECTORS OF THE
COMPANY; PROVIDED, HOWEVER, THAT THIS RESTRICTION SHALL NOT BE CONSTRUED AS
PREVENTING EXECUTIVE FROM INVESTING HIS PERSONAL ASSETS IN PASSIVE INVESTMENTS
IN BUSINESS ENTITIES WHICH ARE NOT IN COMPETITION WITH THE COMPANY OR ITS
AFFILIATES, OR FROM PURSUING BUSINESS OPPORTUNITIES AS PERMITTED BY PARAGRAPH
3.5.
EXECUTIVE AGREES TO PROMOTE AND DEVELOP ALL BUSINESS OPPORTUNITIES THAT COME TO
HIS ATTENTION RELATING TO CURRENT OR ANTICIPATED FUTURE BUSINESS OF THE COMPANY,
IN A MANNER CONSISTENT WITH THE BEST INTERESTS OF THE COMPANY AND WITH HIS
DUTIES UNDER THIS AGREEMENT. SHOULD EXECUTIVE DISCOVER A BUSINESS OPPORTUNITY
THAT DOES NOT RELATE TO THE CURRENT OR ANTICIPATED FUTURE BUSINESS OF THE
COMPANY, HE SHALL FIRST OFFER SUCH OPPORTUNITY TO THE COMPANY. SHOULD THE BOARD
OF THE COMPANY NOT EXERCISE ITS RIGHT TO PURSUE THIS BUSINESS OPPORTUNITY WITHIN
A REASONABLE PERIOD OF TIME, NOT TO EXCEED SIXTY (60) DAYS, THEN EXECUTIVE MAY
DEVELOP THE BUSINESS OPPORTUNITY HIMSELF; PROVIDED, HOWEVER, THAT SUCH
DEVELOPMENT MAY IN NO WAY CONFLICT OR INTERFERE WITH THE DUTIES OF EXECUTIVE
HEREUNDER. FURTHER, EXECUTIVE MAY DEVELOP SUCH BUSINESS OPPORTUNITIES ONLY ON
HIS OWN TIME, AND MAY NOT USE ANY SERVICE, PERSONNEL, EQUIPMENT, SUPPLIES,
FACILITY, OR TRADE SECRETS OF THE COMPANY IN SUCH DEVELOPMENT. AS USED HEREIN,
THE TERM "BUSINESS OPPORTUNITY" SHALL NOT INCLUDE BUSINESS OPPORTUNITIES
INVOLVING INVESTMENT IN PUBLICLY TRADED STOCKS, BONDS OR OTHER SECURITIES, OR
OTHER INVESTMENTS OF A PERSONAL NATURE.
STOCK OF COMPANY. DURING THE TERM, EXECUTIVE SHALL BE ENTITLED TO
PURCHASE STOCK OF THE COMPANY IN THE SAME AMOUNTS AND FOR THE SAME
CONSIDERATION, TERMS AND CONDITIONS AS PROVIDED TO OTHER EXECUTIVES OF THE
COMPANY. THE MANNER OF ACQUISITION OF STOCK SHALL BE STRUCTURED SO AS TO
MINIMIZE ADVERSE TAX CONSEQUENCES TO EXECUTIVE.
CONFIDENTIALITY OF TRADE SECRETS AND OTHER MATERIALS.
TRADE SECRETS. OTHER THAN IN THE PERFORMANCE OF HIS OR HER DUTIES HEREUNDER,
EXECUTIVE AGREES NOT TO DISCLOSE, EITHER DURING THE TERM OF HIS OR HER
EMPLOYMENT BY THE COMPANY OR AT ANY TIME THEREAFTER, TO ANY PERSON, FIRM OR
CORPORATION ANY INFORMATION CONCERNING THE BUSINESS AFFAIRS, THE TRADE SECRETS
OR THE CUSTOMER LISTS OR SIMILAR INFORMATION OF THE COMPANY.
OWNERSHIP OF TRADE SECRETS; ASSIGNMENT OF RIGHTS. EXECUTIVE HEREBY AGREES THAT
ALL KNOW-HOW, DOCUMENTS, REPORTS, PLANS, PROPOSALS, MARKETING AND SALES PLANS,
CLIENT LISTS, CLIENT FILES AND MATERIALS MADE BY HIM OR HER OR BY THE COMPANY
ARE THE PROPERTY OF THE COMPANY AND SHALL NOT BE USED BY HIM IN ANY WAY ADVERSE
TO THE COMPANY'S INTERESTS. EXECUTIVE SHALL NOT DELIVER, REPRODUCE OR IN ANY WAY
ALLOW SUCH DOCUMENTS OR THINGS TO BE DELIVERED OR USED BY ANY THIRD PARTY
WITHOUT SPECIFIC DIRECTION OR CONSENT OF THE BOARD OF DIRECTORS OF THE COMPANY.
EXECUTIVE HEREBY ASSIGNS TO THE COMPANY ANY RIGHTS WHICH HE OR SHE MAY HAVE IN
ANY SUCH TRADE SECRET OR PROPRIETARY INFORMATION.
INDEMNITY. THE COMPANY HEREBY INDEMNIFIES THE EXECUTIVE FROM LIABILITY FOR ANY
PRIOR ACTS OF THE COMPANY, INCLUDING BOTH THE COMMISSION OR OMISSION OF SAID
ACTION OR DISCLOSURE, AND THE EXECUTIVE SHALL BE INDEMNIFIED BY THE COMPANY FOR
ANY ACT PERFORMED BY HIM IN GOOD FAITH WITHIN THE SCOPE OF HIS EMPLOYMENT.
TERMINATION.
BASIS FOR TERMINATION.
EXECUTIVE'S EMPLOYMENT HEREUNDER MAY BE TERMINATED AT ANY TIME BY MUTUAL
AGREEMENT OF THE PARTIES.
THIS AGREEMENT SHALL AUTOMATICALLY TERMINATE ON THE LAST DAY OF THE MONTH IN
WHICH EXECUTIVE DIES OR BECOMES PERMANENTLY INCAPACITATED. "PERMANENT
INCAPACITY" AS USED HEREIN SHALL MEAN MENTAL OR PHYSICAL INCAPACITY, OR BOTH,
REASONABLY DETERMINED BY THE COMPANY'S BOARD OF DIRECTORS BASED UPON A
CERTIFICATION OF SUCH INCAPACITY BY, IN THE DISCRETION OF THE COMPANY'S BOARD OF
DIRECTORS, EITHER EXECUTIVE'S REGULARLY ATTENDING PHYSICIAN OR A DULY LICENSED
PHYSICIAN SELECTED BY THE COMPANY'S BOARD OF DIRECTORS, RENDERING EXECUTIVE
UNABLE TO PERFORM SUBSTANTIALLY ALL OF HIS OR HER DUTIES HEREUNDER AND WHICH
APPEARS REASONABLY CERTAIN TO CONTINUE FOR AT LEAST SIX CONSECUTIVE MONTHS
WITHOUT SUBSTANTIAL IMPROVEMENT. EXECUTIVE SHALL BE DEEMED TO HAVE "BECOME
PERMANENTLY INCAPACITATED" ON THE DATE THE COMPANY'S BOARD OF DIRECTORS HAS
DETERMINED THAT EXECUTIVE IS PERMANENTLY INCAPACITATED AND SO NOTIFIES
EXECUTIVE.
EXECUTIVE'S EMPLOYMENT MAY BE TERMINATED BY THE COMPANY "WITH CAUSE," EFFECTIVE
UPON DELIVERY OF WRITTEN NOTICE TO EXECUTIVE GIVEN AT ANY TIME (WITHOUT ANY
NECESSITY FOR PRIOR NOTICE) IF ANY OF THE FOLLOWING SHALL OCCUR:
ANY MATERIAL BREACH OF EXECUTIVE'S OBLIGATIONS IN SECTION
(6?) ABOVE; OR
ANY MATERIAL ACTS OR EVENTS WHICH INHIBIT EXECUTIVE FROM FULLY PERFORMING
HIS OR HER RESPONSIBILITIES TO THE COMPANY IN GOOD FAITH, SUCH AS (A) A
FELONY CRIMINAL CONVICTION; (B) ANY OTHER CRIMINAL CONVICTION INVOLVING
EXECUTIVE'S LACK OF HONESTY OR EXECUTIVE'S MORAL TURPITUDE; (C) DRUG OR
ALCOHOL ABUSE; OR (D) GROSS CARELESSNESS OR GROSS MISCONDUCT.
EXECUTIVE'S EMPLOYMENT MAY BE TERMINATED BY THE COMPANY "WITHOUT CAUSE" (FOR ANY
REASON OR NO REASON AT ALL) AT ANY TIME BY GIVING EXECUTIVE 60 DAYS PRIOR
WRITTEN NOTICE OF TERMINATION, WHICH TERMINATION SHALL BE EFFECTIVE ON THE 60TH
DAY FOLLOWING SUCH NOTICE. IF EXECUTIVE'S EMPLOYMENT UNDER THIS AGREEMENT IS
TERMINATED WITHOUT CAUSE, OR IF HIS AGENT IS TERMINATED UPON A CHANGE OF CONTROL
(AS DEFINED BELOW), THE COMPANY SHALL IMMEDIATELY (A) MAKE A LUMP SUM CASH
PAYMENT TO EXECUTIVE EQUAL TO THE SUM OF (I) EXECUTIVE'S BASE SALARY FOR THE
BALANCE OF THE YEAR IN WHICH TERMINATION OCCURS, (II) A PRO RATA PORTION OF THE
MINIMUM INCENTIVE BONUS, IF ANY, EARNED FOR THE YEAR IN WHICH TERMINATION OCCURS
PRORATED TO THE DATE OF TERMINATION, AND (III) ANY UNREIMBURSED EXPENSES
ACCRUING TO THE DATE OF TERMINATION; AND (B) MAKE A LUMP SUM CASH PAYMENT EQUAL
TO THE SUM OF EXECUTIVE'S ANNUAL BASE SALARY FOR ALL ADDITIONAL YEARS REMAINING
IN THE TERM AND THE MINIMUM INCENTIVE BONUS FOR EACH SUCH YEAR. IMMEDIATELY UPON
THE COMPANY'S TERMINATION OF EXECUTIVE UNDER THIS PROVISION, ALL STOCK OPTIONS,
ENTITLEMENTS, MATCHING FUNDS, AND PROFIT SHARING PREVIOUSLY GRANTED SHALL
IMMEDIATELY VEST. A "CHANGE OF CONTROL" MEANS THAT THE EARLIER TO OCCUR AT ANY
TIME DURING THE TERM: (I) ANY PERSON OR GROUP ACQUIRES 49.9% OR MORE OF ANY
CLASS OF STOCK OR OTHER EQUITY INTEREST IN THE COMPANY, (II) ANY PERSON OR GROUP
ACQUIRES, THROUGH PURCHASE, VOTING AGREEMENT, TRUST, DEVISE OR OTHERWISE, THE
POWER TO ELECT A MAJORITY OF THE BOARD, OR OTHERWISE DIRECT THE MANAGEMENT AND
AFFAIRS OF THE COMPANY, (III) THE COMPANY MERGES, CONSOLIDATES OR ENTERS INTO A
BUSINESS COMBINATION WITH ANOTHER ENTITY WHEREBY THE THEN-CURRENT STOCKHOLDERS
OF THE COMPANY OWN IN THE AGGREGATE 50% OR LESS OF THE OUTSTANDING EQUITY
SECURITIES OF THE SURVIVING ENTITY AS A RESULT OF SUCH TRANSACTION, OR (IV) THE
COMPANY SELLS ALL OR SUBSTANTIALLY ALL OF ITS ASSETS (ANY SUCH EVENT IN CLAUSES
(I) THROUGH (IV) OF THIS PARAGRAPH, A "CHANGE IN CONTROL"). WHILE IT IS NOT
EXPECTED THAT PAYMENTS MADE TO EXECUTIVE HEREUNDER WILL BE TREATED AS PAYMENTS
SUBJECT TO ANY EXCISE TAX UNDER CODE SECTION 4999, TO THE EXTENT THEY ARE THE
COMPANY SHALL PAY EXECUTIVE AN AMOUNT WHICH, NET OF ANY APPLICABLE TAXES
THEREON, WILL PROVIDE EXECUTIVE WITH SUFFICIENT CASH TO PAY ANY EXCISE TAX
PAYABLE BY HIM BY REASON OF ANY PAYMENTS HEREUNDER.
UPON A CHANGE IN CONTROL, EXECUTIVE WILL HAVE NO FURTHER OBLIGATIONS HEREUNDER,
AND SHALL IMMEDIATELY BE ENTITLED TO SEEK OTHER EMPLOYMENT, PROVIDED THAT
NOTHING SHALL DIMINISH THE PAYMENTS DUE EXECUTIVE HEREUNDER.
EXECUTIVE MAY TERMINATE HIS EMPLOYMENT HEREUNDER BY GIVING THE COMPANY 60 DAYS
PRIOR WRITTEN NOTICE, WHICH TERMINATION SHALL BE EFFECTIVE ON THE 60TH DAY
FOLLOWING SUCH NOTICE.
PAYMENT UPON TERMINATION. UPON TERMINATION UNDER PARAGRAPHS 6.1(A), (B), (C), OR
(F), THE COMPANY SHALL PAY TO EXECUTIVE WITHIN 10 DAYS AFTER TERMINATION AN
AMOUNT EQUAL TO THE SUM OF (I) EXECUTIVE'S BASE SALARY ACCRUED TO THE DATE OF
TERMINATION AND (II) UNREIMBURSED EXPENSES ACCRUED TO THE DATE OF TERMINATION.
MISCELLANEOUS.
TRANSFER AND ASSIGNMENT. THIS AGREEMENT IS PERSONAL AS TO EXECUTIVE AND SHALL
NOT BE ASSIGNED OR TRANSFERRED BY EXECUTIVE. THIS AGREEMENT MAY BE ASSIGNED BY
THE COMPANY TO ANY ENTITY WHICH IS A SUCCESSOR IN INTEREST OR OPERATOR OF THE
COMPANY'S BUSINESS.
SEVERABILITY. NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO REQUIRE THE
COMMISSION OF ANY ACT CONTRARY TO LAW. SHOULD THERE BE ANY CONFLICT BETWEEN ANY
PROVISIONS HEREOF AND ANY PRESENT OR FUTURE STATUTE, LAW, ORDINANCE, REGULATION,
OR OTHER PRONOUNCEMENT HAVING THE FORCE OF LAW, THE LATTER SHALL PREVAIL, BUT
THE PROVISION OF THIS AGREEMENT AFFECTED THEREBY SHALL BE CURTAILED AND LIMITED
ONLY TO THE EXTENT NECESSARY TO BRING IT WITHIN THE REQUIREMENTS OF THE LAW, AND
THE REMAINING PROVISIONS OF THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND
EFFECT.
GOVERNING LAW. THIS AGREEMENT IS MADE UNDER AND SHALL BE CONSTRUED
PURSUANT TO THE LAWS OF THE STATE OF DELAWARE.
COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS AND ALL DOCUMENTS
SO EXECUTED SHALL CONSTITUTE ONE AGREEMENT, BINDING ON ALL OF THE PARTIES
HERETO, NOTWITHSTANDING THAT ALL OF THE PARTIES DID NOT SIGN THE ORIGINAL OR THE
SAME COUNTERPARTS.
ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AND
UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDES ALL PRIOR ORAL OR WRITTEN AGREEMENTS, ARRANGEMENTS, AND
UNDERSTANDINGS WITH RESPECT THERETO. NO REPRESENTATION, PROMISE, INDUCEMENT,
STATEMENT OR INTENTION HAS BEEN MADE BY ANY PARTY HERETO THAT IS NOT EMBODIED
HEREIN, AND NO PARTY SHALL BE BOUND BY OR LIABLE FOR ANY ALLEGED REPRESENTATION,
PROMISE, INDUCEMENT, OR STATEMENT NOT SO SET FORTH HEREIN.
MODIFICATION. THIS AGREEMENT MAY BE MODIFIED, AMENDED, SUPERSEDED, OR CANCELLED,
AND ANY OF THE TERMS, COVENANTS, REPRESENTATIONS, WARRANTIES OR CONDITIONS
HEREOF MAY BE WAIVED, ONLY BY A WRITTEN INSTRUMENT EXECUTED BY THE PARTY OR
PARTIES TO BE BOUND BY ANY SUCH MODIFICATION, AMENDMENT, SUPERSESSION,
CANCELLATION, OR WAIVER.
ATTORNEYS' FEES AND COSTS. IN THE EVENT OF ANY DISPUTE ARISING OUT OF THE
SUBJECT MATTER OF THIS AGREEMENT, THE PREVAILING PARTY SHALL RECOVER, IN
ADDITION TO ANY OTHER DAMAGES ASSESSED, ITS ATTORNEYS' FEES AND COURT COSTS
INCURRED IN LITIGATING OR OTHERWISE SETTLING OR RESOLVING SUCH DISPUTE WHETHER
OR NOT AN ACTION IS BROUGHT OR PROSECUTED TO JUDGMENT. IN CONSTRUING THIS
AGREEMENT, NONE OF THE PARTIES HERETO SHALL HAVE ANY TERM OR PROVISION CONSTRUED
AGAINST SUCH PARTY SOLELY BY REASON OF SUCH PARTY HAVING DRAFTED THE SAME.
WAIVER. THE WAIVER BY EITHER OF THE PARTIES, EXPRESS OR IMPLIED, OF ANY RIGHT
UNDER THIS AGREEMENT OR ANY FAILURE TO PERFORM UNDER THIS AGREEMENT BY THE OTHER
PARTY, SHALL NOT CONSTITUTE OR BE DEEMED AS A WAIVER OF ANY OTHER RIGHT UNDER
THIS AGREEMENT OR OF ANY OTHER FAILURE TO PERFORM UNDER THIS AGREEMENT BY THE
OTHER PARTY, WHETHER OF A SIMILAR OR DISSIMILAR NATURE.
HEADINGS. THE SECTION AND OTHER HEADINGS CONTAINED IN THIS AGREEMENT ARE FOR
REFERENCE PURPOSES ONLY AND SHALL NOT IN ANY WAY AFFECT THE MEANING AND
INTERPRETATION OF THIS AGREEMENT.
NOTICES. ANY NOTICE UNDER THIS AGREEMENT MUST BE IN WRITING, MAY BE TELECOPIED,
SENT BY EXPRESS 24 HOUR GUARANTEED COURIER, OR HAND DELIVERED, OR MAY BE SERVED
BY DEPOSITING THE SAME IN THE UNITED STATES MAIL, ADDRESSED TO THE PARTY TO BE
NOTIFIED, POSTAGE PREPAID AND REGISTERED OR CERTIFIED WITH A RETURN RECEIPT
REQUESTED. THE ADDRESSES OF THE PARTIES FOR THE RECEIPT OF NOTICE SHALL BE AS
FOLLOWS:
If to the Company: Liberty Group Holdings, Inc.
25 53rd Street
Brooklyn, New York 11232
[Remainder of Page Intentionally Omitted;
Signature Page to Follow]
If to Executive: Barry Hawk
638 Willow Road
West Hempstead, New York 11552
with a copy in either
case to : Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attention: David Lubin
Each notice given by registered or certified mail shall be deemed
delivered and effective on the date of delivery as shown on the return receipt,
and each notice delivered in any other manner shall be deemed to be effective as
of the time of actual delivery thereof. Each party may change its address for
notice by giving notice thereof in the manner provided above.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the date first set forth above.
LIBERTY GROUP HOLDINGS, INC.
/s/
By: ------------------------
Name: Barry Hawk
Title: President
/s/
-------------------------
Barry L. Hawk
EMPLOYMENT AGREEMENT
Employment Agreement (this "Agreement") made and entered into as of
July 1, 1999, by and between Liberty Food Group Ltd., a Delaware corporation
(the "Company"), with offices at 11 52nd Street, Brooklyn, New York 11232, and
Dennis Lane, residing at c/o Liberty Food Group, Ltd., 11 52nd Street, Brooklyn,
New York 11232 ("Executive").
RECITALS:
WHEREAS, the Company desires to employ Executive and Executive
desires to be employed by the Company, upon the terms, covenants and conditions
hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
EMPLOYMENT; TERM. THE COMPANY SHALL EMPLOY EXECUTIVE AS CHAIRMAN, CHIEF
EXECUTIVE OFFICER, AND TREASURER, SUBJECT TO THE SUPERVISION AND DIRECTION OF
THE COMPANY'S BOARD OF DIRECTORS (THE "BOARD"), FROM THE DATE HEREOF UNTIL JUNE
30, 2004 (SUCH PERIOD, THE "TERM"). THE TERM SHALL BE AUTOMATICALLY EXTENDED FOR
ADDITIONAL PERIODS OF ONE YEAR EACH, UNLESS EITHER PARTY GIVES NOTICE TO THE
OTHER OF ITS INTENTION NOT TO RENEW AT LEAST 60 DAYS PRIOR TO THE EXPIRATION OF
THE THEN-CURRENT TERM.
COMPENSATION; REIMBURSEMENT.
BASE SALARY. FOR SERVICES RENDERED BY EXECUTIVE HEREUNDER, THE COMPANY SHALL PAY
EXECUTIVE A BASE SALARY OF ONE HUNDRED SIXTY THOUSAND DOLLARS ($160,000) PER
ANNUM, IN EQUAL INSTALLMENTS (THE "BASE SALARY"), IN ACCORDANCE WITH THE PAYROLL
PRACTICES OF THE COMPANY IN EFFECT FROM TIME TO TIME. THE AMOUNT OF THE BASE
SALARY SHALL BE INCREASED ANNUALLY BY AN AMOUNT EQUAL TO THE GREATER OF (I) 10%
OF THE THEN CURRENT BASE SALARY AND (II) THE PERCENT CHANGE THE CONSUMER PRICE
INDEX FOR ALL URBAN CONSUMERS FOR REGION II (NEW YORK AND NORTHERN NEW JERSEY)
FOR THE TWELVE MONTH PERIOD ENDING IN MAY OF EACH YEAR DURING THE TERM.
INCENTIVE BONUS. IN ADDITION TO THE BASE SALARY, EXECUTIVE SHALL BE ELIGIBLE TO
RECEIVE AN INCENTIVE BONUS ("INCENTIVE BONUS") EACH YEAR IN AN AMOUNT NOT LESS
THAN 10% OF THE BASE SALARY (THE "MINIMUM INCENTIVE BONUS"), NOR MORE THAN 100%
OF THE BASE SALARY, AS DETERMINED BY THE BOARD CONSIDERING THE OPERATING RESULTS
OF THE COMPANY FOR EACH YEAR OF THE TERM; PROVIDED, THAT IN ORDER TO RECEIVE AT
LEAST THE MINIMUM INCENTIVE BONUS, FOR EACH YEAR OF THE TERM THE COMPANY SHALL
HAVE ACHIEVED EITHER (A) PRE-TAX INCOME OF $100,000.00, OR (B) REVENUE GROWTH OF
10% OR MORE, BASED ON REVENUES FOR THE 12 MONTH PERIOD ENDING EACH JUNE 30. THE
INCENTIVE BONUS SHALL BE PAID WITHIN 30 DAYS AFTER SUCH OPERATING RESULTS HAVE
BEEN DETERMINED BY THE COMPANY'S ACCOUNTANTS, BUT IN ANY CASE, NOT LATER THAN
OCTOBER 15 OF EACH YEAR.
ADDITIONAL BENEFITS. (A) IN ADDITION TO THE BASE SALARY AND THE INCENTIVE BONUS,
EXECUTIVE SHALL BE ENTITLED TO ALL OTHER BENEFITS OF EMPLOYMENT PROVIDED TO THE
OTHER EXECUTIVES OF THE COMPANY OR ITS AFFILIATES, INCLUDING BUT NOT LIMITED TO
RETIREMENT, HEALTH, DISABILITY, AND LIFE INSURANCE.
FROM JULY 1, 1999 THROUGH JUNE 30, 2000, EXECUTIVE SHALL BE ENTITLED TO FOUR
WEEKS PAID VACATION; FROM JULY 1, 2000 THROUGH JUNE 30, 2002, FIVE WEEKS OF
ANNUAL PAID VACATION; FROM AND AFTER JULY 1, 2002, SIX WEEKS OF ANNUAL PAID
VACATION.
REIMBURSEMENT. EXECUTIVE SHALL BE REIMBURSED FOR ALL REASONABLE OUT OF POCKET
BUSINESS EXPENSES FOR BUSINESS TRAVEL AND ENTERTAINMENT INCURRED IN CONNECTION
WITH THE PERFORMANCE OF HIS DUTIES HEREUNDER (A) SO LONG AS SUCH EXPENSES
CONSTITUTE BUSINESS DEDUCTIONS FROM TAXABLE INCOME FOR THE COMPANY AND ARE
EXCLUDABLE FROM TAXABLE INCOME TO THE EXECUTIVE UNDER THE GOVERNING LAWS AND
REGULATIONS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE");
PROVIDED, THAT EXECUTIVE SHALL NEVERTHELESS BE ENTITLED TO FULL REIMBURSEMENT IN
ANY CASE WHERE THE INTERNAL REVENUE SERVICE MAY, UNDER SECTION 274(N) OF THE
CODE, DISALLOW TO THE COMPANY DEDUCTION OF 50% OF MEALS AND ENTERTAINMENT
EXPENSES; AND (B) TO THE EXTENT SUCH EXPENSES DO NOT EXCEED THE AMOUNTS
ALLOCABLE FOR SUCH EXPENSES IN BUDGETS THAT ARE APPROVED FROM TIME TO TIME BY
THE COMPANY. THE REIMBURSEMENT OF EXECUTIVE'S BUSINESS EXPENSES SHALL BE
MONTHLY, UPON PRESENTATION TO AND APPROVAL BY THE COMPANY OF VALID RECEIPTS AND
OTHER APPROPRIATE DOCUMENTATION FOR SUCH EXPENSES.
DUTIES.
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND TREASURER OF THE COMPANY. (A) THE
EXECUTIVE'S PRIMARY DUTIES SHALL BE TO ACT AS HEAD OF CORPORATE DEVELOPMENT AND
(II) MANAGEMENT OF THE DAY TO DAY OPERATIONS OF THE COMPANY. EXECUTIVE WILL BE
RESPONSIBLE FOR IDENTIFYING, NEGOTIATING, AND STRUCTURING ACQUISITIONS ON BEHALF
OF THE COMPANY, AND WILL CONDUCT THE DUE DILIGENCE ON THE TARGET COMPANIES AS
WELL AS ENGAGE OTHER PROFESSIONALS (I.E. LEGAL, ACCOUNTING, OR ACTUARIAL) TO
ASSIST IN SUCH PROCESS. Executive hereby agrees to devote his full time,
abilities and energy to the faithful performance of the duties assigned to him
or her and to the promotion and forwarding of the business affairs of the
Company; provided, that nothing contained herein shall prevent Executive from
devoting business time and attention to (a) casexpress.com, LLC, (b) Liberty
Trading LLC and (c) Knollwood Container LLC.
CONFLICTING ACTIVITIES.
EXECUTIVE SHALL NOT, DURING THE TERM OF THIS AGREEMENT, BE ENGAGED IN ANY OTHER
BUSINESS ACTIVITY WITHOUT THE PRIOR CONSENT OF THE BOARD OF DIRECTORS OF THE
COMPANY; PROVIDED, HOWEVER, THAT THIS RESTRICTION SHALL NOT BE CONSTRUED AS
PREVENTING EXECUTIVE FROM INVESTING HIS PERSONAL ASSETS IN PASSIVE INVESTMENTS
IN BUSINESS ENTITIES WHICH ARE NOT IN COMPETITION WITH THE COMPANY OR ITS
AFFILIATES, OR FROM PURSUING BUSINESS OPPORTUNITIES AS PERMITTED BY PARAGRAPH
3.5
EXECUTIVE AGREES TO PROMOTE AND DEVELOP ALL BUSINESS OPPORTUNITIES THAT COME TO
HIS ATTENTION RELATING TO CURRENT OR ANTICIPATED FUTURE BUSINESS OF THE COMPANY,
IN A MANNER CONSISTENT WITH THE BEST INTERESTS OF THE COMPANY AND WITH HIS
DUTIES UNDER THIS AGREEMENT. SHOULD EXECUTIVE DISCOVER A BUSINESS OPPORTUNITY
THAT DOES NOT RELATE TO THE CURRENT OR ANTICIPATED FUTURE BUSINESS OF THE
COMPANY, HE SHALL FIRST OFFER SUCH OPPORTUNITY TO THE COMPANY. SHOULD THE BOARD
OF THE COMPANY NOT EXERCISE ITS RIGHT TO PURSUE THIS BUSINESS OPPORTUNITY WITHIN
A REASONABLE PERIOD OF TIME, NOT TO EXCEED SIXTY (60) DAYS, THEN EXECUTIVE MAY
DEVELOP THE BUSINESS OPPORTUNITY HIMSELF; PROVIDED, HOWEVER, THAT SUCH
DEVELOPMENT MAY IN NO WAY CONFLICT OR INTERFERE WITH THE DUTIES OF EXECUTIVE
HEREUNDER. FURTHER, EXECUTIVE MAY DEVELOP SUCH BUSINESS OPPORTUNITIES ONLY ON
HIS OWN TIME, AND MAY NOT USE ANY SERVICE, PERSONNEL, EQUIPMENT, SUPPLIES,
FACILITY, OR TRADE SECRETS OF THE COMPANY IN SUCH DEVELOPMENT. AS USED HEREIN,
THE TERM "BUSINESS OPPORTUNITY" SHALL NOT INCLUDE BUSINESS OPPORTUNITIES
INVOLVING INVESTMENT IN PUBLICLY TRADED STOCKS, BONDS OR OTHER SECURITIES, OR
OTHER INVESTMENTS OF A PERSONAL NATURE.
STOCK OF COMPANY. DURING THE TERM, EXECUTIVE SHALL BE ENTITLED TO
PURCHASE STOCK OF THE COMPANY IN THE SAME AMOUNTS AND FOR THE SAME
CONSIDERATION, TERMS AND CONDITIONS AS PROVIDED TO OTHER EXECUTIVES OF THE
COMPANY. THE MANNER OF ACQUISITION OF STOCK SHALL BE STRUCTURED SO AS TO
MINIMIZE ADVERSE TAX CONSEQUENCES TO EXECUTIVE.
CONFIDENTIALITY OF TRADE SECRETS AND OTHER MATERIALS.
TRADE SECRETS. OTHER THAN IN THE PERFORMANCE OF HIS OR HER DUTIES HEREUNDER,
EXECUTIVE AGREES NOT TO DISCLOSE, EITHER DURING THE TERM OF HIS OR HER
EMPLOYMENT BY THE COMPANY OR AT ANY TIME THEREAFTER, TO ANY PERSON, FIRM OR
CORPORATION ANY INFORMATION CONCERNING THE BUSINESS AFFAIRS, THE TRADE SECRETS
OR THE CUSTOMER LISTS OR SIMILAR INFORMATION OF THE COMPANY.
OWNERSHIP OF TRADE SECRETS; ASSIGNMENT OF RIGHTS. EXECUTIVE HEREBY AGREES THAT
ALL KNOW-HOW, DOCUMENTS, REPORTS, PLANS, PROPOSALS, MARKETING AND SALES PLANS,
CLIENT LISTS, CLIENT FILES AND MATERIALS MADE BY HIM OR HER OR BY THE COMPANY
ARE THE PROPERTY OF THE COMPANY AND SHALL NOT BE USED BY HIM IN ANY WAY ADVERSE
TO THE COMPANY'S INTERESTS. EXECUTIVE SHALL NOT DELIVER, REPRODUCE OR IN ANY WAY
ALLOW SUCH DOCUMENTS OR THINGS TO BE DELIVERED OR USED BY ANY THIRD PARTY
WITHOUT SPECIFIC DIRECTION OR CONSENT OF THE BOARD OF DIRECTORS OF THE COMPANY.
EXECUTIVE HEREBY ASSIGNS TO THE COMPANY ANY RIGHTS WHICH HE OR SHE MAY HAVE IN
ANY SUCH TRADE SECRET OR PROPRIETARY INFORMATION.
INDEMNITY. THE COMPANY HEREBY INDEMNIFIES THE EXECUTIVE FROM LIABILITY FOR ANY
PRIOR ACTS OF THE COMPANY, INCLUDING BOTH THE COMMISSION OR OMISSION OF SAID
ACTION OR DISCLOSURE, AND THE EXECUTIVE SHALL BE INDEMNIFIED BY THE COMPANY FOR
ANY ACT PERFORMED BY HIM IN GOOD FAITH WITHIN THE SCOPE OF HIS EMPLOYMENT.
TERMINATION.
BASIS FOR TERMINATION.
EXECUTIVE'S EMPLOYMENT HEREUNDER MAY BE TERMINATED AT ANY TIME BY MUTUAL
AGREEMENT OF THE PARTIES.
THIS AGREEMENT SHALL AUTOMATICALLY TERMINATE ON THE LAST DAY OF THE MONTH IN
WHICH EXECUTIVE DIES OR BECOMES PERMANENTLY INCAPACITATED. "PERMANENT
INCAPACITY" AS USED HEREIN SHALL MEAN MENTAL OR PHYSICAL INCAPACITY, OR BOTH,
REASONABLY DETERMINED BY THE COMPANY'S BOARD OF DIRECTORS BASED UPON A
CERTIFICATION OF SUCH INCAPACITY BY, IN THE DISCRETION OF THE COMPANY'S BOARD OF
DIRECTORS, EITHER EXECUTIVE'S REGULARLY ATTENDING PHYSICIAN OR A DULY LICENSED
PHYSICIAN SELECTED BY THE COMPANY'S BOARD OF DIRECTORS, RENDERING EXECUTIVE
UNABLE TO PERFORM SUBSTANTIALLY ALL OF HIS OR HER DUTIES HEREUNDER AND WHICH
APPEARS REASONABLY CERTAIN TO CONTINUE FOR AT LEAST SIX CONSECUTIVE MONTHS
WITHOUT SUBSTANTIAL IMPROVEMENT. EXECUTIVE SHALL BE DEEMED TO HAVE "BECOME
PERMANENTLY INCAPACITATED" ON THE DATE THE COMPANY'S BOARD OF DIRECTORS HAS
DETERMINED THAT EXECUTIVE IS PERMANENTLY INCAPACITATED AND SO NOTIFIES
EXECUTIVE.
EXECUTIVE'S EMPLOYMENT MAY BE TERMINATED BY THE COMPANY "WITH CAUSE," EFFECTIVE
UPON DELIVERY OF WRITTEN NOTICE TO EXECUTIVE GIVEN AT ANY TIME (WITHOUT ANY
NECESSITY FOR PRIOR NOTICE) IF ANY OF THE FOLLOWING SHALL OCCUR:
ANY MATERIAL BREACH OF EXECUTIVE'S OBLIGATIONS IN SECTION
(6?) ABOVE; OR
ANY MATERIAL ACTS OR EVENTS WHICH INHIBIT EXECUTIVE FROM FULLY
PERFORMING HIS OR HER RESPONSIBILITIES TO THE COMPANY IN GOOD FAITH,
SUCH AS (A) A FELONY CRIMINAL CONVICTION; (B) ANY OTHER CRIMINAL
CONVICTION INVOLVING EXECUTIVE'S LACK OF HONESTY OR EXECUTIVE'S MORAL
TURPITUDE; (C) DRUG OR ALCOHOL ABUSE; OR (D) GROSS CARELESSNESS OR
GROSS MISCONDUCT.
EXECUTIVE'S EMPLOYMENT MAY BE TERMINATED BY THE COMPANY "WITHOUT CAUSE" (FOR ANY
REASON OR NO REASON AT ALL) AT ANY TIME BY GIVING EXECUTIVE 60 DAYS PRIOR
WRITTEN NOTICE OF TERMINATION, WHICH TERMINATION SHALL BE EFFECTIVE ON THE 60TH
DAY FOLLOWING SUCH NOTICE. IF EXECUTIVE'S EMPLOYMENT UNDER THIS AGREEMENT IS
TERMINATED WITHOUT CAUSE, OR IF HIS AGENT IS TERMINATED UPON A CHANGE OF CONTROL
(AS DEFINED BELOW), THE COMPANY SHALL IMMEDIATELY (A) MAKE A LUMP SUM CASH
PAYMENT TO EXECUTIVE EQUAL TO THE SUM OF (I) EXECUTIVE'S BASE SALARY FOR THE
BALANCE OF THE YEAR IN WHICH TERMINATION OCCURS, (II) A PRO RATA PORTION OF THE
MINIMUM INCENTIVE BONUS, IF ANY, EARNED FOR THE YEAR IN WHICH TERMINATION OCCURS
PRORATED TO THE DATE OF TERMINATION, AND (III) ANY UNREIMBURSED EXPENSES
ACCRUING TO THE DATE OF TERMINATION; AND (B) MAKE A LUMP SUM CASH PAYMENT EQUAL
TO THE SUM OF EXECUTIVE'S ANNUAL BASE SALARY FOR ALL ADDITIONAL YEARS REMAINING
IN THE TERM AND THE MINIMUM INCENTIVE BONUS FOR EACH SUCH YEAR. IMMEDIATELY UPON
THE COMPANY'S TERMINATION OF EXECUTIVE UNDER THIS PROVISION, ALL STOCK OPTIONS,
ENTITLEMENTS, MATCHING FUNDS, AND PROFIT SHARING PREVIOUSLY GRANTED SHALL
IMMEDIATELY VEST. A "CHANGE OF CONTROL" MEANS THAT THE EARLIER TO OCCUR AT ANY
TIME DURING THE TERM: (I) ANY PERSON OR GROUP ACQUIRES 49.9% OR MORE OF ANY
CLASS OF STOCK OR OTHER EQUITY INTEREST IN THE COMPANY, (II) ANY PERSON OR GROUP
ACQUIRES, THROUGH PURCHASE, VOTING AGREEMENT, TRUST, DEVISE OR OTHERWISE, THE
POWER TO ELECT A MAJORITY OF THE BOARD, OR OTHERWISE DIRECT THE MANAGEMENT AND
AFFAIRS OF THE COMPANY, (III) THE COMPANY MERGES, CONSOLIDATES OR ENTERS INTO A
BUSINESS COMBINATION WITH ANOTHER ENTITY WHEREBY THE THEN-CURRENT STOCKHOLDERS
OF THE COMPANY OWN IN THE AGGREGATE 50% OR LESS OF THE OUTSTANDING EQUITY
SECURITIES OF THE SURVIVING ENTITY AS A RESULT OF SUCH TRANSACTION, OR (IV) THE
COMPANY SELLS ALL OR SUBSTANTIALLY ALL OF ITS ASSETS (ANY SUCH EVENT IN CLAUSES
(I) THROUGH (IV) OF THIS PARAGRAPH, A "CHANGE IN CONTROL"). WHILE IT IS NOT
EXPECTED THAT PAYMENTS MADE TO EXECUTIVE HEREUNDER WILL BE TREATED AS PAYMENTS
SUBJECT TO ANY EXCISE TAX UNDER CODE SECTION 4999, TO THE EXTENT THEY ARE THE
COMPANY SHALL PAY EXECUTIVE AN AMOUNT WHICH, NET OF ANY APPLICABLE TAXES
THEREON, WILL PROVIDE EXECUTIVE WITH SUFFICIENT CASH TO PAY ANY EXCISE TAX
PAYABLE BY HIM BY REASON OF ANY PAYMENTS HEREUNDER.
UPON A CHANGE IN CONTROL, EXECUTIVE WILL HAVE NO FURTHER OBLIGATIONS HEREUNDER,
AND SHALL IMMEDIATELY BE ENTITLED TO SEEK OTHER EMPLOYMENT, PROVIDED THAT
NOTHING SHALL DIMINISH THE PAYMENTS DUE EXECUTIVE HEREUNDER.
EXECUTIVE MAY TERMINATE HIS EMPLOYMENT HEREUNDER BY GIVING THE COMPANY 60 DAYS
PRIOR WRITTEN NOTICE, WHICH TERMINATION SHALL BE EFFECTIVE ON THE 60TH DAY
FOLLOWING SUCH NOTICE.
PAYMENT UPON TERMINATION. UPON TERMINATION UNDER PARAGRAPHS 6.1(A), (B), (C), OR
(F), THE COMPANY SHALL PAY TO EXECUTIVE WITHIN 10 DAYS AFTER TERMINATION AN
AMOUNT EQUAL TO THE SUM OF (I) EXECUTIVE'S BASE SALARY ACCRUED TO THE DATE OF
TERMINATION AND (II) UNREIMBURSED EXPENSES ACCRUED TO THE DATE OF TERMINATION.
MISCELLANEOUS.
TRANSFER AND ASSIGNMENT. THIS AGREEMENT IS PERSONAL AS TO EXECUTIVE AND SHALL
NOT BE ASSIGNED OR TRANSFERRED BY EXECUTIVE. THIS AGREEMENT MAY BE ASSIGNED BY
THE COMPANY TO ANY ENTITY WHICH IS A SUCCESSOR IN INTEREST OR OPERATOR OF THE
COMPANY'S BUSINESS.
SEVERABILITY. NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO REQUIRE THE
COMMISSION OF ANY ACT CONTRARY TO LAW. SHOULD THERE BE ANY CONFLICT BETWEEN ANY
PROVISIONS HEREOF AND ANY PRESENT OR FUTURE STATUTE, LAW, ORDINANCE, REGULATION,
OR OTHER PRONOUNCEMENT HAVING THE FORCE OF LAW, THE LATTER SHALL PREVAIL, BUT
THE PROVISION OF THIS AGREEMENT AFFECTED THEREBY SHALL BE CURTAILED AND LIMITED
ONLY TO THE EXTENT NECESSARY TO BRING IT WITHIN THE REQUIREMENTS OF THE LAW, AND
THE REMAINING PROVISIONS OF THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND
EFFECT.
GOVERNING LAW. THIS AGREEMENT IS MADE UNDER AND SHALL BE CONSTRUED PURSUANT TO
THE LAWS OF THE STATE OF DELAWARE.
COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS AND ALL DOCUMENTS
SO EXECUTED SHALL CONSTITUTE ONE AGREEMENT, BINDING ON ALL OF THE PARTIES
HERETO, NOTWITHSTANDING THAT ALL OF THE PARTIES DID NOT SIGN THE ORIGINAL OR THE
SAME COUNTERPARTS.
ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AND
UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDES ALL PRIOR ORAL OR WRITTEN AGREEMENTS, ARRANGEMENTS, AND
UNDERSTANDINGS WITH RESPECT THERETO. NO REPRESENTATION, PROMISE, INDUCEMENT,
STATEMENT OR INTENTION HAS BEEN MADE BY ANY PARTY HERETO THAT IS NOT EMBODIED
HEREIN, AND NO PARTY SHALL BE BOUND BY OR LIABLE FOR ANY ALLEGED REPRESENTATION,
PROMISE, INDUCEMENT, OR STATEMENT NOT SO SET FORTH HEREIN.
MODIFICATION. THIS AGREEMENT MAY BE MODIFIED, AMENDED, SUPERSEDED, OR CANCELLED,
AND ANY OF THE TERMS, COVENANTS, REPRESENTATIONS, WARRANTIES OR CONDITIONS
HEREOF MAY BE WAIVED, ONLY BY A WRITTEN INSTRUMENT EXECUTED BY THE PARTY OR
PARTIES TO BE BOUND BY ANY SUCH MODIFICATION, AMENDMENT, SUPERSESSION,
CANCELLATION, OR WAIVER.
ATTORNEYS' FEES AND COSTS. IN THE EVENT OF ANY DISPUTE ARISING OUT OF THE
SUBJECT MATTER OF THIS AGREEMENT, THE PREVAILING PARTY SHALL RECOVER, IN
ADDITION TO ANY OTHER DAMAGES ASSESSED, ITS ATTORNEYS' FEES AND COURT COSTS
INCURRED IN LITIGATING OR OTHERWISE SETTLING OR RESOLVING SUCH DISPUTE WHETHER
OR NOT AN ACTION IS BROUGHT OR PROSECUTED TO JUDGMENT. IN CONSTRUING THIS
AGREEMENT, NONE OF THE PARTIES HERETO SHALL HAVE ANY TERM OR PROVISION CONSTRUED
AGAINST SUCH PARTY SOLELY BY REASON OF SUCH PARTY HAVING DRAFTED THE SAME.
WAIVER. THE WAIVER BY EITHER OF THE PARTIES, EXPRESS OR IMPLIED, OF ANY RIGHT
UNDER THIS AGREEMENT OR ANY FAILURE TO PERFORM UNDER THIS AGREEMENT BY THE OTHER
PARTY, SHALL NOT CONSTITUTE OR BE DEEMED AS A WAIVER OF ANY OTHER RIGHT UNDER
THIS AGREEMENT OR OF ANY OTHER FAILURE TO PERFORM UNDER THIS AGREEMENT BY THE
OTHER PARTY, WHETHER OF A SIMILAR OR DISSIMILAR NATURE.
HEADINGS. THE SECTION AND OTHER HEADINGS CONTAINED IN THIS AGREEMENT ARE FOR
REFERENCE PURPOSES ONLY AND SHALL NOT IN ANY WAY AFFECT THE MEANING AND
INTERPRETATION OF THIS AGREEMENT.
NOTICES. ANY NOTICE UNDER THIS AGREEMENT MUST BE IN WRITING, MAY BE TELECOPIED,
SENT BY EXPRESS 24 HOUR GUARANTEED COURIER, OR HAND DELIVERED, OR MAY BE SERVED
BY DEPOSITING THE SAME IN THE UNITED STATES MAIL, ADDRESSED TO THE PARTY TO BE
NOTIFIED, POSTAGE PREPAID AND REGISTERED OR CERTIFIED WITH A RETURN RECEIPT
REQUESTED. THE ADDRESSES OF THE PARTIES FOR THE RECEIPT OF NOTICE SHALL BE AS
FOLLOWS:
If to the Company: Liberty Group Holdings, Inc.
25 53rd Street
Brooklyn, New York 11232
If to Executive: Dennis Lane
=================
with a copy in either
case to : Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attention: David Lubin
Each notice given by registered or certified mail shall be deemed
delivered and effective on the date of delivery as shown on the return receipt,
and each notice delivered in any other manner shall be deemed to be effective as
of the time of actual delivery thereof. Each party may change its address for
notice by giving notice thereof in the manner provided above.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the date first set forth above.
LIBERTY GROUP HOLDINGS, INC.
By: ____/s/__________________
Name: Barry Hawk
Title: President
/s/
-------------------------
Dennis Lane
LIBERTY FOOD GROUP, LTD.
----------------------------------------
As of July 1, 1999
Dennis Lane
c/o Liberty Food Group Ltd.,
11 52nd Street,
Brooklyn, NY 11232.
Re: Grant of Stock Option
Dear Dennis:
1. Grant of Option. As an incentive for you to remain an employee of
the Company or its subsidiaries, and to encourage you to acquire the
proprietary interest of a stockholder, Liberty Food Group, Ltd., a Delaware
corporation and its present and future subsidiaries, including partnerships,
limited liability companies and other entities in which it directly or
indirectly holds 50% or more of the equity interests thereof (collectively,
the "Company"), hereby gives and grants to you (the "Optionee"), subject to
all of the provisions of this Agreement, the right and option (the "Option")
to purchase up to the aggregate number of shares (the "Option Shares") of
common stock, $.001 per share par value, of the Company set forth in part (a)
of Exhibit A attached hereto at the applicable exercise price per share set
forth in part (c) of Exhibit A attached hereto (the "Option Price").
2. Terms of Exercise. The Option, which is granted pursuant hereto is
not exercisable until the respective commencement exercise dates set forth in
part (c) of Exhibit A attached hereto and then only for the number of Option
Shares set forth for each commencement exercise date, and the Option may not
be exercised after the respective termination exercise dates set forth in part
(b) of Exhibit A attached hereto, unless extended by the Board or the
committee appointed by the Board of Directors of the Company (the
"Committee"). The Option shall be exercisable by the Optionee in whole or in
part, from time to time. The Company agrees that until the termination
exercise date, the Company shall maintain a sufficient number of authorized
shares of Common Stock (which may be unissued shares or issued shares that
have been reacquired by the Company) to provide the number of unexercised
Option Shares granted to Optionee hereunder, after giving effect to all
adjustments pursuant to Section 8 of the Plan.
3. Limitations on Right to Exercise. Unless earlier terminated in
accordance with its terms, the Option shall terminate upon any of the
following:
(i) Voluntary termination of employment by the
Optionee, with or without the consent of the Company;
(ii) Termination of the Optionee's employment by the Company
other than for cause; or
(iii) Termination of the Optionee's employment because of
death, disability, retirement, or because the employing subsidiary has
ceased to be a subsidiary of the Company and the Optionee did not,
prior thereto or contemporaneously therewith, become an employee of the
Company or of another subsidiary;
provided, that in any such event, any Options granted hereunder shall
automatically vest on the date thereof shall be exercisable by Optionee, his
estate, successor or assigns, until the expiration date attributable to such
Options.
4. Payment of Option Price and Conditions of Exercise. Each exercise of
the Option shall be effective only upon the
delivery of a written notice of such exercise to the Company, addressed to the
Secretary of the Company (the "Secretary"), together with payment in full of
the price for as many of the Option Shares as to which the Option is being
exercised. The date of exercise, provided the Option is validly exercised, is
the date on which the Secretary receives the notice, payment and instruments
referred to in this Paragraph 4. The price for such Option Shares shall be
paid in cash. No person exercising the Option will be, or will be deemed to
be, the owner of any Option Shares and shall have no rights as shareholder in
respect of such Option Shares until the occurrence of the applicable
commencement exercise date, and the satisfaction of all other conditions to
the issuance of such Option Shares and unless and until certificates for such
Option Shares are issued to such person. The Committee may require as a
condition of each exercise of the Option that the Optionee (or other
authorized purchaser of Option Shares) represents in writing to the Company at
the time of exercise of the Option that it is the Optionee's (or such
purchaser's) then intention to acquire the Option Shares for investment and
not for resale or with a view to the distribution thereof may require that the
Optionee (or such purchaser) deliver this Agreement to the Secretary or other
designated officer of the Company, who shall endorse hereon a notation of such
exercise and return this Agreement to the Optionee (or such purchaser).
5. Adjustment of Option Price and Number of Shares. The number and kind
of Option Shares purchasable upon the exercise of this Option and the Option
Price hereunder shall be subject to the adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification, Etc. In case of any reclassification,
reorganization, change or conversion of securities of the class issuable upon
exercise of this Option (other than a change in par value, or from par value
to no par value) of other shares or securities of the Company, or (ii) any
consolidation of the Company with or into another corporation (other than a
merger or consolidation with another corporation in which the Company is the
acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Option), or (iii) any sale of all or substantially all of the assets of
the Company, then the Company, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver the holder of this Option a
new Option or a supplement hereto (in form and substance reasonably
satisfactory to the holder of this Option), so that the holder of this Option
shall have the right to receive, at a total purchase price not to exceed that
payable upon the exercise of the unexercised portion of this Option, and in
lieu of the shares of Common Stock theretofore issuable upon the exercise of
this Option, the kind and amount of shares of stock and other securities,
receivable upon such reclassification, reorganization, change or conversion by
a holder of the number of shares of Common Stock then purchasable under this
Option. Such new Option shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 5. The provisions of this Section 5(a) shall similarly attach to
successive reclassifications, reorganizations, changes, and conversions.
(b) Subdivision of Shares. If the Company at any time during which
this Option remains outstanding and unexpired shall subdivide its Common
Stock, the Option Price shall be proportionately decreased and the number of
Shares purchasable hereunder shall be proportionately increased.
(c) Below Market Issuance; Stock Dividends; Etc.. If the Company at
any time while this Option is outstanding and unexpired shall (i) issue or
sell any shares of Common Stock at a price below average of the closing bid
prices for the Common Stock, as reported by the principal exchange upon which
the Common Stock trades, for the 20 consecutive trading days ending with the
day which is two trading days prior to the date of issuance (the "Market
Price"), other than shares issued pursuant to the exercise of options or
warrants outstanding as of the date hereof, (ii) issue, sell or fix a record
date for the issuance of rights, options, warrants or other securities
exercisable, convertible or exchangeable into Common Stock (collectively,
"Warrants"), at a price per share (or exercise, conversion or exchange price
per share) which is below Market Price, (iii) pay a dividend with respect to
Common Stock payable in Common Stock or Warrants, or (iv) make any other
distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 5(a) and (b) above), the price at which
the holder of this Option shall be able to purchase Shares shall be adjusted
by multiplying the Option Price in effect immediately prior to such date of
determination of the holders of securities entitled to receive such
distribution, by a fraction (A) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (B) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend
or distribution, as if all such Warrants had been exercised and the Company
received the consideration payable in respect thereof. Upon each adjustment in
the Option Price pursuant to this Section 5(c), the number of Shares of Common
Stock purchasable hereunder shall be adjusted, to the nearest whole share, to
the product obtained by multiplying the number of Shares purchasable
immediately prior to such adjustment in the Option Price by a fraction, the
numerator of which shall be the Option Price immediately prior to such
adjustment and the denominator of which shall be the Option Price immediately
thereafter.
(d) Repurchase or Redemptions of Common Stock or Options. If the
Company at any time while this Option is outstanding and unexpired shall
repurchase or redeem any outstanding shares of Common Stock or any Warrants,
the Option Price shall thereupon be adjusted by multiplying the Option Price
in effect immediately prior to such repurchase or redemption by a fraction (i)
the numerator of which shall be Option Price in effect immediately prior to
such repurchase or redemption and (ii) the denominator of which shall be the
per share fair market value of the consideration paid for each of the shares
of Common Stock and/or Options at the time of purchase or redemption. Upon
each adjustment in the Option Price pursuant to this Section 5(d), the number
of Shares of Common Stock purchasable hereunder shall be adjusted, to the
nearest whole share, to the product obtained by multiplying the number of
Shares purchasable immediately prior to such adjustment in the Option Price by
a fraction, the numerator of which shall be the Option Price immediately prior
to such adjustment and the denominator of which shall be the Option Price
immediately thereafter. Notwithstanding anything contained herein to the
contrary, upon a reverse stock split of the outstanding shares of Common
Stock, there shall be no adjustment to either the Option Price or the number
of shares of Common Stock purchasable hereunder.
(e) Notice of Adjustments. Whenever the Option Price or the number of
Option Shares purchasable hereunder shall be adjusted pursuant to this Section
5, the Company shall prepare a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated. Such certificate shall be
signed by its chief financial officer and shall be delivered to the holder of
this Option.
(f) Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercised hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Common Stock on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
(g) Cumulative Adjustments. No adjustment in the Option Price shall be
required under this Section 5 until cumulative adjustments result in a
concomitant change of 1% or more of the Option Price or in the number of
Option Shares purchasable hereunder as in effect prior to the last such
adjustment; provided, however, that any adjustments which by reason of this
Section 6 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 5
shall be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
6. No Right to Continued Employment. This Agreement is not an
employment agreement and nothing contained in this Agreement shall in any
manner restrict or affect the right of the Company to terminate the Optionee's
employment at any time, for any reason, with or without cause.
7. Compliance with Laws and Regulations. The Option and the obligation
of the Company to sell and deliver the Option Shares, or any of them,
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as
may be required. Without limiting the generality of the foregoing, the
Optionee acknowledges and understands that the Option Shares have not been
registered under the Securities Act of 1933, as amended, or under the "blue
sky" or securities laws of any state, that the Company has no obligation to so
register any of the Option Shares and that, except to the extent the Option
Shares are so registered, the Option Shares will be restricted securities and
may be sold, transferred or otherwise disposed of only if an exemption from
such registration is available. Unless and until the Option Shares have been
so registered, there shall be noted conspicuously upon each stock certificate
representing Option Shares, the following legend:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("1933 Act")
nor under any applicable state securities act and may not be offered or
sold except pursuant to (i) an effective registration statement
relating to such stock under the 1933 Act and any applicable state
securities act, (ii) Rule 144 under the 1933 Act to the extent
applicable (or any similar rule under such act or acts relating to the
disposition of securities), or (iii) an opinion of counsel satisfactory
to the Corporation that an exemption from registration under such act
or acts is available.
The rights to transfer and vote the shares represented by this
Certificate are restricted by the terms and provisions contained in an
Employee Stock Option Agreement."
8. Sale of Entire Stock of the Company. In the event that the Board of
Directors of the Company or the holders of more than 50% of the shares of
Common Stock of the Company accept a bona-fide offer received from a third
party unaffiliated with the Company (including an offer which is the result of
a solicitation by the Company or such Common shareholders) for the sale of all
or substantially all of the Common Stock of the Company, then upon the request
of the Board of Directors of the Company, Optionee agrees to sell all of the
Option Shares to the third party purchaser at the same price and terms as to
be received solely in respect of share purchase price by the other holders of
Common Stock of the Company (which price shall exclude the value of any
payments or benefits received by any other shareholder pursuant to any
employment, management, consulting, non-competition, severance, restrictive
covenant or similar agreement, or any securities or options or warrants or
rights to subscribe to securities, payable or granted as compensation or
incentives for services rendered or to be rendered). The Optionee shall also
tender the Option Shares (together with stock certificates and stock powers
therefor endorsed in blank), free and clear of all liens, claims and
encumbrances other than this Agreement, and shall execute and deliver such
other instruments and documents so as to implement the approved sale of
capital stock of the Company.
9. Execution.
(a) The grant of the Option hereunder shall be binding and effective
only if this Agreement is duly executed by or on behalf of the Company and by
the Optionee or his representative, and a signed copy is returned to the
Company.
(b) Optionee acknowledges that no assurances or representations are
made by the Company as to the present or future market value of the Company's
Common Stock or as to the business, affairs, financial condition or prospects
of the Company. Optionee acknowledges that the Shares of the Company are not
publicly traded, that there is currently no market for the Shares nor is it
likely any market will ever develop for the Shares. Neither Optionee nor his
estate, personal representatives or any other successor or transferee shall
have any registration rights with respect to any public offering of securities
of the Company, its subsidiaries, affiliates, successors or assigns. AGREED
AND ACCEPTED:
Dennis Lane (Signature of Optionee) LIBERTY FOOD GROUP, LTD.
By: ______/s/________________
Name: Barry Hawk
Title: President
EXHIBIT A
(a) Total Number of shares of the Common Stock covered by
the Option: Two million one hundred seventy five
thousand (2,175,000 Shares)
(b) Termination exercise date: For each tranche of Options described
below, seven years from the date of vesting of such tranches.
(c) Number of Shares; Vesting Date; Exercise Price per share:
Vesting Date;
Number of Shares Exercise Date Exercise
Price per share
<TABLE>
<S> <C> <C>
275,000 (i) On or before July 1, Par value per share
2000 if, for the 12 month
period ending June 30, 2000
the Company as achieved 20%
revenue growth from the 12
month period commencing
June 30, 1999, or (ii)
immediately upon the
acquisition of another
entity with $5,000,000 or
more in annual revenues in
such entity's most recent
fiscal year
400,000 (i) On or before July 1, $1.00 per share
2001 if, for the 12 month
period ending June 30, 2001
the Company has achieved
20% revenue growth from the
12 month period commencing
June 30, 2000, or (ii)
immediately upon the
acquisition of another
entity with $5,000,000 or
more in annual revenues in
such entity's most recent
fiscal year
450,000 (i) On July 1, 2002 if, for $1.50 per share
the 12 month period ending
June 30, 2002 the Company
has achieved 20% revenue
growth from the 12 month
period commencing June 30,
2001, or (ii) immediately
upon the acquisition of
another entity with
$5,000,000 or more in
annual revenues in such
entity's most recent fiscal
500,000 (i) On July 1, 2002 if, for $2.00 per share
the 12 month period ending
June 30, 2001 the Company
has achieved 20% revenue
growth from the 12 month
period ending June 30,
2002, or (ii) immediately
upon acquisition of another
entity with $5,000,000 or
more in annual revenues in
such entity's most recent
fiscal year
550,000 (i) On July 1, 2004 if, for $2.50 per share
the 12 month period ending
June 30, 2004 the Company
has achieved 20% revenue
growth from the 12 month
period commencing June 30,
2003, or (ii) immediately
upon the acquisition of
another entity with
$5,000,000 or more in
annual revenues in the
entity's most recent fiscal
</TABLE>
Notwithstanding the foregoing, Shares shall vest if either the revenue
growth or an acquisition benchmark shall occur within the following 12-month
period (e.g., if the Company achieved 18% revenue or did not make an
acquisition for the 12-month period but within the subsequent 12 months either
achieves 2% revenue growth or an acquisition, the shares for the previous
period shall vest.
LIBERTY FOOD GROUP, LTD.
----------------------------------------
As of July 1, 1999
Barry L. Hawk
638 Willow Road
West Hempstead, New York 11552
Re: Grant of Stock Option
Dear Barry:
1. Grant of Option. As an incentive for you to remain an employee of
the Company or its subsidiaries, and to encourage you to acquire the
proprietary interest of a stockholder, Liberty Food Group, Ltd., a Delaware
corporation and its present and future subsidiaries, including partnerships,
limited liability companies and other entities in which it directly or
indirectly holds 50% or more of the equity interests thereof (collectively,
the "Company"), hereby gives and grants to you (the "Optionee"), subject to
all of the provisions of this Agreement, the right and option (the "Option")
to purchase up to the aggregate number of shares (the "Option Shares") of
common stock, $.001 per share par value, of the Company set forth in part (a)
of Exhibit A attached hereto at the applicable exercise price per share set
forth in part (c) of Exhibit A attached hereto (the "Option Price").
2. Terms of Exercise. The Option, which is granted pursuant hereto is
not exercisable until the respective commencement exercise dates set forth in
part (c) of Exhibit A attached hereto and then only for the number of Option
Shares set forth for each commencement exercise date, and the Option may not
be exercised after the respective termination exercise dates set forth in part
(b) of Exhibit A attached hereto, unless extended by the Board or the
committee appointed by the Board of Directors of the Company (the
"Committee"). The Option shall be exercisable by the Optionee in whole or in
part, from time to time. The Company agrees that until the termination
exercise date, the Company shall maintain a sufficient number of authorized
shares of Common Stock (which may be unissued shares or issued shares that
have been reacquired by the Company) to provide the number of unexercised
Option Shares granted to Optionee hereunder, after giving effect to all
adjustments pursuant to Section 8 of the Plan.
3. Limitations on Right to Exercise. Unless earlier terminated in
accordance with its terms, the Option shall terminate upon any of the
following:
(i) Voluntary termination of employment by the
Optionee, with or without the consent of the Company;
(ii) Termination of the Optionee's employment by the Company
other than for cause; or
(iii) Termination of the Optionee's employment because of
death, disability, retirement, or because the employing subsidiary has
ceased to be a subsidiary of the Company and the Optionee did not,
prior thereto or contemporaneously therewith, become an employee of the
Company or of another subsidiary;
provided, that in any such event, any Options granted hereunder shall
automatically vest on the date thereof shall be exercisable by Optionee, his
estate, successor or assigns, until the expiration date attributable to such
Options.
4. Payment of Option Price and Conditions of Exercise. Each exercise of
the Option shall be effective only upon the
delivery of a written notice of such exercise to the Company, addressed to the
Secretary of the Company (the "Secretary"), together with payment in full of
the price for as many of the Option Shares as to which the Option is being
exercised. The date of exercise, provided the Option is validly exercised, is
the date on which the Secretary receives the notice, payment and instruments
referred to in this Paragraph 4. The price for such Option Shares shall be
paid in cash. No person exercising the Option will be, or will be deemed to
be, the owner of any Option Shares and shall have no rights as shareholder in
respect of such Option Shares until the occurrence of the applicable
commencement exercise date, and the satisfaction of all other conditions to
the issuance of such Option Shares and unless and until certificates for such
Option Shares are issued to such person. The Committee may require as a
condition of each exercise of the Option that the Optionee (or other
authorized purchaser of Option Shares) represents in writing to the Company at
the time of exercise of the Option that it is the Optionee's (or such
purchaser's) then intention to acquire the Option Shares for investment and
not for resale or with a view to the distribution thereof may require that the
Optionee (or such purchaser) deliver this Agreement to the Secretary or other
designated officer of the Company, who shall endorse hereon a notation of such
exercise and return this Agreement to the Optionee (or such purchaser).
5. Adjustment of Option Price and Number of Shares. The number and kind
of Option Shares purchasable upon the exercise of this Option and the Option
Price hereunder shall be subject to the adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification, Etc. In case of any reclassification,
reorganization, change or conversion of securities of the class issuable upon
exercise of this Option (other than a change in par value, or from par value
to no par value) of other shares or securities of the Company, or (ii) any
consolidation of the Company with or into another corporation (other than a
merger or consolidation with another corporation in which the Company is the
acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Option), or (iii) any sale of all or substantially all of the assets of
the Company, then the Company, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver the holder of this Option a
new Option or a supplement hereto (in form and substance reasonably
satisfactory to the holder of this Option), so that the holder of this Option
shall have the right to receive, at a total purchase price not to exceed that
payable upon the exercise of the unexercised portion of this Option, and in
lieu of the shares of Common Stock theretofore issuable upon the exercise of
this Option, the kind and amount of shares of stock and other securities,
receivable upon such reclassification, reorganization, change or conversion by
a holder of the number of shares of Common Stock then purchasable under this
Option. Such new Option shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 5. The provisions of this Section 5(a) shall similarly attach to
successive reclassifications, reorganizations, changes, and conversions.
(b) Subdivision of Shares. If the Company at any time during which
this Option remains outstanding and unexpired shall subdivide its Common
Stock, the Option Price shall be proportionately decreased and the number of
Shares purchasable hereunder shall be proportionately increased.
(c) Below Market Issuance; Stock Dividends; Etc.. If the Company at
any time while this Option is outstanding and unexpired shall (i) issue or
sell any shares of Common Stock at a price below average of the closing bid
prices for the Common Stock, as reported by the principal exchange upon which
the Common Stock trades, for the 20 consecutive trading days ending with the
day which is two trading days prior to the date of issuance (the "Market
Price"), other than shares issued pursuant to the exercise of options or
warrants outstanding as of the date hereof, (ii) issue, sell or fix a record
date for the issuance of rights, options, warrants or other securities
exercisable, convertible or exchangeable into Common Stock (collectively,
"Warrants"), at a price per share (or exercise, conversion or exchange price
per share) which is below Market Price, (iii) pay a dividend with respect to
Common Stock payable in Common Stock or Warrants, or (iv) make any other
distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 5(a) and (b) above), the price at which
the holder of this Option shall be able to purchase Shares shall be adjusted
by multiplying the Option Price in effect immediately prior to such date of
determination of the holders of securities entitled to receive such
distribution, by a fraction (A) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (B) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend
or distribution, as if all such Warrants had been exercised and the Company
received the consideration payable in respect thereof. Upon each adjustment in
the Option Price pursuant to this Section 5(c), the number of Shares of Common
Stock purchasable hereunder shall be adjusted, to the nearest whole share, to
the product obtained by multiplying the number of Shares purchasable
immediately prior to such adjustment in the Option Price by a fraction, the
numerator of which shall be the Option Price immediately prior to such
adjustment and the denominator of which shall be the Option Price immediately
thereafter.
(d) Repurchase or Redemptions of Common Stock or Options. If the
Company at any time while this Option is outstanding and unexpired shall
repurchase or redeem any outstanding shares of Common Stock or any Warrants,
the Option Price shall thereupon be adjusted by multiplying the Option Price
in effect immediately prior to such repurchase or redemption by a fraction (i)
the numerator of which shall be Option Price in effect immediately prior to
such repurchase or redemption and (ii) the denominator of which shall be the
per share fair market value of the consideration paid for each of the shares
of Common Stock and/or Options at the time of purchase or redemption. Upon
each adjustment in the Option Price pursuant to this Section 5(d), the number
of Shares of Common Stock purchasable hereunder shall be adjusted, to the
nearest whole share, to the product obtained by multiplying the number of
Shares purchasable immediately prior to such adjustment in the Option Price by
a fraction, the numerator of which shall be the Option Price immediately prior
to such adjustment and the denominator of which shall be the Option Price
immediately thereafter. Notwithstanding anything contained herein to the
contrary, upon a reverse stock split of the outstanding shares of Common
Stock, there shall be no adjustment to either the Option Price or the number
of shares of Common Stock purchasable hereunder.
(e) Notice of Adjustments. Whenever the Option Price or the number of
Option Shares purchasable hereunder shall be adjusted pursuant to this Section
5, the Company shall prepare a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated. Such certificate shall be
signed by its chief financial officer and shall be delivered to the holder of
this Option.
(f) Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercised hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Common Stock on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
(g) Cumulative Adjustments. No adjustment in the Option Price shall be
required under this Section 5 until cumulative adjustments result in a
concomitant change of 1% or more of the Option Price or in the number of
Option Shares purchasable hereunder as in effect prior to the last such
adjustment; provided, however, that any adjustments which by reason of this
Section 6 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 5
shall be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
6. No Right to Continued Employment. This Agreement is not an
employment agreement and nothing contained in this Agreement shall in any
manner restrict or affect the right of the Company to terminate the Optionee's
employment at any time, for any reason, with or without cause.
7. Compliance with Laws and Regulations. The Option and the obligation
of the Company to sell and deliver the Option Shares, or any of them,
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as
may be required. Without limiting the generality of the foregoing, the
Optionee acknowledges and understands that the Option Shares have not been
registered under the Securities Act of 1933, as amended, or under the "blue
sky" or securities laws of any state, that the Company has no obligation to so
register any of the Option Shares and that, except to the extent the Option
Shares are so registered, the Option Shares will be restricted securities and
may be sold, transferred or otherwise disposed of only if an exemption from
such registration is available. Unless and until the Option Shares have been
so registered, there shall be noted conspicuously upon each stock certificate
representing Option Shares, the following legend:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("1933 Act")
nor under any applicable state securities act and may not be offered or
sold except pursuant to (i) an effective registration statement
relating to such stock under the 1933 Act and any applicable state
securities act, (ii) Rule 144 under the 1933 Act to the extent
applicable (or any similar rule under such act or acts relating to the
disposition of securities), or (iii) an opinion of counsel satisfactory
to the Corporation that an exemption from registration under such act
or acts is available.
The rights to transfer and vote the shares represented by this
Certificate are restricted by the terms and provisions contained in an
Employee Stock Option Agreement."
8. Sale of Entire Stock of the Company. In the event that the Board of
Directors of the Company or the holders of more than 50% of the shares of
Common Stock of the Company accept a bona-fide offer received from a third
party unaffiliated with the Company (including an offer which is the result of
a solicitation by the Company or such Common shareholders) for the sale of all
or substantially all of the Common Stock of the Company, then upon the request
of the Board of Directors of the Company, Optionee agrees to sell all of the
Option Shares to the third party purchaser at the same price and terms as to
be received solely in respect of share purchase price by the other holders of
Common Stock of the Company (which price shall exclude the value of any
payments or benefits received by any other shareholder pursuant to any
employment, management, consulting, non-competition, severance, restrictive
covenant or similar agreement, or any securities or options or warrants or
rights to subscribe to securities, payable or granted as compensation or
incentives for services rendered or to be rendered). The Optionee shall also
tender the Option Shares (together with stock certificates and stock powers
therefor endorsed in blank), free and clear of all liens, claims and
encumbrances other than this Agreement, and shall execute and deliver such
other instruments and documents so as to implement the approved sale of
capital stock of the Company.
9. Execution.
(a) The grant of the Option hereunder shall be binding and effective
only if this Agreement is duly executed by or on behalf of the Company and by
the Optionee or his representative, and a signed copy is returned to the
Company.
(b) Optionee acknowledges that no assurances or representations are
made by the Company as to the present or future market value of the Company's
Common Stock or as to the business, affairs, financial condition or prospects
of the Company. Optionee acknowledges that the Shares of the Company are not
publicly traded, that there is currently no market for the Shares nor is it
likely any market will ever develop for the Shares. Neither Optionee nor his
estate, personal representatives or any other successor or transferee shall
have any registration rights with respect to any public offering of securities
of the Company, its subsidiaries, affiliates, successors or assigns. AGREED
AND ACCEPTED:
Barry L. Hawk (Signature of Optionee) LIBERTY FOOD GROUP, LTD.
By: _____/s/_________________
Name: Dennis Lane
Title: Chief Executive Officer
EXHIBIT A
(a) Total Number of shares of the Common Stock covered by
the Option: Two million one hundred seventy five
thousand (2,175,000 Shares)
(b) Termination exercise date: For each tranche of Options described
below, seven years from the date of vesting of such tranches.
(c) Number of Shares; Vesting Date; Exercise Price per share:
Vesting Date;
Number of Shares Exercise Date Exercise
Price per share
<TABLE>
<S> <C> <C>
275,000 (i) On or before July 1, Par value per share
2000 if, for the 12 month
period ending June 30, 2000
the Company as achieved 20%
revenue growth from the 12
month period commencing
June 30, 1999, or (ii)
immediately upon the
acquisition of another
entity with $5,000,000 or
more in annual revenues in
such entity's most recent
fiscal year
400,000 (i) On or before July 1, $1.00 per share
2001 if, for the 12 month
period ending June 30, 2001
the Company has achieved
20% revenue growth from the
12 month period commencing
June 30, 2000, or (ii)
immediately upon the
acquisition of another
entity with $5,000,000 or
more in annual revenues in
such entity's most recent
fiscal year
450,000 (i) On July 1, 2002 if, for $1.50 per share
the 12 month period ending
June 30, 2002 the Company
has achieved 20% revenue
growth from the 12 month
period commencing June 30,
2001, or (ii) immediately
upon the acquisition of
another entity with
$5,000,000 or more in
annual revenues in such
entity's most recent fiscal
500,000 (i) On July 1, 2002 if, for $2.00 per share
the 12 month period ending
June 30, 2001 the Company
has achieved 20% revenue
growth from the 12 month
period ending June 30,
2002, or (ii) immediately
upon acquisition of another
entity with $5,000,000 or
more in annual revenues in
such entity's most recent
fiscal year
550,000 (i) On July 1, 2004 if, for $2.50 per share
the 12 month period ending
June 30, 2004 the Company
has achieved 20% revenue
growth from the 12 month
period commencing June 30,
2003, or (ii) immediately
upon the acquisition of
another entity with
$5,000,000 or more in
annual revenues in the
entity's most recent fiscal
</TABLE>
Notwithstanding the foregoing, Shares shall vest if either the revenue
growth or an acquisition benchmark shall occur within the following 12-month
period (e.g., if the Company achieved 18% revenue or did not make an
acquisition for the 12-month period but within the subsequent 12 months either
achieves 2% revenue growth or an acquisition, the shares for the previous
period shall vest.
AMENDMENT NO. 1 TO ESCROW AGREEMENT
Amendment No. 1 to Escrow Agreement (this "Agreement"), dated as of
February 1, 2000, by and among Liberty Food Group, LLC, a Delaware limited
liability company (the "Buyer"), Ferro Foods Corporation, a New York
corporation, Frank Ferro, Sr. and Frank Gambino (collectively, the "Seller"),
and Herrick, Feinstein LLP (the "Escrow Agent").
RECITALS
WHEREAS, the parties hereto have executed the Escrow Agreement dated
as of November 23, 1999 (the "Escrow Agreement"; capitalized terms used herein
not otherwise defined shall have the meanings given to such terms in the Escrow
Agreement) pursuant to which, among other things, the Shares were subject to
escrow until a financial accommodation to satisfy the Debt was in place which
was satisfactory to the Buyer;
WHEREAS, since the financial accommodation was not in place at the
time stipulated for in the Escrow Agreement, the Buyer and the Seller wish to
amend the Escrow Agreement upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Each of the Sellers hereby acknowledges that the Buyer and its
business have been economically harmed and the value of the Purchased Assets has
been diminished as a result of the failure of the establishment of the financial
accommodation to satisfy the Debts as required pursuant to the terms of the
Purchase Agreement and Escrow Agreement. Accordingly, the Sellers and the Buyer
agree as follows:
(i) 67,000 of the Shares belonging to Ferro Foods Corporation
shall be released from escrow and transferred to Suan Investments (50,400);
Martin Siegel (8,000); Stoubridge Investments (5,600), Eli Goldin (2,500) and
Ira Dick (500).
(ii) The balance of the Shares (1,933,000) (hereinafter
referred to as the "Escrow Shares") shall remain subject to escrow and released
only upon the written instructions of the Buyer. It is the intention of the
Seller that the Escrow Shares shall be used, to the extent possible, to satisfy
outstanding debts and liabilities of the Business and the Purchased Assets.
2. Seller hereby agrees, acknowledges and confirms that (i) the
Escrow Shares shall not be released to the Seller unless and until the Buyer is
satisfied, in its sole and absolute discretion, that all liabilities or
obligations of the Business and any liabilities or obligations of the Seller or
the Principals in connection with or related to the Business or the Purchased
Assets have been satisfied and (ii) the Seller shall have no rights to the
Escrow Shares until and unless the Buyer releases said shares, in said amount
and at times to be determined in the sole discretion of the Buyer.
<PAGE>
3. The Seller hereby agrees that the Escrow Agent shall be entitled
to act upon the receipt of a letter from the Buyer instructing the Escrow Agent
as to whom any portion of the Escrow Shares shall be delivered.
4. Entire Agreement. This Agreement and the Escrow Agreement
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior written or oral negotiations,
representations, agreements, commitments, contracts or understandings with
respect thereto and no modification, alteration or amendment to this Agreement
may be made unless the same shall be in writing and signed by both parties
hereto.
5. Full Force and Effect. Other than as specifically set forth in
this Agreement, all terms and conditions of the Escrow Agreement shall remain in
full force and effect. All references to the Escrow Agreement after the date
hereof shall automatically be deemed to include this Agreement, and,
accordingly, without limiting the generality of this sentence, it is understood
and agreed that the defined term "Agreement" includes, collectively, the Escrow
Agreement and this Agreement.
6. Governing Law. This Agreement and the rights of the
---------------
parties shall be governed by, and construed in accordance with the laws of the
State of New York without giving effect to principles of conflicts of law.
7. References. The headings in this Agreement are for
----------
convenience of reference only and not for any other purpose.
8. Counterparts. This Amendment may be executed in one or
------------
more counterparts and as so executed shall constitute one agreement binding
on the Seller and the Buyer.
[Remainder of Page Intentionally Omitted; Signature Page to Follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date and year first above written.
HERRICK, FEINSTEIN LLP
as Escrow Agent
By: /s/
Name: Herrick, Feinstein LLP
FERRO FOODS CORPORATION
/s/
-------------------------------
Frank Ferro, Sr.
President
/s/
--------------------------------
Frank Gambino
Secretary & Tresurer
LIBERTY FOOD GROUP, LLC
By: LIBERTY GROUP HOLDINGS, INC.,
f/k/a BIO-RESPONSE, INC.,
its sole member
By: _____/s/____________________
Name: Barry Hawk
Title: President
