KEY EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 31st day of January,
2002, by and between FRESH BRANDS, INC., a Wisconsin corporation (the
"Company"), and WALTER G. WINDING (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is the Chairman of the Board of the Company
and, as Chairman of the Board, receives certain compensation from the Company,
including payment of an hourly fee for Chairman of the Board and related
services provided to the Company;
WHEREAS, the Company and the Executive desire to enter into this
Agreement, to ensure that any proposal for a change in control or acquisition of
the Company will be considered by the Executive objectively, with reference only
to the best interests of the Company and its shareholders and without undue
regard for the Executive's personal interests.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Definitions.
(a) Act. For purposes of this Agreement, the term "Act" means the
Securities Exchange Act of 1934, as amended.
(b) Affiliate and Associate. For purposes of this Agreement, the terms
"Affiliate" and "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations of the Act.
(c) Beneficial Owner. For purposes of this Agreement, a Person shall
be deemed to be the "Beneficial Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase, or (B) securities issuable upon exercise of Rights issued
pursuant to the terms of the Company's Rights Agreement with Firstar Bank,
N.A., dated as of October 12, 2001, as amended from time to time, at any
time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this
subparagraph (ii) as a result of an agreement, arrangement or understanding
to vote such security if the agreement, arrangement or understanding: (A)
arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Act and (B)
is not also then reportable on a Schedule 13D under the Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy
as described in Section 1(c)(ii) above) or disposing of any voting
securities of the Company.
(d) Cause. "Cause" for termination by the Company of the Executive's
consulting relationship after a Change in Control of the Company shall, for
purposes of this Agreement, be limited to (i) the engaging by the Executive in
intentional conduct not taken in good faith which has caused demonstrable and
serious financial injury to the Company, as evidenced by a determination in a
binding and final judgment, order or decree of a court or administrative agency
of competent jurisdiction, in effect after exhaustion or lapse of all rights of
appeal, in an action, suit or proceeding, whether civil, criminal,
administrative or investigative; (ii) conviction of a felony (as evidenced by
binding and final judgment, order, or decree of a court of competent
jurisdiction, in effect after exhaustion or lapse of all rights of appeal) which
substantially impairs the Executive's ability to perform his duties or
responsibilities; and (iii) continuing willful and unreasonable refusal by the
Executive to perform his duties or responsibilities hereunder.
(e) Change in Control of the Company. For purposes of this Agreement,
a "Change in Control of the Company" shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Act. Without limiting the inclusiveness
of the definition in the preceding sentence, a Change in Control of the Company
shall be deemed to have occurred if:
(i) any Person (other than (i) an Affiliate of the Company, (ii)
any employee benefit plan of the Company or of any Affiliate of the
Company, including any Retirement Savings Plan or (iii) any Person
organized, appointed or established pursuant to the terms of any such
benefit plan) is or becomes the Beneficial Owner of securities of the
Company representing at least 20% of the combined voting power of the
Company's then outstanding securities;
(ii) two or more of the members of the Board are not Continuing
Directors;
(iii) there shall be consummated (x) any consolidation, merger,
share exchange or other business combination of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a
2
consolidation, merger, share exchange or other reorganization of the
Company in which the holders of the Company's Common Stock immediately
prior to the consolidation, merger, share exchange or other reorganization
have the same proportionate ownership of common stock of the surviving
corporation immediately after the consolidation, merger, share exchange or
other reorganization, or (y) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company; or
(iv) the shareholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company.
(f) Code. For purposes of this Agreement, the term "Code" means the
Internal Revenue Code of 1986, including any amendments thereto or successor tax
codes thereof.
(g) Consulting Period. For purposes of this Agreement, the term
"Consulting Period" means a period commencing on the date of a Change in Control
of the Company, and ending at 11:59 p.m. Milwaukee time on the third anniversary
of such date.
(h) Continuing Director. For purposes of this Agreement, the term
"Continuing Director" means any member of the Board of Directors of the Company
who was (i) a member of such Board on the date hereof; (ii) elected by a
majority of the Continuing Directors then on such Board; or (iii) recommended to
be elected as a member of the Board by a majority of the Continuing Directors
then on such Board.
(i) Covered Termination. For purposes of this Agreement, the term
"Covered Termination" means any termination of the Executive's consulting
relationship where the Termination Date is any date on or prior to the end of
the Consulting Period.
(j) Discretionary Termination. For purposes of this Agreement,
"Discretionary Termination" means the determination by the Executive at any time
during the sixty (60) day period commencing one year after the occurrence of a
Change in Control of the Company, as evidenced by the Executive's delivery to
the Company of a Notice of Termination during such period, to terminate this
Agreement and his consulting relationship hereunder for any reason whatsoever in
his sole discretion with or without good faith, and regardless of whether the
Company has terminated or is terminating Executive for any reason, including for
"Cause."
(k) Good Reason. For purposes of this Agreement, the Executive shall
have a "Good Reason" for termination of Executive's consulting relationship
after a Change in Control of the Company in the event of: (i) any breach of this
Agreement by the Company or one of its Affiliates, including, but not limited
to, the failure by the Company to make any of the payments due hereunder; or
(ii) failure by the Company to obtain the Agreement referred to in Section 17(a)
hereof as provided therein.
(l) Monthly Retainer Amount. For purposes of this Agreement, the term
"Monthly Retainer Amount" shall mean, subject to increase (but not any decrease)
pursuant Section 6, one-twelfth of any and all compensation (excluding only the
reimbursement for
3
expenses of the type referred to in Section 5(c)) and benefits of any and all
types and kinds whatsoever received by the Executive from the Company during the
year immediately prior to the Change in Control of the Company.
(m) Person. For purposes of this Agreement, the term "Person" shall
mean any individual, firm, partnership, corporation or other entity and shall
include any successor (by merger or otherwise) of such entity.
(n) Retirement Savings Plan. For purposes of this Agreement, the term
"Retirement Savings Plan" means the Fresh Brands Distributing, Inc. Retirement
Savings Plan (as such plan may be renamed from time to time) and any similar
plan administered by the Company or any of its Affiliates as in effect
immediately prior to the Change in Control of the Company.
(o) Termination Date. For purposes of this Agreement, except as
otherwise provided in Section 17(a) hereof or as set forth below, the term
"Termination Date" means (i) if the Executive's consulting relationship is
terminated by the Executive's death, the date of death; (ii) if the Executive's
consulting relationship is terminated by reason of voluntary early retirement,
as agreed in writing by the Company and the Executive, the effective date of
such early retirement which is set forth in such written agreement; (iii) if the
Executive's consulting relationship is terminated by reason of disability
pursuant to Section 12 hereof, the earlier of thirty (30) days after the Notice
of Termination is given or one day prior to the end of the Consulting Period;
(iv) if the Executive's consulting relationship is terminated by the Executive
voluntarily (other than for Good Reason or disability pursuant to Section 12),
the date the Notice of Termination is given; (v) if the Executive's consulting
relationship is terminated by the Executive pursuant to a Discretionary
Termination, the date the Notice of Termination is given; and (vi) if the
Executive's consulting relationship is terminated by the Company or one of its
Affiliates (as applicable) (other than by reason of disability pursuant to
Section 12 hereof) or by the Executive for Good Reason, the earlier of thirty
(30) days after the Notice of Termination is given or one day prior to the end
of the Consulting Period. Notwithstanding the foregoing,
(A) If termination is by the Company or one of its Affiliates for
Cause as defined in Section 1(d)(iii) of this Agreement and if the
Executive has cured the conduct constituting such Cause as described
in the Notice of Termination delivered by the Company or one of its
Affiliates (as applicable) within such thirty (30) day or shorter
period, then the Executive's consulting relationship hereunder shall
continue as if no such Notice of Termination had been delivered.
(B) If the Company or one of its Affiliates shall, in good faith,
give a Notice of Termination for Cause or by reason of disability and
the Executive in good faith notifies the Company that a dispute exists
concerning the termination within the fifteen (15) day period
following receipt thereof, then the Executive may elect to continue
his consulting relationship during such dispute and the Termination
Date shall be determined under this paragraph. If the Executive so
elects and it is thereafter determined that Cause or disability (as
the case may be) did exist, the Termination Date shall be the earlier
of (1) the date on which the dispute is finally determined, either (x)
by mutual written agreement of the parties or (y) in accordance with
Section 22 hereof, (2) the date of the Executive's death,
4
or (3) one day prior to the end of the Consulting Period. If the
Executive so elects and it is thereafter determined that Cause or
disability (as the case may be) did not exist, then the consulting
relationship of the Executive hereunder shall continue after such
determination as if the Company had not delivered its Notice of
Termination and there shall be no Termination Date arising out of such
Notice. In either case, this Agreement continues, until the
Termination Date, if any, as if such Notice of Termination had not
been delivered except that, if it is finally determined that the
Executive's consulting relationship was properly terminated for the
reason asserted in the Notice of Termination, the Executive shall in
no case be entitled to a Termination Payment (as hereinafter defined)
arising out of events occurring after such Notice of Termination was
delivered.
(C) If the Executive shall, in good faith, give a Notice of
Termination for Good Reason or by reason of disability and the Company
notifies the Executive that a dispute exists concerning the
termination within the fifteen (15) day period following receipt
thereof, then the Executive may elect to continue his consulting
relationship during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that Good Reason or disability (as the case may
be) did exist, the Termination Date shall be the earlier of (1) the
date on which the dispute is finally determined, either (x) by mutual
written agreement of the parties or (y) in accordance with Section 22
hereof, (2) the date of the Executive's death or (3) one day prior to
the end of the Consulting Period. If the Executive so elects and it is
thereafter determined that Good Reason or disability (as the case may
be) did not exist, then the Executive's consulting relationship
hereunder shall continue after such determination as if the Executive
had not delivered the Notice of Termination asserting Good Reason or
disability (as the case may be) and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues,
until the Termination Date, if any, as if the Executive had not
delivered the Notice of Termination except that, if it is finally
determined that Good Reason or disability (as the case may be) did
exist, the Executive shall in no case be denied the benefits described
in Sections 8 and 9 hereof (including a Termination Payment) based on
events occurring after the Executive delivered his Notice of
Termination.
(D) Except as provided in Paragraphs (B) and (C) above and other
than a Discretionary Termination (which cannot be subject to dispute
by the Company), if the party receiving the Notice of Termination in
good faith notifies the other party that a dispute exists concerning
the termination within the fifteen (15) day period following receipt
thereof and it is finally determined that the reason asserted in such
Notice of Termination did not exist, then (1) if such Notice was
delivered by the Executive, the Executive will be deemed to have
voluntarily terminated his consulting relationship and (2) if
delivered by the Company or one of its Affiliates, the Company and all
of its Affiliates will be deemed to have terminated the Executive
other than by reason of Cause.
5
2. Termination or Cancellation Prior to Change in Control. The Board
of Directors of the Company shall retain the right to remove or replace the
Executive as its Chairman of the Board at any time prior to a Change in Control
of the Company. In addition, the Executive retains the right to resign as a
director and/or the Chairman of the Board. If the Executive resigns, or is
removed or replaced, as the Chairman of the Board of the Company prior to a
Change in Control of the Company, then this Agreement shall automatically be
terminated and cancelled and be of no further force and effect, and thereupon
any and all rights and obligations of the parties hereunder shall immediately
and automatically cease.
3. Consulting Relationship. Beginning immediately upon the occurrence
of any Change in Control of the Company while the Executive is the Chairman of
the Board of the Company, the Company hereby, without any further action by or
on behalf of the Company, engages the Executive as a consultant for the
Consulting Period, and the Executive shall make himself available to the Company
as a consultant, in accordance with and subject to the terms and provisions of
this Agreement (provided, that, nothing herein shall limit the Executive's right
to exercise a Discretionary Termination), and the terms of this Agreement shall
expressly supersede the terms and conditions of any other then existing
arrangement or agreement between the Company and/or its Affiliates and the
Executive with respect to his service as Chairman of the Board and/or a
consultant to the Company.
4. Duties. During the Consulting Period, the Executive shall make
himself reasonably available to the Company's senior management to be able to
perform mutually agreed upon consulting services consistent with the nature and
type of services performed by him for the Company prior to the Change in Control
of the Company (or in such other capacities and positions as may be mutually
agreed to by the Company and the Executive in writing) on the same basis that he
was available during the year immediately prior to the Change in Control of the
Company.
5. Compensation. During the Consulting Period, the Executive shall be
compensated as follows:
(a) Monthly Retainer Amount. On or before the first day of each month
during the Consulting Period, the Company shall pay the Executive, in cash, an
amount equal to the Monthly Retainer Amount, subject to increase (but not
decrease) as hereinafter provided. Timely and full payment by the Company to the
Executive of the Monthly Retainer Amount shall not be conditioned on, delayed,
withheld, offset against, or diminished for any reason whatsoever, including
based upon the number of hours of services, if any, provided or not provided by
the Executive or on any level, quality, quantity or expectation of performance,
results or otherwise provided, or not provided, by the Executive.
(b) Additional Consulting Payments. If, during any month during the
Consulting Period, the number of hours of services provided by the Executive
under this Agreement exceeds one-twelfth of the total number of hours of
services provided by the Executive to the Company in the year immediately prior
to the Change in Control of the Company, then (i) the Executive shall, promptly
after the end of each such month, send the Company a written statement that
states the total number of hours of services provided during such month and (ii)
the Company shall pay Executive, in cash, an amount equal to the excess hours
worked multiplied by the Hourly Consulting Fee. For purposes of this Agreement,
the
6
"Hourly Consulting Fee" shall mean an amount equal to (i) the Monthly Retainer
Amount then in effect divided by (ii) one-twelfth the number of hours in which
the Executive provided services during the year immediately prior to the Change
in Control of the Company.
(c) Reimbursement of Expenses. The Executive shall, at such intervals
and in accordance with such standard policies as may be in effect immediately
prior to the Change in Control of the Company, be reimbursed for any and all
monies advanced or incurred by the Executive in connection with the Executive's
provision of services to the Company or one of its Affiliates for out-of-pocket
expenses incurred by the Executive on behalf of the Company or any of its
Affiliates, including, without limitation, travel, lodging, telephone and other
expenses.
(d) Compensation Plans. The Executive shall continue to participate in
any and all benefit, bonus or other compensation plans in which Executive
participated immediately prior to the Change in Control of the Company to the
same extent he participated in such plans immediately prior to the Change in
Control of the Company (including, without limitation, health, medical, dental,
insurance and similar plans and benefits); provided, that, in no event shall the
level of benefits under each such plan in which the Executive is included be
less than the level of benefits under plans of the type referred to in this
Section 5(d) in which the Executive was participating immediately prior to the
Change in Control of the Company.
(e) Other Benefit Plans. The Executive shall be included in all plans
providing additional benefits to consultants of the Company, including but not
limited to deferred compensation, split-dollar life insurance, supplemental
retirement, stock option, stock appreciation, stock bonus and similar or
comparable plans; provided, that, in no event shall the level of benefits under
each such plan be less than the level of benefits under plans of the type
referred to in this Section 5(e) in which the Executive was participating
immediately prior to the Change in Control of the Company.
6. Annual Compensation Adjustments. During the Consulting Period, the
Board of Directors of the Company (or an appropriate committee thereof) will
consider and appraise, at least annually, the contributions of the Executive to
the Company's operating efficiency, growth, cash flow from operations and
operating profits, and due consideration shall be given to the appropriate
annual bonus to be paid to the Executive and to the upward (but not downward)
adjustment of the Executive's Monthly Retainer Amount, at least annually,
commensurate with (i) increases generally given to other consultants and
executives of the Company, and (ii) as the scope of the Company's operations or
the Executive's consulting relationship expands.
7. Termination For Cause or Without Good Reason. If there is a Covered
Termination for Cause or due to the Executive's voluntarily terminating his
consulting relationship, other than for Good Reason, disability pursuant to
Section 12 or a Discretionary Termination (any such terminations to be subject
to the procedures set forth in Section 13 hereof), then the Executive shall be
entitled to receive only Accrued Benefits pursuant to Section 9(a) hereof.
7
8. Termination Giving Rise to a Termination Payment.
(a) If there is a Covered Termination (a) that is a Discretionary
Termination, (b) that is a termination by reason of death, (c) that is a
termination by reason of disability pursuant to Section 12, (d) by the Executive
for Good Reason or (e) by the Company or one of its Affiliates, other than by
reason of Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits pursuant to Section 9(a) hereof
and, in lieu of further base salary for periods following the Termination Date,
as liquidated damages and severance pay, the Termination Payment pursuant to
Section 9(b) hereof.
(b) If there is a Covered Termination and the Executive is entitled to
Accrued Benefits and the Termination Payment, then the Executive and his wife
shall each, until the later of (a) the third anniversary of the Termination Date
or (b) the Executive's sixty-fifth birthday, continue to be covered by the same
or equivalent life insurance, hospitalization, health, medical and dental
coverage as provided hereunder immediately prior to the date the Notice of
Termination is given, with all costs and expenses (including premiums,
deductibles and co-pay charges) associated with such life insurance,
hospitalization, health, medical and dental coverage paid by the Company. In the
event that the Executive dies prior to the later of (a) the third anniversary of
the Termination Date or (b) the Executive's sixty-fifth birthday, his wife
shall, until her sixty-fifth birthday, continue to be covered by the same or
equivalent life insurance, hospitalization, health, medical and dental coverage
as was required hereunder immediately prior to the Executive's death, with all
costs and expenses (including premiums, deductibles and co-pay charges)
associated with such life insurance, hospitalization, health, medical and dental
coverage paid by the Company.
9. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the Executive's
"Accrued Benefits" shall include the following amounts, payable as described
herein: (i) all compensation for the time period ending with the Termination
Date; (ii) reimbursement for any and all monies advanced in connection with
expenses incurred by the Executive on behalf of the Company or its Affiliates
for the time period ending with the Termination Date; (iii) any and all other
cash earned through the Termination Date and deferred at the election of the
Executive or pursuant to any deferred compensation plan then in effect; (iv) a
lump sum payment of the bonus or incentive compensation otherwise payable to the
Executive with respect to the year in which termination occurs under all bonus
or incentive compensation plan or plans in which the Executive is a participant;
and (v) all other payments and benefits to which the Executive may be entitled
as compensatory fringe benefits or under the terms of any benefit plan,
including health, medical and insurance coverage for the otherwise expected
duration of the Consulting Period (as if such Termination Date did not occur)
and severance payments under severance policies of the Company and its
Affiliates (as applicable) and practices as in effect immediately prior to the
Change in Control of the Company. Payment of Accrued Benefits shall be made
promptly in accordance with the prevailing practice with respect to Subsections
(i) and (ii) or, with respect to Subsections (iii), (iv) and (v), pursuant to
the terms of the benefit plan or practice establishing such benefits.
(b) Termination Payment. The Termination Payment shall be an amount
equal to the sum of (i) thirty six (36) times the Monthly Retainer Amount, as
adjusted upward
8
(but not downward) from time to time pursuant to Section 6 hereof, plus (ii)
three (3) times the higher of (a) the average of the two highest annual bonuses
(if any) that are either (i) paid to the Executive or (ii) offered by the
Company or its Board of Directors (or any committee thereof) to and declined by
the Executive in the three years immediately prior to the Change in Control of
the Company or (b) the average of the two highest annual bonuses (if any) that
are either (i) paid to the Executive or (ii) offered by the Company or its Board
of Directors (or any committee thereof) to and declined by the Executive in the
three years immediately prior to the date of the Covered Termination. Except as
otherwise provided herein, the Termination Payment shall be paid to the
Executive in cash no later than ten (10) business days after the Termination
Date; provided, however, the Termination Payment shall be paid immediately upon
receipt by the Company of a Notice of Termination relating to a Discretionary
Termination (regardless of any differing effective date of the termination of
the Executive's consulting relationship). The Executive shall not be required to
mitigate the amount of the Termination Payment by securing other employment or
otherwise, nor will such Termination Payment be reduced by reason of the
Executive securing other employment or for any other reason.
(c) Gross-Up Payment.
(i) Notwithstanding any other provision of this Agreement, if any
portion of any payment under this Agreement, or under any other agreement
with or plan of the Company or any of its Affiliates (in the aggregate, the
"Total Payments"), would constitute an "excess parachute payment," the
Company shall pay Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by Executive after deduction of any
excise tax imposed under Section 4999 of the Code, any interest charges or
penalties in respect of the imposition of such excise tax (but not any
federal, state or local income tax, or employment tax) on the Total
Payments, and any federal, state and local income tax, employment tax, and
excise tax upon the payment provided for by this Section 9(c), shall be
equal to the Total Payments. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of Executive's domicile for income tax
purposes on the date the Gross-Up Payment is made, net of the maximum
reduction in federal income taxes that may be obtained from the deduction
of such state and local taxes.
(ii) For purposes of this Agreement, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned to them
in Section 280G of the Code and such "parachute payments" shall be valued
as provided therein. Present value for purposes of this Agreement shall be
calculated in accordance with Section 280G(d)(4) of the Code (or any
successor provision). Promptly following a Covered Termination or notice by
the Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an excess parachute payment
as defined in Section 280G of the Code, the Executive and the Company, at
the Company's expense, shall obtain the opinion (which need not be
unqualified) of nationally recognized tax counsel ("National Tax Counsel")
selected by the Company's independent auditors and reasonably acceptable to
the Executive (which may be regular
9
outside counsel to the Company), which opinion sets forth (i) the amount of
the Base Period Income, (ii) the amount and present value of Total
Payments, (iii) the amount and present value of any excess parachute
payments, and (iv) the amount of any Gross-Up Payment. As used in this
Agreement, the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period" as
defined in Section 280G(d)(1) of the Code. For purposes of such opinion,
the value of any noncash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code (or any successor
provisions), which determination shall be evidenced in a certificate of
such auditors addressed to the Company and the Executive. The opinion of
National Tax Counsel shall be addressed to the Company and the Executive
and shall be binding upon the Company and the Executive. If such National
Tax Counsel so requests in connection with the opinion required by this
Section 9(c), the Executive and the Company shall obtain, at the Company's
expense, and the National Tax Counsel may rely on, the advice of a firm of
recognized executive compensation consultants as to the reasonableness of
any item of compensation to be received by the Executive solely with
respect to its status under Section 280G of the Code and the regulations
thereunder. Within five (5) days after the National Tax Counsel's opinion
is received by the Company and the Executive, the Company shall pay (or
cause to be paid) or distribute (or cause to be distributed) to or for the
benefit of Executive such amounts as are then due to Executive under this
Agreement.
(iii) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Total Payments or
Gross-Up Payment, a change is finally determined to be required in the
amount of taxes paid by Executive, appropriate adjustments shall be made
under this Agreement such that the net amount which is payable to the
Executive after taking into account the provisions of Section 4999 of the
Code shall reflect the intent of the parties as expressed in this Section
9, in the manner determined by the National Tax Counsel.
(iv) The Company agrees to bear all costs associated with, and to
indemnify and hold harmless, the National Tax Counsel of and from any and
all claims, damages, and expenses resulting from or relating to its
determinations pursuant to this Section 9(c), except for claims, damages or
expenses resulting from the gross negligence or willful misconduct of such
firm.
10. Death. In the event of a Covered Termination due to the
Executive's death, the Executive's estate, heirs and beneficiaries shall receive
all the Executive's Accrued Benefits through the Termination Date and the
Termination Payment in accordance with Section 9(b).
11. Retirement. If, during the Consulting Period, the Executive and
the Company shall execute an agreement providing for the early retirement of the
Executive, or the Executive shall otherwise give notice that he is voluntarily
choosing to retire, the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's consulting relationship is
terminated by the Executive for Good Reason, disability or a Discretionary
Termination or by the Company other than by reason of Cause and the Executive
10
also, in connection with such termination, elects to retire, the Executive shall
also be entitled to receive a Termination Payment pursuant to Section 9(b)
hereof.
12. Termination for Disability. If, during the Consulting Period, as a
result of the Executive's disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been unable to perform the Executive's duties hereunder for six (6)
consecutive months and, within thirty (30) days after the Company or the
Executive notifies the other in writing that it intends to terminate the
Executive's consulting relationship (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have returned
to the performance of the Executive's duties hereunder, the Executive or Company
and its Affiliates (as the case may be) may terminate the Executive's consulting
relationship pursuant to a Notice of Termination given in accordance with
Section 13 hereof. In the event the Executive's consulting relationship is
terminated on account of the Executive's disability in accordance with this
Section 12, the Executive shall receive Accrued Benefits in accordance with
Section 9(a) and the Termination Payment in accordance with Section 9(b) hereof
and shall remain eligible for all benefits provided by any long term disability
programs for which the Executive is eligible and that are in effect at the time
of such termination.
13. Termination Notice and Procedure. Any Covered Termination by the
Company, any of its Affiliates or the Executive shall be communicated by written
Notice of Termination to the Executive, if such Notice is given by the Company
or one of its Affiliates, and to the Company, if such Notice is given by the
Executive, all in accordance with the following procedures and those set forth
in Section 23 hereof:
(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination. (No such detail
need be provided for a Discretionary Termination).
(b) Any Notice of Termination by the Company or one of its Affiliates
shall have been approved, prior to the giving thereof to the Executive, by a
resolution duly adopted by a majority of the directors of the Company (or any
successor corporation) then in office.
(c) The Executive shall have thirty (30) days, or such longer period
as the Company may determine to be appropriate, to cure any conduct or act, if
curable, alleged to provide grounds for termination of the Executive's
consulting relationship for Cause under this Agreement.
(d) The recipient of the Notice of Termination shall personally
deliver or mail in accordance with Section 23 hereof written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen (15) days after receipt thereof, provided, however, that a Notice
of Termination relating to a Discretionary Termination shall not be subject to
dispute for any reason by the Company or otherwise. After the expiration of such
fifteen (15) days (or immediately upon receipt of a Notice of Termination
relating to a Discretionary Termination), the contents of the Notice of
Termination shall become final and not subject to dispute.
11
14. Confidentiality Obligations of the Executive; Noncompetition.
(a) During and following the Executive's consulting relationship with
the Company, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential information
or proprietary data of the Company, except to the extent authorized in writing
by the Board of Directors of the Company or required by any court or
administrative agency, other than to an employee of the Company or a person to
whom disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of duties as an executive of the Company.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of his
consulting relationship.
(b) The Executive agrees that, in the event of a Covered Termination
in which the Executive has or will receive a Termination Payment, for a period
of one year after the Termination Date or until the end of the Consulting
Period, whichever is shorter, the Executive shall not, within the State of
Wisconsin, except as permitted by the Company's prior written consent (which
shall not be unreasonably withheld), participate in the management of any
business which is a direct and substantial competitor of the Company or one of
its Affiliates. The ownership of less than five percent of any class of
securities of any corporation listed on a national securities exchange or
regularly traded over the counter even though such corporation may be a
competitor of the Company or one of its Affiliates as specified above, shall not
be deemed as constituting a financial interest in such competitor.
15. Expenses and Interest. If, after a Change in Control of the
Company, a good faith dispute arises with respect to the enforcement of the
Executive's rights under this Agreement or if any legal or arbitration
proceeding shall be brought in good faith to enforce or interpret any provision
contained herein, or to recover damages for breach hereof, the Executive shall
recover from the Company any reasonable attorneys' fees and necessary costs and
disbursements incurred as a result of such dispute, legal or arbitration
proceeding ("Expenses"), and prejudgment interest on any money judgment or
arbitration award obtained by the Executive calculated at the rate of interest
announced by U.S. Bank, N.A. (or any successor thereto) from time to time as its
prime or base lending rate from the date that payments to him should have been
made under this Agreement. Within ten (10) days after the Executive's written
request therefor, the Company shall pay to the Executive, or such other person
or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
16. Payment Obligations Absolute. The Company's obligation during and
after the Consulting Period to pay the Executive the amounts and to make the
benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section
15 of this Agreement, all amounts payable by the Company hereunder shall be paid
without notice or demand. Except as provided in Section 9(c) of this Agreement,
each and every
12
payment made hereunder by the Company shall be final, and the Company will not
seek to recover all or any part of such payment from the Executive, or from
whomsoever may be entitled thereto, for any reason whatsoever.
17. Successors.
(a) If the Company sells, assigns or transfers all or substantially
all of its business and assets to any Person, or if the Company merges into or
consolidates or otherwise combines with any Person, then the Company shall
assign all of its right, title and interest in this Agreement as of the date of
such event to such Person, and the Company shall cause such Person, by written
agreement in form and substance reasonably satisfactory to the Executive, to
expressly assume and agree to perform from and after the date of such assignment
all of the terms, conditions and provisions imposed by this Agreement upon the
Company. Failure of the Company to obtain such agreement shall be a breach of
this Agreement constituting "Good Reason" hereunder, except that for purposes of
implementing the foregoing, the date upon which such transfer or other
succession becomes effective shall be deemed the Termination Date. In case of
such assignment by the Company and of assumption and agreement by such Person,
as used in this Agreement, "Company" shall thereafter mean such Person which
executes and delivers the agreement provided for in this Section 17 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law, and this Agreement shall inure to the benefit of and be
enforceable by such Person. The Executive shall, in his discretion, be entitled
to proceed against any or all of such Persons, any Person which theretofore was
such a successor to the Company (as defined in the first paragraph of this
Agreement) and the Company (as so defined) in any action to enforce any rights
of the Executive hereunder. Except as provided in this Section 17(a), this
Agreement shall not be assignable by the Company. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 7, 8, 9, 10, 11 and 12 hereof if the
Executive had lived shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs and representatives.
18. Severability. The provisions of this Agreement shall be regarded
as divisible, and if any of said provisions or any part hereof are declared
invalid or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
19. Amendment. This Agreement may not be amended or modified at any
time except by written instrument executed by the Company and the Executive.
20. Withholding. The Company and its Affiliates shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed the
minimum amount required to be withheld by law. The Company and its Affiliates
shall be entitled to rely on an opinion of nationally recognized tax counsel if
any question as to the amount or requirement of any such withholding shall
arise.
13
21. Certain Rules of Construction. No party shall be considered as
being responsible for the drafting of this Agreement for the purpose of applying
any rule construing ambiguities against the drafter or otherwise. No draft of
this Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an agreement in writing shall be
deemed to require that the writing in question be signed by the Executive and an
authorized representative of the Company.
22. Governing Law; Resolution of Disputes. This Agreement and the
rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Wisconsin. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect or by
litigation. Executive shall be entitled to the rights set forth in Section 15 to
recover his costs with respect to any such dispute. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Sheboygan, Wisconsin or, at the Executive's election, in the
judicial district encompassing the city in which the Executive resides. The
parties consent to personal jurisdiction in each trial court in the selected
venue having subject matter jurisdiction notwithstanding their residence or
situs, and each party irrevocably consents to service of process in the manner
provided hereunder for the giving of notices.
23. Notice. Notices given pursuant to this Agreement shall be in
writing and, except as otherwise provided by Section 13(d) hereof, shall be
deemed given when actually received by the Executive or actually received by the
Company's Secretary or any officer of the Company other than the Executive. If
mailed, such notices shall be mailed by United States registered or certified
mail, return receipt requested, addressee only, postage prepaid, if to the
Company or any of its Affiliates, to Fresh Brands, Inc., Attention: Secretary,
2215 Union Avenue, Sheboygan, Wisconsin 53081 and to Foley & Lardner, Attention:
Steven R. Barth, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, or if to
the Executive, at the address set forth below the Executive's signature to this
Agreement, or to such other address as the party to be notified shall have
theretofore given to the other party in writing.
24. No Waiver. No waiver by either party at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
25. Headings. The headings herein contained are for reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.
14
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
FRESH BRANDS, INC.
By:
------------------------------------
Elwood F. Winn
President and Chief Executive Officer
EXECUTIVE
---------------------------------------
Walter G. Winding
{Address]
15