Exhibit 10.11
EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT
EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT (the "Agreement"), dated as
of August 20, 1998, between RICHFOOD HOLDINGS, INC., a Virginia corporation (the
"Company"), and ALEC C. COVINGTON (the "Employee").
WHEREAS, the Company expects that the Employee will make substantial
contributions to its future growth and prospects; and
WHEREAS, the Company desires to obtain the continued services of the
Employee; and
WHEREAS, the Employee desires to continue to be employed by the Company
and to remain in the employ of the Company during the term of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto covenant and agree
as follows:
1. Definitions. When used in this Agreement, the following terms shall
have the meanings specified:
(a) Cause. "Cause", when referring to a termination of employment,
shall mean: (i) conviction by a court of competent jurisdiction for a felony;
(ii) breach of any material obligation to the Company under any material
agreement concerning any term of employment; or (iii) willful or gross neglect
of duties to the Company (other than by reason of illness or temporary
disability short of Disability) or willful or gross misconduct in the
performance of such duties. All determinations as to whether a termination of
employment is for Cause shall be made in good faith by the Board of Directors of
the Company and shall be binding on the parties hereto.
(b) Change in Control. A "Change in Control" of the Company shall be
deemed to have occurred if: (i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing more than 50% of the aggregate voting power of all classes of the
Company's then-outstanding voting securities; or (ii) the shareholders of the
Company approve (A) a plan of merger, consolidation or share exchange between
the Company and an entity other than a direct or indirect wholly-owned
subsidiary of the Company, or (B) a proposal with respect to the sale, lease,
exchange or other disposal of all, or substantially all, of the Company's
property.
(c) Disability. "Disability" shall mean a condition, determined on the
basis of medical evidence satisfactory to a physician designated by the Board of
Directors of the Company, rendering the Employee, due to bodily injury or
disease or mental illness, unable to perform the duties pertaining to his
employment with the Company on a full-time basis for 180 consecutive days.
2. Term. This Agreement shall continue in full force and effect for
three (3) years following the date first above written (the "Term").
3. Employment by the Company. The Company agrees to employ the Employee
as President of its Wholesale Division through the Term of this Agreement, with
a job description, responsibilities and duties commensurate with that position.
Notwithstanding the foregoing, the parties agree that the Company may terminate
the Employee's employment hereunder at any time, subject to the provisions of
Section 5 hereof, it being expressly understood that this Agreement is not
intended to alter the at-will nature of the Company's employment of the
Employee. In consideration of the Company's obligations under this Agreement,
the Employee agrees that (i) he will not voluntarily leave the employ of the
Company during the Term of this Agreement without first complying with the
provisions of Section 5(d) hereof, and (ii) he will devote his full business
time and attention to service to the Company and its subsidiaries commensurate
with his position throughout the Term of this Agreement.
4. Compensation. During the Term of this Agreement and unless the
Employee's employment has been earlier terminated, the Company agrees to: (i)
pay the Employee as compensation for his services an annual base salary in the
amount of Three Hundred Twenty Five Thousand Dollars ($325,000) per year,
payable in equal periodic installments (less any amounts permitted or required
to be deducted or withheld under applicable law) not less frequently than
monthly, it being understood that the parties contemplate a good faith review of
such base salary on an annual basis for possible increase in light of the
Employee's performance; (ii) permit the Employee to participate in the Company's
executive officer annual performance plan, with a participation level of 40% of
his base salary; (iii) permit the Employee to participate in such long-term
incentive compensation programs as the Company may make generally available to
its executive employees from time to time; (iv) provide for the benefit of the
Employee such vacation, pension and disability benefits as are, and such
coverage under life, accident, medical and dental plans as is, generally
provided from time to time to executive employees of the Company; and (v)
provide the Employee with an automobile consistent with those provided by the
Company to its other executive officers with similar titles and
responsibilities.
5. Termination of Employment; Severance.
(a) By the Company For Cause. The Company may terminate the Employee's
employment under this Agreement at any time for Cause by delivery of written
notice of termination to the Employee (which notice shall specify in reasonable
detail the basis upon which such termination is made). In the event the
Employee's employment is terminated for Cause, all provisions of this Agreement
(other than Sections 7 through 17 hereof) and the Term shall be terminated. Upon
any such termination, the Employee shall be entitled only to payment of his
earned and unpaid salary to the date of termination, any earned and unpaid bonus
under the Company's executive officer annual performance plan (or such
comparable successor program that may be in effect from time to time) for the
prior year, unreimbursed business and entertainment expenses in accordance with
the Company's policy, and unreimbursed medical, dental and other employee
benefit expenses incurred in accordance with the Company's employee benefit
plans (hereinafter referred to as the "Standard Termination Payments").
(b) Upon Death or Disability. If the Employee dies, all provisions of
this Agreement (other than Sections 6, 7 and 9 through 17 hereof, and other than
any rights or benefits arising as a result of such death) and the Term shall be
automatically terminated; provided, however, that the Standard Termination
Payments, together with additional salary payments equal to and in lieu of the
Employee's accrued and unused vacation, shall be paid to the Employee's
surviving spouse or, if none, his estate, and the death benefits under the
Company's employee benefit plans shall be paid in accordance with the terms of
the individual plans. If the Employee becomes Disabled, either the Company or
the Employee may terminate this Agreement and the Term at any time thereafter.
In such event, the Employee shall be entitled to receive his normal compensation
hereunder through the date of such termination, and shall thereafter be entitled
to receive the Standard Termination Payments, together with additional salary
payments equal to and in lieu of the Employee's accrued and unused vacation and
such disability and other employee benefits as may be provided under the terms
of the Company's employee benefit plans.
(c) By the Company Without Cause.
(i) The Company may terminate the Employee's employment under
this Agreement without Cause, and other than by reason of his death or
Disability, by sending written notice of termination to the Employee, which
notice shall specify a date not more than ninety (90) days after the date of
such notice as the effective date of such termination (the "Termination Date").
From the date of such notice through the Termination Date, the Employee shall
continue to perform the normal duties of his employment hereunder, and shall be
entitled to receive when due all compensation and benefits applicable to the
Employee hereunder. Promptly (and in any event within 60 days) following the
Termination Date, the Company shall pay to the Employee (A) the Standard
Termination Payments, together with additional salary payments equal to and in
lieu of the Employee's accrued and unused vacation, plus (B) a lump sum
severance benefit in an amount equal to two times the Employee's base salary as
in effect on the Termination Date. The Employee shall have no obligation
whatsoever to mitigate any damages, costs or expenses suffered or incurred by
the Company with respect to the severance obligations set forth in this Section
5(c)(i) and, except as set forth in subsection (ii) of this Section, no such
severance payments received or receivable by the Employee shall be subject to
any reduction, offset, rebate or repayment as a result of any subsequent
employment or other business activity by the Executive.
(ii) Following any termination of the Employee's employment
pursuant to this Section 5(c), the Company shall also be obligated to provide
continued coverage under the Company's medical, dental and life insurance
benefit plans or arrangements with respect to the Employee for a period of two
years following the Termination Date (whether or not such period would extend
beyond the Term) or, if the Employee is not eligible for continuing coverage
under the terms of such plans or arrangements, the Company shall provide
substantially similar coverage on an individual basis for such period. The
Company's obligation to provide continued benefits coverage in accordance with
this Section 5(c)(ii) shall be subject to mitigation to the extent that
substantially similar benefits are provided by any successor employer during
such continuation period.
(d) By the Employee. The Employee may terminate his employment, and
any further obligations which Employee may have to perform services on behalf of
the Company hereunder at any time after the date hereof, by sending written
notice of termination to the Company not less than ninety (90) days prior to the
effective date of such termination. During such ninety (90) day period, the
Employee shall continue to perform the normal duties of his employment
hereunder, and shall be entitled to receive when due all compensation and
benefits applicable to the Employee hereunder. Except as provided below, if the
Employee elects to terminate his employment hereunder (other than as a result of
Disability) and otherwise complies with his obligations under this paragraph,
then the Employee shall be entitled to receive the Standard Termination
Payments, together with additional salary payments equal to and in lieu of the
Employee's accrued and unused vacation, but the Company shall have no further
obligation to make payments or provide benefits to the Employee. Anything in
this Agreement to the contrary notwithstanding, the termination of the
Employee's employment by the Employee within one year after a Change in Control
of the Company shall be deemed to be a termination of the Employee's employment
without Cause by the Company for purposes of this Agreement, and the Employee
shall be entitled to the payments and benefits set forth in Section 5(c) above.
6. Change in Control/Excise Taxes. If a Change in Control occurs during
the Term of this Agreement and the Employee becomes liable, in any taxable year,
for the payment of an excise tax under Internal Revenue Service Code ("Code")
section 4999 with respect to any payment or benefit under this Agreement or
under any stock option plan or other program of the Company (including, for
example, the accelerated exercisability of stock options upon a Change in
Control) without regard to whether a termination of employment has occurred, the
Company shall pay to the Employee (i) an amount equal to the excise tax for
which the Employee is liable under Code section 4999, plus (ii) the federal,
state and local income taxes, and the hospital insurance tax under Code section
3111(b), for which the Employee is liable on account of the payment described in
clause (i) of this Section, together with an amount sufficient to satisfy any
additional federal, state or local income taxes or hospital insurance tax for
which the Employee is liable on account of the amounts received pursuant to this
clause (ii). Such payment shall be made in one or more installments at times
necessary to permit the Employee to make estimated tax payments with respect to
the Employee's relevant taxable year and a final payment shall be made not later
than 20 days after the date (or extended filing date) on which the tax return
reflecting the liability for such excise tax is required to be filed with the
Internal Revenue Service.
7. Confidentiality. (a) Except as specifically authorized by the
Company in writing, from the date hereof and continuing forever, the Employee
agrees not to (i) disclose any trade secrets or confidential information to any
individual or entity, or otherwise permit any person or entity to obtain or
disclose any trade secrets or confidential information, or (ii) use any trade
secrets or confidential information for the Employee's own financial gain,
whether individually or on behalf of another individual or entity. For purposes
hereof, the phrase "trade secrets and confidential information" means any and
all information relating to any part of the business of the Company or the
business of any affiliate of the Company, provided to the Employee or to which
the Employee has had access, which information is not a matter of public record
or generally known to the public, including, without limitation: (i) financial
information regarding the Company or any affiliate of the Company; (ii)
personnel data, including compensation arrangements, relating to any employee of
the Company or any affiliate of the Company; (iii) internal plans, practices and
procedures of the Company or any affiliate of the Company; (iv) the names,
addresses and requirements of any customers of the Company or any affiliate of
the Company; (v) any other information expressly deemed confidential by the
officers or directors of the Company; and (vi) the terms and conditions of any
supply agreements and other agreements, documents and instruments to which the
Company or any of its affiliates are parties.
(b) All writings, records and other documents and things containing
any trade secrets or confidential information in the Employee's custody or
possession shall be the exclusive property of the Company, shall not be copied
and/or removed from the premises of the Company, except in pursuit of the
business of the Company, and shall be delivered to the Company, without
retaining any copies, upon the termination of the Employee's employment or at
any time as requested by the Company.
8. Non-competition Agreement. In consideration of the Company's
agreement to employ the Employee upon the terms and conditions set forth in this
Agreement and the Company's agreement to pay severance benefits under certain
circumstances pursuant to Section 5(c) hereof, the Employee covenants and agrees
that, for two years following the Termination Date, the Employee shall not,
directly or indirectly: (a) engage in or accept employment with (as a consultant
or otherwise), own a material interest in, or otherwise give assistance to,
whether or not for compensation, any person, firm or corporation (other than an
affiliate of a purchaser of, or successor to, the business of the Company)
engaged in the ownership or management of a business of the type conducted by
the Company or any of its subsidiaries within the geographical areas in which
the Company or any of its subsidiaries compete on the Termination Date; or (b)
solicit or recruit for employment any employee or independent contractor of the
Company or any of its subsidiaries. In the event of any breach of the provisions
of this Section by the Employee, the restrictions set forth herein shall be
extended by a period equal to the duration of such breach.
9. Remedies. The parties hereto agree that each would suffer
irreparable harm from a breach by the other of any of the covenants or
agreements contained herein. Therefore, in the event of the actual or threatened
breach by either party hereto of any of the provisions of this Agreement, the
other party hereto may, in addition and supplementary to other rights and
remedies existing in favor of such party, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions hereof.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and its affiliates and their successors and
assigns, and shall be binding upon and inure to the benefit of the Employee and
his legal representatives and assigns, provided that in no event shall the
Employee's obligations to perform services for the Company and its affiliates be
delegated or transferred by the Employee. The Company may assign or transfer its
rights hereunder to a successor corporation in the event of a merger,
consolidation or transfer or sale of all or substantially all of the assets of
the Company or of the Company's business (provided, however, that no such
assignment or transfer shall have the effect of relieving the Company of any
liability to the Employee hereunder or under any other agreement or document
contemplated herein), but only if such assignment or transfer does not result in
employment terms, conditions, duties or responsibilities which are or may be
materially different than the terms, conditions, duties or responsibilities of
the Employee hereunder.
11. Modification or Waiver. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be binding or effective for
any purpose unless it is made in a writing signed by the party against whom
enforcement of such amendment, modification, waiver, termination or cancellation
is sought. No course of dealing between or among the parties to this Agreement
shall be deemed to affect or to modify, amend or discharge any provision or term
of this Agreement. No delay on the part of the Company or the Employee in the
exercise of any of their respective rights or remedies shall operate as a waiver
thereof, and no single or partial exercise by the Company or the Employee of any
such right or remedy shall preclude other or further exercises thereof. A waiver
of a right or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right or remedy on any other occasion.
12. Notice. For purposes of this Agreement, notice and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or by overnight courier
service, or when mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company:
Richfood Holdings, Inc.
P. O. Box 26967
Richmond, Virginia 23261
Attention: President & Chief Executive Officer
with a copy to:
Gary E. Thompson, Esquire
Hunton & Williams
Riverfront Plaza - East Tower
951 E. Byrd Street
Richmond, VA 23219
If to the Employee:
to his address as reflected from time-to-time in the
personnel records of the Company.
Either party hereto may change its address for purposes of this Section by
furnishing written notice to the other party in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
13. Governing Law; Jurisdiction. This Agreement and all rights,
remedies and obligations hereunder, including, but not limited to, matters of
construction, validity and performance shall be governed by the laws of the
Commonwealth of Virginia without regard to its conflict of laws principles or
rules. To the full extent lawful, each of the Company and the Employee hereby
consents irrevocably to personal jurisdiction, service and venue in connection
with any claim or controversy arising out of this Agreement in the courts of the
Commonwealth of Virginia located in Richmond, Virginia, and in the federal
courts in the Eastern District of Virginia.
14. Severability. Whenever possible each provision and term of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision or term of this Agreement shall be
held to be prohibited by or invalid under such applicable law, then such
provision or term shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provisions or term or the remaining provisions or terms of
this Agreement.
15. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same Agreement.
16. Headings. The headings of the Sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
hereof and shall not affect the construction or interpretation of this
Agreement.
17. Entire Agreement. This Agreement (together with all documents and
instruments referred to herein) constitutes the entire agreement, and supersedes
all other prior agreements and undertakings, both written and oral, among the
parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed on its behalf, and the Employee has duly executed this Agreement, all
as of the date first above written.
RICHFOOD HOLDINGS, INC.
By: /s/ John E. Stokely
--------------------------
John E. Stokely
President & Chief Executive
Officer
EMPLOYEE:
/s/ Alec C. Covington
---------------------------
Alec C. Covington