FORM OF CHANGE-OF-CONTROL EMPLOYMENT SECURITY AGREEMENT AND NON-COMPETE
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FORM OF CHANGE-OF-CONTROL EMPLOYMENT SECURITY AGREEMENT AND NON-COMPETE
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AGREEMENT, by and between John B. Sanfilippo & Son, Inc., a Delaware corporation (the “ Company ”), and [ • ] (the “ Executive ”), dated as of the [ • ] day of [ • ], 20[ • ] (this “ Agreement ”).
The Board of Directors of the Company (the “ Board ”), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage the Executive’s full attention and dedication to the Company and the Affiliated Companies currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effect of Agreement .
(a) Unless and until there occurs, during the Term of this Agreement, either a Change in Control or a termination of the Executive’s employment in anticipation of a Change in Control as contemplated by Section 3(d) : (i) Sections 2 , 3 and 4 of this Agreement shall have no effect and shall not give rise to any rights of the Executive, and (ii) upon any termination of the Executive’s employment, the Executive shall have no further rights under this Agreement. Except as specifically provided for in Section 1(a)(i) , the other provisions of this Agreement, including Section 8 , shall be effective as of the date first written above.
(b) From and after the first date during the Term of this Agreement on which a Change in Control occurs, this Agreement shall supersede any Employment Agreement, but except as expressly provided for herein, shall have no effect on any Other Agreement or Other Plan; provided, that any confidentiality and non-competition provisions in any Employment Agreement shall continue in full force and effect.
(c) This Agreement does not alter the Executive’s status as an “at will” employee of the Company. The Executive may terminate his or her employment with the Company at any time, and the Company retains the right to terminate the Executive’s employment without notice, at any time, for any reason or no reason. Rather, this Agreement solely prescribes the terms and conditions under which separation payments and benefits shall be provided to the Executive in the event of termination of the Executive during the Protected Period as set forth in Section 4 below.
2. Terms of Employment . This Section 2 sets forth the terms and conditions of Executive’s employment, if any, by the Company during the period (the “ Protected Period ”) beginning on the first day during the Term of this Agreement on which a Change in Control occurs and ending on the second anniversary of that date, or such earlier date as the Executive’s employment terminates as contemplated by Section 3 .
(a) Position and Duties .
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(b) Compensation .
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3. Termination of Employment .
(a) Death or Disability . The Executive’s employment shall terminate automatically if the Executive dies during the Protected Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Protected Period, it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that the Executive shall not have returned to full-time performance of the Executive’s duties prior to the 30th day after receipt of such notice.
(b) By the Company . The Company may terminate the Executive’s employment during the Protected Period for Cause or without Cause. The termination of the Executive’s employment shall not be deemed to be for Cause, unless and until (i) the Company gives notice to the Executive of the existence of the event or condition constituting “Cause” and (ii) the Executive fails to cure such event or condition within 30 days after receiving such notice.
(c) By the Executive . The Executive may terminate employment during the Protected Period for Good Reason or without Good Reason. The termination of the Executive’s employment by the Executive shall not be deemed to be for “Good Reason” unless and until (i) the Executive gives written notice to the Company of the existence of the event or condition constituting “Good Reason” within 90 days after such event or condition initially occurs or exists, (ii) the Company fails to cure such event or condition within 30 days after receiving such notice, and (iii) the Executive’s
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“separation from service” within the meaning of Section 409A of the Code occurs within 30 days of the end of the 30 day cure period, but in no event later than the last day of the Protected Period and, in all events, not later than two years after such event or condition initially occurs or exists.
(d) Termination in Anticipation of a Change in Control . Anything in this Agreement to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the Executive’s employment with the Company is terminated by the Company before the Change in Control occurs in a manner and under circumstances that would be considered a termination by the Company without Cause if it had occurred during the Protected Period, and (iii) such termination of employment was made within one year at the request or suggestion of a third party that had taken steps reasonably calculated to effect the Change in Control, then such termination shall be treated under Section 4 of this Agreement as a termination by the Company without Cause during the Protected Period, except that the date of the actual Change in Control shall be treated as the Executive’s Date of Termination.
(e) Notice, Date and Effect of Termination . Any termination of the Executive’s employment by the Company pursuant to Section 3(b) or the Executive pursuant to Section 3(c) shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b) , after satisfaction of the procedural requirements of Section 3(b) or 3(c) to the extent applicable. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder, or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing their respective rights hereunder. If the Executive’s employment is terminated by the Company for Cause or by the Executive for Good Reason or without Good Reason, the termination shall be effective as of the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination (but not later than 30 days after the giving of such notice or as otherwise provided with respect to a Good Reason termination), as the case may be. If the Executive’s employment is terminated by the Company other than for Cause or Disability, the termination shall be effective as of the date on which the Company notifies the Executive of such termination. The Company and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 3(e) constitutes a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “ Date of Termination .”
4. Obligations of the Company upon Termination .
(a) Termination for Death, Disability, Cause or Other than for Good Reason . If, during the Protected Period, the Executive’s employment is terminated as a result of death, the Company terminates the Executive for Disability or for Cause, or the Executive terminates employment other than for Good Reason, then the Company shall pay to the Executive the sum of the following amounts, to the extent not previously paid to the Executive (the “ Accrued Obligations ”): (i) the unpaid amount, if any, of Base Salary through the Date of Termination; (ii) the amount of any substantiated but previously unreimbursed business expenses incurred prior to the Date of Termination, (iii) any Other Benefits; and (iv) to the extent required by applicable law any accrued pay in lieu of unused vacation.
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(b) Other than for Cause, Death or Disability; Good Reason . If, during the Protected Period, the Company terminates the Executive’s employment other than for Cause or Disability or the Executive terminates employment for Good Reason, the Company will pay to the Executive the Accrued Obligations, and, if the Executive executes and delivers to the Company a separation agreement and general release of all claims in the form attached hereto as Exhibit A (the “ Release ”) not later than the Release Deadline, the Company shall make the payments and provide the benefits described below.
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5. Non-exclusivity of Rights . Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any Other Plan for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any Other Agreement. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any Other Plan or any Other Agreement shall be payable in accordance with such Other Plan or Other Agreement, except as explicitly modified by this Agreement, including Section 4(b)(v) . Notwithstanding the foregoing, if the Executive receives payments and benefits pursuant to Section 4(b) , the Executive shall not be treated as having any additional years of service or age for purposes of any Other Plan or Other Agreement by virtue of receiving such payments and benefits, unless such Other Plan or Other Agreement specifically so provides.
6. Full Settlement; Legal Fees . In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and, subject to Section 8 , such amounts shall not be reduced, regardless of whether the Executive obtains other employment. The Company agrees to pay as incurred, within 10 days following the Company’s receipt of an invoice from the Executive, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur, at any time from the date of this Agreement through the Executive’s remaining lifetime, as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the rate equal to the prime rate as reported in the Wall Street Journal, compounded quarterly; provided, that the
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Executive shall submit an invoice for such fees and expenses promptly (but in no event later than 90 days after such fees are incurred); provided, further , that the Executive shall repay any such fees and expenses (and no additional reimbursements shall be made) (a) if there is a specific judicial finding that the Executive’s request to litigate was frivolous, unreasonable or without foundation or (b) if it has been finally determined that the Executive’s termination of employment for Cause was proper, that the Executive terminated his employment without Good Reason, or that Executive breached any of the covenants in Section 8 ; provided, further , that the Company’s obligations to Executive pursuant to this Section 6 will be limited to, and will not exceed, $50,000.00. The Executive’s right to have the Company pay such legal fees and expenses may not be liquidated or exchanged for any other benefit. If it is has been finally determined that Executive breached any of the covenants in Section 8 , then Executive shall be responsible for all legal fees and expenses that the Company may reasonably incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability under, Section 8 of this Agreement.
7. Adjustment in Payments .
(a) In the event that any payment or benefit received or to be received by Executive pursuant to the terms of this Agreement (the “ Contract Payments ”) or in connection with Executive’s termination of employment or contingent upon a Change in Control of the Company pursuant to any Other Plan or Other Agreement (the “ Other Payments ” and, together with the Contract Payments, the “ Payments ”) would be subject to the excise tax (the “ Excise Tax ”) imposed by Section 4999 of the Code, as determined as provided below, and provided , that if Executive’s Payment is, when calculated on a net-after-tax basis (taking into account the Excise Tax as well as other applicable federal, state and local income taxes), less than 100% of the net-after tax amount (taking into account applicable federal, state and local income taxes) of the Payment which could be paid to Executive under Section 280G of the Code without causing the imposition of the Excise Tax, then the Payment shall be limited to the largest amount payable without resulting in the imposition of any Excise Tax (such amount, the “ Capped Amount ”).
(b) For purposes of determining the Capped Amount, whether any of the Payments will be subject to the Excise Tax and the amounts of such Excise Tax, (i) the total amount of the Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to the extent that, in the opinion of independent tax counsel selected by the Company’s independent auditors and reasonably acceptable to Executive (“ Tax Counsel ”), a Payment (in whole or in part) does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code, or such “excess parachute payments” (in whole or in part) are not subject to the Excise Tax, (ii) the amount of the Payments that shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Payments or (B) the amount of “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) hereof), and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by Tax Counsel in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amounts compared in the proviso of Section 7(a) above, Executive shall be deemed to pay federal
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income tax at the highest marginal rates of federal i