Exhibit 10.18
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EXECUTIVE AGREEMENT
THIS EXECUTIVE AGREEMENT (this "Agreement") is made as of June 6, 2002, by and among Roundy's Acquisition Corp., a Delaware corporation (the "Company"), Roundy's, Inc., a
Wisconsin corporation and a wholly owned subsidiary of the Company ("Roundy's"), and Darren W. Karst ("Executive"). Certain definitions are set forth in Section 18 of this Agreement.
Executive desires to be employed by Roundy's, and Roundy's desires to employ Executive and to be assured of its right to have the benefit of Executive's services on the terms and conditions hereinafter set forth. Executive desires to purchase shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), and Preferred Stock, par value $.01 per share (the "Preferred Stock," and collectively with the Common Stock, the "Stock"), of the Company, and the Company desires to issue such Common Stock and Preferred Stock to Executive on the terms and conditions set forth herein. The Company, Roundy's and Executive desire to enter into this Agreement to, among other things, (i) set forth the terms of Executive's purchase of the Executive Stock (as defined below); (ii) set forth the terms and conditions of Executive's employment with Roundy's; (iii) provide the Company with certain rights in respect of the Executive Stock; and (iv) set forth the obligation of Executive to refrain from competing with the Company and its Subsidiaries (as defined below) under certain circumstances as provided herein.
On the Effective Date, Executive shall become a party to the Investor Rights Agreement, dated as of June 6, 2002 by and among the Company, Executive, the Investors (as defined below) and certain other parties (as in effect today and as amended from time to time hereafter in accordance with its terms, the "Investor Rights Agreement").
Certain provisions of this Agreement are intended for the benefit of, and shall be enforceable by, Willis Stein & Partners III, L.P., Willis Stein & Partners Dutch III-A, L.P., Willis Stein & Partners Dutch III-B, L.P., and Willis Stein & Partners III-C, L.P. (the foregoing, collectively, the "Investors").
NOW, THEREFORE, the parties hereto agree as follows:
A. PURCHASE AND SALE OF EXECUTIVE STOCK
1. On the Effective Date, Executive shall purchase from the Company, and the Company shall sell to Executive 2,096.67 shares of Common Stock at a price of $100 per share, which shares shall be subject to vesting as provided herein (the "Vesting Shares"), for an aggregate purchase price of $209,667. On the Effective Date, the Company shall deliver to Executive stock certificates representing the Vesting Shares, and Executive shall deliver to the Company the aggregate purchase price for the Vesting Shares in the manner provided in Section 2.
2. On the Effective Date, Executive shall deliver to the Company (i) a duly executed promissory note in the form of Annex A attached hereto in the initial principal amount of $209,667 (the "Executive Note"), and (ii) a counterpart signature page to the Investor Rights
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Agreement. Executive's obligations under the Executive Note shall be secured by a pledge to the Company of all of the Vesting Shares, and in connection therewith, Executive shall execute and deliver to the Company a pledge agreement in the form of Annex B attached hereto.
3. The Company shall hold each stock certificate representing the Vesting Shares, if any, until such time as the Vesting Shares represented by such certificate is released from the pledge to the Company.
4. Within thirty (30) days after Executive purchases the Vesting Shares from the Company hereunder, Executive shall make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of Annex C attached hereto.
5. In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that:
(a) The Executive Stock to be acquired by Executive pursuant to this Agreement shall be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock shall not be disposed of in contravention of the Securities Act or any applicable state securities laws.
(b) Executive is an executive officer of Roundy's, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Stock. Executive is an "accredited investor," as defined in Regulation D promulgated under the Securities Act.
(c) Executive is able to bear the economic risk of Executive's investment in the Executive Stock for an indefinite period of time because the Executive Stock have not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available.
(d) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as Executive has requested. Executive has reviewed, or has had an opportunity to review, a copy of the Investor Rights Agreement.
(e) This Agreement and each of the other agreements contemplated hereby constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement and such other agreements by Executive does not and shall not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject.
(f) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any person or entity other than the
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Company or Roundy's except as set forth on Schedule 5(f). No waivers or amendments of the agreements set forth on Schedule 5(f) have been made. Executive's prior employment as the Chief Financial Officer and Executive Vice President with Dominick's Supermarket's, Inc. and Dominick's Finer Foods, Inc. (collectively, "Dominick's") was terminated by voluntary resignation by him on or about August 22, 1998.
(g) Since November 17, 1998, Executive has not received any confidential information or trade secrets of Dominick's. Executive shall be prohibited from using or disclosing any confidential information or trade secrets belonging to Dominick's that Executive may have learned through his prior employment with Dominick's in the performance of Executive's services hereunder.
(h) Executive has consulted with independent legal counsel regarding his rights and obligations under this Agreement and fully understands the terms and conditions contained herein. Executive has obtained advice from persons other than the Company and its counsel regarding the tax effects of the transaction contemplated hereby.
6. In connection with the purchase and sale of the Executive Stock hereunder, the Company represents and warrants to Executive that:
(a) This Agreement and each of the other agreements contemplated hereby constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement and such other agreements by the Company does not and shall not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject.
(b) As of the Effective Date, the authorized capital stock of the Company will consist of 94,350 shares of Common Stock, of which 90,156.67 shares will be issued and outstanding and 10,483.33 shares of Preferred Stock of which 10,483.33 shares will be issued and outstanding. As of the Effective Date and immediately thereafter, all of the shares of Executive Stock shall be (so long as the Executive shall have paid the purchase price in respect of the Executive Stock) validly issued, fully paid and nonassessable. As of the Effective Date, except as set forth in the Certificate of Incorporation, neither the Company nor any of its Subsidiaries shall have any outstanding any stock or securities convertible or exchangeable for any shares of its capital stock or containing any profit participation features, nor shall it have outstanding any rights or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or
Phantom Stock Plans 7. As an inducement to the Company to issue the Executive Stock to Executive, and as a condition thereto, Executive acknowledges and agrees that neither the issuance of the Executive Stock to Executive nor any provision contained herein shall entitle Executive to remain in the employment of Roundy's or any of its Subsidiaries or affect the right of Roundy's to terminate Executive's employment at any time for any reason.
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B. VESTING AND REPURCHASE PROVISIONS
REGARDING CERTAIN EXECUTIVE STOCK
8. Vesting of Common Stock; Vested Shares. The Company and Executive acknowledge and agree that the Vesting Shares purchased by Executive hereunder shall be subject to vesting as hereinafter provided. "Vested Shares" means all Vesting Shares which have become vested pursuant to the terms of this Agreement. All Vesting Shares which have not become vested are referred to herein as "Unvested Shares."
The Vesting Shares shall vest in accordance with the following schedule, if as of each such date Executive is, and has been continuously, employed by the Company or any of its Subsidiaries:
- -------------------------------------------------------------------------------------------------------
Cumulative Percentage of
Date Vesting Shares Vested - ------------------------------------------------------------------------------------------------------- February 2, 2002 (the "Commencement Date") 0% - ------------------------------------------------------------------------------------------------------- End of the First Quarter Following the Commencement Date 5% - ------------------------------------------------------------------------------------------------------- End of the Second Quarter Following the Commencement Date 10% - ------------------------------------------------------------------------------------------------------- End of the Third Quarter Following the Commencement Date 15% - ------------------------------------------------------------------------------------------------------- First Anniversary of the Commencement Date 20% - ------------------------------------------------------------------------------------------------------- End of the Fifth Quarter Following the Commencement Date 25% - ------------------------------------------------------------------------------------------------------- End of the Sixth Quarter Following the Commencement Date 30% - ------------------------------------------------------------------------------------------------------- End of the Seventh Quarter Following the Commencement Date 35% - ------------------------------------------------------------------------------------------------------- Second Anniversary of the Commencement Date 40% - ------------------------------------------------------------------------------------------------------- End of the Ninth Quarter Following the Commencement Date 45% - ------------------------------------------------------------------------------------------------------- End of Tenth Quarter Following the Commencement Date 50% - ------------------------------------------------------------------------------------------------------- End of the Eleventh Quarter Following the Commencement Date 55% - ------------------------------------------------------------------------------------------------------- Third Anniversary of the Commencement Date 60% - ------------------------------------------------------------------------------------------------------- End of the Thirteenth Quarter Following the Commencement Date 65% - ------------------------------------------------------------------------------------------------------- End of the Fourteenth Quarter Following the Commencement Date 70% - ------------------------------------------------------------------------------------------------------- End of the Fifteenth Quarter Following the Commencement Date 75% - ------------------------------------------------------------------------------------------------------- Fourth Anniversary of the Commencement Date 80% - ------------------------------------------------------------------------------------------------------- End of the Seventeenth Quarter Following the Commencement Date 85% - ------------------------------------------------------------------------------------------------------- End of the Eighteenth Quarter Following the Commencement Date 90% - ------------------------------------------------------------------------------------------------------- End of the Nineteenth Quarter Following the Commencement Date 95% - ------------------------------------------------------------------------------------------------------- Fifth Anniversary of the Commencement Date 100% - -------------------------------------------------------------------------------------------------------
Notwithstanding the foregoing, all unvested Vesting Shares shall vest upon the consummation of a Change of Control (assuming Executive is then, and has been continuously, employed by the Company or any of its Subsidiaries).
9. Repurchase Option.
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(a) Repurchase Option. In the event that Executive, for any reason, ceases to be employed by Roundy's, the Repurchase Shares, whether held by Executive or one or more Permitted Transferees, shall be subject to repurchase by the Company and the Investors, if the Company or the Investors so elect at their sole discretion, in accordance with the terms and conditions set forth in this Section 9 (the "Repurchase Option").
(i) Termination Without Cause, Termination with Good Reason or Nonrenewal; Death or Incapacity. If Executive is no longer employed by Roundy's as a result of (A) a termination by Roundy's without Cause, (B) a termination by Executive with Good Reason, (C) a failure on the part of Roundy's to extend Executive's Employment Period under this Agreement beyond the then applicable Employment Period, or (D) as a result of death or Incapacity, then (x) with the prior written consent of Executive or Executive's estate, as the case may be, the Company and the Investors shall have the right to purchase all (but not less than all) of the Vested Repurchase Shares, at a purchase price per share equal to the Fair Market Value thereof as of the Termination Date, and (y) the Company and the Investors shall have the right to purchase all or any portion of the Unvested Repurchase Shares, at a purchase price per share equal to the lesser of the Original Cost thereof and the Fair Market Value thereof.
(ii) Voluntary Termination. If Executive is no longer employed by Roundy's as a result of a Voluntary Termination, then (A) the Company and the Investors shall have the right to purchase all or any portion of the Vested Repurchase Shares, at a purchase price per share equal to the Fair Market Value thereof, and (B) the Company and the Investors shall have the right to purchase all or any portion of the Unvested Repurchase Shares, at a purchase price per share equal to the lesser of the Original Cost thereof and the Fair Market Value thereof as of the Termination Date.
(iii) Termination with Cause. If Executive is no longer employed by Roundy's as a result of a termination by Roundy's with Cause, then the Company and the Investors shall have the right to purchase all or any portion of the Repurchase Shares (including Vested Repurchase Shares and Unvested Repurchase Shares), at a purchase price per share equal to the lesser of the Original Cost thereof and the Fair Market Value thereof as of the Termination Date.
(b) Repurchase Procedures. After the termination of Executive's employment with Roundy's for any reason, subject to the required consent by Executive under Section 9(a)(i)(x) of this Agreement, the Company may elect to exercise the right to purchase Repurchase Shares (in the amounts and for the prices set forth in Sections 9(a)(i), 9(a)(ii) and 9(a)(iii)) pursuant to the Repurchase Option by delivering a written notice (the "Repurchase Notice") to Executive and/or any other holder or holders of Repurchase Shares and the Investors at any time prior to the end of the four-month period commencing on the date of such termination of employment. The Repurchase Notice shall set forth the number of shares of each class and type of such stock to be acquired from such holder(s), the aggregate consideration to be paid for such shares of such stock and the time and place for the closing of the transaction. The number of shares to be repurchased by the Company shall first be satisfied to the extent possible from the Repurchase Shares held by Executive at the time of delivery of the Repurchase Notice.
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If the number of Repurchase Shares then held by Executive is less than the total number of Repurchase Shares the Company has elected to purchase, the Company shall purchase the remaining shares elected to be purchased from the other holder(s) of Repurchase Shares, pro rata according to the number of Repurchase Shares held by such other holder(s) at the time of delivery of such Repurchase Notice (determined as close as practicable to the nearest whole shares). The Company shall have the right to purchase all or any portion of the Unvested Repurchase Shares without or before purchasing any Vested Repurchase Shares. Any Unvested Repurchase Shares not repurchased pursuant to this Section 9 shall automatically vest upon the expiration of the time periods permitted for the repurchase of such shares under this Section 9.
(c) Rights of the Investors.
(i) If for any reason, subject to the required consent by Executive under Section 9(a)(i)(x) of this Agreement, the Company does not elect to purchase all of the Repurchase Shares available for purchase pursuant to the Repurchase Option, the Investors shall be entitled to exercise the Repurchase Option, in the manner set forth in this Section 9, for all or any portion of the Repurchase Shares which the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company determines that there will be Available Shares, but in any event upon the earlier to occur of (A) the delivery of the Repurchase Notice, and (B) four (4) months after the termination of Executive's employment with the Company, the Company shall deliver a written notice (the "Availability Notice") to the Investors, setting forth the number of each class and type of Available Shares and the purchase price for each Available Share.
(ii) The Investors may elect to purchase all or any portion of the Available Shares by delivering a written notice (an "Election Notice") to the Company within thirty (30) days after receipt of the Availability Notice from the Company (such 30-day period being referred to herein as the "Investor Election Period"); provided that if more than one Investor elects to purchase any or all Available Shares of any type or class and the number of Available Shares of such type or class is less than the aggregate number of Available Shares of such type or class elected to be purchased by such electing Investors, each Investor shall be entitled to purchase the lesser of (A) the number of shares of such type or class such Investor has elected to purchase as indicated in the Election Notice and (B) the number of shares of such type or class obtained by multiplying the number of shares specified in the Availability Notice by a fraction, the numerator of which is the number of shares of Common Stock (on a fully-diluted basis) held by such Investor and the denominator of which is the aggregate number of shares of Common Stock (on a fully-diluted basis) held by all electing Investors. If any Available Shares of such type or class remain after giving effect to such allocation, such allocation shall be repeated until either all of the Available Shares of such type or class requested to be purchased by the electing Investors have been so allocated or no Available Shares of such type or class are available for purchase.
(d) Supplemental Repurchase Notice. As soon as practicable, and in any event within ten (10) days after the expiration of the Investor Election Period, the Company shall, if necessary, notify Executive or each holder of Repurchase Shares as to the number of
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shares being purchased from such holder by the Investors (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to Executive or the holder(s) of Repurchase Shares, the Company shall also deliver to the Investors written notice setting forth the number of Repurchase Shares the Company and the Investors shall acquire, the aggregate purchase price to be paid and the time and place of the closing of the transaction.
(e) Closing. The closing of the purchase of the Repurchase Shares pursuant to this Section 9 shall take place on the date designated by the Company in the Repurchase Notice or the Supplemental Repurchase Notice, as the case may be, which date shall not be more than thirty (30) days after the delivery of the later of such notices, as the case may be. The Company and/or the Investors, as the case may be, may pay the purchase price for the Repurchase Shares to be purchased pursuant to the Repurchase Option by delivery of (i) in the case of the Company, (A) a cashier's or certified check payable to the holder(s) of such shares or wire transfer of immediately available funds, (B) by offsetting any amounts owed by Executive to the Company under the Executive Note or any other indebtedness of Executive to the Company or its Affiliates evidenced by a note or notes against the purchase price for such shares or (C) any combination of (A) and (B) in the aggregate amount of the purchase price for Repurchase Shares, (ii) in the case of the Investors, a cashier's or certified check payable to the holder(s) of such shares or wire transfer of immediately available funds, or (iii) in any such case, as the holder(s) of such shares and the purchaser(s) thereof may otherwise agree. The Company and the Investors, as the case may be, shall receive customary representations and warranties from each seller of Repurchase Shares regarding the sale of the Repurchase Shares (including representations and warranties that such sellers have authorized, executed and delivered the applicable agreements, that such agreements are valid and enforceable and that the purchaser shall obtain good title to such shares, free and clear of all liens and encumbrances).
(f) Termination of Repurchase Right. The right of the Company and the Investors to repurchase shares of Repurchase Shares pursuant to this Section 9 shall terminate upon the consummation of a Change of Control.
(g) Additional Restrictions on Transfer.
(i) All shares of Executive Stock are subject to the restrictions on Transfer set forth in the Investor Rights Agreement.
(ii) In addition to any other legend required pursuant to the Investor Rights Agreement or otherwise, any certificate representing the Executive Stock shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
JUNE 6, 2002, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND JUNE NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
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STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN
EXECUTIVE AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER HEREOF
DATED AS OF JUNE 6, 2002, AS AMENDED AND MODIFIED FROM TIME TO TIME AND
THE INVESTOR RIGHTS AGREEMENT BETWEEN THE COMPANY AND CERTAIN HOLDERS OF
COMPANY STOCK DATED AS OF JUNE 6, 2002, AS AMENDED AND MODIFIED FROM TIME
TO TIME. A COPY OF EITHER SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(iii) Except for transfers to Permitted Transferees, no holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion (reasonably acceptable in form and substance to the Company) of counsel experienced in federal securities laws matters that registration is not required under the Securities Act or any applicable state securities laws in connection with such transfer.
C. EMPLOYMENT PROVISIONS
10. Employment. Roundy's shall employ Executive, and Executive hereby accepts employment with Roundy's, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 13 hereof (the "Employment Period"). Executive's employment shall be "at-will" and may be terminated by either party at any time subject to the provisions contained herein.
11. Position and Duties.
(a) During the Employment Period, Executive shall serve as the Chief Financial Officer of Roundy's and shall have the normal duties, responsibilities and authority associated with such position subject to the power of the board of directors of Roundy's (the "Board") to expand or limit such duties, responsibilities and authority and to override actions of officers.
(b) During the Employment Period, Executive (i) shall report to the Chief Executive Officer, (ii) shall devote substantially all of Executive's business time and att ...