Cto Employment Agreement

Exhibit 10.36


EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this 4th day of March, 1997 (the "Effective Date") by and between Farm Fresh, Inc., a Virginia corporation (the "Company"), and Ronald E. Johnson (the "Executive").


Background


The Company desires to employ Executive, and Executive is willing to be employed by the Company, upon the terms and subject to the conditions hereinafter set forth.


NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and intending to be legally bound hereby, the parties agree as follows:


Terms


SECTION 1. Employment. The Company hereby employs Executive, and Executive hereby accepts such employment and agrees to serve as the Company's President and Chief Executive Officer (the "President and CEO") during the Employment Period set forth in Section 6, subject to the terms and conditions hereinafter set forth.


SECTION 2. Management Duties. As President and CEO of the Company during the Employment Period, Executive shall carry out such duties as are commensurate and normally associated with the positions of President and Chief Executive Officer, which duties shall however, in all cases, be subject to policies set by, and at the direction and control of, the Company's Board of Directors. The Company shall, subject to applicable fiduciary duties of the Company's directors as advised by counsel, nominate the Executive and use its best efforts to have Executive appointed or elected to serve on the Company's Board of Directors at all times during the Employment Period.


SECTION 3. Extent of Services. During the Employment Period, Executive shall devote substantially all his working time (during normal business hours) and attention (other than during any illness and vacations) and give his best efforts, skills and abilities to the management and operations of the Company; it being understood and agreed that Executive shall be permitted to manage his own personal affairs and serve as a director or officer of any trade association, civic, corporate, educational or charitable organization or governmental entity, provided that Executive's service does not materially interfere with Executive's performance of his duties hereunder. Executive shall report only and directly to the Company's Board of Directors. Notwithstanding the above, the Executive shall not be required to perform any duties or responsibilities which would be likely to result in a non-compliance with or violation of any applicable law or regulation. Executive shall perform his services hereunder only at the Company's Norfolk, Virginia offices and (with the consent of the Executive) at such other places as are required for the effective management of the Company (other than business travel).


SECTION 4. Compensation and Benefits.


(a) Executive shall receive, during the Employment Period, from the Company as compensation for his services a salary at the annual rate of Four Hundred Thousand Dollars ($400,000) per annum (the "Base Salary"). The Base Salary shall be payable in equal installments at such intervals as the Company pays its employees generally (but in no event less frequently than once per month).


(b) Subject to Section 4(c), the Executive shall be eligible to participate in an annual cash bonus program which shall contain financial performance formulas and criteria to be agreed upon by the Company and the Executive and pursuant to which the Company and the Executive intend for Executive to be eligible to earn an amount equal to $200,000 upon satisfaction of the specified financial performance formulas and criteria (the "Operations Bonus Program"). The amount of each of the annual cash bonuses to which Executive is entitled under the Operations Bonus Program shall be determined and the bonus shall be paid to Executive as soon as the underlying financial data is available (but in no event later than 90 days following the end of the year for which the bonus is calculated).


(c) The Company, from time to time, may consider engaging in one or more transactions involving the sale of the Company and/or all or a portion of its assets, businesses and operations (including, without limitation, as a merger, consolidation, sale of all or substantially all of the capital stock of the Company or sale of all or a portion of the Company's assets) pursuant to (x) a plan of reorganization which has been confirmed under chapter 11 of title 11 of the United State Code and for which an effective date thereunder has occurred (an "Effective POR"), or (y) a full and complete consensual settlement or other restructuring to which the Company and all of the Company's holders of indebtedness for borrowed money are a party, or (z) an acquisition agreement between the Company and any acquiror which, in the opinion of the Company's Board of Directors, contains indemnification of third parties which is substantially similar (from the perspective of third parties) to the releases that are customarily available to third parties under an Effective POR (any such transaction following any one of the conditions described in clause (x) or (y) or (z), a "Transaction"). In the event that the aggregate Net Value (as defined below) of the consideration received in connection with any Transaction(s) during the Employment Period equals or exceeds $225,000,000 in the aggregate, the Executive shall be entitled to receive from the Company a cash bonus (a "Transaction Bonus") equal to $300,000 plus 1.8% of the positive difference (if any) between the Net Value of the Transaction(s) and $225,000,000. As used herein, "Net Value" shall mean the sum of: (i) in the case of any asset sale, the sum of the cash and fair market value of all securities and other non-cash property received by the Company in any Transaction, increased dollar-for-dollar by any indebtedness for borrowed money assumed by the purchaser, and reduced dollar-for-dollar by any liabilities (other than indebtedness for borrowed money) which are properly allocated to the business sold in the Transaction but which are retained or paid by the Company; and (ii) in the case of any Transaction other than an asset sale, the sum of the cash and fair market value of all securities and other non-cash property received by securityholders of the Company, reduced dollar-for-dollar by (x) any proceeds from any other Transactions held or to be received by the Company and/or its securityholders and (y) any liabilities (other than indebtedness for borrowed money) which are properly allocated to the business sold in the Transaction but which are retained or paid by such securityholders, and increased dollar-for-dollar by the aggregate amount of then-existing indebtedness for borrowed money (after giving effect to any actual or contemplated debt forgiveness or other similar compromise of such indebtedness in connection with such Transaction)(all of the foregoing "Net Value" as reasonably determined by the Company's Board of Directors or any nationally-recognized investment banking firm designated by the Company). The amount of any Transaction Bonus to which Executive is entitled under this Section 4(c) shall be determined and the bonus shall be paid to Executive as soon as practicable (but in no event later than 90 days following the occurrence of the latest Transaction for which a payment is owed under this Section 4(c)). Notwithstanding anything to the contrary contained in this Agreement: (i) aggregate Transaction Bonus payments owed under this Section 4(c) shall not exceed $1,650,000 in the aggregate; and (ii) in the event that any Transaction Bonus is owed with respect to Transactions occurring during any calendar year in which a payment is otherwise owed pursuant to Section 4(b) under the Operations Bonus Program, the Executive only shall receive the Transaction Bonus with respect to such calendar year and no bonus shall be due or owing to the Executive under the Operations Bonus Program with respect to such calendar year; and (iii) if any payments (including Transaction Bonus payments) which the Executive has the right to receive from the Company or any affiliated entities under this Agreement would otherwise constitute an "excess parachute payment" (as defined in Internal Revenue Code Section 280G, but determined without regard to Section 280G(b)(5)(A)(ii)), such payments shall be reduced (the "Parachute Reduction") pro rata (but not below zero) to the largest amount that will result in no portion of any such payment being subject to the excise tax imposed by Internal Revenue Code Section 4999. The determination of any reduction shall be determined by the Company in good faith before any payments are due and payable to the Executive. If "Shareholder Approval" (as defined in the next sentence) is obtained, the Parachute Reduction shall not apply. Shareholder approval means approval of the elimination of the Parachute Reduction by persons who own, immediately before a Transaction, more than 75 percent of the voting power of the Company's outstanding stock by a vote which satisfies the requirements of Internal Revenue Code section 280G(b)(5)(B) and the applicable proposed, temporary or final Treasury Regulations thereunder.


(d) During the Employment Period, Executive and his eligible dependents shall be entitled to participate in the employee benefit plans and programs generally offered to any other senior executive officers of the Company during the Employment Period.


(e) All payments to Executive or his estate made pursuant to this Agreement shall be subject to such withholding as may be required by any applicable laws.


SECTION 5. Expense Reimbursements; Automobile Allowance; Special Long-Term Disability Coverage. During the Employment Period, the Company shall reimburse Executive for all reasonable or necessary out-of-pocket expenses incurred by Executive in the performance of his duties hereunder, provided such expenses are submitted to the Company in accordance with its accounting procedures. The Company shall provide Executive with an automobile allowance of $750 per month to enable Executive to obtain an automobile for the Executive's use. The Executive shall be entitled to participate in the long-term disability plan described on Exhibit A.


SECTION 6. Term. The period of Executive's employment under this Agreement (the "Employment Period") shall commence as of the date hereof and, unless sooner terminated pursuant to Section 7 of this Agreement or extended pursuant to the proviso to this sentence, shall continue until the close of business on the second anniversar ...