Exhibit 10.12


 


CONFIDENTIAL
SETTLEMENT AGREEMENT AND MUTUAL RELEASE


 


This Settlement Agreement and Mutual Release
(the “Agreement”) is entered into this 28th day of March, 2005, by
and among Vita Food Products, Inc. (“Products”), Vita Specialty Foods, Inc.
(formerly known as Vita Holdings, Inc.) (“Specialty”), Virginia Honey
Company, Inc. (“Honey”), The Halifax Group (“Halifax”) (collectively,
Products, Specialty, Honey and Halifax and all affiliates thereof shall be
referred to as “Vita”), and Robert J. Budd (“Budd”).


 


WHEREAS, a Vita entity acquired Halifax, a
business solely owned by Budd and his family, in 2002 as documented in, among
other documents, a certain Merger Agreement, Employment Agreement, and
Non-Competition and Non-Solicitation Agreement, each dated as of November 1,
2002;


 


WHEREAS, Vita and Budd are defendants in a
lawsuit pending in Tulsa, Oklahoma, styled Leonard Mountain, Inc.
v. The Halifax Group, Inc,. et al., case number CJ-2001, 1809 (the “Oklahoma
Lawsuit”);


 


WHEREAS, Vita terminated Budd’s employment on
January 7, 2005;


 


WHEREAS Vita filed a lawsuit in the Circuit
Court of Cook County, Case No. 05 CH 00446 (the “Lawsuit”) seeking
monetary damages and other relief against Budd based on claims stemming from
the merger and Budd’s conduct subsequent thereto;


 


WHEREAS, Budd denies the material allegations
in the Lawsuit and has threatened to assert claims against Vita; and


 


WHEREAS, the parties seek to resolve their
differences in order to avoid the costs of litigation.


 





















 


NOW, THEREFORE, in consideration of the
mutual covenants and agreement contained herein, the receipt and sufficiency of
which hereby are acknowledged, the parties agree as follows:


 


1.                                       That
certain Amended and Restated Promissory Noted date November 1, 2002 in the
original principal amount of $345,781.00 from Halifax to Budd (“Note”) shall be
amended to provide for (i) the payment of the remaining outstanding
principal amount of $330,781.00 in seventy-eight bi-weekly equal installments
of $ 4,240.78, without interest, beginning on April 1, 2005 (or the first
regular pay period following) (ii) that the Note shall not be subject to
reduction for any reason or offsets for present or future claims (except with
respect to the Oklahoma Lawsuit as set forth in Section 4 below).


 


2.                                       The
parties agree that the Employment Agreement (except for Section 3.1
concerning confidentiality) is hereby terminated. Vita shall reinstate Budd as
an employee as of March 30, 2005 with such employment continuing for a
term of 3 years through March 29, 2008, at a salary
of $51,500.00 per annum, such payment being made in equal installments on a
bi-weekly basis, in accordance with normal payroll policies and subject to
applicable withholdings.  Budd will
devote such time and effort to the responsibilities specified by Terry Hess
from time to time but Budd’s employment shall be non-exclusive and his duties
shall be limited so as not to preclude him from assuming other major
responsibilities or duties for other employers. 
During the three year period, Budd shall be entitled to receive health
insurance coverage (self and spouse). 
Budd shall also be entitled to participate in all other Vita employee
benefits programs, all on the same terms and conditions as other employees.  In the event Budd dies or becomes disabled
prior to the end of the three year period, Halifax shall continue to make
payments in the same amounts contemporaneous with the payments on the
Indebtedness.


 





















 


3.                                       On
or before March 30, 2005, Vita shall 
(a) dismiss the Lawsuit with prejudice, and (b) ship to Budd
at the address provided by Budd and at Vita’s expense the homogenizer machine
which Vita acknowledges was shipped to West Virginia from Atlanta by mistake.


 


4.                                       If
on or before April 30, 2005, the Oklahoma Lawsuit is fully settled so as
to permanently preclude Vita from having any liability whatsoever or if Vita is
dismissed with prejudice from that suit as a defendant, Budd shall not be
obligated to indemnify Vita for fees and costs Vita has incurred in the defense
of the Oklahoma Lawsuit.  Budd
acknowledges and accepts that as of January 1, 2005, approximately
$23,000.00 in fees and costs have been incurred by Vita with respect to the
Oklahoma Lawsuit (“Fees”) which charges Budd may review for the authenticity
thereof.  However, if by April 30,
2005, the Oklahoma Lawsuit is not fully settled so as to permanently preclude
Vita from having any liability whatsoever or if Vita is not dismissed with
prejudice from that suit as a defendant, then Budd shall be obligated on or
before April 30, 2005, to (i) pay Vita the Fees; and (ii) provide
Vita with documentation reasonably sufficient to demonstrate Budd’s ability to
indemnify Vita from any costs, fees, damages or other expenditures that Vita
may incur in the Oklahoma Lawsuit. Budd’s obligation to provide such
documentation shall be continuing in nature such that Budd shall provide this
documentation every 180 days. Further, notwithstanding anything outside of this
paragraph to the contrary, nothing in this Agreement shall in any way release (i)Budd’s
obligation pursuant to section 2(e)(i) of the Merger Agreement to
indemnify, defend and hold harmless Vita from all liability, fees and costs in
conjunction with the Oklahoma Lawsuit, nor (ii) affect Budd’s right to
defend Vita with Budd’s choice of counsel, being Day, Edwards, Propester &
Christensen, PC, which Vita hereby agrees is presently satisfactory to Vita.
Except in the event that Vita reasonably believes that Day, Edwards, Propester &
Christensen, PC, cannot fairly and properly represent


 





















 


Vita in the Oklahoma Lawsuit, if Vita engages its own counsel in this
matter going forward, Budd will not be obligated to indemnify Vita with respect
to the costs of Vita’s law firm. The parties agree that any amounts due by Budd
to Vita pursuant to Budd’s indemnification for the Oklahoma Lawsuit will be
paid by Budd within thirty (30) days after Budd’s receipt of notice and
reasonable documentation with respect thereto, but in the event not so paid,
Vita will be entitled to offset such amounts against any payments due to Budd
under the Note.


 


5.                                       Notwithstanding
anything herein to the contrary, the parties hereby amend the Non-Competition
and Non-Solicitation Agreement dated November 2, 2002 and entered into by
and among Specialty, Products, Halifax and Budd (“Non-Competition Agreement”)
as follows:  Notwithstanding anything to
the contrary contained in the Non-Competition Agreement: (a) the
Non-Competition Agreement shall terminate on March 1, 2010; and (b) the
restrictive scope of the Non-Competition Agreement shall be limited by (i) amending
the definition of “Current Business” to mean those products currently
manufactured, sold or distributed by Vita as of February 28, 2005
including without limitation herring, salmon and other fish, sauces, salad dressing
and honey.  The parties acknowledge that
it is their intention of the parties hereto that Budd may freely engage in any
business that is not producing products competitive with the products of Vita
as of February 28, 2005. For example, and not by way of limitation, Budd
may engage in a business producing soups that incorporate honey as a major
ingredient.


 


6.                                       On
or before March 30, 2005, Vita shall assign to Budd the certificate of
title to the 1997 Lexus LS400 automobile presently in Budd’s possession.  Budd shall have sole responsibility for
insuring such vehicle as of the date of transfer.


 


7.                                      Other
than as set forth in this Agreement, Vita and Budd, and their respective
agents, owners, officers, directors, shareholders, partners, beneficiaries,
affiliates,


 





















 


representatives, attorneys, successors, heirs or assigns, (i) hereby
release and forever discharge the other and their affiliated entities and
present, former and subsequent officers, directors, shareholders, employees,
partners, beneficiaries, agents, representatives, attorneys, successors, and
assigns of any of the foregoing from any and all claims, actions, causes of
actions, debts, fees, costs, expenses, contracts, promises, liens, liabilities,
losses, demands and damages of any nature whatsoever, known or unknown, fixed
or contingent, in law or in equity, under statute or otherwise, currently
existing, with respect to all matters that existed amongst the parties hereto
prior to the execution of this Agreement including without limitation obligations,
claims, rights or damages related in any way to the Merger Agreement or the
Employment Agreement;  (ii) agree
that Sections 3(a)(iv), 4(b), 4(k), 4(z), 6(d), and 8(b)(iii) of the
Merger Agreement shall remain in full force and effect until the expiration of
the statute of limitations and any claims by Vita under such sections are not
released or affected by this Agreement in any way; and (iii) warrant and
represent that they own all right, title, and interest in the claims released
herein, and that they have not assigned, transferred, or conveyed any interest
in any such claims to any person, firm, or entity that is not a signatory
hereto.  Budd expressly disclaims and
releases any claim or right to any “earn-out” or other payment pursuant to the
Merger Agreement including without limitation Section 2 thereof.


 


8.                                       The
terms and conditions of this Agreement shall be confidential, and shall not be
disclosed to any person or entity by any party. 
Notwithstanding anything to the contrary, the parties may respond to
judicial or quasi-judicial process and may provide testimony, documents, or
other information as required by law including state or federal securities
laws, and disclose such information as they deem appropriate to their own
professional directors, officers, advisors, accountants and tax professionals.


 





















 


9.                                       Each
party to this Agreement shall bear its own attorneys fees and costs incurred in
connection with the Lawsuit, including attorneys’ fees and costs incurred in
connection with the preparation of this Agreement.


 


10.                                 The
rights and obligations of the parties under this Agreement shall not be
assignable by either Vita or Budd without the prior written consent of the
other, which will not be unreasonably withheld.


 


11.                                 This
Agreement shall be construed and governed in accordance with the laws of the
State of Delaware without regard to conflicts or choice of law principles, and
any and all disputes or claims which arise between the parties relating in any
way to this Agreement shall be filed in a court of competent jurisdiction
located in the State of Delaware.


 


12.                                 This
Agreement may be executed in counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same
instrument.


 


13.                                 This
Agreement may be amended, superseded or canceled, and the terms hereof may be
waived, only by a written instrument signed by the parties hereto or, in the
case of a waiver, by the party waiving compliance.


 


14.                                 Nothing
contained herein shall be construed as an admission of liability by any party
with respect to the claims or defenses asserted by any other party.  Rather, the parties hereto state that they
have entered into this Agreement solely to avoid protracted litigation, costs
and expenses.


 


15.                                 It
is acknowledged that each party to this Agreement, with the assistance of
competent counsel, has participated in the drafting of this Agreement, and that
any ambiguities should not be construed for or against any party to this
Agreement on account of such drafting.


 





















 


16.                                 Except
as provided herein, the parties to this Agreement agree that this Agreement and
the negotiations surrounding this Agreement shall not be admissible in any
suit, action, or other proceeding brought by any party to this Agreement
against any party to this Agreement, except as shall be necessary to enforce
the terms of this Agreement.  Further,
this Agreement constitutes the full and complete agreement between the parties
concerning the subject matter herein, and neither party has made or relied upon
any representation or warranty other than those explicitly set forth in this
Agreement.


 


17.                                 Each
party represents and warrants that the person executing this Agreement on its
behalf is duly authorized to do so and not subject to any agreement, governmental
or other restriction, that such parties have carefully read the Agreement and
have been afforded reasonable opportunity to have the contents and legal effect
of this Agreement explained by the legal counsel of his choice and that each
party intends to be legally bound by his promises.