**Exhibit 10.12**

 

**CONFIDENTIALSETTLEMENT AGREEMENT AND MUTUAL RELEASE**

 

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

 

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

 

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

 

WHEREAS, Vita terminated Budd’s employment onJanuary 7, 2005;

 

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

 

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

 

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

 

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

 

1.                                       Thatcertain Amended and Restated Promissory Noted date November 1, 2002 in theoriginal principal amount of $345,781.00 from Halifax to Budd (“Note”) shall beamended to provide for (i) the payment of the remaining outstandingprincipal amount of $330,781.00 in seventy-eight bi-weekly equal installmentsof $ 4,240.78, without interest, beginning on April 1, 2005 (or the firstregular pay period following) (ii) that the Note shall not be subject toreduction for any reason or offsets for present or future claims (except withrespect to the Oklahoma Lawsuit as set forth in Section 4 below).

 

2.                                       Theparties agree that the Employment Agreement (except for Section 3.1concerning confidentiality) is hereby terminated. Vita shall reinstate Budd asan employee as of March 30, 2005 with such employment continuing for aterm of 3 years through March 29, 2008**,** at a salaryof $51,500.00 per annum, such payment being made in equal installments on abi-weekly basis, in accordance with normal payroll policies and subject toapplicable withholdings.  Budd willdevote such time and effort to the responsibilities specified by Terry Hessfrom time to time but Budd’s employment shall be non-exclusive and his dutiesshall be limited so as not to preclude him from assuming other majorresponsibilities or duties for other employers. During the three year period, Budd shall be entitled to receive healthinsurance coverage (self and spouse). Budd shall also be entitled to participate in all other Vita employeebenefits programs, all on the same terms and conditions as other employees.  In the event Budd dies or becomes disabledprior to the end of the three year period, Halifax shall continue to makepayments in the same amounts contemporaneous with the payments on theIndebtedness.

 

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

 

4.                                       Ifon or before April 30, 2005, the Oklahoma Lawsuit is fully settled so asto permanently preclude Vita from having any liability whatsoever or if Vita isdismissed with prejudice from that suit as a defendant, Budd shall not beobligated to indemnify Vita for fees and costs Vita has incurred in the defenseof the Oklahoma Lawsuit.  Buddacknowledges and accepts that as of January 1, 2005, approximately$23,000.00 in fees and costs have been incurred by Vita with respect to theOklahoma Lawsuit (“Fees”) which charges Budd may review for the authenticitythereof.  However, if by April 30,2005, the Oklahoma Lawsuit is not fully settled so as to permanently precludeVita from having any liability whatsoever or if Vita is not dismissed withprejudice from that suit as a defendant, then Budd shall be obligated on orbefore April 30, 2005, to (i) pay Vita the Fees; and (ii) provideVita with documentation reasonably sufficient to demonstrate Budd’s ability toindemnify Vita from any costs, fees, damages or other expenditures that Vitamay incur in the Oklahoma Lawsuit. Budd’s obligation to provide suchdocumentation shall be continuing in nature such that Budd shall provide thisdocumentation every 180 days. Further, notwithstanding anything outside of thisparagraph to the contrary, nothing in this Agreement shall in any way release (i)Budd’sobligation pursuant to section 2(e)(i) of the Merger Agreement toindemnify, defend and hold harmless Vita from all liability, fees and costs inconjunction with the Oklahoma Lawsuit, nor (ii) affect Budd’s right todefend 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

 

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

 

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

 

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

 

**7.****                                     **Otherthan as set forth in this Agreement, Vita and Budd, and their respectiveagents, owners, officers, directors, shareholders, partners, beneficiaries,affiliates,

 

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

 

8.                                       Theterms and conditions of this Agreement shall be confidential, and shall not bedisclosed to any person or entity by any party. Notwithstanding anything to the contrary, the parties may respond tojudicial or quasi-judicial process and may provide testimony, documents, orother information as required by law including state or federal securitieslaws, and disclose such information as they deem appropriate to their ownprofessional directors, officers, advisors, accountants and tax professionals.

 

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9.                                       Eachparty to this Agreement shall bear its own attorneys fees and costs incurred inconnection with the Lawsuit, including attorneys’ fees and costs incurred inconnection with the preparation of this Agreement.

 

10.                                 Therights and obligations of the parties under this Agreement shall not beassignable by either Vita or Budd without the prior written consent of theother, which will not be unreasonably withheld.

 

11.                                 ThisAgreement shall be construed and governed in accordance with the laws of theState of Delaware without regard to conflicts or choice of law principles, andany and all disputes or claims which arise between the parties relating in anyway to this Agreement shall be filed in a court of competent jurisdictionlocated in the State of Delaware.

 

12.                                 ThisAgreement may be executed in counterparts, each of which shall be deemed anoriginal but all of which together shall constitute one and the sameinstrument.

 

13.                                 ThisAgreement may be amended, superseded or canceled, and the terms hereof may bewaived, only by a written instrument signed by the parties hereto or, in thecase of a waiver, by the party waiving compliance.

 

14.                                 Nothingcontained herein shall be construed as an admission of liability by any partywith respect to the claims or defenses asserted by any other party.  Rather, the parties hereto state that theyhave entered into this Agreement solely to avoid protracted litigation, costsand expenses.

 

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

 

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16.                                 Exceptas provided herein, the parties to this Agreement agree that this Agreement andthe negotiations surrounding this Agreement shall not be admissible in anysuit, action, or other proceeding brought by any party to this Agreementagainst any party to this Agreement, except as shall be necessary to enforcethe terms of this Agreement.  Further,this Agreement constitutes the full and complete agreement between the partiesconcerning the subject matter herein, and neither party has made or relied uponany representation or warranty other than those explicitly set forth in thisAgreement.

 

17.                                 Eachparty represents and warrants that the person executing this Agreement on itsbehalf is duly authorized to do so and not subject to any agreement, governmentalor other restriction, that such parties have carefully read the Agreement andhave been afforded reasonable opportunity to have the contents and legal effectof this Agreement explained by the legal counsel of his choice and that eachparty intends to be legally bound by his promises.

 

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