**Exhibit 10.5**

Execution Copy

 

PIERRE FOODS, INC.

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT ismade as of the 28th day of November, 2007 between PIERRE FOODS, INC., a NorthCarolina corporation (the “Company”), and ANTHONY SCHRODER (“Employee”),under the following circumstances:

 

A. Employee is an employee of the Company. The Company and Employee desire to continue the employment relationship.

 

B.  Forthe purposes of setting forth the terms of Employee’s employment and to expressthe agreement of the parties with respect to the other matters for whichprovision is made in this agreement, the Company and Employee are entering intothis Agreement.

 

NOW, THEREFORE, inconsideration of the premises and mutual covenants contained herein, theparties hereby agree as follows:

 

1.  Employment.  The Company hereby employs Employee, andEmployee hereby accepts employment by the Company, on a full-time basis asSenior Vice President of Sales, with duties and responsibilities consistent with Employee’s position.  Employee shall report to, and shall be subjectto the direction of, the Company’s President and Chief Executive Officer (orsuch other executive of the Company as the Board of Directors of the Companyfrom time to time may designate), and shall have such duties andresponsibilities as may be assigned to him from time to time by suchperson.  While employed by the Companypursuant to this Agreement, Employee shall devote all of his business time andeffort to the performance of his duties hereunder.

 

2.  Term. Unless sooner terminated in accordance with the provisions of thisAgreement, Employee’s employment under this Agreement shall commence on thedate hereof and shall continue for a period of three (3) years from suchdate (the “Term”).

 

3.  Compensation.

 

(a) Base Salary*. *Employeeshall receive as compensation for his services under this Agreement an annualbase salary of One Hundred Eighty Thousand Dollars ($180,000) pro-rated forperiods of less than twelve (12) months, as the same may be increased from timeto time by the President and Chief Executive Officer of the Company (or suchother executive of the Company as the Board of Directors of the Company fromtime to time may designate).  Such basesalary shall be paid in accordance with the payroll schedule followed by theCompany (less applicable withholding and other deductions).

 

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(b) Bonus.  In addition to any othercompensation or consideration payable to Employee hereunder, Employee shall beentitled to participate in the Company’s bonus program, if any, for similarlysituated employees of the Company.

 

4.  Other Benefits.  Employee shall be entitled to receive otherbenefits, as follows:

 

(a)  Automobile.  The Company shall provide Employee with anautomobile for his use or, at the option of the President and Chief ExecutiveOfficer of the Company (or such other executive of the Company as the Board ofDirectors from time to time may designate), an automobile allowance of $750 permonth.

 

(b)  Benefits.  Employee shall be eligible to participate inthe benefit programs provided by the Company for employees of a similar levelof responsibility as Employee.

 

(c)  Expenses.  The Company shall reimburse Employee for allreasonable travel expenses and other out-of-pocket expenses incurred by Employeein performing services requested by the Company in accordance with normalCompany policies.

 

5.  RestrictedStock.  In connection with theexecution of this Agreement, the Company has agreed to cause Pierre HoldingCorp., an affiliate of the Company (“Holding”) to issue and sell toEmployee, and Employee shall purchase from Holding, 5,000 shares of commonstock of Holding (the “Restricted Stock”), for $0.25 per share.  The issuance of the Restricted Stock iscontingent upon Employee executing and delivering to Holding a Restricted StockAgreement in the form approved by the Board of Directors of Holding (the “RestrictedStock Agreement”).  The RestrictedStock will be issued under the Pierre Holding Corp. 2008 Restricted Stock Plan(the “Plan”) and will be subject to all rights, restrictions andlimitations set forth in such Plan and in such Restricted Stock Agreement.  Subject to the limitations set forth in theRestricted Stock Agreement and the Plan, the Restricted Stock will vest dailyover a 4 year period commencing on the date of the Restricted Stock Agreement.

 

6.  Termination.  Employee’s employment under this Agreementshall terminate prior to the expiration of the Term in the following manner:

 

(a)  By Death orDisability.  Immediately upon the deathof Employee during the Term, or, at the option of the Company, in the event ofEmployee’s disability, upon thirty (30) days notice to Employee.  Employee will be considered “disabled” if, asa result of incapacity due to physical or mental illness or injury, Employee isunable to perform the material duties of his position on a full time basis fora period of two (2) consecutive months, even after reasonableaccommodations for such disability or incapacity are provided by the Companyor, if providing such accommodations would be unreasonable, as determined bythe President and Chief Executive Officer of the Company (or such otherexecutive of the Company as the Board of Directors of the Company from time totime may designate) in his reasonable good faith judgment.  Employee shall cooperate in all respects withthe Company if a question arises as to whether he has become disabled(including, without limitation, submitting to an examination by a medicaldoctor or other 

 

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health care specialist selected by theCompany and authorizing such medical doctor or health care specialist todiscuss Employee’s condition with the Company).

 

(b)  For Cause.  For “Cause” immediately upon written noticeby the Company to Employee.  “Cause”means, with respect to Employee, one or more of the following:  (A) the commission of a felony or thecommission of any other act or omission involving dishonesty or fraud withrespect to the Company or any of its subsidiaries or any of their customers orsuppliers; (B) reporting to work under the influence of alcohol or illegaldrugs, the use of illegal drugs (whether or not at the workplace) or otherrepeated conduct causing the Company or any of its subsidiaries substantialpublic disgrace or disrepute or substantial economic harm; (C) substantialand repeated willful failure to perform duties consistent with this Agreement,as reasonably directed by the President and Chief Executive Officer (or suchother executive of the Company as the Board of Directors of the Company fromtime to time may designate); (D) any act or omission aiding or abetting acompetitor, supplier or customer of the Company or any of its subsidiaries tothe material disadvantage or detriment of the Company or any of itssubsidiaries; or (E) breach of fiduciary duty, gross negligence or willfulmisconduct with respect to the Company or any of its subsidiaries.

 

(c)  Without Cause.At any time, either the Company may, without Cause, or Employee may, terminateEmployee’s employment, effective upon at least fifteen (15) days’ prior writtennotice from the Company to Employee or Employee to the Company, as the case maybe.

 

(d)  Resignation forGood Reason.  By Employee upon thirty(30) days written notice to the Company of the resignation of Employee for GoodReason (as hereinafter defined).  Forpurposes of this Agreement, “Good Reason” shall mean:

 

(i)            Without his express written consent, a material change inhis reporting responsibilities or title, or any removal of Employee from theposition described in Section 1, except in connection with the terminationof his employment for Cause or as a result of his death or disability or byEmployee other than for Good Reason;

 

(ii)           A material breach of this Agreement by the Company whichis not cured to Employee’s reasonable satisfaction within fifteen (15) daysafter written notice thereof to the Company; or

 

(iii)          A relocation of Employee’s primary office from theCincinnati, Ohio metropolitan area without the express written consent ofEmployee.

 

7.  Occurrences Upon Termination.  Upon termination of Employee’s employmentprior to the expiration of the Term in accordance with Section 6 hereof,Employee shall be subject to the following:

 

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(a) Cessation of Salary and Benefits. All obligations of the Company to provide Employee with compensation andbenefits as provided herein shall discontinue at the termination date ofEmployee’s employment, except as otherwise required herein or by law.

 

(b) Payment of Bonus.  Employee iseligible to receive bonus payments under the Company’s bonus program in whichhe participates, if any, only if Employee is an employee of the Company on thedate that the Company pays bonus payments to all participants of such program.

 

(c) Surrender of Company Property. Promptly upon termination of Employee’s employment prior to theexpiration of the Term, Employee or Employee’s personal representative shallreturn to the Company (i) all Confidential Information (as hereinafterdefined); (ii) all other records, designs, patents, business plans,financial statements, manuals, memoranda, lists, correspondence, reports,records, charts, advertising materials, and other data or property delivered toor compiled by Employee by or on behalf of the Company or any of itssubsidiaries that pertain to the business of the Company and its subsidiaries,whether in paper, electronic or other form; and (iii) all keys, creditcards, vehicles, and other property of the Company and its subsidiaries.  Employee shall not retain or cause or allowto be retained any copies of the foregoing. Employee hereby agrees that all of the foregoing are and shall remainthe property of the Company and its subsidiaries and shall be subject at alltimes to its discretion and control.

 

(d) Benefits.  With respect to anybenefit plans or programs in which Employee is participating at the time oftermination of his employment, Employee’s rights and benefits under each suchplan or program shall be determined in accordance with the terms, conditions,and limitations of the plan or program and any separate agreement executed byEmployee and the Company which may then be in effect.

 

(e) Termination Without Cause; Death/Disability; Resignation for Good Reason; orNonrenewal.

 

(i) *Definitions. *For purposes of this Section and elsewhere in thisAgreement, the following terms shall have the following meanings:

 

(A)          “Sale of the Company” shallhave the meaning given that term in the Restricted Stock Agreement, except thatfor purposes of this Agreement only, the term “Company” as used in suchdefinition shall be deemed to mean Pierre Foods, Inc., Holding, and PFManagement, Inc. as if each such entity was the “Company” as used in suchdefinition.

 

(B)           “Independent Third Party”shall have the meaning given that term in the Restricted Stock Agreement,except that for purposes of this Agreement only, the term “Company” as used insuch definition shall be deemed to mean Pierre Foods, Inc., Holding, andPF Management, Inc. as if each such entity was the “Company” as used insuch definition.

 

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(ii)           *Termination Prior to aSale of the Company. *Providedthat a Sale of the Company shall not have occurred or is pending, during theTerm, if Employee’s employment is terminated by the Company without Cause, ifEmployee’s employment is terminated by reason of death or disability, or ifEmployee voluntarily terminates his employment with the Company for GoodReason, the Company shall continue to pay Employee or his estate as specialseverance payments hereunder Employee’s then current base salary as provided inSection 3(a) payable in regular installments over a period of one (1) yearafter termination in accordance with the normal payroll practices of theCompany, but if and only if, Employee or, in the event of Employee’s death ordisability, his executor or other personal representative, has executed anddelivered to the Company a general release (“Release”) in form andsubstance reasonably satisfactory to the Company, and the Release has becomeeffective, and only so long as Employee has not revoked or breached theprovisions of the Release or breached the provisions of Section 8, 9 or 10hereof.  In addition, notwithstanding Section 7(d) hereof,for the term of the one-year period after such termination, subject to thelimitations described immediately above and subject to Employee’s election of“COBRA” continuation coverage during such period, the Company shall reimburseEmployee an amount equal to the employer portion of the heath insurance premiumpaid by the Company on behalf of Employee immediately prior to termination ofEmployee’s employment; provided, however, that any such payments shall cease ifEmployee becomes eligible for coverage under another employer’s healthinsurance plan.  Employee shall beresponsible for the remainder of the COBRA payments over and above suchreimbursement.

 

(iii)          *Termination After a Saleof the Company. *If a Sale ofthe Company shall have occurred or is pending, during the Term, and ifEmployee’s employment is terminated by the Company without Cause, if Employee’semployment is terminated by reason of death or disability, or if Employeevoluntarily terminates his employment with the Company for Good Reason, theCompany shall continue to pay Employee or his estate as special severancepayments hereunder Employee’s then current base salary as provided in Section 3(a) payablein regular installments over a period (the “Severance Period”) equal tothe greater of (x) two (2) years following the date of such Sale ofthe Company, or (y) one (1) year after termination of Employee’semployment.  Such payments shall be madein accordance with the normal payroll practices of the Company, but if and onlyif, Employee or, in the event of Employee’s death or disability, his executoror other personal representative, has executed and delivered to the Company aRelease in form and substance reasonably satisfactory to the Company, and theRelease has become effective, and only so long as Employee has not revoked orbreached the provisions of the Release or breached the provisions of Section 8,9 or 10 hereof.  In addition,notwithstanding Section 7(d) hereof, during the Severance Period,subject to the limitations described immediately above and subject toEmployee’s election of “COBRA” continuation coverage during such period, theCompany shall reimburse Employee an amount equal to the employer portion of theheath insurance premium paid by the Company on behalf of Employee immediatelyprior to termination of Employee’s employment; provided, however, that any suchpayments shall cease if Employee becomes eligible for coverage under anotheremployer’s health insurance plan. Employee 

 

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shall be responsible for theremainder of the COBRA payments over and above such reimbursement.

 

8.  Covenant Not to Disclose ConfidentialInformation.  As a result ofEmployee’s employment by the Company, Employee has and will become acquaintedwith confidential and proprietary information of the Company and itssubsidiaries, in whatever form, whether oral, written, or electronic including,but not limited to, manner of operation, manufacturing processes and know-how,plant design, customer names and representatives, customer files, customerlists, customer specifications and requirements, product recipes, productpricing, special customer matters, sales methods and techniques, merchandisingconcepts and plans, business plans, sources of supply and vendors, terms andconditions of business relationships with vendors, agents and brokers,promotional materials and information, financial matters, mergers,acquisitions, personnel matters and confidential processes, designs, formulas,ideas, plans, devices and materials and other similar matters that are keptconfidential by the Company (any and all such information being referred toherein as “Confidential Information”). The parties agree that the use of Confidential Information by Employeeother than in furtherance of the business of the Company and its subsidiarieswill seriously damage the business of the Company and its subsidiaries.  Accordingly, Employee agrees that he(individually or in concert with others) during or after the Term:

 

(a)  Shall not,directly or indirectly, use any Confidential Information for any purpose otherthan to benefit the Company and its subsidiaries, except with the prior writtenconsent of the Company or as required by law;

 

(b)  Shall not, directlyor indirectly, divulge, publish or otherwise reveal or allow to be revealed anyConfidential Information to any individual or entity except with the priorwritten consent of the Company or as required by law;

 

(c)  Shall refrain fromany action or conduct that might reasonably or foreseeably be expected tocompromise the confidentiality or proprietary nature of any ConfidentialInformation; and

 

(d)  Shall have norights to apply for, or to obtain any patent, copyright or other form ofintellectual property protection regarding, any Confidential Information.

 

This restriction shall notapply to any Confidential Information that (i) becomes known generally tothe public through no fault of Employee; (ii) is required by applicablelaw, legal process, or any order or mandate of a court or other governmentalauthority to be disclosed; or (iii) is reasonably believed by Employee,based upon the advice of legal counsel, to be required to be disclosed indefense of a lawsuit or other legal or administrative action brought againstEmployee; provided, that in the case of clauses (ii) and (iii), Employeeshall give the Company reasonable advance written notice of the ConfidentialInformation intended to be disclosed and the reasons and circumstancessurrounding such disclosure, in order to permit the Company to seek aprotective order or other appropriate confidential treatment of the applicableConfidential Information.

 

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9.  Inventions.

 

(a)  Employee shall disclose promptly to the Company allsignificant conceptions and ideas for inventions, improvements, and valuablediscoveries, whether patentable or not, that are conceived or made by Employee,solely or jointly with another, during the period of employment or within one (1) yearthereafter, and that are directly related to the business or activities of theCompany or any of its subsidiaries and that Employee conceives as a result ofhis employment by the Company or its subsidiaries, regardless of whether or notsuch ideas, inventions, or improvements qualify as “works for hire.”  Employee hereby assigns and agrees to assignall his interests therein to the Company or its nominee.  Whenever requested to do so by the Company,Employee shall execute any and all applications, assignments, or otherinstruments that the Company shall deem necessary to apply for and obtainpatent registrations in the United States or any foreign country or tootherwise protect the Company’s and its subsidiaries’ interest therein.

 

(b)  Executive ishereby advised that this Section 9 regarding the Company’s and itssubsidiaries’ ownership of inventions does not apply to any invention for whichno equipment, supplies, facilities or trade secret information of the Companyor any of its subsidiaries was used and which was developed entirely onEmployee’s own time, unless (i) the invention relates to the business ofthe Company or any subsidiary of the Company or to the Company’s or any of itssubsidiary’s actual or demonstrably anticipated research or development, or (ii) theinvention results from any work performed by Employee for the Company or anysubsidiary of the Company.

 

10.  CovenantNot to Compete.

 

(a)  During the Termand for a period of one (1) year thereafter, Employee shall not and shallnot permit any of affiliates to, directly or indirectly (whether as aprincipal, proprietor, consultant, partner, lender, licensor, or holder of debtor equity securities or otherwise), engage, assist, or have any interest in anyperson, firm, corporation or other business entity (other than a publicly-heldcorporation of which they collectively hold less than 1% of the voting power)which is engaged in a business that competes with the business of the Companyor any of its subsidiaries within a 200 mile radius of the Company’s principaloffice.

 

(b)  During the Termand for a period of one (1) year thereafter, Employee shall not, nor shallhe permit any of his affiliates to, directly or indirectly, solicit, induce orinfluence any employee of the Company or any of its subsidiaries to leave theemployment of the Company or such subsidiary.

 

(c)  Employee agreesthat the restrictions set forth herein are fair and reasonably required for theprotection of the Company and its subsidiaries and are legally binding andenforceable and the enforcement thereof will not impair Employee’s ability toearn a livelihood.  It is the intentionof the parties that the provisions of this Section 10 shall be enforced tothe fullest extent permissible under the laws and public policies applied ineach jurisdiction in which enforcement is sought.  Accordingly, to the extent that the 

 

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restrictions on competition hereunder areadjudicated to be invalid or unenforceable in any jurisdiction, the courtmaking such determination shall have the power to limit, construe or reduce theduration, scope, activity and/or area of such provisions to the extentnecessary to render such provisions enforceable to the maximum extent permittedby applicable law, such limited form to apply only with respect to theenforceability of this Section in the particular jurisdiction in whichsuch adjudication is made.

 

11.  Remedies.  Any failure by Employee to comply with theterms of Section 8, 9 or 10 may cause irreparable damages to the Companyor its subsidiaries.  Accordingly, in theevent of a breach of any provision of Section 8, 9 or 10, the Companyshall have the immediate right to secure an order enjoining such breach,without posting bond, in addition to any of the other remedies which may beavailable at law or in equity.

 

12.  Notices.  Any notice under this Agreement shall bedeemed sufficiently given if in writing and either personally delivered or sentby registered, certified, or first class mail, postage prepaid, addressed tothe party at the address set forth below, or at such other address as the partysubsequently may designate by notice given in accordance with thisSection.  Notices and communications tothe Company shall be directed to the principal executive office of the Company(attention: President and Chief Executive Officer) or to such other address asthe Company may direct.  Notices andcommunications to Employee shall be directed to the address or facsimile numberof Employee appearing on the employment records of the Company.

 

13.  Amendment; Waiver.  No modification, amendment or waiver of anyprovision of this Agreement shall be valid and binding unless it is in writingand signed by both of the parties hereto. A waiver of any provision of this Agreement shall be effective only inthe specific instance and for the particular purpose for which it wasgiven.  No failure to exercise, and nodelay in exercising, any right or power under this Agreement shall operate as awaiver of such right or power.

 

14.  Assignment.  Employee may not assign his rights ordelegate his duties or obligations hereunder without the prior written consentof the Company.  Any assignment inviolation of this provision shall be void.

 

15.  Confidentiality; Covenant Not to Disparage.  Each party covenants and agrees with theother not to disclose the existence of the terms of this Agreement to anyperson at any time for any purpose, except that (a) either party may makesuch disclosures confidentially to such party’s lawyers and accountants in connection with the rendition oftheir professional services or as otherwise required by law; and (b) theCompany may make such disclosures as it deems to be required by applicablesecurities laws.  Each party covenantsand agrees with the other not to disparage the reputation of the other.

 

16.  Withholding.  All payments made under this Agreement shallbe reduced by (a) the amount of any income, unemployment, withholding,social security or other taxes which the Company may be required to deduct byapplicable law, and (b) any amounts authorized by Employee to be withheld.

 

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17.  Entire Agreement.  This Agreement contains the entire agreementbetween the parties with respect to Employee’s employment by the Company andsupersedes all prior agreements and understandings, oral or written, withrespect to such employment.

 

18.  Governing Law.  This Agreement shall be construed andenforced in accordance with the laws of the State of Ohio, as applicable toagreements executed and entirely performed in such state.

 

IN WITNESS WHEREOF, theparties have duly executed this Agreement as of the date and year first abovewritten.

 
|   | PIERRE FOODS, INC.   |
|--------|----------------------|
|   |                 |
|   |                 |   |
|   | By                   | /s/ Norbert E. Woodhams |
|   |                 | Name: | Norbert E. Woodhams |
|   |                 | Title: | President and Chief Executive Officer |
|   |                 |   |
|   | “Employee       |
|   |                 |
|   |                 |
|   | /s/ Anthony Schroder |
|   | ANTHONY SCHRODER     |

 

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