United Natural Foods, Inc. Form 10-Q; Fiscal Quarter Ended October 29, 2005; Exhibit 10.1




Exhibit 10.1 







EMPLOYMENT TRANSITION AGREEMENT AND MUTUAL RELEASE


United Natural Foods, Inc., a Delaware  corporation (the
"Company") and Steven H. Townsend ("Mr.  Townsend") hereby  agree as
follows:


	1. 	 a.
Mr.  Townsend  hereby  resigns  as an  employee  of the  Company,  effective  December
31,  2005  (the  "Resignation Date").





	 	b.
Mr. Townsend hereby resigns as Chairman of the Board of the  Company, and as a Board
member, effective upon the conclusion of the  Company’s Annual Meeting of
Shareholders to be held on December 8, 2005.  Mr. Townsend may if he wishes act as Chair
of such Annual Meeting.





	 	c.
Except as set forth in Paragraphs (a) and (b) above, Mr.  Townsend hereby resigns as: (i)
an employee, officer and director of all direct  and indirect subsidiaries and other
affiliates of the Company (collectively,  unless the context is otherwise, the “Company”),
including the offices  of President and Chief Executive Officer of United Natural Foods,
Inc., and (ii)  trustee of any Company benefit plans, all effective October 21, 2005.





	 	c.
Upon the expiration of the Revocation Period (as  hereinafter defined), all rights and
obligations of the parties under that  certain Employment Agreement dated as of January
1, 2003 are hereby terminated  and of no further force and effect.






	2. 	On the Resignation Date, the Company will pay Mr. Townsend  for any unused  vacation time
earned by him through the Resignation Date. Upon the expiration of the Revocation Period:





	 	a. The Company shall be obligated to continue to pay Mr. Townsend’s annual base
salary, which is $700,000, for a period of two years  from the Resignation Date, payable
in accordance with the Company’s  standard payroll practices, provided, however that
the Company shall make no  payments under this Paragraph until July 1, 2006, at which
time the Company  shall pay Mr. Townsend $350,000; the Company shall thereafter pay the
balance of  $1,050,000 over the remaining eighteen months of this period in accordance
with  its standard payroll practices.





	 	b. The Company shall pay Mr. Townsend a bonus payment of  $700,000 on October 1, 2006.





	 	c. The above amounts shall be subject to all federal and
state income tax and other required deductions.





 



	 	d.
For the period beginning January 1, 2006, through and  including December 31, 2007, Mr.
Townsend agrees to be generally available to  consult with the Company’s Chief
Executive Officer or his designees, such  consulting not to exceed ten hours per month.
In exchange for this consulting  assistance, the Company shall pay Mr. Townsend a monthly
consulting fee of  $8,333.33 per month, beginning January 1, 2006. Consulting fees paid
by the  Company shall be reported on IRS Form 1099. While Mr. Townsend will make
reasonable efforts to be available, the parties agree that such availability  shall not
materially interfere with Mr. Townsend’s employment or other  material obligations
he may have. The parties acknowledge and agree that the  Company shall not be entitled to
assert any breach or alleged breach by Mr.  Townsend under this paragraph as a basis for,
or as a means of offsetting or  reducing, in any way, nonpayment of the Company’s
obligations, monetary or  otherwise, under the other paragraphs of this Agreement.




	3. 	Upon
the expiration of the Revocation Period:





	 	a.
The Company shall be obligated to continue to provide Mr.  Townsend and his family, at
its expense, not less than the medical, dental and  other health insurance coverage
provided to the Company’s senior executive  officers as of the Resignation Date
until December 31, 2007, subject to no  applicable benefits deductions such as “co-pay” contributions.
Thereafter, the Company shall respect Mr. Townsend’s rights (and his  dependents’ rights),
if any, to continued medical coverage at his own  expense under the Consolidated Omnibus
Budget Reconciliation Act (COBRA).





	 	b.
The Company will provide Mr. Townsend, at its expense, with  executive outplacement
assistance at Right Associates or other comparable  executive outplacement provider of
substantially equal cost until the earlier of  his resumption of full-time employment or
December 31, 2006.





	 	c.
Mr. Townsend shall be entitled, at Company expense, to tax  planning and preparation
assistance for tax returns for calendar years 2005,  2006, 2007 and 2008. Mr. Townsend
may continue to use his current service  provider. This amount shall not exceed $25,000
in the aggregate and the Company  shall not be obligated to pay or reimburse any such
amounts before July 1, 2006.





	 	d.
Mr. Townsend shall be entitled to continue to use his  personal laptop computer, cellular
phone and blackberry, which the Company is  providing to Mr. Townsend to facilitate the
consulting services provided  hereunder. Mr. Townsend shall be responsible for
transferring the cellular phone  service to his name.







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	 	e.
The Company shall pay Mr. Townsend’s reasonable  attorneys’ fees incurred as a
result of his resignation, including the  negotiation of this Agreement and the
preparation of applicable filings with the  Securities Exchange Commission. The Company
shall not be obligated to pay or  reimburse any such amounts before July 1, 2006.





	 	f.
The Company shall provide Mr. Townsend, or his designated  representatives, reasonable
access, under supervision and with reasonable  advance notice, to such records or other
information as Mr. Townsend may  reasonably request in order for Mr. Townsend to comply
with one or more personal  obligations, such as preparation of tax returns and insurance
claims.





	4. 	a.
As of the Resignation Date, Mr. Townsend shall no longer  be eligible to receive
long-term disability benefits or to participate in the  Company’s 401(k) and Profit
Sharing Plan. The Company will promptly notify  Mr. Townsend in writing concerning his
options with regard to his 401(k)  account.





	 	b.
The Company acknowledges that it is currently obligated to  indemnify Mr. Townsend in his
capacity as a Director and officer of the Company  in accordance with the General
Corporation Law of the State of Delaware, the  Company’s Certificate of
Incorporation and the Company’s By-laws  (collectively, “Indemnification
Obligations”), and that the Company  maintains so-called Officers and Directors
liability insurance to secure, in  part, the Company’s Indemnification Obligations.
The Company shall continue  to indemnify Mr. Townsend with respect to its Indemnification
Obligations for  claims made prior to December 31, 2015, and shall continue to maintain
Officers  and Directors liability insurance in an amount and coverage not less than that
provided for other Directors and senior officers of the Company through December  31,
2015. In the event Mr. Townsend becomes, directly or indirectly, subject to  litigation
or other adversary proceedings for which the Indemnification  Obligations apply, and Mr.
Townsend receives written advice from counsel (and  delivers a copy of such written
advice to the Company) that, under the  circumstances, Mr. Townsend should retain
separate counsel, Mr. Townsend may so  retain separate counsel, and the Company shall
promptly reimburse Mr. Townsend  for reasonable fees and costs of such counsel.





	 	c.
In consideration for the release set forth below, the  Company hereby releases and
forever discharges Mr. Townsend and his successors,  heirs and assigns from any and all
liabilities, causes of action, debts, claims  and demands including, without limitation,
claims and demands for monetary  payments, both in law and in equity, known or unknown,
fixed or contingent,  which it may have or claim to have based upon or in any way related
to Mr.  Townsend’s actions or omissions as a Director, officer or employee of the
Company and hereby covenants not to file a lawsuit or charge to assert such  claims.







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	5. 	a.
Schedule 5a attached hereto sets forth the options to  purchase the Company’s Common
Stock granted to Mr. Townsend as of the  Resignation Date (collectively, the “Stock
Options”). Schedule 5a also  sets forth the Restricted Stock granted to Mr. Townsend
as of the Resignation  Date (the “Restricted Stock”). Notwithstanding the terms
of any stock  option or restricted stock agreements or other written documentation
evidencing  such grant of Stock Options or Restricted Stock to Mr. Townsend, all of the
Stock Options and Restricted Stock shall be deemed to (i) have been fully vested  and
(ii) with respect to Stock Options shall be subject to no other contingency  on behalf of
or to be performed by Mr. Townsend (including that he remain an  employee or Director of
the Company), except for the payment of the applicable  exercise price for the Stock
Options.





	 	b.
Mr. Townsend may at any time exercise his rights under the  Company’s Employee Stock
Ownership Plan (“ESOP”) to effect the  distribution and sale, if he so elects,
of shares of the Company’s Common  Stock allocated to him, in accordance with the
provisions of the ESOP.





	6. 	a.
In consideration of the foregoing, which Mr. Townsend  acknowledges includes rights he
may not otherwise be entitled to, Mr. Townsend  hereby releases and forever discharges
the Company, its present and former  directors, officers, employees, agents,
subsidiaries, shareholders, successors  and assigns from any and all liabilities, causes
of action, debts, claims and  demands (including without limitation claims and demands
for monetary payment)  both in law and in equity, known or unknown, fixed or contingent,
which he may  have or claim to have based upon or in any way related to employment (as an
officer, director or employee), rights or entitlements related thereto or  termination of
such employment by the Company and hereby covenants not to file a  lawsuit or charge to
assert such claims. This includes but is not limited to  claims arising under the Federal
Age Discrimination in Employment Act, and any  other federal, state or local laws
prohibiting employment discrimination or  claims growing out of any legal restrictions on
the Company’s right to  terminate its employees, provided, however, that the
foregoing shall not release  or otherwise limit the Company’s obligations set forth
in this Agreement.





	 	b.
Mr. Townsend understands that various State and Federal  laws prohibit employment
discrimination based on age, sex, race, color, national  origin, religion, handicap or
veteran status. These laws are enforced through  the Equal Employment Opportunity
Commission (EEOC), Department of Labor and  State Human Rights Agencies. Mr. Townsend
acknowledges that he has been advised  by the Company to discuss this Agreement with his
attorney and has been  encouraged to take this Agreement home for up to twenty-one (21)
days so that he  can thoroughly review it and understand the effect of this Agreement
before  acting on it.








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	7. 	Mr.
Townsend acknowledges that all payments and benefits  payable to him under this Agreement
(other than earned wages and vested vacation  time) are contingent upon his compliance
with the provisions of this Paragraph  7, that the availability of such payments and
benefits is sufficient  consideration for the release set forth in paragraph 6(a), and
that termination  of such payments and benefits due to his non-compliance shall not
affect the  release set forth in Paragraph 6(a). Mr Townsend covenants with the Company
as  follows:





	 	a.
Mr.  Townsend shall not knowingly use for his own benefit or  disclose or reveal to any
unauthorized person, any trade secret or other  confidential information relating to the
Company, or to any of the businesses  operated by it, including, without limitation, any
customer lists, customer  needs, price and performance information, processes,
specifications, hardware,  software, devices, supply sources and characteristics,
business opportunities,  potential business interests, marketing, promotional pricing and
financing  techniques, or other information relating to the business of the Company, and
Mr. Townsend confirms that such information constitutes the exclusive property  of the
Company. Such restriction on confidential information shall remain in  effect until such
time as the confidential information is (i) generally  available in the industry, (ii)
disclosed in published literature or (iii)  obtained by Mr. Townsend from a third party
with the prior right to make such  disclosure. Mr. Townsend agrees that he will return to
the Company any physical  embodiment of such confidential information upon the
Resignation Date.





	 	b.
during the period commencing on the date of this Agreement  and ending December 31, 2006,
Mr. Townsend shall not engage, directly or  indirectly (which includes, without
limitation, owning, managing, operating,  controlling, being employed by, giving
financial assistance to, participating in  or being connected in any material way with
any person or entity), anywhere in  the United States in the wholesale distribution of
natural foods; provided,  however, that: Mr. Townsend’s ownership as a passive
investor of less than  two percent (2%) of the issued and outstanding stock of a publicly
held  corporation so engaged, shall not by itself be deemed to constitute such
competition. Further, during such period Mr. Townsend shall not act to induce  any of the
Company’s vendors, customers or employees to take action which  might be
disadvantageous to the Company.





	 	c.
Mr. Townsend hereby acknowledges that he will treat as for  the Company’s sole
benefit, and fully and promptly disclose and assign to  the Company without additional
compensation, all ideas, information,  discoveries, inventions and improvements which are
based upon or related to any  confidential information protected under Paragraph 7(a)
herein, and which are  made, conceived or reduced to practice by him at any time up to
and including  December 31, 2005. The provisions of this Paragraph 7(c) shall apply
whether  such ideas, discoveries, inventions, improvements or knowledge are conceived,
made or gained by him alone or with others, whether during or after usual  working hours,
either on or off the job, to matters directly or indirectly  related to the Company’s
business interests (including potential business  interests), and whether or not within
the realm of his duties.








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	 	d.
Mr. Townsend shall, upon request of the Company, but at no  expense to Mr. Townsend, sign
all instruments and documents and cooperate in  such other acts reasonably required of
him to protect rights to the ideas,  discoveries, inventions, improvements and knowledge
referred to above, including  applying for, obtaining and enforcing patents and
copyrights thereon in any and  all countries. Mr. Townsend shall promptly return to the
Company any Company  property in his possession.





	 	e.
Mr. Townsend shall make himself available in any third  party claims, investigations,
litigation or similar proceedings to answer any  questions relating to his employment or
actions as an employee, officer or  director of the Company, including without limitation
attendance at any  deposition or similar proceeding. The Company shall pay Mr. Townsend’s
expenses and shall be obligated to compensate him at a per diem rate of $2,500  for time
actually expended.





	8. 	Mr.
Townsend shall at no time make any derogatory or  disparaging comments regarding the
Company, its business, or its present or past  directors, officers or employees. The
Company shall at no time make any  derogatory or disparaging comments regarding Mr.
Townsend.





	9. 	The
execution of this Agreement shall not be construed as an  admission of a violation of any
statute or law or breach of any duty or  obligation by either the Company or Mr. Townsend.





	10. 	No
party to this Agreement shall cause, discuss, cooperate  or otherwise aid in the
preparation of any press release or other publicity  other than filings required by the
securities laws, concerning any other party  to this Agreement or the Agreement’s
operation without prior approval of  such other party, unless required by law, in which
case notice of such  requirement shall be given to the other party.





	11. 	The
invalidity or unenforceability of any particular  provision of this Agreement shall not
affect the other provisions hereof, and  this Agreement shall be construed in all
respects as if such invalid and  unenforceable provisions were omitted.





	12. 	This
Agreement is personal to Mr. Townsend and may not be  assigned by him. However, in the
event of Mr. Townsend’s death, all the  rights of Mr. Townsend set forth in this
Agreement shall accrue to his spouse,  if she is living; otherwise, to his heirs. This
Agreement shall inure to the  benefit of and be binding upon the successors and assigns
of the Company.








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	13. 	This
Agreement is made pursuant to and shall be governed by  the laws of the State of
Connecticut, without regard to its rules regarding  conflict of laws. The parties agree
that the courts of the State of Connecticut,  and the Federal Courts located therein,
shall have exclusive jurisdiction over  all matters arising from this Agreement. Mr.
Townsend and the Company hereby  agree that service of process by certified mail, return
receipt requested, shall  be deemed appropriate service of process.





	14. 	Except
as otherwise indicated, this Agreement contains the  entire understanding between Mr.
Townsend and the Company, supersedes all prior  agreements, oral or written, regarding
the subject matter hereof, and may not be  changed orally but only by an agreement in
writing signed by the party against  whom enforcement of any waiver, change,
modification, extension or discharge is  sought. Mr. Townsend acknowledges that he has
not relied upon any representation  or statement, written or oral, not set forth in this
Agreement.





	15. 	Mr.
Townsend may revoke this Agreement at any time during  the seven-day period following the
date of his signature below (the  “Revocation Period”) by delivering written
notice of his revocation to  the Company’s attention at 260 Lake Road, Dayville,
Connecticut 06241;  Attention: Rick D. Puckett. This Agreement shall become effective
upon the  expiration of the Revocation Period.





	16. 	All
notices required or contemplated by this Agreement  shall be deemed effective if written
and delivered in person or if sent by  certified mail, return receipt requested, to the
Company at the address shown in  Paragraph 15 above, to the attention of Michael S. Funk,
Acting Chief Executive  Officer of the Company, with a copy to E. Colby Cameron, Esq.,
Cameron & Mittleman LLP, 56 Exchange Terrace, Providence, RI 02903 and to Mr.
Townsend at  169 Barrett Hill Road, Brooklyn, CT 06234, with a copy to: Stanford N.
Goldman,  Jr., Esq., Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial
Center, Boston, MA 02111, or such other persons or addresses as may hereafter be
designated by the respective parties.





[signature lines appear on the next page]







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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set  forth below.



	United Natural Foods, Inc.


By: /s/ Rick D. Puckett


Rick D. Puckett

Vice President, Chief Financial Officer

and Treasurer



Date: 10/23/05




/s/ Steven H. Townsend


Steven H. Townsend



Date: 10/23/05

	     	

  Witness:



  /s/ Jeanne Puckett












  Witness:



  /s/ Jeanne Puckett


     
			
			








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SCHEDULE 5a


Stock Options and Restricted Stock


Steven H. Townsend


	Grant Date	Grant
Type	Option
Price	Options
Vesting	Original
Vesting
	 
	   12/3/2002	 	 	Non-Qualified	 	 	$	 12.55	 	 	62,032	 	on 12/3/2006	 	 
	   12/3/2002	 	 	Incentive	 	 	$	 12.55	 	 	7,968	 	on 12/3/2006	 	 
	   12/3/2003	 	 	Non-Qualified	 	 	$	 18.66	 	 	15,000	 	on 12/3/2006	 	 
	   12/3/2003	 	 	Non-Qualified	 	 	$	 18.66	 	 	9,640	 	on 12/3/2007	 	 
	   12/3/2003	 	 	Incentive	 	 	$	 18.66	 	 	5,360	 	on 12/3/2007	 	 
	   12/3/2003	 	 	Non-Qualified	 	 	$	 18.66	 	 	5,000	 	on 12/3/2006	 	 
	   12/3/2003	 	 	Non-Qualified	 	 	$	 18.66	 	 	5,000	 	on 12/3/2007	 	 
	 
	Optionee Totals	 	 		 	 			 	 	110,000	 		 	 






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