Document:

EXHIBIT 10.8

CHANGE IN CONTROL AGREEMENT

 

THIS
CHANGE IN CONTROL AGREEMENT (the “Agreement”) is made by and between
Gardenburger, Inc., an Oregon corporation (the “Company”) and Scott C. Wallace
(“Employee”).

WHEREAS,
the Board of Directors of the Company considers it essential to the best
interests of the Company to foster the continued employment of key management
personnel including Employee; and

WHEREAS,
the parties entered into an employment agreement (the “Employment Agreement”)
on January 15, 2001; and

WHEREAS,
the Board of Directors of the Company wishes to insure that Employee is focused
on and motivated by the desire to obtain maximum value for the Company in the
event of a sale or acquisition;

WHEREAS,
the Board recognizes that, as is the case with many publicly-held corporations,
the possibility of a Change in Control exists and that it is in the best
interests of the Company to enter into this Agreement to minimize any
distraction to Employee in the performance of his duties to the Company in the
face of a potential Change in Control; and

WHEREAS,
the Board has determined that any benefits payable to Employee in connection
with a Change in Control should be conditioned on Employee’s agreement (as
specified in this Agreement) to provide services to the Company and its
successor in the period immediately following a Change in Control transaction,
to be available to provide consulting services to the Company’s successor, and
to refrain from competing with the Company or its successor during the period
specified in this agreement following the Change in Control;

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the Company and Employee hereby agree as follows:

1.             Effect on Employment Agreement.  The Employment Agreement remains in full
force and effect except (a) as expressly provided in a Supplement to Employment
Agreement in the form attached to this Agreement as Appendix 1, and (b) to the
extent expressly or necessarily modified by provisions of this Agreement.

2.             Term.  This Agreement shall commence on the date
last signed and shall continue in effect through December 31, 2004; provided,
however, that if a Change in Control shall have occurred during the term of
this Agreement, this Agreement shall continue in effect for a period of nine
(9) months beyond the day in which such Change in Control occurred.  This Agreement shall automatically terminate
nine (9) months after a Change in Control unless expressly extended by the
Board of Directors.

 

 

 

3.             Limitation of Agreement to
Change in Control.  The payments and
benefits under this Agreement are intended to compensate Employee for services
and refraining from competition during the period following a termination as a
result of or in connection with a Change in Control.  If Employee is terminated before a Change in Control and for
reasons unrelated to the Change in Control, any payments or benefits will be
determined by the Employment Agreement.

4.             Definitions

 

                4.1  Change in Control. 
For the purpose of this Agreement, a “Change in Control” shall mean:

                (a)           The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either (i) the then outstanding shares of common stock of the Company
(the “Outstanding Company Common Stock”) or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that the following acquisitions shall not
constitute a Change in Control:  (w) any
acquisition directly from the Company (excluding an acquisition by virtue of
the exercise of a conversion privilege, other than a conversion privilege in
existence as of the date of this agreement), (x) any acquisition by the
Company, (y) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (z) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization, merger
or consolidation, the conditions described in clauses (i), (ii) and (iii) of
subsection (c) of this Section 4.1 are satisfied; or

                (b)           Individuals who, as of the  date of this Agreement, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date of this Agreement whose election, or nomination for election by the
Company’s shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual was a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office as a director
of the Company occurs as a result of either an actual or a threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or

                (c)           Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 50% of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation in substantially the same
proportions, as

 

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their
ownership, immediately prior to such reorganization, merger or consolidation,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger or consolidation and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 50% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 50% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board at
the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or

                (d)           Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or related trust)
of the Company or such corporation and any Person beneficially owning,
immediately prior to such sale or other disposition, directly or indirectly,
50% or more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then outstanding shares of common
stock or such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time
of the execution of the initial agreement or action of the Board providing for
such sale or other disposition of assets of the Company; or

                (e)           No Change of Control shall be deemed to have occurred as a
result of any acquisition, reorganization, merger, consolidation or other
transaction described in this Section 4.1 unless, as a result of such
transaction, the subordinated debt and preferred stock of the Company
outstanding as of the date of this Agreement, as the same may be amended or
modified, shall be retired for cash.

 

                4.2  Cause.  For
purposes of this Agreement, “Cause” shall have the meaning given in the
Employment Agreement.

 

 

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                4.3  CIC Date.  For
purposes of this Agreement, “CIC Date” shall mean the closing date on which a
Change in Control transaction is completed.

 

                4.4  Good Reason.  For
purposes of this Agreement, “Good Reason” shall exist if:

 

                (a) The Company undertakes any
of the following without Employee’s prior consent:  (i) the assignment to Employee of any duties or
responsibilities which result in any diminution or adverse change of Employee’s
position, status or circumstances of employment; a change in Employee’s titles
or offices that results in any diminution or adverse change of Employee’s
position, status or circumstances of employment; or any removal of Employee
from or any failure to re-elect Employee to any of such positions, except in
connection with the termination of his employment for Cause, retirement, or any
other voluntary termination of employment by Employee other than a termination
of employment by Employee for Good Reason; (ii) any reduction by the
Company in Employee base salary not related to a reduction in the salaries of
all executive officers of the Company; (iii) any failure by the Company to
continue in effect any benefit plan or arrangement, including incentive plans
or plans to receive securities of the Company, in which Employee is
participating as of the date hereof (hereinafter referred to as “Benefit
Plans”), or the taking of any action by the Company which would adversely
affect Employee’s participation in or reduce Employee’s benefits under the
Benefit Plans or deprive Employee of any fringe benefit enjoyed by Employee as
in effect on the date hereof; provided, however, that no termination of
employment by Employee for Good Reason shall be deemed to occur based upon this
subsection (a)(iii) if the Company offers a range of benefit plans and programs
which, taken as a whole, are comparable to the Benefit Plans offered Employee
before the action or if the change in benefit plans and programs applies to all
executive officers of the Company; (iv)  a relocation of Employee, or the Company’s
principal offices if Employee’s principal office is at such offices, to a
location more than thirty five (35) miles from the location at which Employee
was performing his duties as of the date hereof, except for required travel by
Employee on the Company’s business to an extent substantially consistent with
Employee’s business travel obligations as of the date hereof; (v) any
breach by the Company of any provision of this Agreement; (vi) any
directive to Employee to perform any act which would expose him to personal
legal liability or which, viewed objectively, is likely to constitute an
unethical act; or

 

                (b)  Providing Employee continues
his employment with the Company
through the 90-day period following the CIC Date, any termination by
Employee of his position with the Company or its successor that is effective on
or within the 30 days following expiration of such 90-day period
following the CIC Date for any reason or for no reason will constitute Good
Reason.  For this purpose, if Employee
is terminated by the Company without Cause before the CIC Date and such
termination is in connection with the Change in Control, Employee will be deemed
to have continued his employment through the CIC Date.

 

5.             Payment in Connection with
Termination of Employment.

 

                5.1  Termination Governed by Employment
Agreement.  In the event of (a) any termination of Employee by the Company or termination by
Employee before a Change in Control or (ii) termination of Employee by the
Company for Cause or termination by Employee without Good Reason after the CIC
Date, such termination will be governed by Employee’s 

 

 

4

 

existing Employment Agreement and Employee will not be
entitled to any severance benefit under this Agreement.  For this purpose, if Employee is teminated
by the Company without Cause before the CIC Date and such termination is in
connection with the Change in Control, such termination will be deemed to have
occurred after a Change in Control.

 

                5.2  CIC Severance Benefits.  In the event that, after a Change in Control has occurred and during the Term of
this Agreement, the Company terminates Employee without Cause or Employee
terminates his employment for Good Reason, the Company will pay Employee, in
addition to all other amounts due under the Employment Agreement, the following
“CIC Severance Benefits” (but only if and to the extent Employee complies with
the provisions of Sections 7 and 8 of this Agreement):

 

                (a)
A lump sum payment in an amount equal to Employee’s annual base salary as in
effect on the date of termination (or, if higher, the annual base salary as in
effect prior to any reduction referred to in Section 4.4(a)(ii)), payable on
the later of the CIC Date or 48 hours after the termination;

 

                (b)
Continuation (or reimbursement for the cost of) all health and welfare benefits
for Employee and his dependents for a period of 12 months following termination
at the same or comparable coverage; and

 

                (c)
Reimbursement of actually incurred relocation expenses (up to a maximum of
$20,000)  for moving Executive’s
household goods from Portland, Oregon, to Orange County, California,.

 

Payment
of CIC Severance Payments pursuant to this Agreement is in lieu of any
severance payment Employee would otherwise be entitled to receive under the
Employment Agreement.

 

6.             Termination Procedure.

(a)           Notice of Termination.  Any termination of Employee’s employment by
the Company or by Employee (other than termination due to the death of
Employee) hereof shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 9.  For purposes of this Agreement, a “Notice of Termination” shall
mean a notice, which shall indicate the specific provision in this Agreement
relied upon and, if applicable, shall identify in reasonable detail the reason
for termination of Employee’s employment under the provision so indicated.

(b)           Date of Termination.  “Date of Termination” shall mean:
(i) if Employee’s employment is terminated by his death, the date of his
death, or (ii) if Employee’s employment is terminated pursuant to any
other reason or Section of this Agreement, the date of termination shall be the
date that Notice of Termination is issued.

7.             Transition
Employment.  In consideration of,
and as a condition to receiving the severance benefits described in Section 5
of this Agreement, Employee agrees that, if Employee is terminated as a result
of a Change in Control, he shall, if requested by the buyer or acquiror, remain
employed for a transition period of a mutually agreeable term not to exceed
three (3)

 

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months.  The
Company shall pay to Employee his usual and customary salary and benefits equal
to the amount payable to him immediately before the Change in Control.  Nothing herein, however, shall delay any
payment required to be made to him by virtue of the Employment Agreement or the
provisions of this Agreement.

8.             Post
Termination Services. In consideration
of, and as a condition to receiving the severance benefits described in Section
5 of this Agreement, Employee agrees as follows:

                8.1  Consulting.    Employee agrees to make himself available for a period of three
years following the expiration of the transition employment described in
Section 7 to provide consulting services to the Company (for purposes of this
Section 8, references to the Company include its successor in the Change in
Control transaction) on the following terms and conditions:

                (a)           Employee will provide consulting
services via telephone, electronic mail, and/or facsimile communication (or in
person at a location to be mutually agreed upon by Employee and the Company),
at times mutually determined by Employee and the Company.  Employee will not be required (without his
prior consent) to provide consulting services for more than 20 hours in any
calendar month or in a location outside of Portland, Oregon and Employee will
not be required to provide services that interfere with other regular
employment Employee may have.  Employee
will be available in person in the Company’s offices only if and to the extent
that the Company and Employee mutually agree that the nature of consulting
services to be provided by Employee require his personal presence in the
Company’s offices.

                (b)           Employee will be entitled to
compensation at the rate of $100 per hour for consulting services performed for
the Company.

                (c)           For all purposes, including that of
determining Employee’s eligibility to participate in the Company’s employee
benefit plans, Employee’s relationship to the Company during the consulting
period will be that of an independent contractor and not an employee.

                (d)           Employee will continue to hold
confidential for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company obtained by Employee
during his employment by the Company or during the consulting period.

                8.2           Noncompetition.  Employee agrees to execute at the request of
the Company following a Change in Control a new Noncompetition Agreement in the
form attached to this Agreement as Appendix 8.2.  The Company and Employee mutually agree that whether or not a
Change in Control occurs and whether or not Employee enters into the new
Noncompetition Agreement described in this Section 8.2, the noncompetition
provisions of Employee’s Employment Agreement will remain in full force and
effect.

9.             Miscellaneous.

(a)           Notices.  All notices, consents and other communications required or
authorized to be given by either party to the other under this Agreement shall
be in writing and shall be deemed to have been given or submitted (i) upon
actual receipt if delivered in person or by facsimile transmission with
confirmation of transmission, (ii) upon the earlier of actual receipt or 

 

6

 

the expiration of two (2) business days after sending
by express courier (such as U.P.S. or Federal Express), and (iii) upon the
earlier of actual receipt or the expiration of seven (7) business days after
mailing if sent by registered or certified mail, postage prepaid, to the
parties at the following addresses:

	
  To
  the Company:

  	
   

  	
  Gardenburger,
  Inc.

  
	
   

  	
   

  	
  1411
  SW Morrison St., Suite 400

  
	
   

  	
   

  	
  Portland,
  OR  97205

  
	
   

  	
   

  	
  Fax
  Number: 503-205-1576

  
	
   

  	
   

  	
  Attn:
  Director, Human Resources

  
	
   

  	
   

  	
   

  
	
  To
  Employee:

  	
   

  	
  Scott
  C. Wallace

  
	
   

  	
   

  	
  At
  the last address and fax number

  
	
   

  	
   

  	
  Shown
  on the records of the Company

  

 

Employee
shall be responsible for providing the Company with a current address.  Either party may change its address (and
facsimile number) for purposes of notices under this Agreement by providing
notice to the other party in the manner set forth above.

(b)           Assignment.  This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective executors, administrators, heirs,
personal representatives and successors, but, except as hereinafter provided,
neither this Agreement nor any right hereunder may be assigned or transferred
by either party hereto, or by any beneficiary or any other person, nor be
subject to alienation, anticipation sale, pledge, encumbrance, execution, levy
or other legal process of any kind against Employee, Employee’s beneficiary or
any other person.  Notwithstanding the
foregoing, any person or business succeeding to all or substantially all of the
business of the Company by stock purchase, merger, consolidation, purchase of
assets or otherwise, shall be bound by and shall adopt and assume this
Agreement, and the Company shall obtain the express assumption of this
Agreement by such successor.

(c)           No Obligation to Fund.  The agreement of the Company (or its
successor) to make payments to Employee hereunder shall represent the unsecured
obligation of the Company (and its successor), except to the extent (i) the
terms of any other agreement, plan or arrangement pertaining to the parties
provide for funding; or (ii) the Company (or its successor) in its sole
discretion elects in whole or in part to fund the Company’s obligations under
this Agreement pursuant to a trust arrangement or otherwise.

(d)           Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Oregon,
except to the extent otherwise expressly provided in this Agreement.

(e)           Arbitration of Disputes;
Expenses.  All claims by Employee for
compensation and benefits under this Agreement shall be directed to and
determined by the Director, Human Resources, and shall be in writing.  Any denial by the Director, Human Resources,
of a claim for benefits under this Agreement shall be delivered to Employee in
writing and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon.  The Director, Human Resources, shall afford a reasonable
opportunity to Employee for a review of a 

 

7

 

decision denying a claim and shall further allow
Employee to appeal to the Chief Executive Officer a decision of the Director,
Human Resources, within sixty (60) days after notification by the Director,
Human Resources, that Employee’s claim has been denied.  Any further dispute or controversy arising
under or in connection with this agreement shall be settled exclusively by
arbitration in Portland, Oregon, in accordance with the commercial arbitration
rules of the American Arbitration Association then in effect.  The arbitration award shall be final and
binding upon the parties and judgment upon the award may be entered in any
court having jurisdiction.  In the event
either party incurs legal fees and other expenses with relation to an action
seeking to obtain or to enforce any rights or benefits provided by this
Agreement and is successful, in whole or in part, in obtaining or enforcing any
such rights or benefits through settlement, arbitration or otherwise, the non-prevailing
party shall promptly pay the prevailing party’s reasonable legal fees and
expenses incurred in enforcing this Agreement and the fees of the
arbitrator(s).  Except to the extent
provided in the preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute; provided, however, that the fee for
the arbitrator(s) shall be shared equally.

(f)            Consulting and Subsequent
Employment.  Nothing in this Agreement
shall preclude the Company or its successors from employing Employee in a
consulting or regular employment capacity following termination of employment
and following the consulting period described in Section 8.1 under the
conditions of this Agreement.

(g)           Amendment.  This Agreement may only be amended by a written instrument signed
by the parties hereto, which makes specific reference to this Agreement.

(h)           Severability.  If any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provisions
hereof.

(i)            Other Benefits.  Except as set forth herein, nothing in this
Agreement shall limit or replace the compensation or benefits payable to
Employee, or otherwise adversely affect Employee’s rights, under any other
benefit plan, program or agreement to which Employee is a party.

 

8

 

10.           Release of Claims.  As a precondition to receipt of the CIC
Severance Benefits provided in Section 5.2 of this Agreement, Employee
acknowledges and understands that he must sign a Waiver and Release of Claims
Agreement.  Such Agreement shall be
substantially similar to the Agreement attached as Appendix 10.  Employee understands that he will not be
entitled to receive any payments until he executes and delivers the Waiver and
Release of Claims Agreement, and the revocation period set forth in the Waiver
and Release of Claims Agreement has run.

 

IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
behalf by its duly authorized officers, and Employee has set his hand, as of
the date last signed.

 

	
   

  	
   

  	
  GARDENBURGER,
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/  Scott C. Wallace

  	
   

  	
  By:

  	
  /s/  Lorraine Crawford

  
	
  Scott
  C. Wallace

  	
   

  	
   

  	
  Lorraine
  Crawford

  
	
   

  	
   

  	
   

  	
   

  
	
  “Employee”

  	
   

  	
  Title:

  	
  Vice
  President, Finance

  
	
   

  	
   

  	
   

  	
   

  

 

	
  Date:

  	
  April
  30, 2003

  	
   

  	
  Date:

  	
  April
  30, 2003

  
	
   

  	
   

  	
   

  	
   

  

 

 

9

 

APPENDIX 8.2

 

Form
of

NONCOMPETE
AGREEMENT

 

                THIS AGREEMENT is entered into
as of [DATE], by and between GARDENBURGER, INC., an Oregon corporation (“the
Company”) and SCOTT C. WALLACE (“Executive”). 
In consideration of the mutual covenants and the other terms and
conditions set forth in this Agreement, the parties agree as follows:

 

RECITALS

                A.            Executive and the Company are
parties to an employment agreement dated January 15, 2001 (the “2001
Agreement”), and a Supplement to Employment Agreement (the “Supplement”) dated
April      , 2003; together these agreements (collectively
the “Employment Agreement”) govern Executive’s employment with the Company.

                B.            Executive and the Company are
parties to a change in control agreement (the “CIC Agreement”) dated
     .

                C.            As a result of a transaction dated
                  ,
the provisions of the Change and Control Agreement have taken effect (will take
effect).

                D.            Company wishes to ensure that the
Company’s new management will have the benefit of protection from competition
by Executive over a larger geographical area and longer period of time than
otherwise provided for by the Employment Agreement.

                NOW
THEREFORE in consideration of the mutual promises herein, and for other good
and valuable consideration, the parties agree as follows:

 

1. NONCOMPETITION

                1.1
Covenants.  Executive will not, throughout North
America, Europe or Asia either individually or as a director, officer, partner,
employee, agent, representative, or consultant with any business, directly or
indirectly for three years following a change in control:

                (a)
Engage or prepare to engage in the business of frozen or refrigerated products
which contain Imitation Meat products exclusively or as a primary
ingredient.  Notwithstanding anything
herein, Executive shall not be restricted from engaging or preparing to engage
in activities for a business that has as a separate product line or division
Imitation Meat products as described above, so long as Executive does not
personally work in that division or with that product line;

                (b)
Induce or attempt to induce any person who is an employee of the Company to
leave the employ of the Company; or

                (c)
Solicit, divert, or accept orders for products or services that are
substantially competitive with the products or services sold by the Company
from any customer of the Company, or suggest, request, or encourage any
suppliers or customers of the Company to 

 

i

 

curtail, reduce, or cancel their business done with
the Company, or otherwise solicit for himself or any other person or entity any
business of the Company.

                1.2
Severability.  While Executive acknowledges that the
restrictions contained herein are reasonable, if any term or condition of this
Section 1 is determined to be unenforceable because of its scope, duration, geographical
area or similar factor, the court or arbitrator making such determination will
have the power to reduce or limit such scope, duration, area, or other factor,
and such covenant will then be enforceable in its reduced or limited form.

2. GENERAL TERMS AND CONDITIONS

                2.1
Effect on
Prior Agreements.  This
Agreement contains the entire understanding between the parties concerning the
subject matter of this Agreement and supersedes any prior agreements (express
or implied, oral or written) concerning the subject matter of this Agreement,
other than the provisions of the Employment Agreement and the CIC Agreement.

                2.2
Successors
and Assigns.  This Agreement
will inure to the benefit of any successors or assigns of the Company.

                2.3
Sale
Bonus.  Receipt of the sale
bonus identified in the CIC Agreement is contingent upon Executive executing
this non-competition agreement.

                2.4
Modification
and Waiver.

                (a)
This Agreement may be modified or amended only by a written instrument signed
by both parties.

                (b)
No term or condition of this Agreement will be deemed to have been waived, nor
will there be any estoppel against the enforcement of any provision of this
Agreement, except by a written instrument signed by the party charged with such
waiver or estoppel.  No such written
waiver will be deemed a continuing waiver unless specifically stated therein,
and each such waiver will operate only as to the specific term or condition
waived and will not constitute a waiver of such term or condition for the
future as to any act other than that specifically waived.

                2.5
Severability.  If, for any reason, any provision of this
Agreement, or any part of any provision, is held invalid, such invalidity will
not affect any other provision of this Agreement or any part of such provision
not held so invalid, and each such other provision and part thereof will to the
full extent consistent with law continue in full force and effect.

                2.6
Headings
for Reference Only.  The
headings of sections herein are included solely for convenience of reference
and will not control the meaning or interpretation of any of the provisions of
this Agreement.

                2.7
Governing
Law.  This Agreement will be
governed by the laws of the state of Oregon.

                2.8
Not an
Employment Relationship. 
Executive agrees and acknowledges that this non-competition agreement is
entered into in connection with a change in control and not related to his
employment as contemplated by ORS 653.295(2), and as such is not governed by
the provisions of ORS 653.295(1). 
Moreover, Executive agrees that if for any reason the terms of this
Agreement are voided because of any action taken by Executive, he will
forthwith return all consideration paid hereunder.

 

ii

 

                2.9  Attorney Fees.  In the event of any suit or action or arbitration proceeding to
enforce or interpret any provision of this Agreement (or which is based on this
Agreement), the prevailing party will be entitled to recover, in addition to
other costs, the reasonable attorney fees incurred by the prevailing party in
connection with such suit, action, or arbitration, and in any appeal
therefrom.  The determination of who is
the prevailing party and the amount of reasonable attorney fees to be paid to
the prevailing party will be decided by the arbitrator or arbitrators (with
respect to attorney fees incurred prior to and during the arbitration
proceedings) and by the court or courts, including any appellate courts, in
which the matter is tried, heard, or decided, including the court which hears
any exceptions made to an arbitration award submitted to it for confirmation as
a judgment (with respect to attorney fees incurred in such confirmation
proceedings).

                The parties have executed this
Noncompete Agreement as of the date stated above.

 

 

	
   

  
	
  Scott
  C. Wallace

  
	
   

  
	
   

  
	
  GARDENBURGER,
  INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  
	
  Lorraine
  Crawford

  
	
   

  	
  Vice
  President, Finance

  

 

 

iii

 

 

APPENDIX
10

Form
of

SEPARATION
AGREEMENT AND RELEASE

 

                THIS Separation Agreement and
Release (this “Agreement”) is made and entered into this
      day of
          by and between
GARDENBURGER, INC., an Oregon corporation (“Gardenburger”), formerly known as
Wholesome and Hearty Foods, Inc., and Scott C. Wallace (“Employee”) in order to
provide the terms and conditions of Employee’s termination of employment, and
to fully and completely resolve any and all issues that Employee might have in
connection with Employee’s employment with Gardenburger or the termination
thereof;

 

                NOW, THEREFORE, in consideration
of the mutual promises and conditions contained herein, the parties agree as
follows:

 

                1. Separation. Employee is
currently employed at Gardenburger. 
Employee’s employment will terminate
effective                        (the
“Termination Date”)

 

                2. Pay.

                                2.1 Wages.  From the date of this Agreement through the
Termination Date, Gardenburger will continue to pay Employee, on Gardenburger’s
normal bi-weekly pay dates, all wages owing to Employee.

 

                                2.2 Severance
Pay.  Gardenburger agrees to pay
Employee the severance benefits described in the Change in Control Agreement
between Gardenburger and Employee dated effective April    ,
2003 (the “CIC Agreement”).

 

                                2.3 Withholdings.  All compensation paid to Employee under this
Section 2 shall be subject to the customary withholding of federal and state
income tax and other deductions required by law, or otherwise authorized, with
respect to compensation paid by a corporation to an employee.

 

                                2.4 Accruals.
Employee agrees to accept a payment of the sum of  $        in full satisfaction
of any accrued vacation pay or other form of accrued compensation benefits
owing to Employee from Gardenburger, except for any amounts to which Employee
may be entitled under Gardenburger’s 401(k) plan.

 

                                2.5 Payment
in Full.  Employee acknowledges
that, other than the severance to be paid under this Agreement and the CIC
Agreement, Gardenburger has paid Employee in full any and all sums due related
to Employee’s employment with Gardenburger.

 

3 Release of
Claims

 

3.1
In return for the benefits conferred by this Agreement, which Employee
acknowledges that Gardenburger had no legal obligation to provide, Employee,
hereby releases and forever discharges Gardenburger, its predecessors,
successors and assigns, and its past, present, and future insurers,
representatives, officers, trustees, shareholders, directors, agents,
attorneys, and 

 

 

i

 

 

employees,
and their respective successors, assigns, executors, and administrators
(collectively, the “Releasees”), of and from any and all claims, charges,
complaints, actions, causes of action, liability, damages, costs, attorney
fees, expenses of whatever nature, and demands of any kind (including without
limitation those based in tort, contract, or statue, including without
limitation, applicable state civil rights laws, Title VII of the Civil Rights
Act of 1964, the Post-Civil War Rights Act, the Age Discrimination in
Employment Act, 29, USC 621 et seq, the Americans with Disabilities Act, the
Rehabilitation Act of 1973, the Equal Pay Act of 1963, and any regulations
under such laws) up to and including the date set forth below, whether known or
unknown, foreseen or unforeseen, asserted or unasserted.

 

                                3.2 Without
limitation on the foregoing, Employee hereby accepts the payments set forth
herein in full settlement and satisfaction of all claims, charges, complaints,
actions, causes of action, and demands against Gardenburger or any of the
Releasees of every nature and kind whatsoever, known or unknown, suspected or
unsuspected, past, present, or future on account of or in any way related to or
arising from the employment relationship existing between them or the
termination of that relationship. 
Employee agrees that Employee is lawfully entitled to no payments,
wages, compensation, or benefits from Gardenburger except as set forth in this
Agreement, and except for any amounts to which Employee is entitled under the
terms of Gardenburger’s 401(k) plan and under the stock option agreements
entered into between Gardenburger and Employee.

 

                                3.3. Employee
represents that Employee has no claims against or relating to Gardenburger
pending or filed with any local, state, or federal agency as of the date this
Agreement is signed; and that if any such claims are pending or filed, they
will be immediately withdrawn or dismissed. 
Employee agrees that Employee will not assert any court action, lawsuit,
or any to Employee’s claims against Gardenburger or any other Releasees arising
out of or in connection with any of the foregoing released claims, including
without limitation any action, lawsuit, or claim arising out of or in
connection with the employment relationship existing between Gardenburger and
Employee or the termination of that relationship other than one based upon an
alleged violation of this Agreement.

 

                                3.4 Gardenburger
hereby releases and forever discharges Employee and Employee’s heirs,
successors, beneficiaries, agents and attorneys, and their respective
successors, assigns, executors, and administrators, of and from any and all
charges, complaints, actions, causes of action, liability, damages, costs,
attorney fees, expenses of whatever nature and demands of any kind (including
without limitation those based in tort, contract, or statue) arising from or
based on claims of which any current member of Gardenburger’s Board of
Directors has actual knowledge as of the date of this Agreement.

 

                4. No Admission of Liability.  Nothing in this Agreement shall operate or
be interpreted as an admission of liability as to any of the claims, charges,
actions, or lawsuits released hereby.

 

                5. Employee Given 7 days to Consider
Agreement.  Gardenburger
hereby advises Employee in writing to consult with an attorney before signing
this Agreement and that Employee has a period of at least 7 days to consider
whether to execute this Agreement.  For 

 

 

ii

 

purposes
of this 21-day waiting period, Employee acknowledges that a form of this
Agreement was delivered to Employee on             . Employee understands that Employee may accept this
agreement at any time during the 21-day waiting period by signing and
delivering it to Gardenburger.

 

                6. Revocation.  After signing the Agreement and delivering
it to        , Employee may revoke this
Agreement by written notice, delivered to
       , within seven days following his or
her date of signature as set forth on page 5 of this Agreement.  This Agreement becomes effective and
enforceable after the seven-day period has expired, without revocation.

 

                7.
Confidentiality.  Employee agrees to keep the terms of this
Agreement, specifically including without limitation, the amount of the
severance pay, and the fact that Employee received severance pay, strictly
confidential.  Employee may disclose the
terms of this Agreement to Employee’s spouse or significant other, or
Employee’s accountant, attorney and taxing authorities only as may be necessary
for Employee’s financial affairs or as required by law.

 

                8. Non-Disparagement.  Employee agrees to not make any derogatory
remarks of any nature whatsoever at any time about Gardenburger, its past or
present employees or its products either, publicly or privately, unless
required by law, during or after Employee’s employment with Gardenburger.

 

                9. Employee Proprietary Rights and
Confidentiality Agreement; Employee Non-Competition Agreement.  Employee acknowledges and reaffirms
Employee’s obligations under the Employee Proprietary Rights and
Confidentiality Agreement and Employee’s Employment Agreement with Gardenburger
dated January 15, 2001, and the Noncompetition Agreement entered into between
Gardenburger and Employee as of the date of this Agreement pursuant to the
provisions of the CIC Agreement.  The
terms of such Employee Proprietary Rights and Confidentiality Agreement,
Employment Agreement, and Non-Competition Agreement are hereby incorporated
herein and made a part of this Agreement. 
Employee agrees to strictly comply with the terms of such Agreements.

 

                10. Return of Property.  Employee agrees to and hereby represents
that Employee has returned to Gardenburger all of Gardenburger’s property in
Employee’s possession or under Employee’s control.

 

                11. Miscellaneous.

 

                11.1 Entire Agreement.  This document, together with the obligations
of Employee set forth in the CIC Agreement, the Employee Proprietary Rights and
Confidentiality Agreement, the Employment Agreement, and the and
Non-Competition Agreement described in Section 9 of this Agreement supersedes
and replaces all other written and oral agreements and understandings
heretofore made or existing by and between the parties or their representatives
with respect thereto.  There have been
no representations or commitments by Gardenburger to make any payment or
perform any act other than those expressly stated in such agreements.

 

 

iii

 

 

                11.2 Waiver.  No waiver of any provision of this Agreement
shall be deemed, or shall constitute, a waiver of any other provisions, whether
or not similar, nor shall any waiver constitute a continuing waiver.  No waiver shall be binding unless executed
in writing by the party making the waiver.

 

                11.3 Binding Effect.  All rights, remedies and liabilities herein
given to or imposed upon the parties shall extend to, inure to the benefit of
and bind, as the circumstances may require, the parties and their respective
heirs, personal representatives, administrators, successors and permitted
assigns; provided, however, that the obligations of Employee are personal and
shall not be assigned by her.

 

                11.4 Amendment.  No supplement, modification or amendment of
this Agreement shall be valid, unless the same is in writing and signed by all
parties hereto.

 

                11.5 Severability.  In the event any provision or portion of
this Agreement is held to be unenforceable or invalid by any court of competent
jurisdiction, the remainder of this Agreement shall remain in full force and
effect and shall in no way be affected or invalidated thereby.

 

                11.6. Arbitration.   Any dispute between the parties, including,
without limitations, any dispute concerning or arising under this Agreement,
shall be settled by binding arbitration using the Arbitration Service of
Portland, Inc., and the rules and procedures thereof.  The arbitration shall be conducted in Portland, Oregon, before a
single arbitrator.  A party
substantially prevailing in the arbitration shall also be entitled to recover
such amount for its costs and reasonable attorneys fees incurred in connection
with the arbitration as shall be determined by the arbitrator.  Judgement upon the arbitration award may be
entered in any court having jurisdiction. 
Nothing herein, however, shall prevent either party from resorting to a
court of competent jurisdiction in those instances where injunctive relief may
be appropriate.  In the event of such
litigation in the courts, the prevailing party shall be entitled to recover its
reasonable attorney fees and other costs incurred in connection with that
action or proceeding, including such costs and attorney fees incurred in
connection with any appeal or petition for review.

 

                11.7 Knowing and Voluntary
Agreement; No Pressure or Coercion. 
Employee acknowledges and agrees that the only consideration for this
Agreement is the consideration expressly described herein, that Employee has
carefully read the entire Agreement, that Employee has had the opportunity to
review this Agreement and to have it reviewed and explained to Employee by an
attorney and financial counsel of Employee’s choosing, that Employee fully
understands it’s final and binding effect, and that Employee is signing this
Agreement voluntarily, with the full intent of releasing Gardenburger from all
claims, without any undue pressure or coercion from Gardenburger.

 

	
   GARDENBURGER, INC.

  	
   

  	
   

  
	
  Signed:

  	
   

  	
   

  	
  By:
  

  	
   

  
	
   

  	
  Scott
  C. Wallace

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  

 

 

ivEXHIBIT
10.9

SUPPLEMENT TO EMPLOYMENT
AGREEMENT

	
   

  	
   

  	
   

  
	
  Company:

  	
   

  	
  Gardenburger, Inc., an Oregon corporation

  
	
   

  	
   

  	
   

  
	
  Employee:

  	
   

  	
  Scott C. Wallace

  
	
   

  	
   

  	
   

  
	
  Original
  Agreement:

  	
   

  	
  The Employment Agreement dated effective January 15,
  2001, between Company and Employee

  

 

Company and Employee mutually agree to supplement the
Original Agreement as follows:

 

1.     Sale Bonus.  Employee will have the right, in his sole
discretion, to waive receipt of any portion of the Sale Bonus otherwise due to
Employee pursuant to Section 4.7 of the Original Agreement if and to the extent
that Employee determines that reduction in the amount of the Sale Bonus would
give Employee an income tax benefit. 
Any reduction by Employee of the amount of Sale Bonus received as
provided in this paragraph will not affect Employee’s other rights to the Sale
Bonus or any other provision of the Original Agreement.

 

2.     Effect on Original Agreement.  Except as expressly provided in this
Supplement, all the terms and conditions of the Original Agreement will remain in
full force and effect.

 

Company
has caused this Agreement to be executed on its behalf by its duly authorized
officer and Employee has set his hand, in each case as of the date last signed.

 

 

	
   

  	
   

  	
  GARDENBURGER,
  INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/  Scott C. Wallace

  	
   

  	
  By:

  	
   

  	
  /s/  Lorraine Crawford

  
	
   

  	
  Scott C.
  Wallace

  	
   

  	
   

  	
   

  	
  Lorraine
  Crawford

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Vice
  President, Finance

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  April 30, 2003

  	
   

  	
  Date:

  	
   

  	
  April 30, 2003

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