1
EXHIBIT 10.13
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT is made as of the 22nd day of June, 1998, by and between
Vlasic Foods International Inc. (the "Company") and Xxxxxx X. Xxxxxxxxx (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists
and that the threat of or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has, as recommended and approved by the Compensation
and Organization Committee, determined that it is essential and in the best
interest of the Company and its shareowners to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and
to ensure Executive's continued dedication and efforts in such event without
undue concern for Executive's personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, particularly in the event of a threat or the occurrence of a
Change in Control, the Company desires to enter into this Agreement with the
Executive to provide the Executive with certain benefits in the event
Executive's employment is terminated as a result of, or in connection with, a
Change in Control and to provide the Executive with certain other benefits
whether or not the Executive's employment is terminated.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of June 22,
1998, and shall continue in effect until the third anniversary of such date;
provided however, that commencing on the second anniversary of such date and
on each anniversary thereafter, the term of this Agreement shall
automatically be extended for one (1) year unless either the Company or the
Executive shall have given written notice to the other at least ninety (90)
days prior thereto that the term of this Agreement shall not be so extended;
and provided further, that notwithstanding any such notice by the Company not
to extend, the term of this Agreement shall not expire prior to the
expiration of twenty-four (24) months after the occurrence of a Change in
Control.
2. Definitions.
2.1 Cause. For purposes of this Agreement only, a termination
for "Cause" is a termination evidenced by a resolution adopted in good faith
by two-thirds of the Board that: (a) the Executive intentionally and
continually failed to substantially perform Executive's duties with the
Company (other than a failure resulting from the Executive's incapacity due
to physical or mental illness) which failure continued for a period of at
least thirty (30) days after a written notice of demand for substantial
performance has been delivered to the Executive specifying the manner in
which the Executive has failed to substantially perform; or (b) the Executive
engaged in conduct that constitutes willful gross misconduct that is
demonstrably and materially
2
injurious to the Company, monetarily or otherwise, misappropriated funds,
made one or more willful and material misrepresentations to the directors or
officers of the Company, was grossly negligent in the performance of the
Executive's duties having a material adverse effect on the business,
operations, assets, properties or financial condition of the Company, or
entered into competition with the Company; provided however, that no
termination of the Executive's employment shall be for Cause as set forth in
clause (b) above until (x) there shall have been delivered to the Executive a
copy of a written notice setting forth that the Executive was guilty of the
conduct set forth in clause (b) and specifying the particulars thereof in
detail, and (y) the Executive shall have been provided an opportunity to be
heard by the Board (with the assistance of the Executive's counsel if the
Executive so desires). No act, nor failure to act, on the Executive's part,
shall be considered "willful" unless Executive has acted, or failed to act,
with an absence of good faith and without a reasonable belief that
Executive's action or failure to act was in the best interest of the
Company. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by the Executive after a Notice of
Termination is given by the Executive shall constitute Cause for purposes of
this Agreement.
2.2 Change in Control. For purposes of this Agreement, a
"Change in Control" shall mean any of the following events:
(a) The acquisition in one or more transactions by any
"Person" (as the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under
the 0000 Xxx) of twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding voting securities (the "Voting
Securities"), provided however, that for purposes of this Section 2.2a, the
Voting Securities acquired directly from the Company by any Person shall be
excluded from the determination of such Person's Beneficial Ownership of
Voting Securities (but such Voting Securities shall be included in the
calculation of the total number of Voting Securities then outstanding); or
(b) The individuals who, as of the later of April 1, 1998
or the first date that the membership of the Board reaches seven (7), are
members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the Board; provided however, that if the
election, or nomination for election by the Company's shareowners, of any new
director was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes of this Agreement, be considered
as a member of the Incumbent Board; or
(c) Approval by shareowners of the Company of: (i) a
merger or consolidation involving the Company if the shareowners of the
Company, immediately before such merger or consolidation, do not own,
directly or indirectly, immediately following such merger or consolidation,
more than eighty percent (80%) of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such merger
or consolidation in substantially the same proportion as their ownership of
the Voting Securities immediately before such merger or consolidation; or
(ii) a complete liquidation or dissolution of the Company or an agreement for
the sale or other disposition of all or substantially all of the assets of
the Company; or
2
3
(d) Acceptance by shareowners of the Company of shares in
a share exchange if the shareowners of the Company, immediately before such
share exchange, do not own, directly or indirectly, immediately following
such share exchange, more than eighty percent (80%) of the combined voting
power of the outstanding Voting Securities of the corporation resulting from
such share exchange in substantially the same proportion as their ownership
of the Voting Securities outstanding immediately before such share exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because twenty-five percent (25%) or more of the then
outstanding Voting Securities is acquired by: (i) a trustee or other
fiduciary holding securities under one or more employee benefit plans
maintained by the Company or any of its subsidiaries; (ii) any entity that,
immediately prior to such acquisition, is entirely owned (directly or
indirectly) by shareowners of the Company in the same proportions as their
ownership of stock in the Company immediately prior to such acquisition;
(iii) any "Grandfathered Xxxxxxxx Family shareowner" (as hereinafter
defined); or (iv) any Person who has acquired such Voting Securities directly
from any Grandfathered Xxxxxxxx Family shareowner but only if such Person has
executed an agreement that is approved by two-thirds of the Board and
pursuant to which such Person has agreed that he or she (or they) will not
increase his or her (or their) Beneficial Ownership (directly or indirectly)
to thirty percent (30%) or more of the outstanding Voting Securities (the
"Standstill Agreement") and only for the period during which the Standstill
Agreement is effective and fully honored by such Person. For purposes of
this Section, "Grandfathered Xxxxxxxx Family shareowner" means at any time a
"Xxxxxxxx Family shareowner" (as hereinafter defined) who or which is at the
time in question the Beneficial Owner solely of (v) Voting Securities
beneficially owned by such individual on April 1, 1998, (w) Voting Securities
acquired directly from the Company, (x) Voting Securities acquired directly
from another Grandfathered Xxxxxxxx Family shareowner, (y) Voting Securities
that are also Beneficially Owned by other Grandfathered Xxxxxxxx Family
shareowners at the time in question, and (z) Voting Securities acquired after
April 1, 1998 other than directly from the Company or from another
Grandfathered Xxxxxxxx Family shareowner by any "Xxxxxxxx Grandchild" (as
hereinafter defined); provided that the aggregate amount of Voting Securities
so acquired by each such Xxxxxxxx Grandchild shall not exceed five percent
(5%) of the Voting Securities outstanding at the time of such acquisition. A
"Xxxxxxxx Family shareowner" who or which is at the time in question the
Beneficial Owner of Voting Securities that are not specified in clauses (v),
(w), (x), (y) and (z) of the immediately preceding sentence shall not be a
Grandfathered Xxxxxxxx Family shareowner at the time in question. For
purposes of this Section, "Xxxxxxxx Family shareowners" means individuals who
are descendants of the late Xx. Xxxx X. Xxxxxxxx, Xx. and/or the spouses,
fiduciaries and foundations of such descendants. A "Xxxxxxxx Grandchild"
means as to each particular grandchild of the late Xx. Xxxx X. Xxxxxxxx, Xx.,
all of the following taken collectively: such grandchild, such grandchild's
descendants and/or the spouses, fiduciaries and foundations of such
grandchild and such grandchild's descendants.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by the
Company that, by reducing the number of Voting Securities
3
4
outstanding, increases the proportional number of shares Beneficially Owned
by the Subject Person; provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any additional Voting
Securities that increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
(e) Notwithstanding anything contained in this Agreement
to the contrary, if the Executive's Termination Date (as defined in Section
6) is within one year prior to a Change in Control and the Executive
reasonably demonstrates that such termination (1) was at the request of a
Third Party (as defined in Section 2.4(b)) who effectuates a Change in
Control or (2) otherwise occurred in connection with or in anticipation of, a
Change in Control, then for all purposes of this Agreement, the date of a
Change in Control shall mean the date immediately prior to the date of such
termination of the Executive's employment.
2.3 Disability. For purposes of this Agreement only,
"Disability" shall mean a physical or mental infirmity which impairs the
Executive's ability to substantially perform the Executive's duties under
this Agreement for a period of one hundred eighty (180) consecutive days.
2.4 (a) Good Reason. For purposes of this Agreement, "Good
Reason" shall mean the occurrence after a Change in Control of any of the
events or conditions described in Subsections (1) through (10) hereof:
(1) an assignment to the Executive of any duties
materially inconsistent with, or a reduction or change by the Company in the
nature or scope of the authority, duties or responsibilities of the Executive
from those assigned to or held by the Executive immediately prior thereto;
(2) any removal of the Executive from the positions
held immediately prior to the Change in Control, except in connection with
promotions to positions of greater responsibility and prestige;
(3) any reduction by the Company in the Executive's
compensation as in effect immediately prior to the Change in Control or as
the same may be increased thereafter;
(4) revocation or any modification of any employee
benefit plan, or any action taken pursuant to the terms of any such plan,
that materially reduces the opportunity of the Executive to receive benefits
under any such plan;
(5) a transfer or relocation of the site of
employment of the Executive immediately preceding the Change in Control,
without the Executive's express written consent, to a location more than
fifty (50) miles distant therefrom, or that is otherwise an unacceptable
commuting distance from the Executive's principal residence at the date of
the Change in Control;
4
5
(6) a requirement that the Executive undertake
business travel to an extent substantially greater than the Executive's
business travel obligations immediately prior to the Change in Control;
(7) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company;
(8) any material breach by the Company of any
provision of this Agreement;
(9) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the terms of
Section 2.1; or
(10) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any successor or assign of the
Company to assume and agree to perform this Agreement, as contemplated in
Section 8 hereof.
(b) Any event or condition described in this Section
2.4(a)(1) through (10) which occurs prior to a Change in Control but which
the Executive reasonably demonstrates: (i) was at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a Change in Control (a "Third Party"); or (ii) otherwise arose in
connection with or in anticipation of a Change in Control, shall constitute
Good Reason for purposes of this Agreement notwithstanding that it occurred
prior to the Change in Control.
(c) The Executive's right to terminate his employment
pursuant to this Section 2.4 shall not be affected by his incapacity due to
physical or mental illness.
2.5 Window Period. For purposes of this Agreement, "Window
Period" shall mean the thirty (30) day period beginning one year after a
Change in Control.
3. Obligations of the Executive. The Executive agrees that in the
event any person or group attempts a Change in Control, the Executive will
not voluntarily terminate employment with the Company without Good Reason:
(a) until such attempted Change in Control terminates; or (b) if a Change in
Control shall occur, until ninety (90) days following such Change in
Control. For purposes of the foregoing subsection (a), Good Reason shall be
determined as if a Change in Control had occurred when such attempted Change
in Control became known to the Board.
5
6
4. Severance and Benefits.
4.1 If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twenty-four (24)
months following a Change in Control, the Executive shall be entitled to the
following compensation and benefits:
(a) If the Executive's employment with the Company shall
be terminated (1) by the Company for Cause or Disability, (2) by reason of
the Executive's death, or (3) by the Executive other than for Good Reason or
other than during the Window Period, the Company shall pay the Executive all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date, including: (i) base salary; (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date; and (iii) vacation
pay (collectively, "Accrued Compensation"). In addition to the foregoing, if
the Executive's employment is terminated by the Company for Disability or by
reason of the Executive's death, the Company shall pay to the Executive or
his beneficiaries an amount equal to the "Pro Rata Bonus" (as hereinafter
defined). The "Pro Rata Bonus" is an amount equal to the Bonus Amount (as
hereinafter defined) multiplied by a fraction the numerator of which is the
number of days in such fiscal year through the Termination Date and the
denominator of which is 365. The term "Bonus Amount" shall mean the greater
of: (x) the Executive's target bonus under the Vlasic Foods International
Inc. Annual Incentive Plan for the fiscal year in which the Termination Date
occurs; or (y) average of the annual bonuses paid or payable during the two
full fiscal years ended prior to the Termination Date. Executive's
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs and practices then in effect.
(b) If the Executive's employment with the Company shall
be terminated (other than by reason of death): (1) by the Company other than
for Cause or Disability; (2) by the Executive for Good Reason; or (3) by the
Executive for any reason whatsoever (other than death) during the Window
Period, the Executive shall be entitled to the following:
(i) The Company shall pay the Executive all
Accrued Compensation and a Pro-Rata Bonus (each as defined in Section 4.1(a)).
(ii) The Company shall pay the Executive as
severance pay and in lieu of any further compensation for periods subsequent
to the Termination Date, in a single payment an amount (the "Severance
Amount") in cash equal to three (3) times the sum of: (A) the greater of the
Executive's annual base salary in effect at any time during the 90-day period
prior to the Change in Control ("Base Salary") or at any time thereafter; and
(B) the Bonus Amount. Notwithstanding the foregoing, if the Executive has
attained at least age 63 on the Termination Date the Severance Amount to be
paid under this Subsection (ii) shall be the amount described in the
preceding sentence multiplied by a fraction (which in no event shall be less
than one-fourth) the numerator of which shall be the number of months (for
this purpose any partial month shall be considered as a whole month)
remaining until the Executive's 65th birthday (but in no event shall be less
than 6) and the denominator of which shall be 24 and if
6
7
the Executive has attained at least age 65 on the Termination Date the Severance
Amount to be paid under this Subsection (ii) shall be the amount described in
the preceding sentence multiplied by one-fourth.
(iii) For a number of months equal to the lesser
of (A) 30 or (B) the number of months remaining until the Executive's 65th
birthday (the "Continuation Period"), the Company shall at its expense
continue on behalf of the Executive and his dependents and beneficiaries the
life insurance, disability, medical, dental and hospitalization benefits
provided (x) to the Executive at any time during the 90-day period prior to
the Change in Control or at any time thereafter or (y) to other similarly
situated executives who continue in the employ of the Company during the
Continuation Period. The coverage and benefits (including deductibles and
costs) provided in this Section 4.1(b)(iii) during the Continuation Period
shall be no less favorable to the Executive and his dependents and
beneficiaries than the most favorable of such coverages and benefits during
any of the periods referred to in clauses (x) and (y) above. The Company's
obligation hereunder with respect to the foregoing benefits shall be limited
to the extent that the Executive obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce the
coverage of any benefits it is required to provide the Executive hereunder as
long as the aggregate coverages and benefits of the combined benefit plans is
no less favorable to the Executive than the coverages and benefits required
to be provided hereunder. This Subsection (iii) shall not be interpreted so
as to limit any benefits to which the Executive, his dependents or
beneficiaries may be entitled under any of the Company's employee benefit
plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits.
(iv) The Company shall pay in a single payment an
amount in cash equal to the excess of (A) the Supplemental Retirement Benefit
(as defined below) had (w) the Executive remained employed by the Company for
an additional two and one-half complete years of credited service (or until
the Executive's 65th birthday if earlier), (x) the Executive's annual
compensation during such period been equal to his Base Salary and the Bonus
Amount, (y) the Company and/or the Subsidiary or Division made employer
contributions to each defined contribution plan in which the Executive was a
participant at the Termination Date (in an amount equal to the amount of such
contribution for the plan year immediately preceding the Termination Date)
and (z) the Executive had been fully (100%) vested in his benefit under each
retirement plan in which the Executive was a participant, over (B) the lump
sum actuarial equivalent of the aggregate retirement benefit the Executive is
actually entitled to receive under such retirement plans. For purposes of
this Subsection (iv), the "Supplemental Retirement Benefit" shall mean the
lump sum actuarial equivalent of the aggregate retirement benefit the
Executive would have been entitled to receive under the Company's
supplemental and other retirement plans including, but not limited to, the
Vlasic Foods International Inc. Retirement and Pension Plan for Salaried
Employees, Vlasic Foods International Inc. Supplemental Retirement Benefit
Program (collectively referred to as the "Retirement Plan"), the Vlasic Foods
International Inc. Savings and 401(k) Plan for Salaried Employees and the
Vlasic Foods International Inc. Supplemental Savings Program. For purposes
of this Subsection (iv), the "actuarial equivalent" shall be determined in
accordance with the actuarial assumptions used for the calculation of
benefits under the Retirement Plan as applied prior to the Termination Date
7
8
in accordance with such plan's past practices. This Subsection (iv) shall not be
interpreted so as to limit any benefits to which the Executive, his dependents
or beneficiaries may be entitled under any of the Company's employee benefit
plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits.
(v) The outstanding incentive awards (including restricted
stock and performance shares or units, stock options or stock appreciation
rights) granted to the Executive under the Vlasic Foods International Inc.
1998 Long-Term Incentive Plan or under any subsequent incentive plan or
arrangement, shall vest and any restrictions thereon shall lapse as follows:
(i) all such incentive awards (other than performance related awards) shall
vest or become exercisable immediately and any restrictions thereon shall
lapse; and (ii) any performance related awards shall vest or become
exercisable and any restrictions thereon shall lapse on a pro-rata portion of
such awards based on the portion of the relevant performance period that has
expired as of the Termination Date (but in no event shall such performance
related award vest, become exercisable or restrictions lapse with respect to
less than 50% of the total outstanding awards, any additional vesting to
apply to those awards which have been outstanding the longest), and (B) the
Executive shall have the right to require the Company to purchase, for cash,
any shares of unrestricted stock or shares purchased upon exercise of any
options, at a price equal to the fair market value of such shares on the date
of purchase by the Company. To the extent that, due to a Change in Control,
Executive is entitled to a greater level of benefits or compensation (which
includes but is not limited to a vesting schedule more favorable to
Executive) under the terms of any Vlasic Foods International Inc. incentive
or deferred compensation plan, as compared to this provision, the terms of
the Vlasic Foods International Inc. incentive or deferred compensation plan
will govern.
(c) The amounts provided for in Sections 4.1(a) and
4.1(b)(i), (ii), (iv) and (v) shall be paid within thirty (30) days after the
Executive's Termination Date. The Company may withhold from all payments due
to Executive under this Agreement all taxes or other withholdings which the
Company reasonably believes are required to be withheld under applicable
federal, state or local law
(d) The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 4.1(b)(iii).
4.3 The severance pay and benefits provided for in Sections
4.1(a) and 4.1(b)(i) and (ii) shall be in lieu of any other severance pay to
which the Executive may be entitled under any Company severance plan, program
or arrangement.
5. Notice of Termination. Following a Change in Control, any
purported termination of the Executive's employment by the Company or by the
Executive shall be communicated by written Notice of Termination to the
other. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which indicates the specific termination provision
8
9
in this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. For purposes of this Agreement, no
such purported termination shall be effective without such Notice of
Termination.
6. Termination Date. "Termination Date" shall mean in the case of
the Executive's death, his date of death, and in all other cases, the date
specified in the Notice of Termination subject to the following:
(a) If the Executive's employment is terminated by the Company
for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that in the case of
Disability the Executive shall not have returned to the full-time performance
of his duties during such period of at least thirty (30) days; and
(b) If the Executive's employment is terminated for Good
Reason, or if the Executive delivers a Notice of Termination during the
Window Period, the date specified in the Notice of Termination shall not be
more than sixty (60) days from the date the Notice of Termination is given to
the Company.
7. Certain Additional Payments by the Company. (a) Anything in
this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 7) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 7 (c), all
determinations required to be made under this Section 7, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Company's public accounting firm (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the
Change in Control, the Company shall appoint another nationally recognized
public accounting firm reasonably acceptable to Executive to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
9
10
hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7,
shall be paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7 (c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Executive is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to
be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim,
(2) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
10
11
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 7 (c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and xxx for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided further, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7 (c), the Executive becomes
entitled to receive, and receives, any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
Section 7 (c) ) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 7 (c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
8. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and the Company shall
require any successor or assign to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
The term "the Company" as used herein shall include such successors and
assigns. The term "successors and assigns" as used herein shall mean a
corporation or other entity acquiring all or substantially all the assets and
business of the Company (including this Agreement) whether by operation of
law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Executive, his beneficiaries or
legal representatives, except by
11
12
will or by the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal personal
representative.
9. Fees and Expenses. The Company shall pay all legal fees and
related expenses (including the costs of experts, evidence and counsel)
incurred by the Executive as they become due as a result of: (a) the
Executive's termination of employment (including all such fees and expenses,
if any, incurred in contesting or disputing any such termination of
employment); (b) the Executive seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which the Executive is or may be entitled to
receive benefits; or (c) the Executive's hearing before the Board as
contemplated in Section 2.1 of this Agreement; provided however, that the
circumstances set forth in clauses (a) and (b) (other than as a result of the
Executive's termination of employment under circumstances described in
Section 2.2(d)) occurred within twenty-four (24) months following a Change in
Control.
10. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses last given
by each party to the other, provided that all notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been
received on the date of delivery thereof or on the third business day after
the mailing thereof, except that notice of change of address shall be
effective only upon receipt.
11. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its subsidiaries and for which the Executive may qualify, nor shall
anything herein limit or reduce such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Provided,
to the extent that the Executive receives benefits under this Agreement, he
or she is not entitled to severance pay under any other severance plan,
policy or arrangement of the Company, including specifically the Severance
Protection Program. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan or program of the Company or
any of its subsidiaries shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
12. Settlement of Claims. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others.
13. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by
12
13
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
14. Employment Status. This Agreement does not constitute a contract
of employment or impose on the Company any obligation to retain the
Executive, or any obligation on the Executive to remain in the employment of
the Company.
15. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New Jersey without
giving effect to the conflict of laws principles thereof. Each party hereto
consents to the subject matter and in personam jurisdiction and venue in the
United States District Court of New Jersey. In the event it is determined
that the United States District Court of New Jersey should lack subject
matter jurisdiction for any reason, the parties consent to the jurisdiction
and venue in a court of competent jurisdiction in Camden County in the State
of New Jersey.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersede all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
ATTEST: VLASIC FOODS INTERNATIONAL INC.
By:
------------------------------- -----------------------------------
Secretary Vice President - Human Resources
EXECUTIVE
By:
-----------------------------------
13
