EXHIBIT 10.36
THIRD AMENDMENT TO
EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement is entered into as of this 9th
day of December, 1999, by and between Gardenburger, Inc. (the "Company"), and
Xxxx X. Xxxxxxx ("Xxxxxxx").
RECITALS
A. On or about May 23, 1996, the Company and Xxxxxxx executed an Employment
Agreement dated as of April 14, 1996, pursuant to which the Company agreed to
employ Xxxxxxx as its Chief Executive Officer. The employment agreement was
extended and amended pursuant to an Agreement to Extend and Amend Employment
Agreement dated November 16, 1998 (the "First Amendment"), and a second
Agreement to Extend and Amend Employment Agreement dated as of March 5, 1999
(the "Second Amendment"). The employment agreement, as amended by the First
Amendment and Second Amendment, shall hereinafter be referred to as the
"Employment Agreement."
B. The Company and Xxxxxxx desire to further amend the Employment Agreement
in the manner set forth below.
AGREEMENTS
NOW, THEREFORE, the Company and Xxxxxxx agree as follows:
1. Section 5.5.2 of the Employment Agreement is amended to provide in its
entirety as follows:
5.5.2(A) In the event of the termination of
Employee's employment pursuant to Section 5.2 (Death or Disability) or
Section 5.4 (termination of Employee's employment without Cause
occurring in the absence of a Change in Control as that term is defined
in Section 5.7), the Company shall pay to Employee:
(1) The then current base compensation payable to
Employee under Section 2.1 prorated through the effective date
of the termination;
(2) The annual target incentive bonus in effect as of
the date of termination of Employee's employment prorated
through the effective date of termination as if such annual
target incentives had been achieved; and
(3) Severance pay equal to:
(i) the greater of (x) one and one-half
times Employee's annual base compensation in effect
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as of the date of termination or (y) the base
compensation remaining to be paid to Employee under
Section 2.1 between the effective date of such
termination and the end of the employment term under
this Agreement; and
(ii) one and one-half times the average of
the annual incentive bonuses reported as W-2
compensation to Employee for the two calendar years
ending prior to the calendar year in which the
termination occurs.
5.5.2(B) No other compensation, benefits or payments
of any nature whatsoever shall be due and payable under this Agreement
in the event of termination of Employee's employment by the Company
pursuant to Section 5.2 or 5.4.
5.5.2(C) Employee agrees, as a condition to payment
and receipt of such severance pay, to execute a full and complete
release, in form and substance satisfactory to the Company, of any and
all claims of every kind and nature whatsoever against the Company.
2. Section 5.6.1 of the Employment Agreement is amended to provide in its
entirety as follows:
5.6.1 DECISION OF COMPANY NOT TO EXTEND TERM. The
Company is required under Section 1.1 above to notify Employee at the
end of the second year of the employment term and, in the event this
Agreement is extended, at the end of each subsequent one-year period
thereafter, whether the Company elects to extend this Agreement for an
additional one-year term. If the Company, in its sole and absolute
discretion, decides not to extend this Agreement for an additional
one-year term, then the Company shall, in the event it has not already
paid severance pay to Employee under Section 5.5.2(a)(3) above, pay to
Employee at the end of the final year of Employee's employment, as
severance pay, an amount equal to one and one-half times Employee's
annual base compensation in effect as of the expiration date of
Employee's employment with the Company and one and one-half times the
average of the annual incentive bonuses reported as W-2 compensation to
Employee for the two calendar years ending prior to the calendar year
in which the termination occurs; provided, however, the Company shall
have no obligation to pay such severance pay if the reason for not
extending this Agreement is Employee's retirement. Employee agrees, as
a condition to payment and receipt of such severance pay, to execute a
full and complete release, in form and substance satisfactory to the
Company, of any and all claims of every kind and nature whatsoever
against the Company. The Board of Directors shall be under no
obligation, in the event it elects not to extend the term of this
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Agreement, to review Employee's performance, or offer Employee another
extension, at the end of the final year of Employee's employment.
3. Section 5.7.2 of the Employment Agreement is amended to provide in its
entirety as follows:
5.7.2(A) In the event that Employee's employment with
the Company is terminated, either by Employee with Good Reason or by
the Company without Cause, within two years after the date of
occurrence of any event constituting a Change in Control (it being
recognized that more than one such event may occur in which case the
two-year period shall run from the date of occurrence of each such
event), and provided that the condition set forth in Section 5.7.6 of
this Agreement is satisfied, Employee shall be entitled to the payments
described in Sections 5.5.2(a)(1) and (2) of this Agreement and, in
lieu of the severance pay described in Section 5.5.2(a)(3) of this
Agreement, an amount of severance pay equal to 2.99 times the sum of
(i) the average of the annual base compensation paid to Employee by the
Company during the "Base Period" as defined by Internal Revenue Code
Section 280G(d)(2) and the regulations thereunder (hereinafter "Base
Period"), and (ii) the average of the annual incentive bonuses (if any)
reported as W-2 compensation to Employee during the Base Period;
provided, however, for purposes of calculating the average of the
annual incentive bonuses, Base Period shall not include any period
ending prior to January 1, 1997. If the Base Period includes a short or
incomplete taxable year, the base compensation and incentive bonuses
paid in the short or incomplete year will be annualized before
determining the average.
5.7.2(B) In the event that Employee's employment with
the Company is terminated, either by Employee with Good Reason or by
the Company without Cause, within two years after the date of
occurrence of any event constituting a Change in Control (it being
recognized that more than one such event may occur in which case the
two-year period shall run from the date of occurrence of each such
event), and if the condition set forth in Section 5.7.6 of this
Agreement is not satisfied, Employee shall be entitled to the payments
described in Section 5.5.2(a)(1) and (2) of this Agreement and, in lieu
of the severance pay described in Section 5.5.2(a)(3) of this
Agreement, the following additional amounts:
(i) one and one-half times the higher of
Employee's annual base compensation in effect as of
the date of termination of Employee's employment or
the date immediately prior to the Change in Control
Date; and
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(ii) one and one-half times the higher of
Employee's annual target incentive bonus in effect as
of the date of termination of Employee's employment
or the date immediately prior to the Change in
Control Date as if such annual target incentives had
been achieved.
5.7.2(C) The severance payments described in Sections
5.7.2(a) and 5.7.2.(b) of this Agreement, which are in the alternative,
shall hereinafter be referred to as the "Change in Control Severance
Payment."
5.7.2(D) Except for the benefits described in Section
5.9 of this Agreement, no other compensation, benefits or payments of
any nature whatsoever shall be due and payable under this Agreement in
the event of termination of Employee's employment by the Company
pursuant to Sections 5.7.2(a) or (b).
5.7.2(E) Employee agrees, as a condition to payment
and receipt of the Change in Control Severance Payment, to execute a
full and complete release, in form and substance satisfactory to the
Company, of any and all claims of every kind and nature whatsoever
against the Company.
4. Sections 5.7.5(a) and (b) of the Employment Agreement are amended to
provide in their entirety as follows:
(a) In the event that any portion of the total
payments to be received by Employee in connection with a Change in
Control (including the payments described in Sections 5.5.2(a)(1) and
(2) of this Agreement, the Change in Control Severance Payment and any
other payment or benefit payable to Employee in connection with the
Change in Control pursuant to any plan, arrangement, or agreement with
the Company, a person whose actions result in the Change in Control, or
person affiliated with the Company or such person) (hereinafter
referred to as "Total Payments") would constitute an "excess parachute
payment" within the meaning of Section 280G(b) of the Code that is
subject to an Excise Tax, the Total Payments otherwise payable to
Employee shall be reduced to the minimum extent necessary to avoid the
Excise Tax. Employee shall have the right to choose the items
comprising the Total Payments to be reduced.
(b) For purposes of the reduction described in
Section 5.7.5(a):
(1) No portion of the Total Payments, the receipt or
enjoyment of which Employee has effectively waived in writing
prior to the date of payment of the severance payments, shall
be taken into account;
(2) No portion of the Total Payments shall be taken
into account which, in the opinion of Xxxxxx Xxxxxxxx LLP (or,
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if Xxxxxx Xxxxxxxx LLP is unavailable, such tax counsel
selected by Employee and reasonably acceptable to Company)
("Tax Counsel"), does not constitute a "parachute payment"
within the meaning of Section 280G of the Code;
(3) If Employee and the Company disagree whether any
of the Total Payments will result in an Excise Tax, the matter
will be conclusively resolved by an opinion of Tax Counsel;
and
(4) The value of any noncash benefit or any deferred
payment or benefit included in the Total Payments, whether or
not all or a portion of any payment or benefit is a "parachute
payment" for purposes of paragraph (b)(2) above, and the
amount of the reduction, if any, in the Total Payments shall
be determined by Tax Counsel in accordance with the principles
of Section 280G of the Code.
(5) In no event shall Company be liable or
responsible for the payment of or reimbursement to Employee
for Employee's payment of any Excise Tax for which Employee is
or may be liable in connection with any portion of the Total
Payments received by Employee.
5. Section 5.7.6 of the Employment Agreement is amended to provide as
follows:
5.7.6 The Change in Control Severance Payment
described in Section 5.7.2(a) of this Agreement shall be paid to
Employee only if the Change in Control results from an Acquiring Person
acquiring control in the Company for a price per share of the Company's
common stock that exceeds the applicable minimum per share price set
forth below, which applicable minimum per share sale price shall be
determined as of the earlier of the Change in Control Date or the date
of full execution of a definitive agreement which, if consummated, will
result in a Change in Control (which date shall hereinafter be referred
to as the "Determination Date"):
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Determination Date Minimum per
occurring on or before share sale price
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December 1, 1998 $10.00
March 1, 1999 $10.375
June 1, 1999 $10.75
September 1, 1999 $11.125
December 1, 1999 $11.50
March 1, 2000 $11.93
June 1, 2000 $12.36
September 1, 2000 $12.79
December 1, 2000 $13.23
March 1, 2001 $13.72
April 15, 2001 $13.96
6. Section 5.9 shall be added to the Employment Agreement and shall provide
as follows:
5.9 HEALTH AND LIFE INSURANCE COVERAGE. If Employee
becomes entitled to a Change in Control Severance Payment, then for a
period of eighteen (18) months following the date of termination (the
"Severance Period"), the Company shall pay for Employee's life,
accident and health insurance benefits ("Welfare Benefits")
substantially similar in all material respects to those which the
Employee was receiving immediately prior to the date of termination
(without giving effect to any adverse amendment to, or elimination of,
such benefits made after the Change in Control). Any eligible dependent
coverage Employee had as of the date of termination will continue for
such period on the same terms, to the extent permitted by the
applicable policies or contracts. If the terms of any benefit plan
referred to in this Section 5.9 do not permit continued participation
by Employee or the benefits are not substantially similar in all
material respects, the Company, if possible, will arrange for other
coverage at its expense providing substantially similar benefits. The
coverage provided for in this Section 5.9 shall be applied against and
shall reduce the period for which COBRA benefits will be provided. If
Employee receives Welfare Benefits from another source during the
Severance Period, then the Company's obligation to continue Welfare
Benefits at the Company's expense will cease. Employee agrees to
promptly report to the Company if he receives any Welfare Benefits
during the Severance Period.
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7. No other modification or amendment to the Employment Agreement is made
or intended to be made hereby. All terms, conditions, and covenants of the
Employment Agreement, to the extent not inconsistent with the amendments
described above, shall remain in full force and effect.
GARDENBURGER, INC.
By: /s/ E. Xxx Xxxxx By: /s/ Xxxx X. Xxxxxxx
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E. Xxx Xxxxx Xxxx X. Xxxxxxx
Chair of the Board of Directors
