Exhibit 10.5
Eskimo Pie Corporation
Executive Retention Bonus and Severance Agreement
Eskimo Pie Corporation (the "Company") has adopted an Executive Retention
Bonus and Severance Program (the "Executive Retention Bonus and Severance
Program") designed to encourage executives to remain focused on their job
responsibilities and to continue employment with the Company or a subsidiary in
light of a possible "Sale of the Company" (as that term is defined below)
relating to your employment.
In accordance with established criteria for the Executive Retention Bonus
and Severance Program, you have been selected as a participant in lieu of
participation in the Company's general retention and severance program contained
in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation
Welfare Benefit Plan (the Company's "welfare plan").
1. Executive Retention Bonus. If you are eligible in accordance with
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the criteria which follow, you will receive an Executive Retention Bonus
consisting of two installments - one for $56,250 (the "First Installment") and
one for $168,750 (the "Second Installment"), each subject to normal tax and
other applicable withholding and deductions.
In order to receive the First Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the First Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the First Installment on
or about January 15, 2000 (but in no event later than the date the Second
Installment of the Executive Retention Bonus is due) in a lump sum payment.
In order to receive the Second Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the Second Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the Second Installment
within five business days after the Sale of the Company relating to your
employment in a lump sum payment. If for any reason no Sale of the Company
relating to your employment occurs before January 1, 2001, you will not receive
the Second Installment of the Executive Retention Bonus.
2. Severance Benefits. If you cease to be employed by the Company at
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or within one year after the Sale of the Business relating to your employment
under the applicable additional eligibility criteria described below for
severance benefits for any reason (including without limitation your voluntary
cessation of employment) other than Cause (as defined below) or death, you will
also be entitled to severance benefits in the form of extended medical and
dental insurance coverage under the Company's welfare plan for you, your spouse
and your eligible dependents for one year with the Company paying the entire
cost of coverage for such extended coverage period. This extended medical and
dental coverage will not run concurrently with the COBRA coverage period under
the Company's welfare plan, and the applicable COBRA coverage period under the
Company's welfare plan will be available to you and your qualifying
beneficiaries after the end of this extended medical and dental coverage period.
3. Retention Period. The Retention Period began on October 7, 1999.
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It ends for the First Installment of the Executive Retention Bonus on December
31, 1999 or your earlier involuntary termination by the Company for reasons
other than death, permanent disability or Cause (as defined below). It ends for
the Second Installment of the Executive Retention Bonus on the Sale of the
Company relating to your employment or your earlier involuntary termination by
the Company for reasons other than death, permanent disability or Cause (as
defined below). For purposes hereof, you will
automatically be considered involuntarily terminated by the Company for reasons
other than death, permanent disability or Cause if you voluntarily terminate for
Good Reason (as defined below)
4. Sale of the Company. For purposes of this Agreement, the term "Sale
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of the Company" means any of the following occurring before January 1, 2001:
a) a change in the ownership of the Company resulting in the possession
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")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
50% of the outstanding stock of the Company (whether by sale or
issuance of stock, reorganization, merger, consolidation or otherwise)
in connection with a transaction contemplated by the Board of
Directors of the Company (the "Board") in connection with the Board's
publicly announced intention to sell the Company or its assets,
including the assets of its subsidiaries (the "Company Sale
Announcement");
b) if you are employed by a subsidiary or a division of the Company, the
sale of the stock of, or substantially all of the assets of, that
subsidiary or that division of the Company;
c) if you are employed in connection with Company-wide matters,
substantially all of your duties and responsibilities as of October 7,
1999 are effectively eliminated by reason of a sale or sales of the
assets or divisions of the Company or of its subsidiaries; or
d) if you are employed in connection with any other operations of the
Company or any subsidiary (including corporate headquarters
operations) which is the subject of or related to any other sale of
assets determined by the Company to result in a cessation of such
operations in connection with the Company Sale Announcement, the sale
of such assets.
5. Cause. For purposes of this Agreement, "Cause" means:
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a) dishonesty,
b) conviction of a felony,
c) the willful unauthorized disclosure of confidential information of the
Company or any of its subsidiaries or affiliates, or
d) the willful and continued failure to substantially perform your duties
with the Company or any of its subsidiaries or affiliates (other than
any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is
delivered to you by the Board, the Compensation Committee or its
delegate which specifically identifies the manner in which you have
not substantially performed your duties.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done, by you
in bad faith or without reasonable belief that your action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or any
committee of the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company.
6. Good Reason. For purposes of this Agreement, "Good Reason" shall
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mean the occurrence of any of the following without Cause:
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a) the assignment to you of any duties which are inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Company that you held immediately on
October 7, 1999, or a significant adverse alteration in the nature or
status of your responsibilities or the conditions of your employment
from those in effect immediately on October 7, 1999, provided that any
promotion or such change or alteration in your duties, authority,
responsibilities or conditions of employment which is either accepted
or not rejected in writing delivered to the Board of Directors of the
Company within 10 days of such promotion, change or alteration shall
be deemed to have been held or in effect immediately on October 7,
1999;
b) a reduction by the Company in your annual base salary as in effect on
October 7, 1999 or as the same may be increased from time to time;
c) if you are principally employed at the Company's principal executive
offices, the relocation of the Company's principal executive offices
to a location outside the Richmond Metropolitan Area or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
d) except in the event of reasonable administrative delay, the failure by
the Company to pay to you any portion of your current compensation or
to pay to you any portion of an installment of deferred compensation
under any deferred compensation program of the Company within seven
(7) days of the date such compensation is due;
e) the failure by the Company to continue in effect any compensation plan
in which you participated on October 7, 1999 that is material to your
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue your
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as it existed on October 7, 1999;
f) the failure by the Company to continue to provide you with benefits
having an aggregate value of at least 75% of the aggregate value of
the benefits enjoyed by you under any of the Company's life insurance,
medical, health and accident, disability plans, or other welfare and
defined benefit plans (qualified and non-qualified) in which you were
participating on October 7, 1999, the taking of any action by the
Company which would directly or indirectly reduce by more than 25% the
aggregate value of such benefits or deprive you of any material fringe
benefit enjoyed by you on October 7, 1999, or the failure by the
Company to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect on
October 7, 1999; or
g) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in section 8.1) captioned "Successors" below.
7. Additional Eligibility Criteria for Benefits. Eligibility for
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either installment of the Executive Retention Bonus and for severance benefits
is also conditioned on the following additional rules, as applicable to the
particular benefit:
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a) Voluntary Resignation. You will not receive an Executive Retention
Bonus installment if you voluntarily resign your employment prior to
the last day of the applicable Retention Period other than for Good
Reason.
b) Death, Disability or Involuntary Termination for Cause. You will not
receive an Executive Retention Bonus installment if you die, become
permanently disabled or are involuntarily terminated for Cause by the
Company during the applicable Retention Period.
c) No Other Employment. You will not be eligible for an Executive
Retention Bonus installment or severance benefits under this Agreement
if you engage in any activity during the applicable Retention Period
or, in the case of severance benefits, prior to the Sale of the
Company relating to your employment, which is inconsistent with the
satisfactory performance of your duties including, but not limited to,
engaging in other full-time or substantially full-time employment,
whether as an employee, consultant or in any other capacity, whether
or not you are compensated for such other employment, or engaging in
any other business activity, whether or not such business activity is
pursued for gain or profit, except as approved in advance in writing
by an authorized representative of the Company.
d) Confidentiality. You agree to maintain the utmost confidentiality of
the existence and the terms of this Agreement and all documentation or
records relating to this Agreement and the Executive Retention Bonus
and Severance Program and not to disclose these matters to any person
or entity without the prior written consent of the Company unless
required otherwise by law or court order. You will not be eligible
for the Executive Retention Bonus or severance benefits under this
Agreement if you violate this confidentially requirement.
e) Resignation as Director and/or Officer. You will not be eligible for
severance benefits under this Agreement unless, promptly after your
cessation of employment with the Company and upon receiving a written
request to do so, you resign as a director and/or officer of the
Company (including of each subsidiary and affiliate of the Company)
for which you are then serving as a director and/or officer.
f) Waiver of Other Retention, Termination and Severance Benefits and
Participant in General Retention Bonus Program. Eligibility to
receive the Executive Retention Bonus installments and severance
benefits under this Agreement is contingent upon your agreeing to
waive your rights under and terminate your participation in any and
all other retention, termination and severance programs of the Company
and of each subsidiary and affiliate of the Company (whether by
individual agreement or otherwise) now or subsequently existing during
the period this Agreement is in effect (including without limitation
any executive or other severance agreement now in force and the
Company's general retention bonus and severance program for rank and
file employees contained in the 1999 Company Sale Severance Program),
which you may do by signing, dating and returning to the Company one
copy of this Agreement
g) Acceptance of Agreement. Eligibility to receive the Executive
Retention Bonus and severance benefits under this Agreement is
contingent upon your acceptance of the terms of this Agreement by
signing, dating and returning to the Company one copy of this
Agreement no later than October 25, 1999.
8. Other Terms and Conditions. The following additional terms and
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conditions apply for purposes of this Agreement:
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a) No Contract of Employment. This Agreement is not intended to, and
does not, create a contract of employment for any definite period of
time between you and the Company.
b) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby. You may at any time
or from time to time waive any or all of the benefits provided for
herein which have not been received by you at the time of such waiver.
In addition, prior to the last day of the calendar year in which your
cessation of employment occurs, you may waive any or all rights and
benefits provided for herein which have been received by you; provided
that you repay to the Company the amount of the benefits received
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code). Any waiver of benefits pursuant to this paragraph shall
be irrevocable.
c) Severability. If any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and
effect to the fullest extent permitted by law.
d) Modification. Any modifications to this Agreement must be approved in
writing by an authorized representative of the Company. No reduction
in your rights under this Agreement may be made without your written
consent.
e) Governing law. This Agreement shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of
Virginia.
f) Excise Tax. If you become entitled to benefits under this Agreement
and if any part or all of such benefits will be subject to the tax
("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then the amount otherwise payable or
provided to you in accordance with this Agreement shall be reduced as
necessary so that no part of such payment shall be subject to the
Excise Tax.
g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not
be governed by any duty to mitigate your damages by seeking further
employment nor offset by any compensation which you may receive from
future employment.
h) Interest on Delayed Payments. If payment or provision of any benefit
due to you under this Agreement is not timely made, you shall be
entitled to interest on the amount not timely paid at 120% of the
applicable federal rate, compounded semi-annually, under Section
1274(d) of the Code determined at the time the Sale of the Business
relating to your employment occurs, such interest to accrue from the
date such benefit is due through the date of payment or provision
thereof.
i) Adjudication. If a dispute or controversy arises under or in
connection with this Agreement, you shall be entitled to an
adjudication in an appropriate court of the Commonwealth of Virginia,
or in any other court of competent jurisdiction. Alternatively, you,
at your option, may seek an award in arbitration to be conducted by a
single arbitrator under the Commercial Arbitration Rules of the
American Arbitration Association.
j) Expenses relating to the Company's Failure to Perform. If any contest
or dispute shall arise under this Agreement involving the failure or
refusal of the Company to perform fully in accordance with the terms
hereof other than in connection with a good faith determination of the
existence of Cause, the Company shall reimburse you, on a
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current basis, for all legal fees and expenses, if any, incurred by
you in connection with such contest or dispute (regardless of the
result thereof), together with interest in an amount equal to the
prime rate of BankAmerica from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law,
such interest to accrue from the date the Company receives your
statement for such fees and expenses through the date of payment
thereof. Such reimbursement shall include the cost of attorney's fees
in reviewing this Agreement in connection with such contest or dispute
and in negotiating or attempting to negotiate a settlement of such
contest or dispute prior to your making such claim or commencing any
action or proceeding and in settling any matter relating to this
Agreement.
k) Other Expenses. If any claim, action or proceeding (including without
limitation a claim, action or proceeding by you against the Company)
occurs with respect to this Agreement other than one described in
section 8.j) above, the Company shall pay or reimburse you for all
costs and expenses, including without limitation court costs and
attorney's fees, incurred by you as a result thereof, provided that if
the claim, action or proceeding is by you against the Company, you are
successful in whole or in part on the merits or otherwise in such
claim, action or proceeding. Such reimbursement shall include
interest in an amount equal to the prime rate of BankAmerica from time
to time in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the
date the Company receives your statement for such fees and expenses
through the date of payment thereof.
l) Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company
will require any successor which employs you in connection with a Sale
of the Company to assume expressly 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 you had remained employed by the Company.
As used in this Agreement, the "Company" shall mean Eskimo Pie
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
m) Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
hereunder if you had continued to live, any such amount, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to your devisee, legatee or other designee or, if
there is no such designee, your estate.
n) Termination. If no Sale of the Company occurs prior to January 1,
2001, this Agreement shall then terminate.
Eskimo Pie Corporation
By /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
President and Chief Executive Officer
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
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Agreed and Accepted:
/s/ V. Xxxxxxx Xxxxxxxxx October 25, 1999
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(Name) (Date)
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