FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
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THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT is dated as of January 19,
2004, between TASTY BAKING COMPANY, a Pennsylvania corporation (the "Company")
and XXXXXXX X. XXXXX ("Executive").
Background
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The Company and the Executive have entered into an Employment Agreement
dated as of August 14, 2002 ("Employment Agreement") pursuant to which Executive
became employed as the President and Chief Executive Officer of the Company
effective October 7, 2002. The parties desire to amend the Employment Agreement
for the purposes and with the effect stated herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the Company and Executive
agree as follows:
1. Amendment to Section 5. Subsection 5(a)(viii) of the Employment
Agreement is hereby amended and restated to read in its entirety as follows:
"(viii) Either by Executive at any time during the period
beginning six (6) months after a "change of control" as defined in
Section 5(e) below and ending on the last day of the eighteenth
calendar month following the date of such change of control, by giving
written notice to the Company 90 days prior to the effective date of
such termination, or by the Company (other than for cause) at any time
during the period ending on the last day of the eighteenth calendar
month following the date of such change of control; and".
2. Amendments to Section 6.
(a) The first five (5) lines of subsection 6(d) of the
Employment Agreement are hereby amended and restated to read in their entirety
as follows:
"(d) Upon termination of this Agreement by the
Company without cause (as provided in Section 5(a)(iv) above), by the
Company as a result of its non-renewal of this Agreement (as provided
in Section 5(a)(vi) above), or by the Executive for "good reason" (as
provided in Section 5(a)(v) above), then Executive shall be entitled to
receive, in lieu of all other . . ."
(b) Subsection 6(f) is hereby deleted in its entirety, and
subsection 6(e) is hereby designated subsection 6(f).
(c) A new subsection 6(e) is hereby added to the Employment
Agreement and shall read in its entirety as follows:
"(e) Upon termination of this Agreement by the
Company (other than for cause) or by the Executive upon a change of
control (both as
provided in Section 5(a)(viii) above), then the Executive shall be
entitled to receive, in lieu of all other damages and benefits to which
Executive may otherwise be entitled as a direct or indirect result of
such termination, (i) three times his annual base salary then in effect
payable over 36 months, (ii) for each of the first three fiscal year's
of the Company ending after the date of termination, the average annual
cash bonus he received during the five fiscal years of the Company
immediately preceding the year in which such termination occurs (and if
Executive has been then employed by the Company for less than five full
years, the average shall be calculated for the period Executive was so
employed) multiplied by the percentage derived by dividing (x) the
aggregate cash bonuses awarded to other Senior Executives for each such
year, by (y) the average annual cash bonuses received by such Senior
Executives during the five fiscal years of the Company immediately
preceding the year of calculation, (iii) medical and life insurance
benefits for a period of 36 months after the date of termination
equivalent to those provided to other Senior Executives (provided
Executive satisfies the insurability criteria and complies with the
conditions of such plans) on the same basis as other Senior Executives
employed by the Company during such period, (iv) acceleration of
vesting of all unvested stock options, subject to any applicable
shareholder approval requirement, (v) any unpaid accrued benefits due
to Executive under this Agreement, the SERP or any employee benefit
plan in which Executive was a participant, through the date of such
termination, (vi) reimbursement for any expenses to which Executive is
entitled under the terms of this Agreement through the date of such
termination, and (vii) any indemnification obligations to which
Executive may become entitled from the Company whether by contract or
pursuant to the Company's charter or Bylaws. The amounts payable under
clause (ii) above shall be calculated separately for each year after
termination, and the amounts due shall be paid when and as bonuses, if
any, for such year are paid to other Senior Executives of the Company.
Payments due under clauses (i) and (ii) of the first of this subsection
sentence shall be paid by the Company periodically in accordance with
normal payroll practices for Senior Executives. To the extent that the
Company deems it undesirable to cover Executive under the Company's
group medical or life insurance plans, then the Company shall provide
Executive with the same level of coverage under individual policies or
pay cash to Executive equal to the cost to the Company for such
benefits to Executive immediately prior to termination of his
employment.
Executive and the Company expressly agree that in no event shall
the aggregate amount of change of control benefits payable to Executive
hereunder plus the amount of change of control benefits payable to all
other Senior Executives of the Company exceed three percent (3%) of the
total transaction value for such change of control, as such value and
percentages are then determined by a nationally-recognized executive
compensation consulting firm or investment banking firm at the time of
such change of control. The Company shall have the Accountants (as
defined below) determine promptly after a change of control the
aggregate amount of change of control benefits payable by the Company
to Executive and all other Senior Executives of the Company, and the
amount, if any, by which the cap set forth in the preceding sentence is
exceeded. Such excess shall be allocated among Executive and all other
Senior Executives of the Company receiving change of control benefits
in the same proportion as the total amount of their individual change
of control benefits relates to the aggregate amount of change of
control benefits for all such persons as a group.
The payments made pursuant to this Section 6(e) are expressly
conditioned upon Executive's first signing a valid general release and
waiver in a form reasonably acceptable to each of Executive and the
Company, pursuant to which Executive shall release and waive all claims
that he may have against the Company arising during or related in any
way to the Executive's employment with the Company, except for the
Company's continuing obligations hereunder. Executive shall release the
Company, its affiliates, officers, directors, employees,
representatives and agents. Payments by the Company hereunder shall
commence within 30 days after delivery of such executed release
provided Executive has not revoked the release.
In the event that the benefits provided for in this subsection
(e) or otherwise payable to the Executive constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), that are subject to the excise
tax imposed by Section 4999 of the Code (the "Excise Tax"), then the
Executive shall receive (i) a one-time payment from the Company
sufficient to pay such excise tax (the "Excise Tax Gross-Up"), and (ii)
an additional one-time payment from the Company sufficient to pay the
additional excise tax and federal and state income taxes arising from
the Excise Tax Gross-Up made by the Company to the Executive pursuant
to this subsection (e) (the "Additional Gross-Up"); provided, however,
that the Company shall only pay the Excise Tax Gross-Up and Additional
Gross-Up if the cumulative after-tax value of such payments to the
Executive equals or exceeds $25,000. In the event that the cumulative
after-tax value of such payments to the Executive is less than $25,000,
then the Executive's benefits hereunder shall be either (x) delivered
in full, or (y) delivered as to such lesser extent which would result
in no portion of such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income and employment taxes and the Excise
Tax, results in the receipt by the Executive on an after-tax basis, of
the greatest amount of benefits, notwithstanding that all or some
portion of such benefits may be taxable under the Excise Tax. Unless
the Company and the Executive otherwise agree in writing, the
determination of the Executive's excise tax liability and the amount
required to be paid under this Section 6(e) shall be made in writing in
good faith by the accounting firm serving as the Company's independent
public accountants immediately prior to the Change of Control (the
"Accountants"). In the event that the Excise Tax incurred by the
Executive is determined by the Internal Revenue Service to be greater
or lesser than the amount so determined by the Accountants, the Company
and the Executive agree to promptly make such additional payment,
including interest and any tax penalties, to the other party as the
Accountants reasonably determine is appropriate. For purposes of making
the calculations required by this Section 6(e), the Accountants may
make reasonable assumptions and approximations
concerning applicable taxes and may rely on interpretations concerning
the application of the Code for which there is a "substantial
authority" tax reporting position. The Company and the Executive shall
furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination
under this Section 6(e). The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 6(e)."
3. Amendment to Section 9. The last line of Section 9(b)(i) is hereby
amended and restated to read as follows: ". . .Section 6(d)(i) and (ii) or
Section 6(e)(i) and (ii) above, whichever is applicable; or."
4. General. In all other respects, except as expressly amended hereby,
the Employment Agreement remains in full force and effect as of the date hereof.
This First Amendment represents the entire understanding of the parties hereto
and supersedes all prior agreements and understandings, oral or written,
relating to the subject matter hereof, and no change, alteration or modification
hereof may be made except in a writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties have executed this first amendment as
of the date and year first written above.
Tasty Baking Company
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxx Xxxxx X. Xxxxxxxx
Chairman of the Board
/s/ Xxxxxx X. von Seldeneck
By: -----------------------------
Xxxxxx X. von Seldeneck
Chair of the Compensation Committee
