Exhibit 10.6
EXECUTIVE SEVERANCE AGREEMENT
This Agreement ("Agreement") is entered into as of 1st Day of March,
1997 between ESKIMO PIE CORPORATION, a Virginia corporation ("Eskimo Pie"), and
Xxxxx X. Xxxxx ("Executive").
WHEREAS, the maintenance of a strong and experienced management is
essential in protecting and enhancing the best interests of Eskimo Pie and its
stockholders, and in this connection Eskimo Pie recognizes that the possibility
of a change in control may result in the departure or distraction of management
personnel to the detriment of Eskimo Pie and its stockholders; and
WHEREAS, the Compensation Committee and the Board of Directors of
Eskimo Pie have each determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of key members of
management to their regular duties without distraction arising from a possible
change in control of Eskimo Pie; and
WHEREAS, the Compensation Committee and the Board have each carefully
reviewed the information presented to them and have determined that the
anticipated benefits to Eskimo Pie from entering into this Agreement with
Executive, thereby encouraging his continued attention and dedication to his
duties, exceed the anticipated costs to Eskimo Pie of entering into such
Agreement; and
WHEREAS, the Compensation Committee and the Board have each concluded
this Agreement is in the best interests of Eskimo Pie and its stockholders; and
WHEREAS, Executive is a key executive of Eskimo Pie and has been
selected by the Compensation Committee to enter into such an agreement with
Eskimo Pie;
NOW, THEREFORE, to assure Eskimo Pie that it will have the continued
dedication of Executive and the availability of his advice and counsel
notwithstanding the possibility or occurrence of a change in control of Eskimo
Pie, and to induce Executive to remain in the employ of Eskimo Pie, and for
other good and valuable consideration, Eskimo Pie and Executive agree as
follows:
1. Definitions of Certain Terms. For purposes of this Agreement,
(a) a "Termination" shall occur if Executive's employment by Eskimo Pie
is terminated by Eskimo Pie at any time within three years following a Change in
Control for reasons other than:
(i) for Cause (as defined in Section 3(a);
(ii) as a result of Executive's death, permanent disability, or
retirement at or after the first day of the month following the
month in which Executive attains age 65 ("Normal Retirement
Date");
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(b) a "Termination" shall also occur if Executive's employment by
Eskimo Pie is terminated by Executive for Good Reason (as defined in Section 4)
within three years following a Change in Control; and
(c) "Change in Control" shall mean:
(i) 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 20% or more of
either (A) the then outstanding shares of common stock of Eskimo
Pie (the "Outstanding Common Stock") or (B) the combined voting
power of the then outstanding voting securities of Eskimo Pie
entitled to vote generally in the selection of directors (the
"Outstanding Voting Securities"). Notwithstanding the foregoing,
the following acquisitions shall not constitute a Change in
control: (A) any acquisition directly from Eskimo Pie, (B) any
acquisition by Eskimo Pie, (C) any acquisition by, or benefit
distribution from, any employee benefit plan (or related trust)
sponsored or maintained by Eskimo Pie or any Corporation
controlled by Eskimo Pie, (D) any acquisition pursuant to any
compensatory stock option or stock purchase plan for employees,
or (E) any acquisition pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (A), (B), and
(C) of Subsection (iii) of this Section 1(c) are satisfied; or
(ii) Individuals who, as of the date hereof, 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 hereof whose election
or nomination for election 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 were a member of
the Incumbent Board (with his predecessor thereafter ceasing to
be a member); or
(iii) Approval by the shareholders of Eskimo Pie of the reorganization,
merger, or consolidation of Eskimo Pie unless, following such
reorganization, merger, or consolidation, (A) more than 60% of
the then outstanding shares of common stock and the then
outstanding voting securities of the resulting corporation is
then beneficially owned by all or substantially all of the
beneficial owners, respectively, of the Outstanding Common Stock
and Outstanding Securities immediately prior to such
reorganization, merger, or consolidation, (B) no Person
(excluding (I) Eskimo Pie, (II) any employee benefit plan (or
related trust) of Eskimo Pie or such corporation resulting from
such reorganization, merger, or consolidation, and (III) any
Person beneficially owning, immediately prior to such
reorganization, merger, or consolidation, 20% or more of the
Outstanding Common Stock or Outstanding Voting Securities, (as
the case may be) beneficially owns 20% or more of the then
outstanding shares of common stock or the combined voting power
of the then outstanding voting securities of the resulting
corporation, and (C) at least a majority of the members of the
board of directors of the resulting corporation were members of
the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger, or
consolidation; or
(iv) Approval by the shareholders of Eskimo Pie of (A) a complete
liquidation or dissolution of Eskimo Pie, or (B) the sale or
other disposition of all or substantially all of the assets of
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Eskimo Pie other than to a corporation with respect to which,
following such sale or other disposition, (I) more than 60% of
the outstanding shares of common stock and the then outstanding
voting securities of such corporation is beneficially owned by
all or substantially all of the beneficial owners, respectively,
of the Outstanding Common Stock and Outstanding Voting Securities
immediately prior to such sale or disposition; (II) no Person
(excluding (x) Eskimo Pie, (y) any employee benefit plan (or
related trust) of Eskimo Pie or such corporation, and (z) any
Person beneficially owning, immediately prior to such sale or
other disposition, 20% or more of the Outstanding Common Stock or
Outstanding Voting Securities, as the case maybe, beneficially
owns 20% or more of the then outstanding shares of common stock
or the combined voting power of the then outstanding voting
securities of such corporation, and (III) 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 providing for such sale or other
disposition of the assets of the corporation.
2. Benefit upon Termination. Except as provided in Section 3, upon
Termination, Eskimo Pie agrees to provide or cause to be provided to Executive
the benefits described in Section 2(a) below, subject to the limitations set
forth in Sections 2(b) and (c) below:
(a) Benefit Payment. Executive shall receive within five business days
of Termination a lump sum payment in cash in an amount equal to 2.99 times
Executive's Earnings (as defined in this Section 2(a)); provided, however, that
if there are fewer than 36 months remaining from the date of Termination to
Executive's Normal Retirement Date, the amount calculated pursuant to this
Section 2(a) shall be reduced by multiplying such amount by a fraction, the
numerator of which is the number of months (including any fraction of a month)
remaining to Executive's Normal Retirement Date and the denominator of which is
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For purposes of this Section 2(a), "Earnings" shall mean the average
annual compensation payable by Eskimo Pie and includible in the gross income of
Executive for the taxable years during the period consisting of the most recent
three taxable years ending before the date on which the Change in Control occurs
(or such portion of such period during which Executive performed personal
services for Eskimo Pie).
(b) Other Benefit Plans and Perquisites. The benefit payable upon
Termination in accordance with this Section 2 is not intended to exclude
Executive's participation in any benefit plans or enjoyment of other perquisites
which are available to executive personnel generally in the class or category of
Executive or to preclude such other compensation or benefits as may be
authorized from time to time by the Board of Directors of Eskimo Pie or by its
Compensation Committee; provided, however, that any amount otherwise payable in
accordance with Section 2(a) above shall be reduced by any amounts payable to
Executive upon termination of employment pursuant to any termination allowance
policy or other severance pay plan covering Eskimo Pie employees.
(c) Excise Taxes. If Executive becomes entitled to a payment under this
Section 2 ("Severance Payment"), and if any part or all of the Severance Payment
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 to Executive in accordance with Section 2(a) above shall be
reduced as necessary so that no part of such payment shall be subject to the
Excise Tax.
(d) No Duty to Mitigate. Executive's entitlement to benefits hereunder
shall not be governed by any duty to mitigate his damages by seeking further
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employment nor offset by any compensation which he may receive from future
employment.
3. Conditions to the Obligations of Eskimo Pie. Eskimo Pie shall have
no obligation to provide or cause to be provided to Executive the benefit
described in Section 2 hereof if either of the following events shall occur:
(a) Termination for Cause. Eskimo Pie shall terminate Executive's
employment for Cause. For purposes of this Agreement, termination of employment
for "Cause" shall mean termination solely for dishonesty, conviction of a
felony, or willful unauthorized disclosure of confidential information of Eskimo
Pie.
(b) Resignation as Director and/or Officer. Executive shall not,
promptly after Termination and upon receiving a written request to do so, resign
as a director and/or officer of Eskimo Pie and of each subsidiary and affiliate
of Eskimo Pie for which he is then serving as a director and/or officer.
4. Termination for Good Reason. Executive may terminate his employment
with Eskimo Pie following a Change in Control for Good Reason and shall be
entitled to receive the benefit described in Section 2 hereof. For purposes of
this Agreement, "Good Reason" shall mean:
(a) the assignment to Executive of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in Eskimo Pie that Executive held
immediately prior to the Change in Control, or a significant
adverse alteration in the nature or status of Executive's
responsibilities or the conditions of Executive's employment from
those in effect immediately prior to such Change in Control;
(b) reduction by Eskimo Pie in Executive's annual base salary as in
effect on the date hereof or as the same may be increased from time to time;
(c) the relocation of Eskimo Pie's principal executive offices to a
location outside the Richmond Metropolitan Area or Eskimo Pie's requiring
Executive to be based anywhere other than Eskimo Pie's principal executive
offices except for required travel on Eskimo Pie's business to an extent
substantially consistent with Executive's present business travel obligations;
(d) except in the event of reasonable administrative delay, the failure
by Eskimo Pie to pay to Executive any portion of Executive's current
compensation or to pay to Executive any portion of an installment of deferred
compensation under any deferred compensation program of Eskimo Pie within seven
(7) days of the date such compensation is due;
(e) the failure by Eskimo Pie to continue in effect any compensation
plan in which Executive participates immediately prior to the Change in Control
that is material to Executive's total compensation or any substitute plans
adopted prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by Eskimo Pie to continue Executive's
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 Executive's participation relative to other participants, as it
existed at the time of the Change in Control;
(f) the failure by Eskimo Pie to continue to provide Executive with
benefits substantially similar to those enjoyed by Executive under any of Eskimo
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Pie's life insurance, medical, health and accident, disability plans, or other
welfare and defined benefit plans (qualified and non-qualified) in which
Executive was participating at the time of the Change in Control, the taking of
any action by Eskimo Pie which would directly or indirectly materially reduce
any of such benefits or deprive Executive of any material fringe benefit enjoyed
by Executive at the time of the Change in Control, or the failure by Eskimo Pie
to provide Executive with the number of paid vacation days to which Executive is
entitled on the basis of years of service with Eskimo Pie in accordance with
Eskimo Pie's normal vacation policy in effect at the time of the Change in
Control; or
(g) the failure of Eskimo Pie to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 10 hereof.
5. Other Covenants. Upon Termination, if Executive is entitled to
receive the benefit described in Section 2, then:
(a) If a leased automobile is assigned to Executive at the time of his
Termination, Executive shall have the right to purchase such automobile, free
and clear of any liens and encumbrances, at its fair market value (as determined
by the leasing company). If Executive wishes to exercise this right, he shall
(i) give Eskimo Pie notice to such effect within 10 days following the date of
Termination, (ii) tender the purchase price within 10 days after he is given
notice of the fair market value, and (iii) be solely responsible for maintaining
and insuring the automobile effective from the date of Termination.
(b)At Executive's request, Eskimo Pie shall arrange outplacement
services for Executive, at Eskimo Pie's expense, for a period of
one year following Termination.
(c) Executive and/or his qualified dependents shall be provided
coverage, at his/their expense, under any medical benefit plans
covering him and/or them at the time of Termination in accordance with
the provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended from time to time.
6. Confidentiality: Non-Solicitation: Cooperation.
(a) Confidentiality. At all times following Termination, Executive
will not, without the prior written consent of Eskimo Pie, disclose to any
person, firm or corporation any confidential information of Eskimo Pie or its
subsidiaries or affiliates which is now known to him or which hereafter may
become known to him as a result of his employment or association with Eskimo Pie
and which could be helpful to a competitor; provided, however, that the
foregoing shall not apply to confidential information which becomes publicly
disseminated by means other than a breach of this Agreement.
(b) Non-Solicitation. For a period of three years following the date
of Termination (or until Executive's Normal retirement Date, whichever is
sooner), Executive will not induce or attempt to induce, either directly or
indirectly, any management or executive employee of Eskimo Pie or of any of its
subsidiaries or affiliates to terminate his or her employment.
(c) Cooperation. At all times following Termination, Executive will
furnish such information and render such assistance and cooperation as may
reasonably be requested in connection with any litigation or legal proceedings
concerning Eskimo Pie or any of its subsidiaries or affiliates (other than any
legal proceedings concerning Executive's employment). In connection with such
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cooperation, Eskimo Pie will pay or reimburse Executive for reasonable expenses
actually incurred.
(d) Remedies for Breach. It is recognized that damages in the event of
breach of Sections 6(a) and (b) above by Executive would be difficult, if not
impossible, to ascertain, and it is therefore specifically agreed that Eskimo
Pie, in addition to and without limiting any other remedy or right it may have,
shall have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach. The existence of this right
shall not preclude Eskimo Pie from pursuing any other rights and remedies at law
or in equity which Eskimo Pie may have.
7. Term of Agreement. This Agreement shall commence on the date hereof
and shall remain in force until December 31, 1997; provided, however, that on
each anniversary of such date, the term of this Agreement shall be automatically
renewed for successive one year terms, unless at least 60 days prior to the
expiration of the then current term, Eskimo Pie shall give notice to Executive
that the Agreement shall not be renewed; and further provided, however, that if
a Change in Control occurs during the term of this Agreement, this Agreement
shall continue in effect for a period of 36 months beyond the month in which the
Change in Control occurred. Notwithstanding the foregoing, this Agreement shall
terminate if either Eskimo Pie or Executive terminates the employment of
Executive before a Change in Control occurs. Except as otherwise provided in
Section 9(b), this Agreement shall also terminate upon the Executive's death or
permanent disability or his Normal Retirement Date.
8. Adjudication and Expenses.
(a) If a dispute or controversy arises under or in connection with this
Agreement, Executive shall be entitled to an adjudication in an appropriate
court of the State of Delaware, or in any other court of competent jurisdiction.
Alternatively, Executive, at Executive's option, may seek an award in
arbitration to be conducted by a single arbitrator under the Commercial
Arbitration Rules of the American Arbitration Association.
(b) Eskimo Pie shall pay or reimburse Executive for all costs and
expenses, including without limitation court costs and attorneys' fees, incurred
by Executive as a result of any claim, action or proceeding (including without
limitation a claim, action or proceeding by Executive against Eskimo Pie)
arising out of, or challenging the validity or enforceability of, this Agreement
or any provision hereof, if Executive is successful on the merits or otherwise
in such claim, action or proceeding.
9. Successors; Binding Agreement.
(a) This Agreement shall inure to the benefit of and be binding upon
Eskimo Pie and its successors and assigns. Eskimo Pie will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of Eskimo Pie to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that Eskimo Pie would be required to perform it if no such succession had
taken place. As used in this Agreement, "Eskimo Pie" shall mean Eskimo Pie as
herein before 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.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
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while any amount would still be payable hereunder if Executive had continued to
live, any such amount, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee, legatee or
other designee or, if there is no such designee, Executive's estate.
10. Miscellaneous.
(a) Assignment. No right, benefit or interest here-under shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, except by will or the laws of descent and
distribution, and any attempt thereat shall be void; and no right, benefit or
interest hereunder shall, prior to receipt of payment, be in any manner liable
for or subject to the recipient's debts, contracts, liabilities, engagements or
torts.
(b) Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of Eskimo Pie. This
Agreement is not, and nothing herein shall be deemed to create, a commitment of
continued employment of Executive by Eskimo Pie or by any of its subsidiaries
and affiliates.
(c) Statutory References. Any reference in this Agreement to a specific
statutory provision shall include that provision and any comparable provision or
provisions of future legislation amending, modifying, supplementing or
superseding the referenced provision.
(d) Amendment. This Agreement may not be amended, modified or
terminated except by written agreement of both parties.
(e) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
Executive 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 Executive at the time of
such waiver. In addition, prior to the last day of the calendar year in which
Executive's Termination occurs, Executive may waive any or all rights and
benefits provided for herein which have been received by Executive; provided
that Executive repays to Eskimo Pie the amount of the benefits received
(together with interest at the rate provided in Section l274(b)(2)(B) of the
Code). Any waiver of benefits pursuant to this section shall be irrevocable.
(f) 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.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original and all of which
together shall constitute one agreement.
(h) Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to withholding of taxes, filing,
making of reports and the like, and Eskimo Pie shall use its best efforts to
satisfy promptly all such requirements.
(i) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Virginia.
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(j) Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby.
Each of the parties has therefore caused this Agreement to be executed
on its or his behalf as of the date first written above.
ESKIMO PIE CORPORATION EXECUTIVE
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxx X. Xxxxx
Xxxxxx X. Xxxxxxxx Xxxxx X. Xxxxx
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