EXHIBIT 10(am)
THIRD AMENDMENT AND WAIVER TO SENIOR SECURED, SUPER-
PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT
THIRD AMENDMENT AND WAIVER, dated as of May 19, 2003 (this
"Amendment"), to the DIP Credit Agreement referred to below among AGWAY, INC., a
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Delaware corporation, FEED COMMODITIES INTERNATIONAL LLC, a Delaware limited
liability company, XXXXXXXX AGRONOMIC CONSULTING SERVICE LLC, a Delaware limited
liability company, AGWAY GENERAL AGENCY, INC., a New York corporation, COUNTRY
BEST XXXXX, LLC, a Delaware limited liability company, COUNTRY BEST-XXXXXXX LLC,
a Delaware limited liability company, AGWAY ENERGY PRODUCTS LLC, a Delaware
limited liability company, AGWAY ENERGY SERVICES-PA, INC., a Delaware
corporation, and AGWAY ENERGY SERVICES, INC., a Delaware corporation, as
Borrowers (collectively, the "Borrowers"), THE OTHER CREDIT PARTIES SIGNATORY
THERETO (the "Credit Parties"), the lenders signatory thereto from time to time
(the "Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent ("Agent")
and as a Lender.
W I T N E S S E T H
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WHEREAS, Borrowers, the Credit Parties, the Lenders and Agent
are parties to that certain Senior Secured, Super-Priority Debtor-in-Possession
Credit Agreement, dated as of October 4, 2002 (including all annexes, exhibits
and schedules thereto, and as amended, supplemented or otherwise modified from
time to time, the "DIP Credit Agreement"); and
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WHEREAS, the Agent and Lenders have agreed to amend the DIP
Credit Agreement and to waive certain violations of the DIP Credit Agreement, in
the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
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have the meanings ascribed to them in the DIP Credit Agreement or Annex A
thereto.
2. Waiver. Agent and Lenders hereby waive, as of the Amendment
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Effective Date (as defined below), all Events of Default arising solely from
Borrowers failure to comply with the Financial Covenants referenced in Section
6.10 of the DIP Credit Agreement and set forth in Annex G, clause (b) (Minimum
EBITDA (Agway Operations)) thereof for the Fiscal Months ended March 31, 2003
and April 30, 2003.
3. Amendment. Annex A of the DIP Credit Agreement is hereby amended as
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of the Amendment Effective Date (as defined below) by amending and restating the
definition from Annex A of the DIP Credit Agreement set forth below in its
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entirety to read as set forth below:
""EBITDA" means, with respect to any Person for any fiscal period,
without duplication, an amount equal to (a) consolidated net income of such
Person for such period determined in accordance with GAAP, minus (b) the sum of
(i) income tax credits, (ii) interest income, (iii) gain from extraordinary
items for such period, (iv) any aggregate net gain (but not any aggregate net
loss) during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), and (v) any other non-cash gains (including pension
income) that have been added in determining consolidated net income, in each
case to the extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, but without duplication,
plus (c) for any period ending on or before March 31, 2003, up to $53,000,000 of
non-cash charges solely for purposes of calculating compliance with the
financial covenants set forth in Section 6.10 and Annex G, and (d) the sum of
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(i) any provision for income taxes, (ii) Interest Expense, (iii) loss from
extraordinary items for such period, (iv) the amount of depreciation and
amortization for such period, (v) amortized debt discount for such period, (vi)
the amount of any deduction to consolidated net income as the result of any
grant to any members of the management of such Person of any Stock, in each case
to the extent included in the calculation of consolidated net income of such
Person for such period in accordance with GAAP, but without duplication and
(vii) Restructuring Charges for such period. For purposes of this definition,
the following items shall be excluded in determining consolidated net income of
a Person: (1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person's Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership interest,
except to the extent any such income has actually been received by such Person
in the form of cash dividends or distributions; (3) the undistributed earnings
of any Subsidiary of such Person to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any net
gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor
to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, and (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary."
4. Representations and Warranties. To induce Agent and Lenders to enter
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into this Amendment, Borrowers hereby represent and warrant that:
(a) The execution, delivery and performance by Borrowers of this
Amendment (i) are within Borrowers' respective corporate powers, (ii) has been
duly authorized by all necessary corporate and shareholder action, (iii) is not
in contravention of any provision of any Borrower's charter or bylaws or
equivalent organizational documents, (iv) does not violate any law or
regulation, or any order or decree of any court or Governmental Authority, (v)
does not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which any Borrower is a party or by which any Borrower or any of
its property is bound; and (vi) does not require the consent or approval of any
Governmental Authority or any other Person.
(b) This Amendment has been duly executed and delivered by
or on behalf of Borrowers.
(c) This Amendment constitutes a legal, valid and binding
obligation of Borrowers, enforceable against each of them in accordance with its
terms.
(d) No Default has occurred and is continuing after giving
effect to this Amendment.
(e) No action, claim or proceeding is now pending or, to the
knowledge of Borrowers, threatened against Borrowers, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal, state, or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators, which challenges Borrowers'
right, power, or competence to enter into this Amendment or, to the extent
applicable, perform any of their obligations under this Amendment, the DIP
Credit Agreement or any other Loan Document, or the validity or enforceability
of this Amendment, the DIP Credit Agreement or any other Loan Document or an
action taken under this Amendment, the DIP Credit Agreement or any other Loan
Document or except for items on Disclosure Schedule (3.13) or notifications sent
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to Agent since the Closing Date, which if determined adversely, is reasonably
likely to have or result in a Material Adverse Effect after giving effect to
this Amendment. Except for items on Disclosure Schedule (3.13) or notifications
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sent to Agent since the Closing Date, to the knowledge of Borrowers, there does
not exist a state of facts which is reasonably likely to give rise to such
proceedings.
(f) The representations and warranties of the Borrowers
contained in the DIP Credit Agreement and each other Loan Document shall be true
and correct on and as of the Amendment Effective Date (as hereinafter defined)
with the same effect as if such representations and warranties had been made on
and as of such date, except that any such representation or warranty which is
expressly made only as of a specified date need be true only as of such date.
5. No Other Amendments/Waivers. Except as expressly provided herein,
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(i) the DIP Credit Agreement shall be unmodified and shall continue to be in
full force and effect in accordance with its terms and (ii) this Amendment shall
not be deemed a waiver of any term or condition of any Loan Document and shall
not be deemed to prejudice any right or rights which the Agent or any Lender may
now have or may have in the future under or in connection with any Loan Document
or any of the instruments or agreements referred to therein, as the same may be
amended from time to time.
6. Outstanding Indebtedness; Waiver of Claims. Each of Borrowers and
------------------------------------------
other Credit Parties hereby acknowledges and agrees that as of May 19, 2003, the
aggregate outstanding principal amount of the Revolving Loan is $30,740,739.08
and that such principal amount is payable pursuant to the DIP Credit Agreement
without defense, offset, withholding, counterclaim or deduction of any kind.
7. Expenses. Borrowers hereby reconfirm their obligations pursuant to
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Sections 1.9 and 11.3 of the DIP Credit Agreement to pay and reimburse Agent and
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the Lenders for all reasonable costs and expenses (including, without
limitation, reasonable fees of counsel) incurred in connection with the
negotiation, preparation, execution and delivery of this Amendment and all other
documents and instruments delivered in connection herewith.
8. Effectiveness. This Amendment shall become effective as of May 19,
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2003 (the "Amendment Effective Date") only upon satisfaction in full in the
judgment of Agent of each of the following conditions:
(a) Amendment. Agent shall have received six (6) original
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copies of this Amendment duly executed and delivered by Agent, the Requisite
Lenders and Borrowers.
(b) Payment of Expenses. Borrowers shall have paid to Agent all
-------------------
costs, fees and expenses invoiced and owing in connection with this Amendment
and the other Loan Documents and due to Agent (including, without limitation,
reasonable legal fees and expenses).
(c) Representations and Warranties. The representations and
--------------------------------
warranties of or on behalf of the Borrowers in this Amendment shall be true and
correct on and as of the Amendment Effective Date.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED
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IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10. Counterparts. This Amendment may be executed by the parties hereto
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on any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
(SIGNATURE PAGE FOLLOWS)
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
BORROWERS
AGWAY, INC.
FEED COMMODITIES INTERNATIONAL LLC
XXXXXXXX AGRONOMIC CONSULTING SERVICE LLC
COUNTRY BEST-XXXXXXX LLC
AGWAY ENERGY PRODUCTS LLC
AGWAY ENERGY SERVICES-PA, INC.
AGWAY ENERGY SERVICES, INC.
COUNTRY BEST XXXXX, LLC
AGWAY GENERAL AGENCY, INC.
By: /s/ XXXXX X. XXXXXXX
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Name: Xxxxx X. Xxxxxxx
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Title: Treasurer
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LENDERS
COBANK, ACB
By: /s/ XXXXXXX X. HIDE
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Name: Xxxxxxx X. Hide
-----------------------------
Title: Vice President
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COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "Rabobank Nederland" New York Branch
By:
-----------------------------
Name:
-----------------------------
Title:
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GMAC BUSINESS CREDIT, LLC
By:
-----------------------------
Name:
-----------------------------
Title:
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GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ XXXXXX XXXX
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Name: Xxxxxx Xxxx
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Title: Its Duty Authorized Signatory
EXHIBIT 10(an)
AGWAY (LOGO)
AGWAY INC. XX XXX 0000, XXXXXXXX, XXX XXXX 00000-0000
March 7, 2003
Xxxxxx X. Xxxxxxxxxx
President and Chief Executive Officer
Agway, Inc.
X.X. Xxx 0000 Xxxxxxxx, Xxx Xxxx 00000-0000
Dear Don:
This letter confirms the terms of your termination of employment from Agway,
Inc. ("Agway").
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1. Your employment with Agway and each of its subsidiaries shall terminate
effective April 18, 2003 (the "Termination Date"). In addition,
effective April 1, 2003, you shall resign (i) from Agway's board of
directors and from the board of directors of any of Agway's
subsidiaries on which you serve, and (ii) your position as an officer
of Agway and as an officer of any of its subsidiaries.
2. On the Termination Date, Agway shall make a lump sum cash payment to
you in the amount of $1,026,740, less all applicable withholdings. Such
severance payment shall be in full satisfaction of any rights to
severance pay to which you may be entitled, and you have agreed that
you shall not have any claim for severance pay in addition to such
payment. However, you shall be entitled to receive payment of your
accrued and unpaid base salary through the Termination Date, less
applicable withholdings.
3. During the one (1) year period following the Termination Date, Agway
will permit you and your eligible dependents to continue your coverage
under its medical plan at active employee rates (as such rates may
change), provided you pay the required contributions. Following the
expiration of such medical coverage, you and your eligible dependents
will be eligible for COBRA continuation coverage.
4. In connection with your termination of employment, Agway will provide
you with executive level career transition assistance services by a
firm selected by you at a cost to Agway not to exceed $25,000.
5. Agway has determined that you shall not be entitled to any annual
incentive for Agway's 2003 fiscal year or to any long-term incentive
payment, and you have agreed to waive any claims you might have with
respect to any such payments.
We thank you for your service to Agway and wish you the best of success in the
future.
Sincerely,
/s/ XXXX X. XXX XXXXX
---------------------
Xxxx X. Xxx Xxxxx
Chairman of the Board
Agway, Inc.
ACCEPTED AND AGREED this
7th day of March 2003:
/s/ XXXXXX X. XXXXXXXXXX
------------------------
Xxxxxx X. Xxxxxxxxxx
EXHIBIT 10(ao)
AGWAY (LOGO)
AGWAY INC. XX XXX 0000, XXXXXXXX, XXX XXXX 00000-0000
March 7, 2003
Xxxxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Dear Xxxx:
As you know, over the past several months we have been in continuous
negotiations with the Unsecured Creditors Committee (UCC) with respect to the
Company's management incentive programs as well as other employee compensation
and benefit related programs. Recently, the Company and the UCC reached
agreement on modifications to these programs, which represent compromises from
both sides. Today, we are filing a Motion with the U.S. Bankruptcy Court for the
Northern District of New York to request the Court's approval of the proposed
Agway/Committee agreement ("Agreement"). The Court hearing date to consider that
Motion is expected to be March 25, 2003.
The proposed modifications that pertain to your incentive and benefit programs
are summarized below. Additional details can be found in the enclosed Motion
under the section titled: "Proposed Modification of the Compensation Programs."
1. With respect to your current (FY 2003) annual incentive plan, the
Agreement provides that all of the provisions of your plan remain in
place except for the following modifications:
- The Company must achieve a target EBITDAR of at least $26.1 million in
order for payments to be made to you under your plan.
- If a business unit or the Company exceeds its target EBITDAR by $2
million, affected eligible employees may be paid additional incentives.
However, the aggregate incentive payments to all eligible management
employees are capped at $5 million.
- The change in control feature of your incentive plan (i.e., paragraph
4.c. in your "Incentive Plan for Period July 1, 2002 - June 30, 2003"
dated September 4, 2002, as amended September 16, 2002) has been
eliminated.
- The long-term incentive payment (LTIP) feature of your incentive plan
has been eliminated.
2. For fiscal year 2004, the Agreement provides that:
- The Company target EBITDAR would be no lower than fiscal 2003
(provided that all of the business units remain unchanged) and the
maximum incentive payout to all eligible employees would be capped
at $5 million.
- A guaranteed minimum payment would be made to you at the earlier of
confirmation of a plan of reorganization or if you are terminated
without cause in conjunction with a sale of a business unit. That
guaranteed minimum payment amount will be determined at a later date
and communicated to you.
Xxxxxxx X. Xxxxxxxxx
Page 2
March 7, 2003
3. Your separation compensation and ARB severance remains in place and it
is intended under the Agreement that severance payments will be made in
full as provided for under our severance programs and your incentive
plan. However, the Agreement also provides that the total amount of
severance that the Company can pay to eligible key employees is capped
at $6.4 million, which amount can be revisited with the UCC or the
Court if it is determined to be insufficient. We do believe, however,
that the capped amount will be sufficient to address potential future
severance costs for this group.
4. The Agreement also modifies the Company's vacation policy with respect
to eligible employees who leave Agway in calendar year 2003. For those
employees, any remaining unused vacation due for calendar year 2003
------
(which was accrued in 2002) will be treated as follows: 25% will be
paid in cash upon termination and the remaining 75% will be a
pre-petition unsecured claim against Agway.
Should you have any questions about the proposed Agreement or your benefits,
please feel free to contact Xxxx Xxxxxxx at 449-6138. We will let you know as
soon as the Court decides on our Motion.
Sincerely,
/s/ XXXX X. XXX XXXXX
---------------------
Xxxx X. Xxx Xxxxx
Chairman of the Board
Enclosure
EXHIBIT 10(ap)
AGWAY (LOGO)
AGWAY INC., XX XXX 0000 XXXXXXXX, XXX XXXX 00000-0000
May 16, 2003
Xxxxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Dear Xxxx:
Last Friday, the U.S. Bankruptcy Court for the Northern District of New York
approved modifications to Agway's employee compensation and benefit programs
substantially as set forth in the Motion the Company filed with the Court on
March 7, 2003. The only additional modification was a change requested by the
United States Trustee, whose office administers all Chapter 11 cases filed in
this district. That request, which was agreed to by the Official Committee of
Unsecured Creditors and Agway, affects the timing, but not the amount, of fiscal
2003 incentive payments as described below.
The modifications to your incentive and benefit program, which are now approved
by the Court, were summarized in my March 7th letter to you. The following
provides some additional information with respect to your fiscal 2003 and 2004
incentive plans:
Fiscal 2003 Incentive Plan
--------------------------
1) The Company must achieve at least 85% of its target EBITDAR (Earnings
Before Interest, Taxes, Depreciation, Amortization & Reorganization
Charges) in order for payments to be made under the Company portion of
your incentive plan. The Company's target EBITDAR is $32.4 million.
2) Agway Energy Products must achieve at least 85% of its target EBITDAR
in order for payments to be made under the Energy portion of your
incentive plan. Energy's target EBITAR is $35.8 million.
3) The Feed business (i.e., Feed & Nutrition, FCI, and TSPF) must achieve
at least 85% of its target EBITDAR in order for payments to be made
under the Feed (Agriculture) portion of your incentive plan. Feed's
target EBITDAR is $6.3 million.
4) The amount paid to you will be consistent with the terms of your
incentive plan and determined and communicated to you in July 2003.
5) The timing of payments will be as follows: a) one half of the Company
incentive payment you earn for fiscal 2003 will be paid to you in
August 2003, and the other half will be paid to you at the earlier of
the confirmation of a Chapter 11 plan or your involuntary separation
from employment with Agway; b) one half of the Energy incentive
payment you earn for fiscal 2003 will be paid to you in August 2003,
and the other half will be paid to you at the earlier of: i) the sale
of the Energy business (if a decision is made to sell that business),
ii) confirmation of a Chapter 11 plan; iii) your involuntary
separation from employment or iv) December 26, 2003, which is the last
payroll period for the calendar year; and c) one half of the Feed
incentive payment you earn for fiscal 2003 will be paid to you in
August 2003, and the other half will be paid to you at the earlier of:
i) the sale of the Feed business; ii) confirmation of a Chapter 11
plan; or iii) your
Xxxxxxx X. Xxxxxxxxx
Page 2
May 16, 2003
involuntary separation from employment. In any event, the fiscal 2003
Energy incentive you earn will be paid to you in full no later than
December 26, 2003. If you voluntarily leave prior to a plan
confirmation, you will not be entitled to receive the second half of
your fiscal 2003 Company and Feed incentive payments.
Fiscal 2004 Incentive Plan
--------------------------
1) Your fiscal 2004 incentive plan will be developed during the normal
business timeframe (i.e., July/August).
2) Your fiscal 2004 incentive plan will include a Company target EBITDAR,
an Energy target EBITDAR and a Feed target EBITDAR that will be no
lower than the fiscal 2003 target EBITDARs noted above (provided that
all of the business units remain unchanged).
3) You will be eligible for a portion of your fiscal 2004 incentive to be
paid as a guaranteed minimum amount of $150,004 (regardless of
performance versus target) for remaining with the Company through the
earlier of the sale of the Energy business (if a decision is made to
sell that business) or plan confirmation. You will not be eligible for
such payment if you are severed as part of a reduction in workforce
(i.e., not as a result of a business sale transaction or plan of
reorganization) prior to the earlier of the completion of the sale of
Agway Energy Products or the confirmation of a Chapter 11 plan.
4) If you are involuntarily separated from employment prior to the end of
fiscal 2004, you will be entitled to receive the greater of a pro rata
payment (using completed weeks of service during the incentive period)
based upon your target incentive or the guaranteed minimum amount, if
eligible; such pro rata payment is not to be duplicative of the
minimum guaranteed amount.
Your separation compensation (100% of your base salary), ARB "severance" benefit
(based on years of service as provided in the amended Company Severance Pay
Plan) and other benefits described in your annual incentive plan (excluding the
long-term incentive payment and change-in-control features, which have been
eliminated) remain in place. It is intended under the Compensation Motion that
if you become eligible for separation/severance payments, such payments would be
made in full upon termination. The Compensation Motion also provides that the
total amount of severance that the Company can pay to eligible key employees is
capped at $6.4 million, which amount can be revisited with the Official
Committee of Unsecured Creditors or the Court if it is determined to be
insufficient. We do believe, however, that the capped amount will be sufficient
to address potential future severance costs for this group.
Should you have any questions about the Court approved Motion or your benefits,
please feel free to contact Xxxx Xxxxxxx at 449-6138.
Sincerely,
/s/ XXXX XXX XXXXX
-------------------
Xxxx X. Xxx Xxxxx
Chairman of the Board
cc: Xxxx X. Xxxxxxx
EXHIBIT 10(aq)
[AGWAY LOGO]
Agway Inc., XX XXX 0000, XXXXXXXX, XXX XXXX 00000-0000
March 7, 2003
Xxx Xxxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Dear Xxx:
As you know, over the past several months we have been in continuous
negotiations with the Unsecured Creditors Committee (UCC) with respect to the
Company's management incentive programs as well as other employee compensation
and benefit related programs. Recently, the Company and the UCC reached
agreement on modifications to these programs, which represent compromises from
both sides. Today, we are filing a Motion with the U.S. Bankruptcy Court for the
Northern District of New York to request the Court's approval of the proposed
Agway/Committee agreement ("Agreement"). The Court hearing date to consider that
Motion is expected to be March 25, 2003.
The proposed modifications that pertain to your incentive and benefit programs
are summarized below. Additional details can be found in the enclosed Motion
under the section titled: "Proposed Modification of the Compensation Programs."
1. With respect to your current (FY 2003) annual incentive plan, your existing
incentive targets and all other provisions of your plan remain in place;
however, the Agreement provides for the following modifications subject to
Court approval:
- The Company must achieve a target EBITDAR (Earnings Before Interest,
Taxes, Depreciation, Amortization and Reorganization Charges) of at
least $26.1 million in order for discretionary payments to be made to
you under your plan.
- If a business unit or the Company exceeds its target EBITDAR by $2
million, affected eligible employees may be paid additional
incentives. However, the aggregate incentive payments to all eligible
management employees are capped at $5 million.
- The change in control feature of your incentive plan (i.e., paragraph
4.c. in your "Incentive Plan for Period July 1, 2002 - June 30, 2003"
dated September 4, 2002, as amended September 16, 2002) has been
eliminated.
- The long-term incentive payment (LTIP) feature of your incentive plan
has been eliminated.
Xxx Xxxxxxxx
Page 2
March 7, 2003
2. For fiscal year 2004, the Agreement provides that:
- The Company target EBITDAR would be no lower than fiscal 2003
(provided that all of the business units remain unchanged) and the
maximum incentive payout to all eligible employees would be capped at
$5 million.
- A guaranteed minimum payment would be made to you at the earlier of
confirmation of a plan of reorganization or if you are terminated
without cause in conjunction with a sale of your business unit. That
guaranteed minimum payment amount will be determined at a later date
and communicated to you.
3. Your separation compensation (as described in your April 30, 2001
letter agreement, except for the LTIP payment) remains in place and it is
intended under the Agreement that severance payments will be made in full
as provided for under our severance programs and your incentive plan.
However, the Agreement also provides that the total amount of severance
that the Company can pay to eligible key employees is capped at $6.4
million, which amount can be revisited with the UCC or the Court if it is
determined to be insufficient. We do believe, however, that the capped
amount will be sufficient to address potential future severance costs for
this group.
4. The Agreement also modifies the Company's vacation policy with respect to
eligible employees who leave Agway in calendar year 2003. For those
employees, any remaining unused vacation due for calendar year 2003 (which
was accrued in 2002) will be treated as follows: 25% will be paid in cash
upon termination and the remaining 75% will be a pre-petition unsecured
claim against Agway.
Should you have any questions about the proposed Agreement or your benefits,
please feel free to contact Xxxx Xxxxxxx at 449-6138. We will let you know as
soon as the Court decides on our Motion.
Sincerely,
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxxx
Chief Operating Officer
Enclosure
EXHIBIT 10(ar)
[AGWAY LOGO]
AGWAY INC, XX XXX 0000, XXXXXXXX, XX 00000-0000
XXXXXXX X. XXXXXXXXX
CHIEF EXECUTIVE OFFICER AGWAY INC.
PRESIDENT, AGWAY ENERGY PRODUCTS
May 16, 2003
Xxx X. Xxxxxxxx
0000 Xxxxxx Xxxxx Xx.
Xxxxxxx, XX 00000
Dear Xxx:
Last Friday, the U.S. Bankruptcy Court for the Northern District of New York
approved modifications to Agway's employee compensation and benefit programs
substantially as set forth in the Motion the Company filed with the Court on
March 7, 2003. The only additional modification was a change requested by the
United States Trustee, whose office administers all Chapter 11 cases filed in
this district. That request, which was agreed to by the Official Committee of
Unsecured Creditors and Agway, affects the timing, but not the amount, of fiscal
2003 incentive payments as described below.
The modifications to your incentive and benefit program, which are now approved
by the Court, were summarized in my March 7th letter to you. The following
provides some additional information with respect to your fiscal 2003 and 2004
incentive plans:
Fiscal 2003 Incentive Plan
--------------------------
1) The Company must achieve at least 85% of its target EBITDAR (Earnings
Before Interest, Taxes, Depreciation, Amortization & Reorganization
Charges) in order for payments to be made under the Agway Inc. portion of
your incentive plan. The Company's target EBITDAR is $32.4 million.
2) The Country Products Group must achieve a target EBITDAR of at least ($0.1)
million in order for payments to be made under the CPG portion of your
incentive plan.
3) The amount paid to you will be consistent with the terms of your incentive
plan and determined and communicated to you in July 2003.
4) The timing of payments will be as follows -- one half of the incentive
payment you earn for fiscal 2003 will be paid to you in August 2003, and
the other half will be paid to you at the earlier of: a) the sale of
Country Products Group's businesses (if a decision is made to sell those
businesses); b) confirmation of a Chapter 11 plan; or c) your involuntary
separation from employment. If you voluntarily leave prior to the earlier
of the sale of the CPG businesses or a plan confirmation, you will not be
entitled to receive the second half of your fiscal 2003 incentive payment.
Xxx X. Xxxxxxxx
Page 2
May 16, 2003
Fiscal 2004 Incentive Plan
--------------------------
1) Your fiscal 2004 incentive plan will be developed during the normal
business timeframe (i.e., July/August).
2) Your fiscal 2004 incentive plan will include a Company target EBITDAR and
CPG target EBITDAR that will be no lower than the fiscal 2003 target
EBITDARs noted above (provided that the businesses remain unchanged).
3) You will be eligible for a portion of your fiscal 2004 incentive to be paid
as a guaranteed minimum amount of $175,006 (regardless of performance
versus target) for remaining with the Company through the earlier of a
completion of the sale of the CPG businesses (if a decision is made to sell
those businesses) or the confirmation of a Chapter 11 plan. You will not be
eligible for such payment if you are severed as part of a reduction in
workforce (i.e., not as a result of a business sale transaction or plan of
reorganization) prior to the earlier of the completion of the sale of the
CPG businesses or the confirmation of a Chapter 11 plan.
4) If you are involuntarily separated from employment prior to the end of
fiscal 2004, you will be entitled to receive the greater of a pro rata
payment (using completed weeks of service during the incentive period)
based upon your target incentive or the minimum guaranteed amount, if
eligible; such pro rata payment is not to be duplicative of the minimum
guaranteed amount.
Your separation compensation and benefits (as described in your April 30, 2001
letter agreement, excluding the LTIP payment) remain in place. It is intended
under the Compensation Motion that if you become eligible for separation
compensation such payments would be made in full upon termination. The
Compensation Motion also provides that the total amount of severance that the
Company can pay to eligible key employees is capped at $6.4 million, which
amount can be revisited with the Official Committee of Unsecured Creditors or
the Court if it is determined to be insufficient. We do believe, however, that
the capped amount will be sufficient to address potential future severance costs
for this group.
Should you have any questions about the Court approved Motion or your benefits,
please feel free to contact Xxxx Xxxxxxx at 449-6138.
Sincerely,
/S/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx
Chief Executive Officer
cc: Xxxx Xxxxxxx
