EXECUTIVE RETENTION PAY AGREEMENT
This Agreement is made as of the lst day of October, 1997 between
SWEETHEART HOLDINGS INC., a Delaware corporation (the "Company") and XXXXXXX X.
XXXXX (the "Executive"), residing at 00 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx
00000.
SECTION I.
INTRODUCTION
The Company wishes to recognize the Executive's importance to the
future success of the business of the Company by providing him with an incentive
to devote his continued abilities to the future success of the Company's
business.
SECTION II.
DEFINITIONS
Whenever used herein, the masculine pronoun shall be deemed to include
the feminine, and the singular to include the plural, unless the context clearly
indicates otherwise, and the following words and phrases, when used herein, have
the meanings set forth below:
"Account" means the Executive's account established under the Agreement
and maintained by the Trustee to reflect the Executive's interest under this
Agreement.
"Base Salary" means the Executive's annual compensation (determined
prior to any deferral elections the Executive has made under any of the
Company's retirement or deferred compensation plans) shown on the Company's
payroll records exclusive of bonus compensation, commissions or other
extraordinary remuneration.
"Beneficiary" means the person that the Executive designated most
recently in writing to the Trustee; provided, however, that if the Executive has
failed to make a designation, no person designated is alive, no trust has been
established, or no successor Beneficiary has been designated who is alive, the
term Beneficiary means (a) the Executive's spouse or (b) if no spouse is alive,
the Executive's surviving children, or (c) if no children are alive, the
Executive's parent or parents, or (d) if no parent is alive, the legal
representative of the deceased Executive's estate.
"Cause" means the occurrence of any of the following events: (i)
willful and continued failure (other than such failure resulting from his
incapacity during physical or mental illness) by the Executive to substantially
perform his duties with the Company or Sweetheart Cup Company Inc.; provided,
however, that the Executive must be notified by the Company of any such failure
to perform his duties and shall have 30 days from the date of such notice to
cure such failure; (ii) any act by the Executive of fraud, misappropriation,
dishonesty, embezzlement
or similar conduct against the Company or Sweetheart Cup Company Inc.; or (iii)
indictment or conviction of the Executive for a felony or any other crime
involving moral turpitude.
"Change in Control," means the occurrence, of:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") or the Company's
wholly-owned subsidiary (Sweetheart Cup Company Inc.) by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")) other than American
Industrial Partners Capital Fund, LP or its affiliates or an employee
benefit plan maintained by the Company, immediately after which such Person
has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty-one percent (51 %) or more of the combined
voting power of the Company's or Sweetheart Cup Company Inc.'s then
outstanding Voting Securities; or
(b) The consummation of one of the following transactions:
(i) A merger, consolidation or reorganization involving the
Company where the stockholders of the Company, immediately before such
merger, consolidation or reorganization, fail to own directly or
indirectly immediately following such merger, consolidation or
reorganization, at least fifty-one (51 %) of the combined voting power
of the outstanding voting securities of the corporation resulting from
such merger or consolidation or reorganization in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization.
(ii) A complete liquidation or dissolution of the Company or of
Sweetheart Cup Company Inc.; or
(iii) The sale or other disposition of all or substantially all
of the assets of the Company or of Sweetheart Cup Company Inc.
"Code" means the Internal Revenue Code of 1986, as amended.
"Disabled" has the same meaning as provided in the long-term disability
plan or policy maintained or, if applicable, most recently maintained, by the
Company or Sweetheart Cup Company Inc. for the Executive. If no long-term
disability plan or policy was ever maintained on behalf of the Executive the
occurrence of a disability within the meaning of Section 72(m)(7) of the Code.
"Equity Sale" means the occurrence, of:
-2-
(a) An acquisition (other than directly from the Company) of any
equity securities of the Company (the "Equity Securities") or of the
Company's wholly-owned subsidiary (Sweetheart Cup Company Inc.) by any
"Person" (as the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act")) other than
American Industrial Partners Capital Fund, LP or its affiliates or an
employee benefit plan maintained by the Company, immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of Equity Securities representing sixty
percent (60%) or more of the combined value of the Company's or Sweetheart
Cup Company Inc.'s then outstanding Equity Securities; or
(b) The consummation of a merger, consolidation or reorganization
involving the Company where the stockholders of the Company, immediately
before such merger, consolidation or reorganization, fail to own directly
or indirectly immediately following such merger, consolidation or
reorganization, at least sixty (60%) of the combined value of the
outstanding Equity Securities of the corporation resulting from such merger
or consolidation or reorganization.
"Good Reason" means (i) the Executive's duties, authorities,
responsibilities (including reporting authority and responsibility) or title are
materially and adversely modified without the Executive's written consent, or
(ii) the Executive's Base Compensation is reduced, except for reductions of no
more than ten percent (10%) per year applicable to all salaried employees.
"Trust" means that certain trust agreement between the Company and the
Trustee pursuant to which the Company deposits funds for the benefit of the
Executive to satisfy the Company's obligations hereunder.
"Trustee" means the trustee under the Trust Agreement.
SECTION III.
BENEFIT AMOUNT
The Executive's Account will be credited with an amount representing
one year's current Base Salary.. The Executive's Account will be credited with
additional amounts to reflect any increase in the Executive's Base Salary
occurring during the term of this Agreement. The Executive's Account will be
invested in accordance with the terms hereof.
SECTION IV.
BENEFITS
4.1 The Executive may direct the Trustee, at such times and in
accordance with such procedures as the Trustee provides, as to the investment of
the Executive's Account. The
-3-
investment options available to the Executive shall be selected by the Company
and shall include a large capitalization equity fund, a small capitalization
equity fund, a bond fund and a money market fund maintained by either Vanguard
or Fidelity Investments, and such other investments as the Company permits.
4.2 In the event that the Executive's Account cannot be invested in a
particular mutual fund chosen by the Company, the Company shall select a
replacement fund that is comparable, in the Company's reasonable judgment, to
the fund into which future investment of the Executive's Account is no longer
possible. The Company shall communicate, in writing to the Trustee of any
changes to the available investment options.
4.3 As soon as practical after the Executive's Account vests in
accordance with the terms of this Section 4, the Executive's Account shall be
entitled to a distribution of the then value of his Account under the Trust and
the Trustee shall distribute to the Executive (or in the event of his death, his
Beneficiary) either the investments held in the Account in kind or the proceeds
resulting from the liquidation of the investment in the Executive's Account
under the Trust.
4.4 The Executive's Account shall become fully vested as of the date of
the first to occur:
(i) the second anniversary of the date of this Agreement,
provided the Executive remains continuously employed by the Company or
Sweetheart Cup Company Inc. up to and including the second anniversary
of the date of this Agreement;
(ii) the Executive dies or becomes Disabled for reasons directly
related to the Executive's position or duties with the Company;
(iii) after six months following an Equity Sale;
(iv) after six months following a Change of Control; or
(v) the Executive's employment is terminated by the Company for
reasons other than for Cause or by the Executive with Good Reason.
4.5 In the event that the Executive dies or becomes Disabled for
reasons that are not directly related to the Executive's position or duties with
the Company prior to the occurrence of one of the events described in Section
4.4 hereof, the Executive shall become vested in a proportionate part of the
Executive's Account, determined by multiplying the Executive's Account by a
fraction, the numerator of which is the number of months and partial months that
have elapsed since the date of this Agreement and the denominator of which is 24
months.
-4-
4.6 In the event that the Executive ceases to be employed by the
Company or Sweetheart Cup Company Inc. prior to the time that such Executive's
Account vests in accordance with Section 4.4 or Section 4.5 hereof, the portion
of the Executive's Account that is not vested will be forfeited and, within a
reasonable time after the Executive ceases to be an employee of the Company, the
Trustee shall pay the balance of the Executive's Account to the Company.
SECTION V.
ESTABLISHMENT OF THE TRUST
5.1 Company shall establish the Trust with the Trustee and will deposit
with Trustee in trust the amounts specified in Section III hereof.
5.2 The Trust hereby established shall be irrevocable.
5.3 The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of Company and shall be used exclusively for
the purpose of paying benefits to the Executive. The principal of the Trust and
any earnings thereon shall not be used to satisfy the claims of the Company's
general creditors.
SECTION VI.
PAYMENTS TO EXECUTIVE OR HIS BENEFICIARIES
6.1 The Trustee shall make payments to the Executive or his Beneficiary
in accordance with the terms and conditions of this Agreement and the Trust.
Prior to making any payment to the Executive or his Beneficiary, the Trustee
shall provide the Company with at least ten (10) days prior written notice of
such proposed payment and the Company shall have a period of five (5) days
following receipt of such notice (which shall be deemed to be received three (3)
days following the date such notice is mailed by first class U.S. mail, on the
day after such notice is deposited with an overnight carrier, the date of hand
delivery or the date on which notice is transmitted by facsimile) to provide the
Trustee in writing with a notice of its objection to such proposed payment. If
the Trustee receives from the Company a timely notice of objection, the matter
shall promptly be submitted to arbitration in accordance with Section VIII
hereof. No payment shall be made until decision on the arbitration has been made
and then payment will be made in accordance with such decision. If the Trustee
fails to receive a timely notice of objection from the Company, the Trustee may
proceed with the proposed payment. The Company shall report all distributions
from the Trust to appropriate taxing authorities. The Trustee shall cooperate
with the Company in making provision for the withholding of any federal, state
or local taxes that may be required to be withheld with respect to the payment
of benefits pursuant to the terms of this Agreement and shall pay amounts
withheld to the appropriate taxing authorities.
-5-
6.2 The entitlement of Executive or his Beneficiary to benefits under
this Agreement shall initially be determined by the Trustee or such party as it
designates, except in the event that the Company files a notice of objection to
payment in accordance with Section 6.1 hereof, in which event such determination
shall be made by the arbitrators in accordance with Section VIII hereof.
6.3 No benefit which shall be payable under this Agreement to any
person shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to alienate, sell, transfer,
assign, pledge, encumber or charge the same shall be void; and no such benefit
shall in any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements or torts of any person, nor shall it be subject to
attachment or legal process for, or against, such person except to such extent
as may be required by law.
6.4 Whenever any benefit which shall be payable under this Agreement is
to be paid to or for the benefit of any person who is then a minor or determined
to be incompetent by qualified medical advice, the Company or the Trustee need
not require the appointment of a guardian or custodian, but shall be authorized
to pay the same over to the person having custody of such minor or incompetent,
or to cause the same to be paid to such minor or incompetent without the
intervention of a guardian or custodian, or to cause the same to be paid to a
legal guardian or custodian of such minor or incompetent if one has been
appointed or to cause the same to be used for the benefit of such minor or
incompetent.
SECTION VII.
AMENDMENT OF TERMINATION
7.1 This Agreement may not be amended except by a written instrument
executed by the Company and Executive.
7.2 The Trust shall not terminate until the date on which the Executive
or his Beneficiaries are no longer entitled to benefits pursuant to the terms of
the Agreement. Upon termination of the Trust any assets remaining in the Trust
shall be returned to Company.
SECTION VIII.
SETTLEMENT OF DISPUTES
Any dispute arising under this Agreement shall be submitted to binding
arbitration initiated in accordance with the rules of the American Arbitration
Association in Baltimore, Maryland. The results of such proceedings shall be
conclusive and shall not be subject to judicial review. The Company agrees to
pay the entire cost of any arbitration or legal proceeding arising from any
dispute hereunder, including the legal fees of the Trustee and the Executive or
beneficiary, regardless of the outcome of any such proceeding, unless the
arbitrators or the court hearing such proceeding determines that the Executive's
or beneficiary's claim was submitted in
-6-
bad faith, in which event the Company shall not pay any legal fees and expenses
of the Executive or beneficiary.
-7-
SECTION IX.
LIMITATION OF RIGHTS
This Agreement shall not give the Executive any right or claim except
to the extent that such right is specifically fixed under the terms of the
Agreement,
SECTION X.
MISCELLANEOUS
To the extent not preempted by applicable federal law, this Agreement
is governed by and construed in accordance with the laws of the State of
Maryland.
IN WITNESS WHEREOF, the Company has executed this document as of the
lst day of October, 1997.
SWEETHEART HOLDINGS INC.
By: /s/ Xxxxxxx X. XxXxxxxxxx
----------------------------
Xxxxxxx X. XxXxxxxxxx
Title: President and Chief Executive Officer
ATTEST:
/s/ Xxxxxx X. Xxxxxx
---------------------
Xxxxxx X. Xxxxxx
Title: Corporate Secretary
[CORPORATE SEAL]
EXECUTIVE:
Name: /s/ Xxxxxxx X. Xxxxx
-------------------------
XXXXXXX X. XXXXX
Address: 00 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
