Exhibit 10.4
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
-------------------------
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 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. 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 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:
-----
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
-----------
mean the occurrence of any of the following without Cause:
2
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
--------------------------------------------
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:
3
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
--------------------------
conditions apply for purposes of this Agreement:
4
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
5
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/ David B. Kewer
-----------------------------------
David B. Kewer
President and Chief Executive Officer
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
6
Agreed and Accepted:
/s/ Craig L. Hettrich October 19, 1999
- ----------------------------------- --------------------
(Name) (Date)
7