EXHIBIT 10.13
THIRD
AMENDMENT
TO
INCENTIVE AGREEMENT
THIS THIRD AMENDMENT TO INCENTIVE AGREEMENT (the "Third Amendment") is
made and entered into as of the 11th day of May, 2004 ("Execution Date"), by and
between Pierre Foods, Inc., a North Carolina corporation (the "Company"), and
Norbert E. Woodhams, a resident of the State of Ohio ("Executive").
WITNESSETH:
WHEREAS, Executive serves the Company in the capacity of President
pursuant to a certain Incentive Agreement dated August 18, 1999 (the "Original
Agreement") as amended by a certain First Amendment to Incentive Agreement dated
January 1, 2000 (the "First Amendment"), and a certain Second Amendment to
Incentive Agreement dated December 31, 2001 (the "Second Amendment", the
Original Agreement as amended by the aforesaid First Amendment and Second
Amendment herein the "Incentive Agreement"); and
WHEREAS, the Company considers it essential to the best interest of its
sole shareholder, PF Management, Inc. ("PFMI") to foster the continued
employment of key management personnel in a period of uncertainty recognizing
that the possibility of a change in control exists and that such possibility,
and the uncertainty and questions which it necessarily raises among management,
may result in the departure or distraction of key management personnel to the
detriment of the Company and PFMI in this period when their undivided attention
and commitment to the best interests of the Company and PFMI are particularly
important; and
WHEREAS, the Company wishes to assure itself of the services of the
Executive without distraction from any circumstances arising from the
possibility of a change in control of the Company and to incentivize the
Executive to remain with the Company during any such process to assist in
obtaining an execution of any such corporate transaction (the "Transaction"),
and the Executive wishes to continue to serve in the employ of the Company in
the current capacity and upon the terms and conditions set forth in the
Incentive Agreement, as modified and amended hereby for the compensatory
arrangement in the event of a Transaction; and
WHEREAS, the parties desire to make and memorialize certain amendments to
the Original Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1. Definitions. For purposes hereof:
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(a) "Code" shall mean the United States Internal Revenue Code of 1986,
as amended.
(b) "Change of Control Date" shall mean the date on which a Change of
Control shall be deemed to have occurred.
(c) "Shareholders Agent" shall mean David R. Clark, or such other person
appointed as the agent and representative of the shareholders of
PFMI with respect to the Transaction under a Shareholders Agent
Agreement.
(d) "Parachute Payment" shall mean any payment in the nature of
compensation payable to the Executive if such payment is contingent
on a change in the ownership or effective control of the Company or
PFMI.
(e) "Acquirer" means the person or entity acquiring the shares of PFMI
by reason of a Change of Control.
(f) "Shareholders Agent Agreement" shall mean an agreement binding on
the shareholders of PFMI and executives of the Company participating
in bonuses as a result of a Transaction, said agreement specifying
the rights and obligations of the parties.
(g) "Change of Control" shall mean the occurrence of any of the
following:
(i) In the event that any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, the
"Act"), other than one or more of James C. Richardson, Jr., David R.
Clark and James M. Templeton, or persons controlled by one or more
of them, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Act), directly or indirectly, of more than
50% of the total voting power of the voting stock of the Company or
(ii) In the event the Company merges with or into another
entity or sells, assigns, conveys, transfers, or otherwise disposes
of all or substantially all of its assets to any transferee and
immediately after such transaction one or more of James C.
Richardson, Jr., David R. Clark and James M. Templeton, or persons
controlled by one or more of them, is not the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Act), directly or
indirectly, or more than 50% of the voting stock or equity interests
of the surviving entity or transferee.
(h) "Transaction" means the event causing or resulting in the Change of
Control.
(i) "PFMI" means PF Management, Inc.
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2. Change of Control Amendment. Subject to the Effective Conditions (as
herein defined) and provided the Executive is in the employment of the Company
as of the Change of Control Date, the parties hereby agree to amend the
Incentive Agreement as follows:
(a) Section 2 of the Incentive Agreement is amended to read as follows:
3. Change of Control. If a Change of Control shall occur before the
termination of this Agreement, then the Company shall pay to Executive, in lump
sum by bank check or other good funds, simultaneously with the Change of Control
on the Change of Control Date, a bonus ("Bonus") equal to 4% of the net proceeds
realized by PFMI's shareholders and Executive and the other officers of the
Company receiving payments similar to the Bonus hereunder from the Transaction,
after all purchase price adjustments and reductions for the retirement of debt
and other obligations of the Company (excluding the Bonus hereunder and other
bonuses payable to other officers of the Company), and escrow and indemnity
deposits and other adjustments (including costs and fees) as may be necessary or
required as a condition of the closing of the Transaction, and as reduced by
$2,870,370 to be payable pursuant to a deferred compensation plan to be adopted
by the Company on or prior to the Change of Control Date.
It is expressly agreed and understood and the Executive hereby
acknowledges that the intent of the Bonus is to place the Executive in the same
economic position with respect to the Transaction, with the same risk of
indemnity and obligation for sharing transaction costs, as a hypothetical
shareholder owning 4% of the outstanding capital shares of PFMI; provided, it is
expressly understood that Executive will have no right to participate in or
receive any warrants issued to the shareholders in the Transaction. In
furtherance of this understanding, Executive as a condition of receiving said
Bonus shall agree, and upon instructions from the Shareholders Agent, shall
deliver his proportionate share of said Bonus for deposit in any escrow or other
indemnity account as may be required pursuant to any purchase agreement and
other ancillary agreements (including a Shareholders Agent Agreement) related to
the Transaction. As a further condition of the payment of the Bonus, Executive
agrees to enter into, execute and deliver such ancillary agreements along with
shareholders of PFMI and other key executives participating in any similar bonus
on the same Change of Control as may be required pursuant to the closing of the
Transaction, or otherwise agreed upon by such parties, as necessary to carry out
the obligations of the Executive for his several responsibilities (as among the
PFMI shareholders and participating key executives receiving distributions of
the aforesaid net purchase price proceeds), to indemnify and hold harmless the
Acquirer in the Transaction from working capital or other purchase price
adjustments, claims under indemnity obligations, tax sharing agreements or
otherwise, and all costs, fees, interest, and expenses associated therewith and
under the purchase agreement or any ancillary agreement or in the administration
thereof.
Executive as a further condition of payment of said Bonus does hereby
agree that duly appointed Shareholders Agent (representing the PFMI shareholders
and Executive and other key executives participating in the aforesaid net
proceeds) shall be duly
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authorized to direct the Company, Acquirer, any escrow agent or any other party
distributing or paying such Bonus or any other proceeds from the Transaction,
including from an escrow or indemnity account, for the benefit of Executive to
distribute all or part thereof to the Shareholders Agent for deposit and
distribution under the terms of a Shareholders Agent Agreement, or require the
Executive to likewise contribute all or part thereof to the Shareholders Agent,
subject to the Shareholders Agent's obligation to make payments thereof to the
Executive, and further subject to Shareholders Agent's reasonable discretion to
establish a reserve for future indemnity, costs, expenses or claims arising from
or related to the Transaction as the Agent deems necessary.
The Bonus herein shall be subject to normal and appropriate employment
tax, withholding, and other similar deductions.
(b) Sections 2, 3, 5 and 8 of the Incentive Agreement as originally
written are hereby deleted, and Schedule A attached to the Original Agreement is
deleted and of no further force or effect.
3. Effective Conditions. The effectiveness of the amendments in Section
2 herein and the payment of the Bonus contemplated thereunder is subject to the
satisfaction of all of the following conditions (the "Effective Conditions"):
(a) On or before the Effective Date, the delivery by the Executive of a
waiver (in the form attached as Exhibit A) of all Parachute Payments
due to or receivable by the Executive under any other plan,
arrangement or agreement between the Executive and the Company,
other than as provided under the Incentive Agreement, as hereby
amended.
(b) Approval (in accordance with Section 280G(b)(5)(B) of the Code) by
the shareholders of the Company and PFMI of the amendments in
Section 2 hereof and the payment of the Bonus thereunder (said
approval date being the "Effective Date") before the closing of the
Transaction.
(c) The Change of Control occurs within six months of the Effective
Date.
4. Effectiveness. The amendments in Section 2 shall not become
operative until the satisfaction of conditions (a) and (b) of Section 3
hereinabove. Further provided that notwithstanding the operative effect of the
amendments in Section 2, if a Change of Control does not occur within six months
of the Effective Date, the amendments in Section 2 shall thereafter become null
and void, and the Original Agreement, only as amended by the First and Second
Amendments, shall be binding on the parties as originally written.
5. No Change. Except as amended by this Third Amendment, the Incentive
Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXECUTIVE: COMPANY:
Pierre Foods, Inc.
/s/ Norbert E. Woodhams By: /s/ David R. Clark
-------------------------------- ------------------------------
Norbert E. Woodhams David R. Clark, Vice Chairman
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EXHIBIT A
WAIVER
OF
PAYMENT
MAY 11, 2004
A. Pierre Foods, Inc. (the "Company") and Norbert E. Woodhams, an
executive of the Company (the "Executive") entered into an Incentive Agreement,
dated August 18, 1999 (the "Original Agreement"), as amended by a First
Amendment to an Incentive Agreement dated January 1, 2000 (the "First
Amendment") and a Second Amendment to an Incentive Agreement (the "Second
Amendment", the Original Agreement as amended by the First Amendment and Second
Amendment being the "Incentive Agreement").
B. Pursuant to the Incentive Agreement, the Company committed to pay
Executive certain payments under Sections 2, 3, 5, and 8 upon a Disposition (as
defined in the Original Agreement).
C. The shareholders of PF Management, Inc. ("PFMI") are in negotiations
with an undisclosed buyer ("Buyer") pursuant to which the shareholders of PFMI
may sell all of the capital shares of PFMI to said Buyer.
D. The Company and Executive desire to amend the Incentive Agreement
(the "Third Amendment") to provide for the payment of a different amount in the
event of a Change of Control (as defined in the Third Amendment) or Disposition
(the "New Bonus").
The undersigned Executive, recognizing that PFMI, the Company and Buyer
will rely on this Waiver, agrees as follows:
The Executive understands that it is the intent of the Board of Directors
of the Company to submit the proposed Third Amendment to the Original Agreement
providing for the New Bonus to a vote of PFMI and its shareholders for approval
of said Third Amendment and the payment of said New Bonus in accordance with the
shareholder approval procedures in Section 280G(b)(5)(B) of the Internal Revenue
Code of 1986, as amended, ("Code") and the regulations thereunder. In
consideration thereof, the Executive does hereby waive all rights to any other
payments in the nature of compensation payable to the Executive under any other
plan, arrangement or agreement if such payment is contingent on a Change of
Control. The Executive understands that there are no guarantees or commitments
that the shareholders will actually approve such Third Amendment and New Bonus.
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All other provisions of the Incentive Agreement shall remain in full force
and effect, except as modified or amended by the Third Amendment or affected by
this Waiver.
This Waiver shall be construed in accordance with the laws of the State of
North Carolina, excluding conflicts of laws and principles, with the
understanding that it is intended to exempt the payment of the New Bonus from
the application of excise taxes under Section 4999 of the Code.
The undersigned Executive has executed this Waiver as of May 11, 2004.
Acknowledged, Accepted and Received
this 11th day of May, 2004 __________________________________
Norbert E. Woodhams
Pierre Foods, Inc.
By: _____________________________
David R. Clark, Vice Chairman
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