CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT is entered into as of the ___ day of August, 1997 by
and between Tootsie Roll Industries, Inc., a Virginia corporation, and
__________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive currently serves as a key employee of the
Company (as defined in Section 1) and his services and knowledge are valuable to
the Company in connection with the management of one or more of the Company's
principal operating facilities, divisions, departments or subsidiaries; and
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its shareholders to secure the
Executive's continued services and to ensure the Executive's continued
dedication and objectivity in the event of any threat or occurrence of, or
negotiation or other action that could lead to, or create the possibility of, a
Change in Control (as defined in Section 1) of the Company, without concern as
to whether the Executive might be hindered or distracted by personal
uncertainties and risks created by any such possible Change in Control, and to
encourage the Executive's full attention and dedication to the Company, the
Board has authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "CAP Plan" means the Company's Career Achievement Plan or any
successor plan.
(c) "Cause" means (1) a material breach by the Executive of those
duties and responsibilities of the Executive which do not differ in any material
respect from the duties and responsibilities of the Executive during the 90-day
period immediately prior to a Change in Control (other than as a result of
incapacity due to physical or mental illness) which is demonstrably willful and
deliberate on the Executive's part, which is committed in bad faith or without
reasonable belief that such breach is in the best interests of the Company and
which is not remedied in a reasonable period of time after receipt of written
notice from the Company specifying such breach or (2) the
commission by the Executive of a felony involving moral turpitude.
(d) "Change in Control" means the following, which definition shall
be used solely to define one of the conditions precedent to the payment of
compensation to the Executive pursuant to the terms of this Agreement and shall
have no legal significance for any other purpose:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" 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 both (x) 35% or more of the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities") and (y) combined voting
power of the Outstanding Company Voting Securities equal to or in excess of the
combined voting power of the Outstanding Company Voting Securities held by the
Gordon Family (as hereinafter defined); PROVIDED, HOWEVER, that the following
acquisitions shall not constitute a Change in Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, (D) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation involving the Company, if, immediately after such reorganization,
merger or consolidation, each of the conditions described in clauses (i), (ii)
and (iii) of subsection (3) of this Section (1)(d) shall be satisfied or (E) any
acquisition by any member of the Gordon Family; and PROVIDED FURTHER that, for
purposes of clause (B), if any Person (other than the Company or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or any member of the Gordon Family) shall,
by reason of an acquisition of Outstanding Company Voting Securities by the
Company, become the beneficial owner of (x) 35% or more of the Outstanding
Company Voting Securities and (y) combined voting power of the Outstanding
Company Voting Securities equal to or in excess of the combined voting power of
the Outstanding Company Voting Securities held by the Gordon Family, and such
Person shall, after such acquisition of Outstanding Company Voting Securities by
the Company, become the beneficial owner of any additional Outstanding Company
Voting Securities and such beneficial ownership is publicly announced, such
additional beneficial ownership shall constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of such Board; PROVIDED,
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HOWEVER, that any individual who becomes a director of the Company subsequent
to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved either by the vote of at least a
majority of the directors then comprising the Incumbent Board or by the vote
of at least a majority of the combined voting power of the Outstanding
Company Voting Securities held by the Gordon Family shall be deemed to have
been a member of the Incumbent Board; and PROVIDED FURTHER, that no
individual who was initially elected as a director of the Company as a result
of an actual or threatened election contest, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, or any other
actual or threatened solicitation of proxies or consents by or on behalf of
any Person other than the Board or the Gordon Family shall be deemed to have
been a member of the Incumbent Board;
(3) approval by the shareholders of the Company of a reorganization,
merger or consolidation unless, in any such case, immediately after such
reorganization, merger or consolidation, (i) more than 50% of the combined
voting power of the then outstanding securities of the corporation resulting
from such reorganization, merger or consolidation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals or entities who were the beneficial
owners, respectively, of the Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, (ii) no Person (other
than the Company, any employee benefit plan (or related trust) sponsored or
maintained by the Company or the corporation resulting from such reorganization,
merger or consolidation (or any corporation controlled by the Company) and any
Person which beneficially owned, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 35% or more of the Outstanding
Company Voting Securities) beneficially owns, directly or indirectly, (x) 35% or
more of the combined voting power of the then outstanding securities of such
corporation entitled to vote generally in the election of directors and
(y) combined voting power of the then outstanding securities of such corporation
equal to or in excess of the combined voting power of the then outstanding
securities of such corporation held by the Gordon Family and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement or action of the
Board providing for such reorganization, merger or consolidation; or
(4) approval by the shareholders of the Company of (i) a plan of
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company other than
to a corporation with
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respect to which, immediately after such sale or other disposition, (A) more
than 50% of the combined voting power of the then outstanding securities
thereof entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Voting Securities immediately prior to such sale or
other disposition, (B) no Person (other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the Company or
such corporation (or any corporation controlled by the Company) and any
Person which beneficially owned, immediately prior to such sale or other
disposition, directly or indirectly, 35% or more of the Outstanding Company
Voting Securities) beneficially owns, directly or indirectly, (x) 35% or more
of the combined voting power of the then outstanding securities thereof
entitled to vote generally in the election of directors and (y) combined
voting power of the then outstanding securities thereof equal to or in excess
of the combined voting power of the then outstanding securities thereof held
by the Gordon Family and (C) at least a majority of the members of the board
of directors thereof were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
sale or other disposition.
(e) "Company" means Tootsie Roll Industries, Inc., a Virginia
corporation.
(f) "Date of Termination" means (1) the effective date on which the
Executive's employment by the Company terminates as specified in a prior written
notice by the Company or the Executive, as the case may be, to the other,
delivered pursuant to Section 11 or (2) if the Executive's employment by the
Company terminates by reason of death, the date of death of the Executive.
(g) "Excess Benefit Plan" means the Company's Excess Benefit Plan or
any successor plan.
(h) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:
(1) either of (i) the assignment to the Executive of any duties which
constitute in any material respect a reduction in the level of the Executive's
position(s), duties, responsibilities or status with the Company immediately
prior to such Change in Control or (ii) any removal or involuntary termination
of the Executive from the Company otherwise than as expressly permitted by this
Agreement or any failure to re-elect the Executive to any position with the
Company held by the Executive immediately prior to such Change in Control;
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(2) a reduction by the Company in the Executive's rate of annual base
salary as in effect immediately prior to such Change in Control or as the same
may be increased from time to time thereafter;
(3) any requirement of the Company that the Executive be based more
than 50 miles from the facility where the Executive is located at the time of
the Change in Control;
(4) the failure of the Company to (i) continue in effect any employee
benefit plan or compensation plan in which the Executive is participating
immediately prior to such Change in Control, unless the Executive is permitted
to participate in other plans providing the Executive with substantially
comparable benefits, or the taking of any action by the Company which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such plan, including annual incentive bonuses and
including awards under the CAP Plan, it being understood that if the amount of
an award to the Executive under the CAP Plan is not at least equal to the
average of the amounts of the awards (excluding the special 100-year anniversary
award) to the Executive in respect of the three fiscal years of the Company
immediately preceding the fiscal year in which such Change in Control occurs, a
material reduction in the Executive's benefits under the CAP Plan shall be
deemed to have occurred, (ii) provide the Executive and the Executive's
dependents welfare benefits in accordance with the plans, practices, programs
and policies of the Company and its affiliated companies in effect for the
Executive immediately prior to such Change in Control or as in effect generally
at any time thereafter with respect to other peer executives of the Company and
its affiliated companies, (iii) provide fringe benefits in accordance with the
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive immediately prior to such Change in
Control or as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies, or (iv) provide the
Executive with paid vacation in accordance with the plans, policies, programs
and practices of the Company and its affiliated companies as in effect for the
Executive immediately prior to such Change in Control or as in effect generally
at any time thereafter with respect to other peer executives of the Company and
its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 11(b).
For purposes of this Agreement, any good faith determination of Good
Reason made by the Executive shall be conclusive; PROVIDED, HOWEVER, that an
isolated, insubstantial and inadvertent action taken in good faith and which is
remedied
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by the Company promptly after receipt of notice thereof given by the
Executive shall not constitute Good Reason.
(i) "Gordon Family" means Melvin J. Gordon, Ellen R. Gordon, any
descendant of Melvin J. Gordon and Ellen R. Gordon or the spouse of any such
descendant (collectively, the "Gordon Family Group"), any trust, partnership or
other entity for the benefit of any member of the Gordon Family Group, the
estate of any member of the Gordon Family Group or any charitable organization
established by any member of the Gordon Family Group or by any ancestor of Ellen
R. Gordon or Melvin J. Gordon.
(j) "Nonqualifying Termination" means a termination of the
Executive's employment (1) by the Company for Cause, (2) by the Executive for
any reason other than a Good Reason, (3) as a result of the Executive's death or
(4) by the Company due to the Executive's absence from his duties with the
Company on a full-time basis for at least 180 consecutive days as a result of
the Executive's incapacity due to physical or mental illness.
(k) "Pension Plan" means the Company's Pension Plan or any successor
plan.
(l) "Profit Sharing Plan" means the Company's Profit Sharing Plan or
any successor plan.
(m) "Termination Period" means the period of time beginning with a
Change in Control and ending on the earlier to occur of (1) two years following
such Change in Control and (2) the Executive's death.
2. OBLIGATIONS OF THE EXECUTIVE. The Executive agrees that in the
event any person or group attempts a Change in Control, he shall not voluntarily
leave the employ of the Company without Good Reason (a) until such attempted
Change in Control terminates or (b) if a Change in Control shall occur, until 90
days following such Change in Control. For purposes of the foregoing subsection
(a), Good Reason shall be determined as if a Change in Control had occurred when
such attempted Change in Control became known to the Board.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
(a) If during the Termination Period the employment of the Executive
shall terminate, other than by reason of a Nonqualifying Termination, then the
Company shall pay to the Executive (or the Executive's beneficiary or estate)
within 30 days following the Date of Termination, as compensation for services
rendered to the Company:
(1) a cash amount equal to the sum of (i) the Executive's base salary
from the Company and its affiliated
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companies through the Date of Termination, to the extent not theretofore
paid, (ii) the higher of the Executive's bonus paid or payable, including by
reason of any deferral, to the Executive by the Company or its affiliated
companies in respect of the fiscal year immediately preceding the fiscal year
in which the Change in Control occurs, or the Executive's average annual
bonus paid or payable, including by reason of any deferral, to the Executive
by the Company and its affiliated companies in respect of the three fiscal
years of the Company immediately preceding the fiscal year in which the
Change in Control occurs, in either case multiplied by a fraction, the
numerator of which is the number of days in the fiscal year in which the
Change in Control occurs through the Date of Termination and the denominator
of which is 365 or 366, as applicable, and (iii) any compensation previously
deferred by the Executive (together with any interest and earnings thereon)
and any accrued vacation pay, in each case to the extent not theretofore
paid; plus
(2) a lump-sum cash amount (subject to any applicable payroll or
other taxes required to be withheld pursuant to Section 5) in an amount equal to
(i) three (3) times the Executive's highest annual base salary from the Company
and its affiliated companies in effect during the 12-month period prior to the
Date of Termination, plus (ii) the higher of three (3) times the Executive's
bonus paid or payable, including by reason of any deferral, to the Executive by
the Company and its affiliated companies in respect of the fiscal year
immediately preceding the fiscal year in which the Change in Control occurs, or
three (3) times the Executive's average annual bonus paid or payable, including
by reason of any deferral, to the Executive by the Company and its affiliated
companies in respect of the three fiscal years of the Company immediately
preceding the fiscal year in which the Change in Control occurs; PROVIDED,
HOWEVER, that any amount paid pursuant to this Section 3(a)(2) shall be paid in
lieu of any other amount of severance relating to salary or bonus continuation
to be received by the Executive upon termination of employment of the Executive
under any severance plan, policy or arrangement of the Company.
(b)(1) In addition to the payments to be made pursuant to paragraph
(a) of this Section 3, if on the Date of Termination the Executive shall not be
fully vested in his accrued benefits under the Pension Plan, the Excess Benefit
Plan or the Profit Sharing Plan, the Company shall pay to the Executive within
30 days following the Date of Termination a lump sum cash amount equal to his
unvested accrued benefits under the Pension Plan, the Excess Benefit Plan and
the Profit Sharing Plan as of such date.
(2) In addition to the payments to be made pursuant to paragraph (a)
of this Section 3, if on the Date of Termination any award granted to the
Executive under the CAP Plan shall not
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be fully vested, the Company shall pay to the Executive within 30 days
following the Date of Termination a lump sum cash amount equal to the value
of the unvested portion of such award, assuming that all conditions to the
payment of the maximum amount under such award shall have been satisfied.
(3) If during the Termination Period the employment of the Executive
shall terminate, other than by reason of a Nonqualifying Termination, for a
period of three years commencing on the Date of Termination, the Company shall
continue to keep in full force and effect all policies of medical, accident,
disability and life insurance with respect to the Executive and his dependents
with the same level of coverage, upon the same terms and otherwise to the same
extent as such policies shall have been in effect immediately prior to the Date
of Termination or, if more favorable to the Executive, as provided generally
with respect to other peer executives of the Company and its affiliated
companies, and the Company and the Executive shall share the costs of the
continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the Date of Termination. Benefits otherwise
receivable under this Section 3(b)(3) shall be reduced to the extent comparable
benefits are actually received by or made available to the Executive without
cost during the thirty-six (36) month period following the Date of Termination
(and any such benefits actually received by the Executive shall be reported to
the Company by the Executive).
(c) If during the Termination Period the employment of the Executive
shall terminate by reason of a Nonqualifying Termination, then the Company shall
pay to the Executive within 30 days following the Date of Termination, a cash
amount equal to the sum of (1) the Executive's base salary from the Company
through the Date of Termination, to the extent not theretofore paid and (2) any
compensation previously deferred by the Executive (together with any interest
and earnings thereon) and any accrued vacation pay, in each case to the extent
not theretofore paid.
4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company or its affiliated companies to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
4) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to
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as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 4(c), all determinations
required to be made under this Section 4, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the Company's
public accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, the Executive shall appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 4, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 4(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no
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later than 10 business days after the Executive is informed in writing of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period following the
date on which the Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; PROVIDED FURTHER, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and PROVIDED FURTHER, that any extension of the statute of
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limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 4(c), the Executive becomes entitled to receive,
and receives, any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
Section 4(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
5. WITHHOLDING TAXES. The Company may withhold from all payments
due to the Executive (or his beneficiary or estate) hereunder all taxes which,
by applicable federal, state, local or other law, the Company is required to
withhold therefrom.
6. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise
under this Agreement involving termination of the Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the Executive,
on a current basis, for all legal fees and expenses, if any, incurred by the
Executive in connection with such contest or dispute, together with interest in
an amount equal to the Prime Rate as published in the "Money Rates" section of
THE WALL STREET JOURNAL, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the date the
Company receives the Executive's statement for such fees and expenses through
the date of payment thereof; PROVIDED, HOWEVER, that in the event the resolution
of any such contest or dispute includes a finding denying, in total, the
Executive's claims in such contest or dispute, the Executive shall be required
to reimburse the Company, over a period of 12 months from the date of such
resolution, for all sums advanced to the Executive pursuant to this Section 6.
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7. OPERATIVE EVENT. Notwithstanding any provision herein to the
contrary, no amounts shall be payable hereunder unless and until there is a
Change in Control at a time when the Executive is employed by the Company and a
subsequent termination of employment of the Executive.
8. NONCOMPETITION; NONSOLICITATION. (a) The Executive acknowledges
that in the course of his employment with the Company he has become familiar
with trade secrets and other confidential information concerning the Company and
that his services are of special, unique and extraordinary value to the Company.
(b) The Executive agrees that if during the Termination Period the
employment of the Executive shall terminate, other than by reason of a
Nonqualifying Termination, and the Executive shall receive payments from the
Company pursuant to Sections 3(a) and 3(b), then for a period of one year
following the Date of Termination (the "Noncompetition Period") he shall not in
any manner, directly or indirectly, through any person, firm or corporation,
alone or as a member of a partnership or as an officer, director, stockholder,
investor or employee of or consultant to any other corporation or enterprise or
otherwise, engage or be engaged, or assist any other person, firm, corporation
or enterprise in engaging or being engaged, in any business being conducted by
the Company as of the Date of Termination in any geographic area in which the
Company is then conducting such business.
(c) The Executive further agrees that during the Noncompetition
Period he shall not (i) in any manner, directly or indirectly, induce or attempt
to induce any employee of the Company or any of its subsidiaries to terminate or
abandon his or her employment for any purpose whatsoever, or (ii) in connection
with any business to which Section 8(b) applies, call on, service, solicit or
otherwise do business with any customer of the Company.
(d) Nothing in this Section 8 shall prohibit the Executive from being
(i) a stockholder in a mutual fund or a diversified investment company or (ii) a
passive owner of not more than two percent (2%) of the outstanding stock of any
class of a corporation, any securities of which are publicly traded, so long as
the Executive has no active participation in the business of such corporation.
(e) If, at any time of enforcement of this Section 8, a court holds
that the restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed
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to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(f) The Executive acknowledges that the Company would be damaged
irreparably in the event that any provision of this Section 8 were not performed
in accordance with its terms or were otherwise breached and that money damages
would be an inadequate remedy for any such nonperformance or breach.
Accordingly, the Company and its successors or permitted assigns shall be
entitled, in addition to other rights and remedies existing in their favor, to
seek an injunction or injunctions to prevent any breach or threatened breach of
any of such provisions and to enforce such provisions specifically (without
posting a bond or other security).
9. TERMINATION OF AGREEMENT. (a) This Agreement shall be effective
on the date hereof and shall continue until terminated by the Company as
provided in paragraph (b) of this Section 9; PROVIDED, HOWEVER, that this
Agreement shall terminate in any event upon the first to occur of (i) the
Executive's death and (ii) termination of the Executive's employment with the
Company prior to a Change in Control.
(b) The Company shall have the right prior to a Change in Control, in
its sole discretion, pursuant to action by the Board, to approve the termination
of this Agreement, which termination shall not become effective until the date
fixed by the Board for such termination, which date shall be at least 120 days
after notice thereof is given by the Company to the Executive in accordance with
Section 12; PROVIDED, HOWEVER, that no such action shall be taken by the Board
during any period of time when the Board has knowledge that any person has taken
steps reasonably calculated to effect a Change in Control until, in the opinion
of the Board, such person has abandoned or terminated its efforts to effect a
Change in Control; and PROVIDED FURTHER, that in no event shall this Agreement
be terminated in the event of a Change in Control.
10. SCOPE OF AGREEMENT. Nothing in this Agreement shall be deemed to
entitle the Executive to continued employment with the Company or its
subsidiaries, and if the Executive's employment with the Company shall terminate
prior to a Change in Control, then the Executive shall have no further rights
under this Agreement; PROVIDED, HOWEVER, that any termination of the Executive's
employment following a Change in Control shall be subject to all of the
provisions of this Agreement.
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11. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any merger or
consolidation of the Company whereby the Company is or is not the surviving or
resulting corporation or as a result of any transfer of all or substantially all
of the assets of the Company. In the event of any such merger, consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon the
surviving or resulting corporation or the person or entity to which such assets
are transferred.
(b) The Company agrees that concurrently with any merger,
consolidation or transfer of assets referred to in paragraph (a) of this Section
11, it will cause any successor or transferee unconditionally to assume, by
written instrument delivered to the Executive (or his beneficiary or estate),
all of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Agreement and
shall entitle the Executive to compensation and other benefits from the Company
in the same amount and on the same terms as the Executive would be entitled
hereunder if the Executive's employment were terminated following a Change in
Control other than by reason of a Nonqualifying Termination. For purposes of
implementing the foregoing, the date on which any such merger, consolidation or
transfer becomes effective shall be deemed the Date of Termination.
(c) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts would be payable to the Executive hereunder had the
Executive continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to such person or
persons appointed in writing by the Executive to receive such amounts or, if no
person is so appointed, to the Executive's estate.
12. NOTICE. (a) For purposes of this Agreement, all notices and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed (1) if to the Executive, to his address as set forth
in the records of the Company, and if to the Company, to Tootsie Roll
Industries, Inc., 7401 South Cicero Avenue, Chicago, Illinois 60629, attention
President with a copy to the Secretary, or (2) to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
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(b) A written notice of the Executive's Date of Termination by the
Company or the Executive, as the case may be, to the other, shall (i) indicate
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) specify the termination date (which date
shall be not less than 15 days after the giving of such notice). The failure by
the Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
13. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's
obligation to make any payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and, such amounts shall not be reduced whether or
not the Executive obtains other employment.
(b) If there shall be any dispute between the Company and the
Executive in the event of any termination of the Executive's employment, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause, that the
determination by the Executive of the existence of Good Reason was not made in
good faith, or that the Company is not otherwise obligated to pay any amount or
provide any benefit to the Executive and his dependents or other beneficiaries,
as the case may be, under paragraphs (a) and (b) of Section 3, the Company shall
pay all amounts, and provide all benefits, to the Executive and his dependents
or other beneficiaries, as the case may be, that the Company would be required
to pay or provide pursuant to paragraphs (a) and (b) of Section 3 as though such
termination were by the Company without Cause or by the Executive with Good
Reason; PROVIDED, HOWEVER, that the Company shall not be required to pay any
disputed amounts pursuant to this paragraph except upon receipt of an
undertaking by or on behalf of the Executive to repay all such amounts to which
the Executive is ultimately adjudged by such court not to be entitled.
14. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement shall include employment with any corporation or
other entity in which the Company has a
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direct or indirect ownership interest of 50% or more of the total combined
voting power of the then outstanding securities of such corporation or other
entity entitled to vote generally in the election of directors.
15. GOVERNING LAW; VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Illinois without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which other provisions shall remain in
full force and effect.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
17. MISCELLANEOUS. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
the Executive and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by the
Executive or the Company to insist upon strict compliance with any provision of
this Agreement or to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. The
rights of, and benefits payable to, the Executive, his estate or his
beneficiaries pursuant to this Agreement are in addition to any rights of, or
benefits payable to, the Executive, his estate or his beneficiaries under any
other employee benefit plan or compensation program of the Company.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and the Executive has
executed this Agreement as of the day and year first above written.
TOOTSIE ROLL INDUSTRIES, INC.
By:
--------------------------------
Ellen R. Gordon, President
and Chief Operating Officer
EXECUTIVE
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Subscribed and Sworn to before me
this ___ day of August, 1997.
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Notary Public
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