Exhibit 10.1
AGREEMENT
This Agreement made as of the 8th day of January, 2007, by and between
Friendly Ice Cream Corporation, a Massachusetts corporation (the "Company"), and
George M. Condos ("Employee").
WHEREAS, Employee is an executive of the Company, currently serving as
its President and Chief Executive Officer;
WHEREAS, the Board of Directors (the "Board") of the Company believes
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of Employee to the Company without distraction
notwithstanding the fact that the Company could be subject to a change of
control, although no such transaction is currently being negotiated, and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of key management
personnel to the detriment of the Company; and
WHEREAS, in consideration for Employee agreeing to keep Company
information confidential and providing the Company with a release of any
potential claims, the Company agrees that Employee shall receive a similar
release from the Company and the compensation set forth in this Agreement as a
cushion against the financial and career impact on Employee in the event
Employee's employment with the Company is terminated following a change of
control as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions
"Affiliate" shall have the respective meaning ascribed to such
term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Base Compensation" shall mean the annualized base rate of
salary being paid to Employee in all capacities with the Company, and its
Affiliates, as reported for Federal income tax purposes on Form W-2, on the last
day of the preceding calendar year, or if higher, the actual date of the Change
of Control.
"Board" shall mean the board of directors of the Company.
"Change of Control" means the occurrence of any of the
following events with respect to the Company:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of 50% or more of the total voting power
of the Voting Stock of the Company;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
was approved by a vote of a majority of the directors of the Company then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office;
(iii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
the assets of the Company to any person or group of persons (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act)(other than to any wholly
owned subsidiary of the Company);
(iv) the Company merges or consolidates with or into another
Person or another Person merges with or into the Company, and in any such case,
the securities of the Company that are outstanding immediately prior to such
transaction and that represent 100% of the voting power of the Voting Stock of
the Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities of the Company are changed
into or exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent, immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving Person or transferee; or
(v) the adoption of a plan of liquidation of the Company.
For purposes of the definition of Change of Control, the term
"Permitted Holders" means Donald N. Smith and/or the Company's then existing
senior management and their respective Affiliates. Notwithstanding the
foregoing, in no event shall a transaction described in clause (iii) or (iv)
between the Company and an entity in which the Employee has a substantial equity
interest constitute a Change of Control. The term "Voting Stock" of the Company
means all classes of capital stock of the Company then outstanding and normally
entitled to vote in the election of directors.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Severance Period" shall mean the one (1) year period after
Employee's Termination of Employment.
"Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
"Termination of Employment" shall mean the termination of Employee's
active employment relationship with the Company.
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"Termination following a Change of Control" shall mean a Termination of
Employment, whether initiated by the Company or Employee, within sixty days
after a Change of Control.
2. Notice of Termination. Any Termination of Employment shall be
communicated by a Notice of Termination to the other party hereto given in
accordance with Section 15 hereof.
3. Severance Compensation upon Termination. Subject to the
provisions of Section 10 hereof and the last paragraph of this Section 3, in the
event of Employee's Termination following a Change of Control, Employee shall be
entitled to receive the following payments and benefits from the Company:
(a) Salary continuation payments during the Severance Period
in an aggregate amount equal to the Base Compensation, which payments shall be
paid on Employee's then current payment schedule;
(b) (i) If the Termination following a Change of Control
occurs before December 30, 2007, then within 15 days after the Termination Date,
Employee shall receive an amount equal to the pro-rated amount of the Employee's
target annual incentive bonus for the fiscal year ending December 30, 2007. The
pro-rated bonus shall be computed as 100% of the Employee's target annual
incentive bonus for the fiscal year ending December 30, 2007, multiplied by a
fraction (x) the numerator of which is the number of days in such year preceding
Employee's Termination Date, and (y) the denominator of which is 365. (ii) If
the Termination following a Change of Control occurs after December 30, 2007 and
prior to the expiration of the term of this Agreement, then Employee shall
receive 100% of the amount of the annual incentive bonus the Employee would have
received, if any, under the 2007 Annual Incentive Plan applicable to Employee,
and such amount shall be paid on the date on which annual incentive bonuses are
paid pursuant to the terms of the 2007 Annual Incentive Plan.
(c) The Company shall continue to provide benefits under the
Company's then current health plan (subject to changes made pursuant to
amendments of general application adopted from time to time) for Employee and
his spouse or dependents for the Severance Period on the same basis as if
Employee had continued to be employed during that period, or pay Employee cash
in lieu of such coverage in an amount equal to Employee's after-tax cost of
continuing such coverage.
(d) During the Severance Period, the Company shall reimburse
Employee for the cost of outplacement assistance services, which shall be
provided by an outplacement agency selected by Employee. The Company shall
reimburse Employee within 15 days following the date on which the Company
receives proof of payment of such expense.
Notwithstanding the foregoing, (i) any payment or benefit
under this Agreement shall be subject to limitations as may be required to
comply with Section 409A of the Code, and (ii) no payments or benefits shall be
provided unless Employee executes, and does not revoke, an effective written
release, complying with all state and federal requirements (the "Release"), of
any and all claims against the Company and all related parties with respect to
all matters arising out of Employee's employment by the Company (other than
entitlements under the terms of this Agreement or under any other plans or
programs of the Company in which Employee participated and under which Employee
has accrued or become entitled to a benefit) or the termination thereof. On the
day following the expiration of the revocation period for the Release, the
Company shall provide Employee with a mutual release releasing Employee from any
and all claims arising out of Employee's employment with the Company.
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4. Other Payments and Indemnifications. The payments due under
Section 3 hereof shall be in addition to and not in lieu of any payments or
benefits due to Employee under any other plan, policy or program of the Company
except that Employee shall not receive any benefits under any other severance
plan of the Company. In addition, Employee shall continue to be covered by any
policy of insurance providing indemnification rights for service as an officer
and director of the Company and to all other rights to indemnification provided
by the Company, in each case at least as favorable as applicable to him on the
date of this Agreement.
5. Enforcement.
(a) In the event that the Company shall fail or refuse to make
payment of any amounts due Employee under Section 3, 4 and 10 hereof with the
respective time periods, provided therein, the Company shall pay to Employee, in
addition to the payment of any other sums provided in this Agreement, interest,
compounded daily, on any amount remaining unpaid form the date payment is
required under Section 3, 4, and 10, as appropriate, until paid to Employee, at
the rate from time to time announced by Bank of America, N.A. as its "prime
rate" plus 2%, each change in such rate to take effect on the effective date of
the change in such prime rate.
(b) It is the intent of the parties that Employee not be
required to incur any expenses associated with the enforcement of his rights
under this Agreement by arbitration, litigation or other legal action because
the cost and expense thereof would substantially detract from the benefits
intended to be extended to Employee hereunder. Accordingly, the Company shall
pay Employee on demand the amount necessary to advance to or reimburse Employee
in full for all expenses (including all attorneys' fees and legal expenses)
incurred by employee in attempting to enforce any of the obligations of the
Company under this Agreement, without regard to outcome.
6. No Mitigation. Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
7. Non-exclusivity of Rights. Except as provided in Section 4,
nothing in this Agreement shall prevent or limited Employee's continuing or
future participation in or rights under any benefit, bonus, incentive or other
plan or program provided by the Company or any of its Subsidiaries or Affiliates
and for which Employee may qualify.
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8. No Set-Off. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against Employee or others.
9. Taxes. Any payment required under this Agreement shall be
subject to all requirements of the law with regard to the withholding of taxes,
filing, making of reports and the like, and the Company shall use its best
efforts to satisfy promptly all such requirements.
10. Certain Increases in Payment.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of Employee, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Payment"), would constitute an "excess parachute payment"
within the meaning of Section 280G of the Code, Employee shall be paid an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Employee after deduction of any excise tax imposed under Section 4999 of the
Code, and any federal, state and local income and employment tax and excise tax
imposed upon the Gross-Up Payment shall be equal to the Payment. For purposes of
determining the amount of the Gross-Up Payment, Employee shall be deemed to pay
federal income tax and employment taxes at the highest marginal rate of federal
income and employment taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Employee's residence (or, if
greater, the state and locality in which Employee is required to file a
nonresident income tax return with respect to the Payment) on the Termination
Date, net of the maximum reduction in federal income taxes that may be obtained
from the deduction of such state and local taxes.
(b) All determinations to be made under this Section 10 shall
be made by the Company's independent public account immediately prior to the
Change of Control or, if such firm declines to act, such other independent
public accountant as may be agreed to by the Company and the Employee (the
"Accounting Firm"), which firm shall provide its determinations and any
supporting calculations both to the Company and Employee within ten days of the
Termination Date. Any such determination by the Accounting Firm shall be binding
upon the Company and Employee. Within five days after the Accounting Firm's
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of Employee such amounts as are
then due to Employee under this Agreement.
(c) Employee 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 later than ten business days after Employee knows 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. Employee shall not pay such claim
prior to the expiration of the thirty day period following the date on which he
give 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
Employee in writing prior to the expiration of such period that it desires to
contest such claim, Employee shall:
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(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) 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;
(iii) cooperate with the Company in good faith in order to
effectively contest such claim; and
(iv) 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 Employee harmless, on an
after-tax basis, for any Excise Tax, income tax or employment 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 10, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearing and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Employee to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Employee agrees to prosecute
such contest to a termination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine, provided further, however, that if the Company directs Employee to
pay such claim and sue for a refund the Company shall advance the amount of such
payment to Employee, on an interest-fee basis and shall indemnify and hold
Employee harmless, on an after-tax basis, from any Excise Tax, income tax or
employment 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
limitations relating to payment of taxes for the taxable year of Employee 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 Employee 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 Employee of an amount advanced by
the Company pursuant to this Section, Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to the Company's
complying with the requirements of this Section) 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 Employee of an amount
advanced by the Company pursuant to this Section, a determination is made that
Employee shall not be entitled to any refund with respect to such claim and the
Company does not notify Employee in writing of its intent to contest such denial
of refund prior to the expiration of thirty days after such determination, then
such advance shall be forgiven and shall not be required to repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
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(e) All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in this Section shall be borne solely
by the Company. The Company agrees to indemnify and hold harmless the Accounting
Firm of and from any and all claims, damages and expenses resulting from or
relating to its determinations pursuant to this Section, except for claims,
damages or expenses resulting from the gross negligence or willful misconduct of
the Accounting Firm.
11. Confidential Information. Employee recognizes and acknowledges
that, by reason of his employment by and service to the Company, he has had and
will continue to have access to confidential information of the Company and its
affiliates, including, without limitation, information and knowledge pertaining
to the products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figure, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that he
will not, either during or after his employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of Employee or except as may be required by law
or in a judicial or administrative proceeding. In the event that Employee is
required to disclose any of the Company's Confidential Information, Employee
shall provide reasonable notice to the Company and shall provide reasonable
cooperation with any efforts of the Company to oppose such disclosure.
12. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in
Section 11 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. Employee further represents and acknowledges that (i) he has
been advised by the Company to consult his own legal counsel in respect of this
Agreement, and (ii) that he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with this counsel.
(b) Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Section 11 hereof, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of Section 11
hereof should ever be adjudicated to exceed the time, geographic, service, or
other limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, service, or other limitations permitted by applicable law.
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(c) Employee irrevocably and unconditionally (i) agrees that
any suit, action or other legal proceeding arising out of Section 11 hereof,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the District of Massachusetts,
or if such court does not have jurisdiction or will not accept jurisdiction, in
any court of general jurisdiction in Hampden County, Massachusetts, (ii)
consents to the non-exclusive jurisdiction of any such court it any such suit,
action or proceeding, and (iii) waives any objection which Employee may have to
the laying of venue of any such suit, action or proceeding in any such court.
Employee also irrevocably and unconditionally consents to the service of any
process, pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 15, hereof.
13. Term of Agreement. The term of this Agreement shall be for one
year from the date hereof; provided, however, that (i) after a Change of Control
during the term of this Agreement, this Agreement shall remain in effect until
all of the obligations of the parties hereunder are satisfied, and (ii) this
Agreement shall terminate if, prior to a Change of Control, the employment of
Employee with the Company or any of its Subsidiaries, as the case may be, shall
terminate for any reason; provided, however, that if the Employee is
involuntarily terminated by the Company in contemplation of a Change of Control
which occurs within three months after such termination of employment, this
clause (ii) shall not apply and such termination shall be deemed to be a
Termination following a Change of Control.
14. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken placed. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as herein before defined and any such successor or successors to its
business and/or assets, jointly and severally.
15. Notice. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
services, as follows:
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If to the Company, to:
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, MA 01095
With a copy to:
Office of the General Counsel
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, MA 01095
If to Employee, to:
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or to such other names or addresses as the Company or Employee, as the case may
be, shall designate by notice to the other party hereto in the manner specified
in this Section; provided, however, that if no such notice is given by the
Company following a Change of Control, notice at the last address of the Company
or to any successor pursuant to Section 15 hereof shall be deemed sufficient for
the purposes hereof. Any such notice shall be deemed delivered and effective
when received in the case of personal delivery, five days after deposit; postage
prepaid, with the U.S. Postal Service in the case of registered or certified
mail, or on the next business day in the case of overnight express courier
service.
16. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Massachusetts without giving
effect to any conflict of laws provisions.
17. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supercedes all prior agreements (including,
without limitation, that certain offer letter dated December 19, 2006), sets
forth the entire understanding between the parties hereto with respect to the
subject matter hereof and cannot be changed, modified, extended or terminated
except upon written amendment executed by Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer; provided,
however, that except as stated in Section 4, this Agreement is not intended to
supercede or alter Employee's rights under any compensation, benefit plan or
program, unless specifically modified hereunder, in which Employee participated
and under which Employee retains a right to benefits. The provisions of this
Agreement may provide for payments to Employee under certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof. It is the specific intention of the parties that the provisions of this
Agreement shall supercede any provisions to the contrary in such plans, and such
plans shall be deemed to have been amended to correspond with this Agreement
without further action by the Company or the Board.
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(b) Nothing in this Agreement shall be construed as giving
Employee any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and enforceable by the respective
heirs, representatives, successors and assigns of the parties hereto, except
that the duties and responsibilities of Employee and the Company hereunder shall
not be assignable in whole or in part by the Company.
18. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
19. Remedies Cumulative; No Waiver. No right conferred upon
Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by Employee in exercising any
right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, including, without limitation, any delay by
Employee in delivering a Notice of Termination pursuant to Section 2 hereof
after an event has occurred which would, if Employee had resigned, have
constituted a termination following a Change of Control pursuant to Section 1 of
this Agreement.
20. Miscellaneous. All section headings are for convenience only.
This Agreement may be executed in several counterparts, each of which is an
original. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
Friendly Ice Cream Corporation
By: /s/ Michael J. Daly
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Michael J. Daly, Chairman of
the Compensation Committee
/s/ Gregory A. Pastore /s/ George M. Condos
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Witness George M. Condos
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