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Exhibit
10.5
Executive Retention and
Severance Agreement
This Executive Retention and Severance
Agreement (the “Agreement”) is made and entered into as
of February 24, 2003 (the “Effective Date”), by and
between Fresh Del Monte Produce Inc., (the “Company”)
and Hani El-Naffy (the “Executive”).
RECITALS
The following statements are true and
correct:
As of the Effective Date, the
Executive serves the Company as its President and Chief Operating
Officer and Board Member (Director).
The purpose of this Agreement
is (i) to encourage Executive to remain in the employ of the
Company, presently as its President and Chief Operating Officer and
Board Member (Director) and to continue to devote Executive’s
full attention to the success of the Company and (ii) to
provide specified benefits to Executive in the event of a
Termination Upon Change of Control or a Termination (Without Cause)
in Absence of Change of Control, as such terms are defined in this
Agreement.
Executive also acknowledges
he is employed by the Company in a confidential relationship
wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of
information as to the Company’s specific manner of doing
business, including the processes, techniques and trade secrets
utilized by the Company and future plans with respect thereto, all
of which has been and will be established and maintained at great
expense to the Company. This information is a trade secret and
constitutes the valuable goodwill of the Company. The Company
desires that Employee maintain the confidentiality of this
information.
Therefore, in consideration
of the mutual promises, terms, covenants and conditions set forth
herein and the performance of each, it is hereby agreed as
follows:
1. Termination Upon Change of
Control .
In the event of Executive’s
Termination Upon a Change of Control, provided that Executive
complies with the provisions of this Agreement, Executive shall
receive the following payments and benefits:
1.1 Accrued Salary and
Vacation, and Benefits. Executive shall receive all salary and
accrued vacation (less applicable withholding) earned through the
conclusion of the transition period (or termination date if there
is no transition period requested by the Company), and the
benefits, if any, under Company benefit plans to which Executive
may be entitled pursuant to the terms of such plans. The Company
shall pay 100% of the Executive’s medical premiums for the
same or reasonably equivalent medical coverage he had on the date
of his termination for a period until Executive becomes eligible
for medical insurance coverage at a new employer or until his own
and his spouse’s death if Executive is not able to or did not
secure employment where reasonably equivalent medical coverage he
had on the date of his termination has been provided.
1.2 Cash Severance Payment.
Executive shall receive a lump sum payment equal to the sum of
(A) three (3) times annual base salary plus (B) the
lower of $7,000,000 (Seven Million US Dollars) or three
(3) times the average annual cash bonus paid in respect to the
immediate past three (3) fiscal years, paid within five
(5) business days after the conclusion of the transition
period (or after the termination date if there is no transition
period requested by the Company). The above referenced cash
severance payment shall be “grossed-up” such that taxes
customarily due shall be paid by the Company.
1.3 Cash Bonus Payment.
Executive shall receive a payment in an amount equal to a pro rata
portion of Executive’s bonus through the quarter period that
Executive is employed by the Company during such year. Calculation
of bonus will be based on the corresponding results of earnings
through the full quarter period during which Executive is
terminated (even if Executive was not employed through the full
quarter period when termination occurred). The Cash Bonus Payment,
if any, shall be paid in a lump sum within 90 days after the end of
the quarter period in which Executive’s termination date
occurs. Payments under this section shall be less applicable
withholding.
The Severance Payment and benefits
provided for in this Section 1 shall be in lieu of any other
severance or termination pay, compensation or payment to which the
Executive may be entitled under any Company severance or
termination plan, program, practice or arrangement.
2. Termination (Without Cause) in
Absence of Change of Control .
In the event of Executive’s
Termination in Absence of a Change of Control, and without cause,
provided that Executive complies with the provisions of this
Agreement and performs the transition services that the Company may
request, Executive shall receive the following payments and
benefits:
2.1 Basic Severance
Compensation. Executive shall receive all salary and accrued
vacation (less applicable withholding) earned through the
conclusion of the transition period (or termination date if there
is no transition period requested by the Company), and the
benefits, if any, under Company benefit plans to which Executive
may be entitled pursuant to the terms of such plans. In addition,
the Company shall pay 100% of the Executive’s medical
premiums for the same or reasonably equivalent medical coverage he
had on the date of his termination for a period until Executive
becomes eligible for medical insurance coverage at a new employer
or until his own and his spouse’s death if Executive is not
able to or did not secure employment where reasonably equivalent
medical coverage he had on the date of his termination has been
provided.
2.2 Cash Severance Payment.
Executive shall receive a lump sum payment equal to the sum of
(A) two (2) times annual base salary plus (B) the
lower of $3,000,000 (Three Million US Dollars) or two
(2) times the average annual cash bonus paid in respect to the
immediate past three full fiscal years, paid within five
(5) business days after the conclusion of the transition
period (or after the termination date if there is no transition
period requested by the Company). The above referenced cash
severance payment shall be “grossed-up” such that taxes
customarily due shall be paid by the Company.
2.3 Cash Bonus Payment.
Executive shall receive a payment in an amount equal to a pro rata
portion of Executive’s bonus through the quarter period that
Executive is employed by the Company during such year. Calculation
of bonus will be based on the corresponding results of earnings
through the full quarter period during which Executive is
terminated (even if Executive was not employed through the full
quarter period when termination occurred). The Cash Bonus Payment,
if any, shall be paid in a lump sum within 90 days after the end of
the quarter period in which Executive’s termination date
occurs. Payments under this section shall be less applicable
withholding.
The Severance Payment and benefits
provided for in this Section 2 shall be in lieu of any other
severance or termination pay, compensation or payment to which the
Executive may be entitled under any Company severance or
termination plan, program, practice or arrangement.
3. Termination With Cause
.
In the event of Executive’s
termination with cause, the Company shall not be obligated to make
any severance payments, or provide any severance
benefits.
4. Definitions .
Terms used in this Agreement shall have
the meanings set forth in this Section 3.
4.1 “Cause” means
(a) Executive’s willful and continued failure to perform
substantially his duties with the Company (other than any such
failure resulting from incapacity due to documented physical or
mental illness) and specifically excluding any failure by
Executive, after reasonable efforts to meet performance
expectations, for thirty (30) days after a written demand for
substantial performance is delivered to Executive by the incumbent
Chairman of the Board which specifically identifies the manner in
which the Chairman (of the Board) believes that Executive has not
adequately performed his duties, or (b) a material, willful
breach committed in bad faith of the Company’s Code of
Conduct and Business Ethics policy, or (c) indictment or
conviction of a felony based upon a crime. For purposes of this
provision, no act or failure to act, on the part of Executive,
shall be considered as “willful” unless it is done, or
omitted to be done, by Executive in bad faith without reasonable
belief that Executive’s action or omission was in the best
interests of the Company.
4.2 “Change of
Control” means (a) any “person” (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)), other
than IAT Group, Inc., a trustee or other fiduciary holding
securities of the Company under an employee benefit plan of the
Company, becomes the “beneficial owner” (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more
of (A) the outstanding shares of common stock of the Company
or (B) the combined voting power of the Company’s
then-outstanding securities; (b) the Company is party to a
merger or consolidation, or series of related transactions, which
results in the voting securities of the Company outstanding
immediately prior thereto failing to continue to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving or another entity) at least fifty
(50%) percent of the combined voting power of the voting
securities of the Company or such surviving or other entity
outstanding immediately after such merger or consolidation;
(c) the sale or disposition of all or substantially all of the
Company’s assets (or consummation of any transaction, or
series of related transactions, having similar effect), unless at
least fifty (50%) percent of the combined voting power of the
voting securities of the entity acquiring those assets is held by
persons who held the voting securities of the Company immediate
prior to such transaction or series of transactions; (d) there
occurs a change in the composition of the Board of Directors of the
Company as of change of control date and within a two-year period
therefrom, as a result of which fewer
than a majority of the
directors are Incumbent Directors; (e) the dissolution or
liquidation of the Company, unless after such liquidation or
dissolution all or substantially all of the assets of the Company
are held in an entity at least fifty (50%) percent of the
combined voting power of the voting securities of which is held by
persons who held the voting securities of the Company immediately
prior to such liquidation or dissolution; (f) when the
incumbent Chairman ceases to occupy the position of Chairman of the
Board; or (g) any transaction or series of related
transactions that has the substantial effect of any one or more of
the foregoing.
4.3 “Company”
means Fresh Del Monte Produce Inc., any successor thereto and,
following a Change of Control, any successor or owner of
substantially all the business and/or assets of Fresh Del Monte
Produce Inc.
4.4 “Good Reason”
means the occurrence of any of the following conditions, without
Executive’s consent and which condition is not cured by the
Company within thirty (30) days after notice by Executive
specifying the condition: (a) a reduction or change by the Company
of Executive’s status, title, duties, responsibilities,
authority or reporting relationship such that Executive no longer
serves in a substantive, senior executive role for the Company
comparable in stature to Executive’s current role as of date
of execution of this agreement, or no longer reports to the
incumbent Chairman and Chief Executive Officer of the Company or a
reduction or change in the composition of executives reporting to
him, all of which, in the Executive’s reasonable judgment,
represents an adverse change from his status, title, position or
responsibilities, authority or reporting relationship; (b) a
reduction in Executive’s base salary or the reduction of the
percentage basis of his annual bonus payment, provided that a
reduction in base salary that is the result of a general reduction
in salary in an amount similar to reductions for other similarly
situated Company executives shall not constitute “Good
Reason”; (c) a reduction in benefits (other than future
option grants), provided that a reduction in benefits that is the
result of a general reduction in benefits in an amount similar to
reductions for other similarly situated Company employees shall not
constitute “Good Reason”; (d) the Company’s
requiring Executive to be based at any office or location more than
50 miles from the Company’s head
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