SEVERANCE PROTECTION
AGREEMENT
THIS AGREEMENT
made as of the ___day of ___200___by and between the
“Company” (as hereinafter defined) and
(the “Executive”).
WHEREAS, the Board
of Directors of the Company (the “Board”) recognizes
that the possibility of a Change in Control (as hereinafter
defined) exists and that the threat or the occurrence of a Change
in Control can result in significant distractions of its key
management personnel because of the uncertainties inherent in such
a situation;
WHEREAS, the Board
has determined that it is essential and in the best interest of the
Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in
Control and to ensure the Executive’s continued dedication
and efforts in such event without undue concern for the
Executive’s personal financial and employment security;
and
WHEREAS, in order
to induce the Executive to remain in the employ of the Company,
particularly in the event of a threat of the occurrence of a Change
in Control, the Company desires to enter into this Agreement with
the Executive to provide the Executive with certain benefits in the
event the Executive’s employment is terminated as a result
of, or in connection with, a Change in Control.
NOW, THEREFORE, in
consideration of the respective agreements of the parties contained
herein, it is agreed as follows:
1. Term
of Agreement . Subject to the remaining provisions of this
Section 1, this Agreement shall commence as of the date of
this Agreement and shall continue in effect until
, 200_; provided, however, that commencing on each anniversary of
thereafter, the term of this Agreement shall automatically be
extended for one (1) year unless either the Company or the
Executive shall have given written notice to the other at least
ninety (90) days prior thereto that the term of this Agreement
shall not be so extended; and provided, further, however, that
notwithstanding any such notice by the Company not to extend, if a
Change in Control occurs during the term of this Agreement, the
term of this Agreement shall not expire before the expiration of
24 months after the occurrence of a Change in Control.
Notwithstanding the foregoing, this Agreement shall expire and be
of no further
force and
effect in the event of any termination of employment that occurs
prior to a Change in Control; provided, that, in the event that a
Change in Control actually occurs following such termination of
employment, nothing in this Section 1 shall prohibit the
Executive from asserting that his or her termination of employment
was for Good Reason, consistent with the terms of this
Agreement.
2.1.
Accrued Compensation . For purposes of this Agreement,
“Accrued Compensation” shall mean an amount which shall
include all amounts earned or accrued through the
“Termination Date” (as hereinafter defined) but not
paid as of the Termination Date including (i) base salary,
(ii) reimbursement for reasonable and necessary expenses
incurred by the Executive on behalf of the Company during the
period ending on the Termination Date, (iii) vacation pay, and
(iv) bonuses and incentive compensation (other than the
“Pro Rata Bonus” (as hereinafter defined)).
2.2.
Base Amount . For purposes of this Agreement, “Base
Amount” shall mean the greater of the Executive’s
annual base salary (a) at the rate in effect on the
Termination Date or (b) at the highest rate in effect at any
time during the ninety (90) day period before the Change in
Control, and shall include all amounts of the Executive’s
base salary that are deferred under the qualified and non-qualified
employee benefit plans of the Company or any other agreement or
arrangement.
2.3.
Bonus Amount . For purposes of this Agreement, “Bonus
Amount” shall mean the average of the annual [cash] bonuses
[(including both cash bonus and any cash bonus foregone by the
Executive in exchange for restricted stock units of the Company)]
paid or payable during the three full fiscal years ended before the
Termination Date or, if greater, the three full fiscal years ended
before the Change in Control (or, in each case, such lesser period
for which [cash] annual bonuses [(including both cash bonus and any
cash bonus foregone by the Executive in exchange for restricted
stock units of the Company)] were paid or payable to the
Executive); provided, that, in the event the Executive has not been
employed by the Company for a full fiscal year, the “Bonus
Amount” shall equal the Executive’s target annual
[cash] bonus during the year of termination of
employment.
2
2.4.
Cause . For purposes of this Agreement, a termination of
employment is for “Cause” if (a) the Executive has
been convicted of, or has entered a plea of nolo contendere to,
(i) a crime constituting a felony under the laws of the United
States or any state thereof or (ii) a misdemeanor involving
moral turpitude, or (b) the termination is evidenced by a
resolution adopted in good faith by two-thirds of the Board that
the Executive (i) intentionally and continually failed
substantially to perform the Executive’s reasonably assigned
duties with the Company (other than a failure resulting from the
Executive’s incapacity due to physical or mental illness or
from the Executive’s assignment of duties that would
constitute “Good Reason” as hereinafter defined) which
failure continued for a period of at least thirty (30) days
after a written notice of demand for substantial performance has
been delivered to the Executive by the Company specifying the
manner in which the Executive has failed substantially to perform,
or (ii) intentionally engaged in conduct which is demonstrably
and materially injurious to the Company; provided, however, that no
termination of the Executive’s employment shall be for Cause
as set forth in clause (ii) above until (x) there shall
have been delivered to the Executive a copy of a written notice
setting forth that the Executive was guilty of the conduct set
forth in clause (ii) and specifying the particulars thereof in
detail, and (y) the Executive shall have been provided an
opportunity to be heard in person by the Board (with the assistance
of the Executive’s counsel if the Executive so desires). No
act, nor failure to act, on the Executive’s part, shall be
considered “intentional” unless the Executive has
acted, or failed to act, with a lack of good faith and with a lack
of reasonable belief that the Executive’s action or failure
to act was in the best interest of the Company.
2.5.
Change in Control . For purposes of this
Agreement:
(a) A
“Change in Control” shall mean any of the following
events:
(1) An
acquisition (other than directly from the Company) of any voting
securities of the Company (the “Voting Securities”) by
any “Person” (as the term person is used for purposes
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the “1934 Act”)) immediately after which
such Person has “Beneficial Ownership” (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of
twenty percent
3
(20%) or more
of the combined voting power of the Company’s then
outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting
Securities which are acquired in a “Non-Control
Acquisition” (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A
“Non-Control Acquisition” shall mean an acquisition by
(i) an employee benefit plan (or a trust forming a part
thereof) maintained by (x) the Company or (y) any
corporation or other Person of which a majority of its voting power
or its equity securities or equity interest is owned directly or
indirectly by the Company (a “Subsidiary”),
(ii) the Company or any Subsidiary, or (iii) any Person
in connection with a “Non-Control Transaction” (as
hereinafter defined).
(2) The
individuals who, as of the date of this Agreement, are members of
the Board (the “Incumbent Board”), cease for any reason
to constitute at least two-thirds of the Board; provided, however,
that if the election, or nomination for election by the
Company’s stockholders, of any new director was approved by a
vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as a
member of the Incumbent Board; provided, further, however, that no
individual shall be considered a member of the Incumbent Board if
such individual initially assumed office as a result of either an
actual or threatened “Election Consent” (as described
in Rule 14a-11 promulgated under the 1934 Act) or other actual
or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board (a “Proxy Contest”)
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest;
(3) A merger,
consolidation or reorganization involving the Company or a
subsidiary of the Company, unless
(i) the Voting
Securities of the Company, immediately before such merger,
consolidation or reorganization, continue immediately following
such merger, consolidation or reorganization to represent, either
by remaining outstanding or by being converted into voting
securities of the surviving corporation resulting from such merger,
consolidation or reorganization or its parent (the “Surviving
Corporation”), at least sixty percent (60%) of the
combined
4
voting power of
the outstanding voting securities of the Surviving
Corporation;
(ii) the
individuals who were members of the Incumbent Board immediately
before the execution of the agreement providing for such merger,
consolidation or reorganization constitute more than one-half of
the members of the board of directors of the Surviving Corporation;
and
(iii) no person
(other than the Company, any Subsidiary, any employee benefit plan
(or any trust forming a part thereof) maintained by the Company,
the Surviving Corporation or any Subsidiary, or any Person who,
immediately before such merger, consolidation or reorganization had
Beneficial Ownership of fifteen percent (15%) or more of the then
outstanding Voting Securities) has Beneficial Ownership of fifteen
percent (15%) or more of the combined voting power of the Surviving
Corporation’s then outstanding voting securities.
(a transaction
described in clauses (i) through (iii) shall herein be
referred to as a “Non-Control Transaction”);
(4) A complete
liquidation or dissolution of the Company; or
(5) The
consummation of a sale, lease, transfer, conveyance or other
disposition, in one or a series of related transactions, of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
(b) Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the “Subject Person”)
acquired Beneficial Ownership of more than the permitted amount of
the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of
Voting Securities outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by
the Company, and after such share acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional
voting Securities which increases the percentage of the then
outstanding Voting
5
Securities
Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
(c) Notwithstanding
anything contained in this Agreement to the contrary, if the
Executive’s employment is terminated before a Change in
Control and the Executive reasonably demonstrates that such
termination (1) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control and who effectuates a Change in Control
(a “Third Party”) or (2) otherwise occurred in
connection with, or in anticipation of, a Change in Control which
actually occurs, then for all purposes of this Agreement, the date
of a Change in Control with respect to the Executive shall mean the
date immediately before the date of such termination of the
Executive’s employment.
2.6.
Company . For purposes of this Agreement, the
“Company” shall mean H. J. Heinz Company, a
Pennsylvania corporation with its principal offices at Pittsburgh,
Pennsylvania, and shall include its “Successors and
Assigns” (as hereinafter defined).
2.7.
Disability . For purposes of this Agreement,
“Disability” shall mean a physical or mental infirmity
which impairs the Executive’s ability to substantially
perform the Executive’s duties with the Company for a period
of one hundred eighty (180) consecutive days and the Executive
has not returned to the Executive’s full time employment
before the Termination Date as stated in the “Notice of
Termination” (as hereinafter defined).
2.8.
Good Reason . For purposes of this Agreement:
(a) “Good
Reason” shall mean the occurrence after a Change in Control
of any of the events or conditions described in subsections
(l) through (7) hereof:
(1) a change
in the Executive’s title, position, duties or
responsibilities (including reporting responsibilities) which
represents a material adverse change from the Executive’s
title, position, duties or responsibilities as in effect at any
time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter; or any removal of the Executive
from or failure to reappoint or reelect him to any one of such
offices or
6
positions that
represents a material adverse change, except in connection with the
termination of the Executive’s employment for Disability,
Cause, as a result of the Executive’s death or by the
Executive other than for Good Reason;
(2) a material
reduction in the Executive’s base salary or any failure to
pay the Executive any compensation or benefits to which the
Executive is entitled within five (5) days of the date
due;
(3) the Executive
being required by the Company to perform the Executive’s
regular duties at any place outside a 30-mile radius from the place
where the Executive’s regular duties were performed
immediately before the Change in Control, except for reasonably
required travel on the Company’s business which is not
materially greater than such travel requirements in effect
immediately before the Change in Control;
(4) the failure by
the Company to provide the Executive with compensation and
benefits, in the aggregate, that are not materially less (in
opportunities) than those provided for under the compensation and
employee benefit plans, programs and practices in which the
Executive was participating at any time within ninety (90) days
preceding the date of a Change in Control or at any time
thereafter, which may include, but not be limited to, the plans
listed on Appendix A;
(5) any material
breach by the Company of any provision of this
Agreement;
(6) any purported
termination of the Executive’s employment for Cause by the
Company which does not comply with the terms of Section 2.4;
or
(7) the failure of
the Company to obtain an agreement from any Successors and Assigns
to assume and agree to perform this Agreement, as contemplated in
Section 7 hereof.
In order to invoke
a termination for Good Reason, the Executive shall provide written
notice to the Company of a condition described in clauses
(1) through (7) within 90 days following the
Executive’s initial knowledge of the existence of such
condition or conditions, specifying in reasonable detail the
conditions constituting Good Reason, and the Company shall have
14 days following receipt of such written notice during which
it may remedy the condition. If the Company fails to remedy the
specified conditions within such
7
14-day period,
the Executive must terminate employment within 30 days
following the end of such 14-day period for termination to
constitute a termination for Good Reason.
(b) Any
event or condition described in this Section 2.8(a)(1) through
(7) which occurs before a Change in Control but which the
Executive reasonably demonstrates (1) was at the request of a
Third Party, or (2) otherwise arose in connection with, or in
anticipation of, a Change in Control which actually occurs, shall
constitute Good Reason for purposes of this Agreement
notwithstanding that it occurred before the Change in Control and
without regard to the notice and cure provisions of
Section 2.8(a) which shall not apply with respect to such
event or condition.
2.9.
Notice of Termination . For purposes of this Agreement,
following a Change in Control, “Notice of Termination”
shall mean a written notice of termination from the Company of the
Executive’s employment which indicates the specific
termination provision in this Agreement relied upon and which sets
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.
2.10.
Pro Rata Bonus . For purposes of this Agreement, “Pro
Rata Bonus” shall mean an amount equal to the Bonus Amount
multiplied by a fraction, the numerator of which is the number of
days in the fiscal year through the Termination Date and the
denominator of which is 365.
2.11.
Successors and Assigns . For purposes of this Agreement,
“Successor and Assigns” shall mean a corporation or
other entity which has acquired or succeeded to all or
substantially all or the assets and business of the Company
(including this Agreement) whether by operation of law or
otherwise.
2.12.
Termination Date . For purposes of this Agreement,
“Termination Date” shall mean in the case of the
Executive’s death, the Executive’s date of death, in
the case of Good Reason, the last day of the Executive’s
employment, and in all other cases, the date specified in the
Notice of Termination; provided, however, that if the
Executive’s employment is terminated by the Company for Cause
or due to Disability, the date specified in the Notice of
Termination shall be at least 30 days from the date the Notice
of Termination is given to the Executive, provided that in the case
of Disability the Executive shall not have returned to the
full-time performance of the Executive’s duties during such
period of at least 30 days.
8
3.
Termination of Employment.
3.1.
Amount of Compensation and Benefits . If, during the term of
this Agreement, the Executive’s employment with the Company
shall be terminated within twenty-four (24) months following a
Change in Control, the Executive shall be entitled to the following
compensation and benefits:
(a) If
the Executive’s employment with the Company shall be
terminated (1) by the Company for Cause or Disability,
(2) by reason of the Executive’s death, or (3) by
the Executive for other than Good Reason, the Company shall pay to
the Executive the Accrued Comp
|
