EXHIBIT 10.12
FORM OF CHANGE OF CONTROL AGREEMENT
This Agreement (the "Agreement") is made this __ day of October, 1998
by and between Favorite Brands International, Inc., a Delaware corporation
("FBI") and _________________________ ("Employee").
WHEREAS, FBI desires to retain Employee as a key managerial employee.
WHEREAS, in order to induce Employee to remain employed by FBI, FBI is
willing to offer Employee the benefits set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the continued
employment of Employee and for other good and valuable consideration the
sufficiency of which is acknowledged, the parties agree as follows:
1. Definitions. The following terms shall have the following
meanings:
(a) Without Cause. Termination "Without Cause" shall mean termination
for reasons other than: (i) financial dishonesty including, without limitation,
misappropriation of funds or property of FBI, or any attempt by Employee to
secure any personal profit related to the business or the business opportunities
of FBI without the informed approval of the Board of Directors of FBI; (ii) a
repeated refusal to comply with reasonable directives of Employee's direct
supervisor or the Chief Executive Officer of FBI, or the recklessness or willful
misconduct in the performance of duties assigned to Employee by the such
officer; or (iii) the conviction of any felony or any misdemeanor involving
moral turpitude or fraud.
(b) Good Reason. Termination with "Good Reason" shall mean the
termination of Employee's employment with FBI by written notice, effective on or
after the date of delivery of such notice, from Employee to FBI, upon the
occurrence of any of the following; (i) a material diminution in Employee's
title or office, or in the nature or scope of Employee's authority, duties,
responsibility or status, or in Employee's reporting responsibilities,
compensation, employee benefits or perquisites; or (ii) a written notice
delivered to Employee instructing Employee to change Employee's principal place
of business or principal residence to a location that is more than 30 miles from
Employee's current place of business; provided, however, that no changes
referred to in the preceding clauses (i) and (ii) shall be deemed to constitute
a good reason if you agree to remain an employee of FBI or its successors.
(c) Change of Control. A "Change of Control" means the occurrence of
any of the following: (i) a sale of all or substantially all of the assets of
FBI or Favorite Brands International Holding Corp. ("Holdings"), (ii) any merger
or consolidation of FBI or a sale of outstanding capital stock of FBI subsequent
to the consummation of which the holders of FBI's voting stock prior to such
transaction hold less than fifty percent (50%) of the outstanding voting stock
of such surviving entity following such transaction or (iii) any merger or
consolidation of Holdings or a sale of outstanding capital stock of Holdings
subsequent to the consummation of
which the holders of Holdings' voting stock prior to such transaction hold less
than fifty percent (50%) of the outstanding voting stock of such surviving
entity following such transaction.
(d) Employee Base Salary. "Employee Base Salary" shall mean the
annual base salary being paid by FBI to Employee on the date that the Change of
Control occurs.
(e) Employee Bonus. "Employee Bonus" shall mean the most recent
annual performance bonus actually paid to Employee by FBI for the most recent
complete fiscal year preceding the Change of Control provided that if Employee
did not receive a bonus for such fiscal year or received a partial bonus for
such fiscal year, in either case as a result of Employee only being employed by
FBI for a portion of such fiscal year, then the term "Employee Bonus" shall mean
such Employee's target bonus.
2. Change of Control Payments.
(a) Change of Control Bonus. If Employee is employed by FBI on the
date that a Change of Control occurs and in connection with such Change of
Control TPG Partners L.L.P. ("TPG") achieves an internal rate of return or the
equity sold by TPG in connection with such Change of Control equal to or greater
than 8%, then:
(i) within 10 business days of such Change of Control FBI shall pay
Employee a bonus equal to the sum of Employee's Base Salary plus Employee's
Bonus; and
(ii) If (I) Employee is employed by FBI or its successor on the first
anniversary of the Change of Control, or (II) Employee is terminated by FBI
or its successor Without Cause prior to the first anniversary of the Change
of Control, or (III) Employee terminates his employment with FBI or its
successor for Good Reason prior to the first anniversary of the Change of
Control, then upon the earliest to occur of such events FBI shall pay to
Employee an additional bonus equal to the sum of Employee's Base Salary
plus Employee's Bonus.
(b) Supplemental Change of Control Bonus. If Employee is employed by
FBI on the date that a Change of Control occurs and in connection with such
Change of Control TPG achieves an internal rate of return on the equity sold by
TPG in connection with such Change of Control that is less than 8%, then:
(i) within 10 business days of such Change of Control FBI shall pay
Employee a bonus equal to Employee's Base Salary; and
(ii) If (I) Employee is employed by FBI or its successor on the first
anniversary of the Change of Control, or (II) Employee is terminated by FBI
or its successor Without Cause prior to the first anniversary of the Change
of Control, or (III) Employee terminates his employment with FBI or its
successor for Good Reason prior to the first anniversary of the Change of
Control, then upon the earliest to occur of such events FBI shall pay to
Employee an additional bonus equal to Employee's Base Salary.
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(c) TPG Rate of Return. For purposes of this Agreement, TPG's
internal rate of return shall be calculated in the same manner that TPG
calculates and reports such return to its Limited Partners. TPG's determination
of such rate of return shall be binding upon FBI and Employee.
3. Payment Limitation Provision. Notwithstanding the provisions of
Section 2 above, in the event that in the opinion of tax counsel selected and
compensated by FBI ("Tax Counsel"), any portion of the benefits payable under
Section 2 of this Agreement, together with any other payments or benefits under
any other agreement with, or plan of FBI to or for the benefit of the Employee
(in aggregate, "Total Payments") constitute an "excess parachute payment" within
the meaning of Section 2806 of the Internal Revenue Code of 1986, as amended
(the "Code"), and subject in all events to the last sentence of this Section 3,
then the payments under Section 2 hereof shall be reduced or eliminated until no
portion of the Total Payments are subject to the excise tax under Section 4999
of the Code, or until the payment under Section 2 hereof is reduced to zero. For
purposes of this limitation (i) no portion of the Total Payments the receipt or
enjoyment of which Employee shall have waived in writing prior to the date of
payment thereof shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which in the opinion of Tax Counsel does
not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of
the Code, (iii) the payments under Section 2 hereof shall be reduced only to the
extent necessary so that such payment in its entirety constitutes reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code or is otherwise not subject to excise tax under Section
4999 of the Code, in the opinion of Tax Counsel and (iv) the value of any non-
cash benefit and all deferred payments and benefits included in the Total
Payments shall be determined by the mutual agreement of FBI and Employee in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
Notwithstanding anything to the contrary in this Section 3 whether express or
implied, the payments under Section 2 hereof shall not be reduced if, after
taking into account any income and excise taxes imposed on the Total Payments,
the Employee's net after-tax benefit of receiving the Total Payments without
reduction under this Section 3 exceeds Employee's net after-tax benefit from
receiving the Total Payments after the reduction described in the first sentence
hereof.
4. Miscellaneous.
(a) Withholding. All payments to be made to Employee hereunder shall
be subject to any required withholding for Federal, state or local taxes.
(b) Payments Cumulative. The payments to be made to Employee pursuant
to this Agreement are in addition to any payments Employee may be entitled to
under any other agreement, plan or program, including any other severance or
bonus plan or agreement.
(c) No Obligation. This Agreement shall not create any obligation on
the part of FBI to continue any other existing compensation plans or policies or
to establish or continue any other compensation programs, plans or policies of
any kind. Nothing in this Agreement shall confer upon the Employee the right to
continue in the service of FBI or any other company or
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affect any right which FBI or way other company may have to terminate the
service of Employee.
(d) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors and assigns of
FBI, whether by way of a merger, purchase, consolidation or otherwise.
(e) Governing Law. This Agreement shall be governed by the laws of
the State of Illinois applicable to agreements made and to be performed entirely
within such State.
(f) Amendments. This Agreement may not be altered, modified, changed
or discharged, except by a writing signed by or on behalf of both FBI and the
Employee.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date and year first above written.
FAVORITE BRANDS INTERNATIONAL, INC.
By: _______________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
By: _______________________________
Name:
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