EXHIBIT 10.3


 


AMENDED AND RESTATED RETENTION AGREEMENT


 


THIS AMENDED AND RESTATED RETENTION AGREEMENT (the “Agreement”),
is made on this 4th day of May, 2005 (the “Effective Date”),
by and between GARDENBURGER, INC., an Oregon Corporation (the “Company”)
and Robert Trebing (the “Executive”).


 


WHEREAS, the Executive serves as a valued employee of
the Company and along with other key members of management of the Company
(collectively, the “Executives”) provides essential services to the Company;
and


 


WHEREAS, the Company and the Executive have entered
into that certain Employment Agreement dated February 26, 2004, and an
Amendment to Employment Agreement dated March 24, 2005, pursuant to which the
Executive serves as the Senior Vice President and Chief Financial Officer of
the Company (collectively, the “Employment Agreement”); and


 


WHEREAS, in addition to the benefits that the
Executive may be entitled to receive under the Employment Agreement, the
Company and the Executive are parties to a Retention Agreement, dated January
27, 2005, and an Amendment to Retention Agreement, dated March 24, 2005,
pursuant to which the Company desires to establish an incentive for the
Executive to continue to be employed by the Company through and following the
execution of a definitive agreement relating to a Change in Control (as defined
in Section 2.4) or a Going Private Transaction (as defined in Section 2.7); and


 


WHEREAS, the Executive
has informed the Company that the Executive will be unable to devote
Executive’s complete unimpaired attention to continue providing services to the
Company to assist the Company in negotiating a transaction which contemplates a
Change in Control or Going Private Transaction and will be forced to consider
other employment opportunities, due to the personal financial risks that such a
Change in Control or Going Private Transaction imposes on the Executive, unless
the Company agrees to modify the terms of the Retention Agreement as provided
for in this Amended and Restated Retention Agreement; and


 


WHEREAS, the Company is
aware that the Executives are being recruited by other potential employers and
that certain of the Executives have already received offers regarding
alternative employment opportunities; and


 


WHEREAS, the Company has
determined that Executive’s continued services with the Company are important
to the Company’s efforts to maximize value pursuant to a Change in Control or
Going Private Transaction and that the Company would suffer adverse
consequences if Executive’s employment with the Company terminated.


 


NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and promises contained herein, and intending to be legally
bound hereby, the parties agree as follows:


 





















 


1.                                       Retention
Bonus.


 


1.1. 
Bonus Amount and Conditions.  Subject to Sections 1.2, 3, 4 and 5.1, the Company shall pay to the
Executive the Retention Bonus (as defined in Section 2.9) to the Executive if:
promptly, upon request of the Company, the Executive executes and delivers a
release of claims against the Company, which release shall be in the same form
as Paragraph 9 to the Separation Agreement attached to the Employment Agreement
between the Executive and the Company; and the earlier to occur of:


 


(a)                                  the
Executive has remained continuously employed by the Company through the earlier
of:  (i) the date of a full and complete
execution of a definitive agreement (the “Definitive Agreement”), the
consummation of which would result in either: 
(A) a Change in Control; or (B) a Going Private Transaction; or (ii)
January 27, 2007; or


 


(b)                                 the Executive’s employment by the Company is terminated by
the Company without Cause (as defined in Section 2.3) other than in connection with Executive’s death or
Disability (as defined in Section 2.6).


 


1.2. 
Timing and Form of Payment.


 


(a)                                  Subject
to Section 1.1, the Company shall pay to the Executive:  seventy-five percent (75%) of the Retention
Bonus in a lump sum as soon as administratively feasible following the earlier
of:  (i) the date of a full and complete
execution of a Definitive Agreement (the “Signing”); or (ii) January 27, 2007; provided, however,
that Executive shall not be entitled to the payment contemplated in this
Paragraph 1.2(a) unless the Executive exercises all reasonable efforts to
support a Signing which contemplates a Change in Control or Going Private
Transaction.


 


(b)                                 Subject to Section 1.1, the Company
shall pay the Executive the remaining twenty-five percent (25%) of the
Retention Bonus in a lump sum as soon as administratively feasible following
the earlier of:  (i) the date of the
consummation of the transactions contemplated by the Definitive Agreement; or
(ii) January 27, 2007,
provided, however, that Executive shall not be entitled to the payment
contemplated in this Paragraph 1.2(b) unless the Executive, after the
Signing,  exercises all reasonable
efforts to support the consummation of the applicable Change in
Control or Going Private Transaction and to cooperate with the Company to
consummate the Change in Control (including, if so requested by the Company,
providing assistance to the prospective buyer in obtaining financing for the
Change in Control) or Going Private Transaction.


 


2.                                       Certain
Definitions.  As used herein:


 


2.1. 
“Affiliate” means, with respect to a Person (as defined
below), another Person that directly or indirectly controls, or is controlled
by, or is under common control with such Person.


 


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2.2. 
“Base Salary” means the annual amount equal to Two Hundred
and Four Thousand Dollars ($204,000), as adjusted by the Board of Directors of
the Company from time to time.


 


2.3. 
“Cause” shall have the meaning set forth in Article I of
the Employment Agreement.


 


2.4. 
“Change in Control” shall have the meaning set forth in
Article I of the Employment Agreement, as amended.”


 


2.5. 
“Definitive Agreement” shall have the meaning assigned to
it in Section 1.1(a)(i) of this Agreement.


 


2.6. 
“Disability” shall have the meaning set forth in Article I
of the Employment Agreement.


 


2.7. 
“Going Private Transaction” shall have the meaning set
forth in Section (a)(3) of Rule 13e-3 promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).


 


2.8. 
“Person” means any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.


 


2.9. 
“Retention Bonus” means the amount equal to:


 


(a)                                  if
the Executive has remained continuously employed by the Company through the
date of the Signing and the Signing occurs on or before July 27, 2006, an
amount equal to twelve (12) months of Base Salary in effect at the time of the
payment pursuant to Section 1.2; or


 


(b)                                 if
the Executive has remained continuously employed by the Company through the
earlier of:  (i) the date of the Signing
which Signing occurs after July 27, 2006, or (ii) January 27, 2007, an amount
equal to sixteen (16) months of Base Salary in effect at the time of the
payment pursuant to Section 1.2; or


 


(c)                                  if
payment to the Executive is due as a result of Section 1.1(b) and the Executive’s
termination of employment occurs on or before July 27, 2006, the product
of:  (i) the amount equal to twelve (12)
months of Base Salary in effect at the time of the Executive’s termination of
employment; multiplied by (ii) the quotient of: 
(A) the number of days commencing on January 27, 2005 and ending on the
date of the Executive’s termination of employment; divided by (B) either:  (1) in the event of a Signing, the number of
days commencing on January 27, 2005 and ending on the date of the Signing; or
(2) in the event a Signing does not occur prior to January 27, 2007, then 730;
or


 


(d)                                 if
payment to the Executive is due as a result of Section 1.1(b) and the
Executive’s termination of employment occurs at anytime after July 27, 2006,
the product of:  (i) the amount equal to
sixteen (16) months of Base Salary in effect at the time of the Executive’s
termination of employment; multiplied by (ii) the quotient of:  (A) the number of days


 


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commencing on
January 27, 2005 and ending on the date of the Executive’s termination of
employment; divided by (B) either:  (1)
in the event of a Signing, the number of days commencing on January 27, 2005,
and ending on the date of the Signing; or (2) in the event a Signing does not
occur prior to January 27,2007, then 730.


 


2.10.  “Signing” shall have the
meaning assigned to it in Section 1.2(a)(i) of this Agreement.


 


3.                                       Parachute
Payments.  Payments under this
Agreement shall be made without regard to whether the deductibility of such
payments (or any other payments) would be limited or precluded by Section 280G
of the Internal Revenue Code of 1986 (the “Code”) and without regard to whether
such payments would subject the Executive to the federal excise tax levied on
certain “excess parachute payments” under Section 4999 of the Code; provided,
however, that if the Total After-Tax Payments (as defined below) would be
increased by the limitation or elimination of any amount payable under this
Agreement, then amounts payable under this Agreement will be reduced to the
extent necessary to maximize the Total After-Tax Payments.  The determination of whether and to what
extent payments under this Agreement are required to be reduced in accordance
with the preceding sentence will be made at the Company’s expense by an
independent, certified public accountant selected by the Executive and
reasonably acceptable to the Company.  In
the event of any underpayment or overpayment under this Agreement (as
determined after the application of this Section 3), the amount of such
underpayment or overpayment will be immediately paid by the Company to the
Executive or refunded by the Executive to the Company, as the case may be, with
interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.  For
purposes of this Agreement, “Total After-Tax Payments” means the total of all
“parachute payments” (as that term is defined in Section 280G(b)(2)
of the Code) made to or for the benefit of the Executive (whether made hereunder
or otherwise), after reduction for all applicable federal taxes (including,
without limitation, the tax described in Section 4999 of the Code).


 


4.                                       Certain
Limitations.


 


4.1. 
Cash Flow Limitation.  Notwithstanding any other provision of this
Agreement to the contrary, the aggregate amount of any payments due under this
Agreement or any similar retention agreements executed now or in the future
with any other employee of the Company or any of its Affiliates (each a, “Key
Employee”) to the Executive and one or more Key Employees in a single fiscal
year shall be limited so that in no event shall the aggregate amount to be paid
in cash cause the Company’s Available Credit plus Cash to fall below $1,500,000
(“Cash Flow Ceiling”); and in the event the Available Credit plus Cash would
fall below such amount, the Company shall deliver to the Executive to the
extent required by this Agreement a payment in an amount equal to the product
of (i) the Cash Flow Ceiling multiplied by (ii) a fraction, the numerator of
which is the aggregate amount of such Executive’s full payment hereunder for
the fiscal year and the denominator of which is the aggregate amount of all
payments due to the Executive and all other Key Employees in such fiscal year
(“Cash Flow Permitted Amount”).  To the
extent that payments under this Agreement to the Executive in a single fiscal
year would exceed the Cash Flow Ceiling (“Cash Flow Shortfall”), the Company
shall pay the Cash Flow Permitted Amount to the Executive and shall pay the
Cash Flow Shortfall (in whole or in part) as rapidly as permitted by the terms
of this Section 4.1.  The 


 


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obligation
to pay the Cash Flow Shortfall shall constitute subordinated debt of the
Company until paid.  The Company may, in
the sole discretion of the Board, elect to waive the annual cash flow
limitation set forth above, and absent such a waiver, the limitation shall
apply to payments due under this Agreement. 
For purposes of this Section 4.1, “Available Credit plus Cash” means
credit available to the Company as calculated by the Chief Financial Officer or
an acceptable designee using the borrowing worksheet supplied by the Company’s
Senior Lender plus the total amount of cash in the Company’s bank account(s).


 


4.2. 
Debt Limitations. 
Notwithstanding any other provision of this Agreement to the contrary,
if a payment of any amount to the Executive under this Agreement would, if
made, be prohibited pursuant to any agreement to which the Company (as defined
below) is or from time to time becomes a party, evidencing or governing
indebtedness for borrowed money (each, a “Debt Agreement”), the Company shall
identify to the Executive the part, if any, of the amount that the Company is
permitted to pay in cash under the Debt Agreement (the “Permitted Cash
Amount”).  If any amount is payable under
this Agreement in excess of the Permitted Cash Amount (the “Debt Covenant
Shortfall”) on the applicable payment date, the Company shall pay the Permitted
Cash Amount and shall pay the Debt Covenant Shortfall (in whole or in part) as
rapidly as permitted by and in accordance with the terms of the Debt
Agreement.  The obligation to pay the
Debt Covenant Shortfall shall constitute subordinated debt of the Company until
paid.  The Company shall use commercially
reasonable efforts to obtain a waiver of any such prohibition as may be
contained in any applicable Debt Agreement, but the Company shall not be
obligated to post additional collateral or to accelerate or increase its debt payments
to obtain such waiver.


 


4.3. 
Notwithstanding anything to the contrary in this Agreement, the
limitations contained in Sections 4.1 and 4.2 of this Agreement on the payment
of monies to which the Executive is entitled to receive under this Agreement
shall not apply if the triggering event that entitles the Executive to receive
monies under this Agreement is a Signing which contemplates a Sale Transaction,
as defined in the Employment Agreement between the Company and the Executive or
a consummation of a Sale Transaction.


 


5.                                       Miscellaneous.


 


5.1. 
No Liability of Officers and Directors for Severance
Upon Insolvency.  Notwithstanding any
other provision of this Agreement and intending to be bound by this provision,
the Executive hereby (a) waives any right to claim payment of amounts owed to
him, now or in the future, pursuant to this Agreement from directors or
officers of the Company if the Company becomes insolvent and/or files a
petition for relief under the United States Bankruptcy Code in any state or
Federal court (as determined in good faith by the Board), and (b) fully and
forever releases and discharges the Company’s officers and directors from any
and all claims, demands, liens, actions, suits, causes of action or judgments
arising out of any present or future claim for such amounts.


 


5.2. 
Waiver of Civil Code Section 1542.  The Company and the Executive each understand
and agree that the releases provided herein extend to all claims of every
nature and kind, whether known or unknown, suspected or unsuspected.  It is expressly understood and agreed that
the parties hereby waive the provisions of Section 1542 of the California Civil
Code 


 


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(and any statute or law of similar construction in any other
jurisdiction), which provides as follows:


 


 


A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.


 


5.3. 
Successors and Assigns. The Company may assign this
Agreement to any successor to all or substantially all of its assets and
business by means of liquidation, dissolution, merger, consolidation, transfer
of assets, or otherwise.  The rights of
the Executive hereunder are personal to the Executive and may not be assigned
by him.


 


5.4. 
Governing Law. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of California without regard to the principles of conflicts
of laws.


 


5.5. 
Enforcement.  Any
legal proceeding arising out of or relating to this Agreement will be
instituted in the United States District Court, Central District of California,
Santa Ana Division, or if that court does not have or will not accept
jurisdiction, in any court of general jurisdiction in the State of California,
County of Orange, and the Executive and the Company hereby consent to the
personal and exclusive jurisdiction of such court(s) and hereby waive any objection(s)
that they may have to personal jurisdiction, the laying of venue of any such
proceeding and any claim or defense of inconvenient forum.


 


5.6. 
Waivers; Separability.  The waiver by either party hereto of any
right hereunder or any failure to perform or breach by the other party hereto
will not be deemed a waiver of any other right hereunder or any other failure
or breach by the other party hereto, whether of the same or a similar nature or
otherwise.  No waiver will be deemed to
have occurred unless set forth in a writing executed by or on behalf of the
waiving party.  No such written waiver
will be deemed a continuing waiver unless specifically stated therein, and each
such waiver will operate only as to the specific term or condition waived.  If any provision of this Agreement is
declared to be invalid or unenforceable, in whole or in part, such invalidity
or unenforceability shall not affect the remaining provisions hereof which
shall remain in full force and effect.


 


5.7. 
Notices.  All
notices and communications that are required or permitted to be given hereunder
must be in writing and will be deemed to have been duly given when delivered
personally or upon mailing by registered or certified mail, postage prepaid,
return receipt requested, as follows:


 


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If to the Company, to:


 


Gardenburger, Inc.

15615 Alton Parkway, Suite 350

Irvine, California  92618

Attention:  Jane Furgiuele


With a copy to:


 


Pepper Hamilton LLP

5 Park Plaza, Suite 1700

Irvine, California  92614

Attention:  Michael A. Rule, Esquire


 


If to Executive, to:


 


Mr.
Robert Trebing


28682
Vista Ladera


Laguna
Niguel, CA 92677


 


or to such other address as may
be specified in a notice given by one party to the other party hereunder.


 


5.8. 
Entire Agreement; Amendments.  This Agreement contains the entire agreement
and understanding of the parties relating to the provision of a retention bonus
and merges and supersedes all prior and contemporaneous discussions, agreements
and understandings of every nature relating to that subject.  This Agreement may not be changed or
modified, except by an Agreement in writing signed by each of the parties
hereto.


 


5.9. 
Withholding.  The
Company will withhold from any payments due to Executive hereunder, all taxes,
FICA or other amounts required to be withheld pursuant to any applicable law.


 


5.10.  Headings Descriptive.  The headings of sections and paragraphs of
this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.


 


5.11.  Counterparts.  This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original, but all of which
together will constitute but one and the same instrument.


 


[Signature
page follows]


 


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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date and year first above written.


 


	
   

  	
  GARDENBURGER, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Scott
  C. Wallace

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
    Chief
  Executive Officer and President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Robert
  Trebing

  	
   

  
	
   

  	
  Robert Trebing

  
					



 


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