EXHIBIT 10(h)
EMPLOYMENT AGREEMENT
AGREEMENT by and between ▇▇▇▇▇▇▇, INC., a Delaware corporation (the
"Company"), and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Executive"), dated as of the 1st day of
January, 1996.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that
the Company will have the continued service and dedication of the Executive.
In addition, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements currently and upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. The Board of Directors also believes that the autonomy,
authority and responsibility possessed by the Executive is a significant
attribute of his employment and a Change of Control would be likely to
significantly diminish the attractiveness to Executive of employment by the
Company, and has determined to allow Executive to chose whether to continue in
the employ of the Company upon a Change of Control. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall be the first date
during the "Employment Period" (as defined in Section 1(b)) on which a Change
of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is terminated
or the Executive ceases to be an officer of the Company prior to the date on
which a Change of Control occurs, and it is reasonably demonstrated that such
termination of employment (1) was at the request of a third party who has
taken steps reasonably calculated to effect the Change of Control or (2)
otherwise arose in connection with or anticipation of the Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the
date immediately prior to the date of such termination of employment.
(b) The "Employment Period" is the period commencing on the date hereof
and ending on the earlier of the third anniversary hereof or the Date of
Termination (as defined in Section 4(f); provided, however, that if the Date
of Termination has not yet occurred, commencing on the third anniversary
hereof and on each annual anniversary of such date (such date and each annual
anniversary thereof is hereinafter referred to as a "Renewal Date"), the
Employment Period will be extended so as to terminate three years from such
Renewal Date unless either party shall have delivered to the other a Notice of
Termination (as defined in Section 4(e)). Notwithstanding the foregoing,
unless the Employment Period has already terminated, the Employment Period
shall be automatically extended upon a Change of Control so as to terminate
three years from the Effective Date (such three year period of the Employment
Period being hereinafter referred to as the "Change of Control Employment
Period").
(c) "Change of Control". For the purpose of this Agreement, a "Change of
Control" shall mean:
(i) There shall have occurred a change in control which the Company
would be required to report in response to Item 1 of Form 8-K promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
1
if such regulation is no longer in effect, any regulations promulgated by the
Securities and Exchange Commission pursuant to the Exchange Act which are
intended to serve similar purposes;
(ii) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), provided, however, that any
acquisition by the Company or its subsidiaries, or any employee benefit plan
(or related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the Outstanding Company
Common Stock and Company Voting Securities, as the case may be, shall not
constitute a Change of Control; or
(iii) Individuals who, as of January 1, 1994, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board, provided that any individual becoming a director subsequent to
January 1, 1994 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(iv) Approval by the stockholders of the Company of (x) a
reorganization, merger or consolidation, in each case, with respect to which
all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Company Common Stock and
Company Voting Securities immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or (y) a complete liquidation or
dissolution of the Company, or (z) the sale or other disposition of all or
substantially all of the assets of the Company.
(v) Anything in this Agreement to the contrary notwithstanding, if an
event that would, but for this paragraph, constitute a Change of Control
results from or arises out of a purchase or other acquisition of the Company,
directly or indirectly, by a corporation or other entity in which the
Executive has a direct or indirect equity interest, such event shall not
constitute a Change of Control; provided, however, that the limitation
contained in this sentence shall not apply to any direct or indirect equity
interest in a corporation or other entity (1) which equity interest is part of
a class of equity interests which are publicly traded on any securities
exchange or other market system, (2) received by the Executive, without the
Executive's concurrence or consent, as a result of a purchase or other
acquisition of the Company by such corporation or other entity, or (3)
received by the Executive, without the Executive's concurrence or consent, in
2
connection with a purchase or other acquisition of the Company by such
corporation or other entity in respect of any stock options or performance
awards granted to the Executive by the Company.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company during the Employment Period, in each case subject to the terms and
conditions of this Agreement.
3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, the Company agrees to employ the Executive as Executive
Vice President, or in such other capacity as the Company may designate,
provided that during the Change of Control Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location and in no event shall Executive be required to travel outside
such location more often than 45 days in any calendar year.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours to
the business and affairs of the Company and to use the Executive's reasonable
best efforts to perform faithfully and efficiently such responsibilities.
During the Change of Control Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (C) manage personal
investments, so long as such activities do not significantly interfere with
the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") in an
amount determined annually by the Compensation Committee of the Board of
Directors of the Company. The Annual Base Salary shall be payable no less
frequently than monthly.
(ii) Management Incentive Compensation Plan. In addition to Annual
Base Salary, during each year of the Employment Period, the Executive shall be
designated as a participant in the Company's Management Incentive Compensation
Plan (the "Bonus Plan") and, subject to meeting the criteria of the Bonus
Plan, shall receive the bonus award provided for therein (the "Annual Award").
(iii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year during the Change of Control
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to (x) the average annualized (for any fiscal year consisting of less than
twelve full months or with respect to which the Executive has been employed by
the Company for less than twelve full months) bonus (the "Recent Annual
Bonus") paid or payable to the Executive by the Company and its affiliated
companies in respect of the two fiscal years immediately preceding the fiscal
year in which the Effective Date occurs less (y) the Annual Award actually
paid to the Executive with respect to the current fiscal year under the Bonus
Plan. Each such Annual Bonus shall be paid not later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
3
(iv) Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary, the Annual Award and Annual Bonus payable as hereinabove
provided, the Executive shall be eligible to participate during the Employment
Period in all incentive, savings and retirement plans, practices, policies and
programs applicable to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive during the Change of Control Employment Period with
incentive, savings and retirement benefits opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by the
Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) and applicable to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide benefits
during the Change of Control Employment Period which are less favorable, in
the aggregate, than the most favorable of such plans, practices, policies and
programs in effect at any time during the 90-day period immediately preceding
the Effective Date.
(vi) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive provided that during the Change of Control Employment Period
such reimbursement shall be in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(vii) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(viii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of
a size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated
companies at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as provided at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(ix) Vacation. During the Change of Control Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plan, policies, programs and practices of the Company and its
affiliated companies as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as provided at any time thereafter with respect to other peer
incentives of the Company and its affiliated companies.
(x) Perquisites. During the Employment Period the Company also will
furnish the Executive without cost to him, (i) a Company owned or leased
full-sized luxury automobile not more than three years old, and (ii) an annual
examination of the Executive by a physician selected in accordance with the
4
Company's current policy, to the extent costs and expenses of the Executive to
be reimbursed are properly documented for federal income taxation purposes to
preserve any deduction for such reimbursement to which the Company may be
entitled.
4. Termination of Employment. (a) Prior to Effective Date. At any time
prior to the Effective Date, the Executive's employment may be terminated for
any reason, with or without cause, by the Company or by the Executive by
delivery of a Notice of Termination (as defined below) to the other party
hereto given in accordance with Section 11(b) of this Agreement.
(b) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice
in accordance with Section 11(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected
by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably).
(c) Cause. The Company may terminate the Executive's employment during
the Change of Control Employment Period for "Cause". For purposes of this
Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by
the Executive and intended to result in substantial personal enrichment of the
Executive at the expense of the Company, (ii) repeated violations by the
Executive of the Executive's obligations under Section 3(a) of this Agreement
which are demonstrably willful and deliberate on the Executive's part and
which are not remedied in a reasonable period of time after receipt of written
notice from the Company, or (iii) the conviction of the Executive of a felony
involving moral turpitude.
(d) Good Reason. The Executive's employment may be terminated by the
Executive during the Change of Control Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means (i) a Change of Control and/or
(ii) if Executive shall elect to remain in the employ of the Company during
the Change of Control Employment Period, the occurrence of any one or more of
the following during the Change of Control Employment Period:
A. the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a)(i)(A) of this
Agreement, or any other action by the Company which results in a
diminition in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Executive;
B. any failure by the Company to comply with any of the provisions
of Section 3(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
C. the Company's requiring the Executive to be based at any office
or location other than that described in Section 3(a)(i)(B) hereof;
5
D. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
E. any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
The Company acknowledges and agrees that a material inducement to Executive
in entering into this Agreement was the right of Executive to determine
whether to continue in the employ of the Company upon a Change of Control or
terminate such employment and receive the monetary payments and other benefits
provided for in Section 5(e).
(e) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be
not more than thirty days after the giving of such notice), and (ii) if the
Date of Termination is on or after the Effective Date, indicates the specific
termination provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under such provision. The failure
by the Executive to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from asserting such
fact or circumstance in enforcing the Executive's rights hereunder.
(f) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for death or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination, and (ii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of
death of the Executive or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, provided that if the Executive's death occurs during the
Change of Control Employment Period, the Company shall have the following
obligations: (i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the product of the
greater of the Annual Bonus paid or payable (and annualized for any fiscal
year consisting of less than twelve full months or for which the Executive has
been employed for less than twelve full months) to the Executive for the most
recently completed fiscal year during the Employment Period, if any, and the
Recent Annual Bonus (such greater amount hereafter referred to as the "Highest
Annual Bonus") and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator
of which is 365 and (iii) any compensation previously deferred by the
Executive (together with any accrued interest thereon) and not yet paid by the
Company (the amounts described in paragraphs (i), (ii) and (iii) are hereafter
referred to as "Accrued Obligations"). All Accrued Obligations, as well as
any amounts (the "SERP Amounts") payable to the Executive pursuant to the
▇▇▇▇▇▇▇, Inc. Executive Restoration Plan (the "Plan"), shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. Anything in this Agreement to the
contrary notwithstanding, if the Executive's death occurs during the Change of
Control Employment Period, the Executive's family shall be entitled to receive
benefits at least equal to the most favorable benefits provided by the Company
and any of its affiliated companies to surviving families of peer executives
of the Company and such affiliated companies under such plans, programs,
6
practices and policies relating to family death benefits, if any, as in effect
with respect to other peer executives and their families at any time during
the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their families.
(b) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations. All Accrued Obligations, and all SERP Amounts
if the Disability Effective Date occurs during the Change of Control
Employment Period, shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. Anything in this Agreement to the
contrary notwithstanding, if the Disability Effective Date occurs during the
Change of Control Employment Period, the Executive shall be entitled after the
Disability Effective Date to receive disability and other benefits at least
equal to the most favorable of those provided by the Company and its
affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect with respect to other peer executives and
their families at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families.
(c) Termination during Change of Control Employment Period for Cause
or Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Change of Control Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive the Annual Base Salary through the
Date of Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the
Executive terminates employment during the Change of Control Employment Period
other than for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations. In such
case, all Accrued Obligations and all SERP Amounts shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) Termination Other than for Death or Disability Prior to the
Effective Date. If the Executive's employment shall be terminated during the
Employment Period but prior to the Effective Date, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
executive in a lump sum in cash within 30 days of the Date of Termination.
(e) Termination During Change of Control Employment Period for Good
Reason. If the Executive shall terminate his employment during the Change of
Control Employment Period for Good Reason or if the Company shall terminate
the Executive's employment during the Change of Control Employment Period
other than for Cause or Disability:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination all Accrued Obligations
and all SERP Amounts, provided that notwithstanding the terms of the
Plan, 100% of the Company Contribution Credit Account (as defined
therein) shall be deemed vested;
(ii) the Company shall pay to the Executive as severance pay
within 30 days after the Date of Termination an amount equal to the
product of (x) 3 and (y) the sum of (i) Annual Base Salary and (ii) the
Highest Annual Bonus; and
(iii) from the Date of Termination through the end of the Change
of Control Employment Period, or such longer period as any plan,
program, practice or policy may provide, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the
7
plans, programs, practices and policies described in Section 3(b)(v) of
this Agreement if the Executive's employment had not been terminated in
accordance with the most favorable plans, practices, programs or
policies of the Company and its affiliated companies applicable to
other peer executives and their families during the 90-day period
immediately preceding the Effective Date, or, if more favorable to the
Executive, as in effect at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their
families. For purposes of determining eligibility of the Executive for
retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed
until the end of the Change of Control Employment Period and to have
retired on the last day of such period.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, programs, policies or practices provided by
the Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any other agreements with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of the Company or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program except as explicitly modified by this Agreement.
7. Full Settlement. 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 set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
amounts payable to Executive from any other employment or source shall not
reduce the amounts payable to Executive hereunder. The Company agrees to pay,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to Section 8 of this Agreement), plus
in each case interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen business
8
days of the Date of Termination, if applicable, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 8(b), shall be paid to the Executive
within five days of the receipt of the Accounting Firm's determination. If
the Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with an opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive.
(c) The Executive 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 not later than twenty business days after the Executive
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. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives 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 the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(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 effectively
to contest such claim;
(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 the Executive harmless, on an
after-tax basis, for any Excise Tax or income 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 8(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and ▇▇▇ for a refund or contest
the claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs the Executive
to pay such claim and ▇▇▇ for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect
9
thereto, imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension
of the statute of limitations relating to payment of taxes for the taxable
year of the Executive 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 the Executive 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 the Executive of an amount advanced by the
Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) 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 the
Executive of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions
of this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement during or with respect
to the Change of Control Employment Period.
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
10
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party, or by Federal Express,
Express Mail or other overnight courier service, or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
If to the Company:
The Compensation Committee
of the Board of Directors of ▇▇▇▇▇▇▇, Inc.
c/▇ ▇▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
c/▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, INC.
By
▇▇▇▇▇▇ ▇. ▇▇▇▇
President
11