EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and
between Phar-Mor, Inc., a Pennsylvania corporation (the "Company"), and M. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ (the "Employee") as of June 5, 1997 (the "Effective Date").
WHEREAS, Employee is currently employed by Company pursuant to a
written employment agreement dated September 11, 1995 (the "Existing
Agreement"); and
WHEREAS, the Company desires to continue employing Employee upon
modified terms and conditions of employment; and
WHEREAS, the Company and Employee desire to set forth in this Agreement
the terms and conditions of Employee's continued employment.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
I. EMPLOYMENT AND TERM.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions hereinafter set forth. This Agreement
shall commence on the Effective Date and continue in force and effect for two
years (the "Stated Term") through June 4, 1999 unless sooner terminated pursuant
to the provisions of Section IV of the Agreement.
II. DUTIES.
Subject to the provisions of Section IV of this Agreement:
A. The Company shall employ Employee and Employee shall serve the
Company for the Stated Term in the capacity of President and Chief Operating
Officer of the Company. The Company agrees that the duties that may be assigned
to Employee shall be usual and customary duties of the offices or positions to
which he may from time to time be appointed or elected. Employee shall have such
corporate power and authority as reasonably required to enable the discharge of
duties in any office that may be held.
B. Employee agrees to devote substantially all of his business time,
energies and abilities to the business of the Company. Nothing herein shall
prevent Employee, upon approval of the Board, from serving, or continuing to
serve upon termination of employment, as a director or trustee of other
corporations or businesses that are not in competition with the business of the
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Company as set forth in Section V of this Agreement or in competition with any
present or future affiliate of the Company.
C. Employee shall report to the Chief Executive Officer and Chairman of
the Board or, at the Board's direction, to the Board.
III. COMPENSATION.
A. Base Salary. The Company shall pay to Employee a base salary of
$636,000.00 per year for the first year of the Stated Term which salary shall be
retroactive to December 9, 1996. Said base salary shall be increased to
$675,000.00 on June 5, 1998 for the second year of the Stated Term. Such salary
shall be earned weekly and shall be payable in arrears in periodic installments
no less frequently than monthly in accordance with the Company's customary
practices. Amounts payable shall be reduced by standard withholding and other
deductions authorized by Employee or required by applicable law.
B. Bonus. The Company will pay to Employee annually a bonus in an
amount not less than the amount Employee is entitled to under the Company's
incentive/bonus plan. For the Company's fiscal year ending in 1997, the Company
will pay the Employee a bonus equal to the greater of (i) 60% of his base salary
earned during such fiscal year (the "Minimum Bonus"), or (ii) the amount to
which he is entitled under the incentive/bonus plan then in effect. Thereafter,
the Company will pay the Employee a bonus equal to the amount to which he is
entitled under the incentive/bonus plan of the Company in effect from time to
time. If the fiscal year of the Company is changed, the Employee will receive a
bonus pro-rated to the amount to which he would otherwise be entitled hereunder
based on the number of months in the short year, or such other equitable method
as may be mutually agreed upon by Employee and the Company.
C. Stock Options. Employee has previously earned and is entitled to
receive, subject to the applicable vesting schedule, options to purchase 175,000
shares of the Company at $8.00 per share. Additionally, Employee shall also be
eligible and entitled to receive on June 5, 1997, a nonqualified stock option
for 100,000 shares of Company common stock at a per share exercise price equal
to the fair market value of a share of common stock on said grant date (the
"Option"). The Option shall vest as to one-third of the shares on said grant
date, one-third of the shares on the first anniversary of said grant date and
one-third on the second anniversary of said grant date. Notwithstanding the
foregoing, if, at any time, the Employee's employment is terminated by the
Company without Cause (as defined in Section IV.B. hereof) or the Employee
terminates employment with the Company for Good Reason (as defined in Section
IV.C. hereof), all said options shall immediately vest. During the term of this
Agreement Employee shall remain eligible, subject to the discretion of the
Company, to receive additional option awards ("Additional Options").
D. Other Stock or Equity Plans. Employee shall be eligible to
participate under any other stock or equity incentive plan or benefit provided
by the Company to senior officers at the
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discretion of the Company. For purposes of this Agreement, "senior officer"
means an officer of the Company of the rank of senior vice president or above.
E. Welfare Benefit Plans. Employee and/or his family, as the case may
be, shall (subject only to exceptions of general applicability or applicable
legal requirements) be eligible to participate in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company (including, without limitation, pension, medical, prescription, dental,
disability, and life insurance plans and programs) to the extent available
generally to senior officers of the Company.
F. Expenses. Employee shall be entitled to receive prompt reimbursement
for all reasonable employment expenses incurred by him in accordance with the
policies, practices and procedures of the Company as in effect generally with
respect to senior officers.
G. Vacation. Employee shall be entitled during the term of this
Agreement to four (4) weeks paid vacation per annum. Employee may accumulate
vacation only to the extent permitted by the policies, practices and procedures
of the Company as in effect generally with respect to senior officers.
H. Car or Car Allowance. Employee shall be entitled to a car or car
allowance to the extent applicable generally to senior officers.
I. Attorneys' Fee Reimbursement. Within ten days after presentation of
the invoice therefore, the Company shall pay to the law firm of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇ in Detroit, Michigan, an amount not to exceed $9,500.00 for
legal fees incurred by Employee.
J. Reservation of Right to Amend. With respect to the benefits provided
to Employee in accordance with Section III.E., the Company reserves the right to
modify, suspend or discontinue any and all of the plans, practices, policies and
programs at any time without recourse by Employee so long as such action is
taken with respect to senior officers or management generally and does not
single out Employee.
IV. TERMINATION.
A. Death or Disability. Employee's employment shall terminate
automatically upon Employee's death. If the Company determines in good faith
that a Disability of Employee has occurred (pursuant to the definition of
Disability set forth below), Company may terminate Employee's employment by
providing Employee written notice in accordance with Section XVI of the
Company's intention to terminate Employee's employment. In such event, Employee
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by Employee, provided that, within the 30 days after such
receipt, Employee shall not have returned to full-time performance of his
duties.
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For purposes of this Agreement, "Disability" means a physical or mental
impairment which (i) substantially limits a major life activity of Employee,
(ii) renders Employee unable to perform the essential functions of his position,
even with reasonable accommodation that does not impose an undue hardship on the
Company, and (iii) has contributed to Employee's absence from his duties with
the Company on a full-time basis for more than 60 consecutive days. The Company
reserves the right, in good faith, to make the determination of Disability under
this Agreement based upon information (as to items (i) and (ii) above) supplied
by a physician selected by the Company or its insurers and acceptable to
Employee or his legal representative (such agreement as to acceptability not to
be withheld unreasonably).
B. Cause. The Company may terminate Employee's employment for Cause
(pursuant to the definition of Cause set forth below) by providing Employee
written notice in accordance with Section XVI of the Company's intention to
terminate Employee's employment, setting forth in such notice the specific
grounds therefor. In such event, Employee's employment with the Company shall
terminate effective as of the date of receipt of such notice by Employee.
For purposes of this Agreement, "Cause" means (1) a material breach by
Employee of Employee's obligations under Section II of this Agreement (other
than as a result of incapacity due to physical or mental illness), which is
demonstrably willful and deliberate on the Employee's part and is committed in
bad faith or without reasonable belief that such conduct is in the best
interests of the Company, or which is the result of Employee's gross neglect of
duties, and, in either case, not remedied in a reasonable period of time not
more than five days after receipt of written notice from the Board specifying
such breach, (2) the conviction of Employee of a felony or other crime involving
fraud, dishonesty or moral turpitude, or (3) the commission by Employee of a
fraud which results in a material financial loss to the Company.
C. Good Reason. Employee may terminate Employee's employment for Good
Reason. Employee shall provide the Company written notice in accordance with
Section XVI of Employee's intention to terminate Employee's employment for Good
Reason, setting forth in such notice the grounds therefor. Employee's employment
with the Company shall terminate effective as of the earlier of (i) the 15th day
after the Company's receipt of such notice or (ii) such later date as set forth
in such notice, unless the Company has cured the grounds therefor.
For purposes of this Agreement, "Good Reason" means (1) Employee's
position (including responsibilities, title, reporting requirements or
authority) is reduced below the level set forth in Section II.A. hereof (2)
employee and/or his job functions are transferred to a location more than 25
miles from the location of his current office (3) the Company fails in any
material respect to comply with the provisions of Section III of this Agreement
(4) the Company has within the prior twelve months undergone a Change of Control
(pursuant to the definition of Change of Control set forth below), or (5) the
Company purports to terminate Employee's employment otherwise than as expressly
permitted by this Agreement or without payment of any amounts required to be
paid under Section IV.F. For purposes of this Agreement, "Change of Control"
shall mean (a) the acquisition by any individual, entity or group of beneficial
ownership of 20% or more of either (i) the then outstanding shares of common
stock of the Company, or (ii) the combined
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voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors of the Company or (b) individuals
who, as of the date of this Agreement, constitute the Board cease for any reason
to constitute at least a majority of the Board; or (c) approval by the
shareholders of the Company of a reorganization, merger or consolidation which
results in a change of the ownership and/or voting rights of 30% or more of (i)
the then outstanding shares of common stock of the Company, or (ii) a majority
of the members of the Board of the Company do not remain members of the Board of
the entity resulting from such reorganization, merger or consolidation; or (d)
approval by the shareholders of the Company of a liquidation or dissolution of
the Company, or the sale or other disposition of all or substantially all of the
assets of the Company. For the purposes of this Agreement, Change of Control
shall not include any change in ownership of the Company's common stock
resulting from any transaction between the current principals of the ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ LLC.
D. Other Than Cause or Good Reason or Death or Disability. The Company
may terminate Employee's employment without cause by providing Employee written
notice in accordance with Section XVI of the Company's intention to terminate
Employee's employment. In such event, Employee's employment shall terminate
effective on the 30th day after receipt of such notice by Employee.
E. Termination by Employee Other Than for Good Reason. The Employee may
voluntarily terminate his employment with the Company for any reasons
whatsoever, other than in a situation where he has Good Reason for doing so, by
providing Employer written notice thereof in accordance with Section XVI. In
such event, Employee's employment shall terminate effective on the thirtieth day
after the receipt of such notice by Company unless the parties mutually agree to
an earlier termination.
F. Obligations of the Company Upon Termination. Upon termination of
Employee's employment for any reason, the Company shall have no further
obligations to Employee (or his estate or legal representative) under this
Agreement other than the following:
1. Death or Disability. If Employee's employment is terminated by
reason of Employee's Death or Disability, the Company shall (a) pay the sum of
(i) Employee's annual base salary through the end of the calendar month during
which the termination occurs (to the extent not theretofore paid), (ii) any
accrued vacation pay not theretofore paid, and (iii) any accrued incentive
compensation that has been fixed and determined, which the Company shall pay to
Employee or his estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the date of termination, or earlier as may be required by
applicable law (b) pay any amounts then due or payable pursuant to the terms of
any applicable welfare benefit plans notwithstanding such termination of
employment and (c) perform its obligations under any then outstanding stock
option awards, in accordance with the terms of any applicable stock or equity
incentive plan (the sum of the amounts and benefits described in clauses (a),
(b) and (c) shall be hereinafter referred to as the "Accrued Obligations").
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2. Cause. If Employee's employment is terminated by the Company for
Cause, the Company shall timely pay any Accrued Obligations. If it is
subsequently determined that the Company did not have Cause for termination
under Section IV.B., then the Company's decision to terminate shall be deemed to
have been made under Section IV.D, and the amounts payable under Section IV.F.3
below shall be the only amounts Employee may receive for his termination.
3. Other Than for Cause or by Reason of Death or Disability. If the
Company terminates Employee's employment (other than for Cause or because of his
Death or Disability), or Employee terminates his employment for Good Reason, the
Company shall (a) timely pay any Accrued Obligations (including but not limited
to any immediately vested stock options in accordance with Section III C.
hereof) and (b) if such termination occurs prior to June 5, 1998, pay Employee a
lump sum equal to two times (or if such termination occurs on or after June 5,
1998, one and one half times) the sum of (i) the annual base salary contained in
Section III.A. hereof (or any higher base salary currently in effect on the date
of termination) ("Base Salary") and (ii) the greater of (x) the average of the
annual bonus payable to the Employee by the Company in respect to the two fiscal
years preceding the fiscal year in which the termination occurs, annualized if
any of the fiscal years is shorter than twelve months (or the average of bonuses
paid by the Company for such shorter period preceding the fiscal year in which
the Employee was employed) or (y) the Minimum Bonus (the greater of (x) or (y)
being the "Bonus Amount"). In addition, any Additional Options granted to
Employee under any applicable stock or equity incentive plan shall continue to
vest (in accordance with the applicable option agreements) during the remainder
of the Stated Term as if such termination had not occurred and the termination
of service for purposes of any such plan and such option agreements shall be
deemed to occur at the expiration of the Stated Term. The Company shall also pay
on behalf of Employee the full cost of the continuation for two years of that
level of health benefit coverage provided by the Company to Employee and/or his
family immediately prior to termination of his employment. Employee shall be
entitled to exercise his rights to continued coverage under COBRA upon the
expiration of said two years of continued health benefit coverage. Further, the
Company shall pay to Employee, within fourteen days of presentation of receipts
or other substantiation reasonably required hereunder, an amount equal to (i)
all out of pocket expenses for packing and moving his household effects and
automobiles by commercial moving service from Youngstown, Ohio to any other
location in the continental United States and (ii) any loss he suffers on his
home in Youngstown, Ohio equal to the excess of the purchase price of his home,
plus any capital improvements thereto, over the Sale Price (as defined herein)
((i) and (ii) jointly referred to as the "Moving Reimbursement"). The Sale Price
means the actual selling price to a third party, less commissions and other
customary expenses of sale, for which Employee sells his home if the sale occurs
within 180 days after termination of employment or, if no such sale has occurred
within such period, the Appraised Value (as defined herein). The Appraised Value
means the fair market value of the home as of the date of the appraisal as
determined by a qualified appraiser mutually agreed to by the Employee and the
Company. If the parties cannot mutually agree, each party shall pick an
appraiser who in turn shall mutually agree on a third qualified appraiser who
shall determine the fair market value of the home as of the date of the
appraisal. Such appraisal shall be binding on the parties hereto. The appraisal
shall be paid for one half by the Employee and one half by the Company.
Notwithstanding the
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foregoing, the Moving Reimbursement shall not exceed the lesser of $75,000 or
the full amount of the Moving Reimbursement reduced by amounts paid by a
subsequent employer for packing and moving expenses from Youngstown, Ohio and
for any loss Employee suffers on his Youngstown, Ohio home.
4. Termination by Employee Other Than for Good Reason. If the Employee
voluntarily terminates his employment with the Company without Good Reason, the
Company shall timely pay any Accrued Obligations.
5. Withholdings and Deductions. Any payment made pursuant to this
Section IV.F. shall be paid, less standard withholdings and other deductions
authorized by Employee or required by law. All amounts due Employee under this
Section IV.F. shall be paid within 14 days after the date of termination or as
earlier required by law.
6. Exclusive Remedy. Employee agrees that the payments contemplated by
this Agreement shall constitute the exclusive and sole remedy for any
termination of his employment, and Employee covenants not to assert or pursue
any other remedies, at law or in equity, with respect to any termination of
employment.
V. NONCOMPETITION.
Employee agrees that for that portion of the Stated Term during which
he remains in the employ of the Company, he will not, directly or indirectly,
without the prior written consent of the Board, provide consulting services with
or without pay, own, manage, operate, join, control, participate in, or be
connected as a stockholder, partner, employee, director, officer or otherwise
with any other person, entity or organization engaged directly or indirectly in
the business of operating a regional or national discount drug store chain.
VI. UNIQUE SERVICES; INJUNCTIVE RELIEF; SPECIFIC PERFORMANCE.
Employee agrees (i) that the services to be rendered by Employee
pursuant to this Agreement, the rights and privileges granted to the Company
pursuant to this Agreement and the rights and privileges granted to Employee by
virtue of his position, are of a special, unique, extraordinary, managerial and
intellectual character, which gives them a peculiar value, the loss of which to
the Company cannot be adequately compensated in damages in any action at law,
(ii) that the Company will or would suffer irreparable injury if Employee were
to terminate this Agreement without Good Reason or to compete with the business
of the Company or solicit employees of the Company in violation of Section V. or
VII. of this Agreement, and (iii) that the Company would by reason of such
breach or violation of this Agreement be entitled to the remedies of injunction,
specific performance and other equitable relief in a court of appropriate
jurisdiction. Employee consents to the jurisdiction of a court of equity to
enter provisional equitable relief to prevent a breach or anticipatory breach of
Section V. of this Agreement by Employee.
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VII. SOLICITING EMPLOYEES.
Employee, while employed by the Company and for one year following
termination of his employment, will not directly or indirectly solicit any
employee of the Company or of any subsidiary or affiliate of the Company in an
executive, managerial, sales or marketing capacity to work for any business,
individual, partnership, firm, corporation, or other entity then in competition
with the business of the Company or of any subsidiary or affiliate of the
Company.
VIII. CONFIDENTIAL INFORMATION.
Employee agrees that during the Stated Term of this Agreement and at
all times thereafter (notwithstanding the termination of this Agreement or the
expiration of the Stated Term of this Agreement):
A. Employee 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
that are obtained by Employee during his employment by the Company or any of its
affiliated companies and that are not or do not become public knowledge (other
than by acts by Employee or his representatives in violation of this Agreement).
For the purposes of this Agreement, "Confidential Information"
includes financial information about the Company (including gross profit
margins), contract terms with the Company's vendors and others, customer lists
and data, trade secrets and such other competitively sensitive information to
which Employee has access as a result of his positions with the Company. After
termination of Employee's employment with the Company, he shall not, without the
prior written consent of the Company, or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
B. Employee agrees that all styles, designs, lists, materials, books,
files, reports, computer equipment, pharmacy cards, Company automobiles, keys,
door opening cards, correspondence, records and other documents ("Company
material") used, prepared or made available to Employee, shall be and shall
remain the property of the Company. Upon the termination of employment or the
expiration of this Agreement, all Company materials shall be returned
immediately to the Company, and Employee shall not make or retain any copies
thereof.
IX. SUCCESSORS.
A. This Agreement is personal to Employee and neither it nor any
benefits hereunder shall, without the prior written consent of the Company, be
assignable by Employee.
B. This Agreement shall inure to the benefit or and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted
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for the Company under the terms of this Agreement for all purposes. As used
herein, "successor" and "assignee" shall include any person, firm, corporation
or other business entity that at any time, whether by purchase, merger or
otherwise, directly or indirectly acquires the stock of the Company or to which
the Company assigns this Agreement by operation of law or otherwise.
X. WAIVER.
No waiver of any breach of any term or provision of this Agreement
shall be construed to be, nor shall be, a waiver of any other breach of this
Agreement. No waiver shall be binding unless in writing and signed by the party
waiving the breach.
XI. MODIFICATION.
This Agreement may not be amended or modified other than by a written
agreement executed by the Employee and (a) the Chairman of the Board or (b) a
duly authorized member of the Board who is not an officer or employee of the
Company or a subsidiary of the Company.
XII. SAVINGS CLAUSE.
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement that can be given effect without the invalid provisions or
applications, and to this end the provisions of this Agreement are declared to
be severable.
XIII. COMPLETE AGREEMENT.
This Agreement constitutes and contains the entire agreement and
understanding concerning Employee's employment and the other subject matters
addressed herein between the parties and supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or oral,
concerning the subject matters of this Agreement, including the Existing
Agreement.
XIV. GOVERNING LAW.
This Agreement shall be deemed to have been executed and delivered
within the State of Ohio, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with, and governed by,
the laws of the State of Ohio without regard to principles of conflict of laws.
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XV. CAPTIONS.
The captions of this Agreement are not part of the provisions of this
Agreement and shall have no force or effect.
XVI. COMMUNICATIONS.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered or if
mailed by registered or certified mail, postage prepaid, addressed:
If to Employee, to
M. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇;
If to Company, to
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
Attention: Chairman of the Board of Directors.
Either party may change the address at which notice shall be given by written
notice given in the above manner.
XVII. ARBITRATION.
Except as otherwise provided in Section VI. of this Agreement, any
dispute, controversy or claim arising out of or in respect of this Agreement (or
its validity, interpretation or enforcement), the employment relationship or the
subject matter of this Agreement shall at the request of either party be
submitted to and settled by arbitration conducted in either Cleveland, Ohio or
Pittsburgh, Pennsylvania, as directed by the party requesting the arbitration,
in accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association. The arbitration shall be governed by the Federal
Arbitration Act (9 U.S.C. ▇▇.▇▇. 1-16). The arbitration of such issues,
including the determination of any amount of damages suffered, shall be final
and binding upon the parties to the maximum extent permitted by law. The
arbitrator in such action shall not be authorized to ignore, change, modify, add
to or delete from any provision of this Agreement. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The arbitrator shall award reasonable expenses (including reimbursement
of the assigned arbitration costs) to the prevailing party upon application
therefor.
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XVIII. EXECUTIONS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same Agreement. Photographic copies of such signed counterparts may
be used in lieu of the originals for any purpose.
XIX. LEGAL COUNSEL.
In entering this Agreement, the parties represent that they have relied
upon the advice of their respective attorneys, who are attorneys of their own
choice, and that the terms of this Agreement have been completely read and
explained to them by their attorneys, and that those terms are fully understood
and voluntarily accepted by them.
XX. LIMITATION ON PAYMENTS.
A. Notwithstanding anything contained herein to the contrary, prior to
the payment of any amounts pursuant to Section IV.F.3. hereof, an independent
national accounting firm designated by the Company (the "Accounting Firm") shall
compute whether there would be any "excess parachute payments" payable to the
Employee, within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), taking into account the total "parachute
payments," within the meaning of Section 280G of the Code, payable to the
Employee by the Company or any successor thereto under this Agreement and any
other plan, agreement or otherwise. If there would be any excess parachute
payments, the Accounting Firm will compute the net after-tax proceeds to the
Employee, taking into account the excise tax imposed by Section 4999 of the
Code, if (i) the payments hereunder were reduced, but not below zero, such that
the total parachute payments payable to the Employee would not exceed three (3)
times the "base amount" as defined in Section 280G of the Code, less One Dollar
($1.00), or (ii) the payments hereunder were not reduced. If reducing the
payments hereunder would result in a greater after-tax amount to the Employee,
such lesser amount shall be paid to the Employee. If not reducing the payments
hereunder would result in a greater after-tax amount to the Employee, such
payments shall not be reduced. The determination by the Accounting Firm shall be
binding upon the Company and the Employee subject to the application of Section
XX.B. hereof.
B. As a result of the uncertainty in the application of Sections 280G
of the Code, it is possible that excess parachute payments will be paid when
such payment would result in a lesser after-tax amount to the Employee; this is
not the intent hereof. In such cases, the payment of any excess parachute
payments will be void ab initio as regards any such excess. Any excess will be
treated as a loan by the Company to the Employee. The Employee will return the
excess to the Company, within fifteen (15) business days of any determination by
the Accounting Firm that excess parachute payments have been paid when not so
intended, with interest at an annual rate equal to the rate provided in Section
1274(d) of the Code (or 120% of such rate if the
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Accounting Firm determines that such rate is necessary to avoid an excise tax
under Section 4999 of the Code) from the date the Employee received the excess
until it is repaid to the Company.
C. All fees, costs and expenses (including, but not limited to, the
cost of retaining experts) of the Accounting Firm shall be borne by the Company
and the Company shall pay such fees, costs and expenses as they become due. In
performing the computations required hereunder, the Accounting Firm shall assume
that taxes will be paid for state and federal purposes at the highest possible
marginal tax rates which could be applicable to the Employee in the year of
receipt of the payments, unless the Employee agrees otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PHAR-MOR, INC.
By: ___________________________ __________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇ M. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Its: Chief Executive Officer
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