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EX (e)(3)
FIRST AMENDMENT TO
SEVERANCE PROTECTION AGREEMENT
WHEREAS, Xxxxxxx Resources Corporation (the "Company") and Xxxxx X.
Dea (the "Executive") have entered into a Severance Protection Agreement dated
February 9, 1998, as amended November 18, 1999, (the "Agreement") which provides
the Executive with certain benefits in the event the Executive's employment is
terminated following a Change in Control; and
WHEREAS, the Company has determined that it is in the best interests
of the Company and its stockholders to amend the Agreement to delete Section 5
thereof relating to limitations on payments made under the Agreement in the case
of an excise tax being imposed on such payments under Section 4999 of the
Internal Revenue Code of 1986, as amended, and to add a new Section 5 in lieu
thereof which provides for additional payments by the Company in such case;
NOW THEREFORE, the Agreement hereby is amended by deleting Section 5
thereof in its entirety and adding the following new Section 5 in lieu thereof:
1. Certain Additional Payments.
A. Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment or distribution by the Company or
its affiliated companies 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, but determined without regard to any
additional payments required under this Section 5) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (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 any interest and penalties
imposed with respect thereto) 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 5.3, all determinations required to
be made under this Section 5, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be
made by Xxxxxx Xxxxxxxx LLP (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive
within 10 business days of the receipt of notice
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from the Executive that there has been a Payment, or such earlier time as
is requested by the Company or the Executive. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5, shall be paid by the
Company 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 a written 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 5.3 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 no later than 10 business days after the
Executive is informed in writing 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 the Executive
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:
1. give the Company any information reasonably requested by the Company
relating to such claim,
2. 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,
3. cooperate with the Company in good faith in order effectively to
contest such claim, and
4. 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
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(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 5.3, 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 xxx 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 further, that if the Company directs the
Executive to pay such claim and xxx 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 thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided further, 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 5.3, the Executive becomes entitled to
receive, and receives, any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements
of Section 5.3) 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 5.3, 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.
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IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed by its duly authorized officer and the Executive has executed this
Amendment as of the 3rd day of May, 2001.
XXXXXXX RESOURCES CORPORATION
By: _________________________
EXECUTIVE
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ATTEST:
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Name:
