EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of the 18th day of June, 1999 by and between GLENAYRE TECHNOLOGIES, INC., a
Delaware corporation (the "Corporation"), and XXXX X. XXXXXXX (the "Executive").
Statement of Purpose
The Corporation desires to retain the services of the Executive, and the
Executive desires to provide services to the Corporation, on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing Statement of Purpose and
the terms and provisions of this Agreement, the parties hereto agree as follows:
1. Employment and Duties.
(a) Employment. The Corporation hereby employs the Executive, and the
Executive hereby agrees to serve, as the President and Chief Executive Officer
of the Corporation pursuant to the terms of this Agreement.
(b) Duties. The Executive shall have the duties and authority and exercise
such powers as are customary for his office and such other duties commensurate
with his position as may from time to time be reasonably requested of him by the
Board of Directors of the Corporation (the "Board") or vested in him by the
bylaws of the Corporation. The Executive shall report to the Board, any
applicable Committee of the Board and the Chairman of the Board. During the
Term, the Executive shall:
(1) devote substantially all of his business time, attention and
abilities to the businesses of the Corporation (including its subsidiaries
or affiliates, when so required), provided, that the Executive may engage
in personal investment, charitable or community activities and, with the
consent of the Board (which will not unreasonably be withheld) serve on
the boards of directors of for-profit entities so long as such activities
do not materially interfere with the performance of the Executive's duties
hereunder;
(2) faithfully serve the Corporation and use his best efforts to
promote and develop the interests of the Corporation; and
(3) not acquire, directly or indirectly, any interest in any form,
partnership, association or corporation, the business operations of which
may in any material manner, directly or indirectly, compete with the trade
or businesses conducted by the Corporation or any of its subsidiaries, or
affiliates, that (i) the Executive may beneficially own, directly or
indirectly, or exercise control or direction over, the voting securities
or publicly traded debt of a publicly traded company which is engaged in
any of the foregoing trade or
businesses, on the condition that the percentage of such securities owned,
controlled or directed by the Executive shall not exceed 5% of the voting
securities or 5% of the principal amount of publicly traded debt (as the
case may be) of the publicly traded company and (ii) the Executive may own
less than 5% of investment partnerships or similar entities so long as
they are blind pools.
2. Term of Employment.
(a) Term. The initial term of the Executive's employment hereunder shall
be for a period of two years, commencing as of the effective date of this
Agreement. The term of the Executive's employment hereunder shall be
automatically renewed for successive two-year renewal terms thereafter unless
written notice is given by either party to the other party not later than 180
days prior to the expiration of the initial term or any renewal term. The
initial term and each renewal term are referred to collectively in this
Agreement as the "Term." After a notice of nonrenewal by the Corporation, the
Executive, on 30 days prior written notice, may accelerate the end of the Term
and be treated as if the Term ended as a result of the notice of nonrenewal by
the Corporation as of the end of such 30-day period.
(b) Earlier Termination. Notwithstanding the provisions of Paragraph 2(a)
above, the Executive's employment hereunder may be terminated prior to the
expiration of the Term as follows:
(1) The Corporation may terminate the Executive's employment
hereunder for "Cause" (as defined in Paragraph 2(c) below), provided that
the Corporation complies with the provisions of Paragraph 3(a)(1) below;
(2) The Corporation may terminate the Executive's employment
hereunder upon the Executive's "Total and Permanent Disability" (as
defined in Paragraph 2(d) below), provided that the Corporation complies
with the provisions of Paragraphs 3(a)(1), 3(a)(2), 3(b) and 3(c) below;
(3) The Executive may terminate his employment hereunder for "Good
Reason" (as defined in Paragraph 2(e) below) or without "Good Reason" on
30 days prior written notice at any time after the first anniversary of
this Agreement;
(4) The Executive's employment hereunder shall terminate
automatically upon his death;
(5) The Corporation may terminate the Executive's employment
hereunder at any time without "Cause" (as defined in Paragraph 2(c)
below), provided that the Corporation complies with the provisions of
Paragraphs 3(a)(1), 3(a)(2), 3(a)(3) (if applicable), 3(a)(4) (if
applicable), 3(b) and 3(c) below.
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(c) Definition of "Cause". As used herein, "Cause" shall mean the
occurrence of any of the following:
(1) acts of dishonesty or fraud on the part of the Executive with
regard to the Corporation which are intended to result in his substantial
personal enrichment at the expense of the Corporation or its affiliates,
provided, however, that this Paragraph 2(c)(1) shall not apply to good
faith disputes over the Executive's expense reimbursements;
(2) the conviction after the exhaustion of all appeals by the
Executive of a felony involving moral turpitude or the entry of a plea of
nolo contendere for such a felony; or
(3) material violation of the Executive's responsibilities as set
forth herein which are willful and deliberate; provided, however, that
prior to the determination by the Board that "Cause" under this Paragraph
2(c)(3) has occurred, the Board shall (A) provide to the Executive in
writing, in reasonable detail, the reasons for the Board's determination
that such "Cause" exists, (B) afford the Executive a reasonable
opportunity to remedy any such breach, (C) provide the Executive an
opportunity to be heard at the Board meeting where the final decision to
terminate the Executive's employment hereunder for such "Cause" is to be
considered, and (D) make any decision that such "Cause" exists in good
faith.
(d) Definition of "Total and Permanent Disability." The Executive shall be
considered to have a "Total and Permanent Disability" if he is unable to
perform, in all material respects, his duties because of illness or injury for
six consecutive months. The Corporation may terminate the Executive for Total
and Permanent Disability only by written notice given after the end of such
six-month period while the Executive continues to have a Total and Permanent
Disability.
(e) Definition of "Good Reason." As used herein, "Good Reason" shall mean
the occurrence of any of the following:
(1) except where such failure or change is specifically approved by
the Executive in writing, failure to elect or reelect or to appoint or
reappoint the Executive to the offices of President and Chief Executive
Officer of the Corporation, or any other material diminution by the
Corporation of the Executive's functions, authority, duties or
responsibilities; provided, however, that the Executive must first (i)
provide the Board with written notice specifying the particular failure of
the Corporation under this Paragraph 2(e)(1) and (ii) allow the Board 10
days from receipt of notice to cure such failure;
(2) the liquidation or dissolution of the Corporation;
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(3) any failure by the Corporation to pay to the Executive the Base
Salary or other compensation and benefits provided for herein; provided,
however, that the Executive must first (i) provide the Board with written
notice specifying the particular failure of the Corporation under this
Paragraph 2(e)(3) and (ii) allow the Board 15 days from receipt of notice
to cure such failure;
(4) any other material breach of this Agreement by the Corporation;
provided, however, that the Executive must first (i) provide the Board
with written notice specifying the particular failure of the Corporation
under this Paragraph 2(e)(4) and (ii) allow the Board 30 days from receipt
of notice to cure such failure;
(5) any "Change in Control," which shall mean any of the following:
(A) the acquisition, directly or indirectly after the date of
this Agreement, in one or a series of transactions, of 25% or more
of the Corporation's voting common stock by any "person" as that
term is defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (including any amounts owned as of the date
hereof);
(B) the consummation of a merger, consolidation, share
exchange or similar transaction of the Corporation with any other
corporation, entity or group, as a result of which the holders of
the voting capital stock of the Corporation as a group would receive
less than 50% of the voting capital stock of the surviving or
resulting corporation and Paragraph 2(e)(5)(A) above is not
violated;
(C) the consummation of an agreement providing for the sale or
transfer (other than as security for obligations of the Corporation)
of all or substantially all the assets of the Corporation;
(D) a material change in the composition or character of the
Board as follows: (i) whether in one or more actions or elections,
the replacement of a majority of directors on the effective date of
this Agreement by directors opposed by the Executive and a majority
of the members of the Executive Committee of the Board (or, in the
absence of the existence of an Executive Committee, a majority of
the members of the Board) or (ii) at any meeting or aggregate series
of meetings of the Corporation's shareholders, the election of a
majority of directors standing for election who are opposed by the
Executive and a majority of the members of the Executive Committee
of the Board (or, in the absence of the existence of an Executive
Committee, a majority of the members of the Board).
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(6) Any change in the principal office of the Corporation to a
location which is more than 30 miles from its current principal office at
0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000.
3. Payments to the Executive Upon Termination of Employment.
(a) Compensation. In the event that the Executive's employment with the
Corporation is terminated, whether upon the expiration of the Term as a result
of a notice of nonrenewal or upon the earlier termination of the Term as
provided in Paragraph 2(b) above, then the Corporation shall pay to the
Executive the following amounts on the date of such termination and shall
provide to the Executive the following benefits, as applicable:
(1) In the event that the Executive's employment hereunder is
terminated for any reason whatsoever, the Corporation shall pay to the
Executive an amount equal to the sum of (i) his accrued but unpaid Base
Salary, plus (ii) his accrued but unpaid vacation pay, plus (iii) any
earned but unpaid bonus for any completed prior fiscal year, plus (iv) any
other compensation payments or benefits which have accrued and are payable
in connection with such termination under any prior plan, program or
practice.
(2) In the event that the Executive's employment hereunder is
terminated (i) by the Corporation because of the Executive's "Total and
Permanent Disability" pursuant to Paragraph 2(b)(2) above, (ii) because of
the Executive's death pursuant to Paragraph 2(b)(4) above, (iii) by the
Executive for "Good Reason" pursuant to Paragraph 2(b)(3) above or (iv) by
the Corporation pursuant to Paragraph 2(b)(5) above, then and in any such
event, the Corporation shall pay to the Executive, in addition to the
payments described in Paragraph 3(a)(1), a pro rata share of the Projected
Bonus for the fiscal year of the Corporation in which such termination
occurs. The "Projected Bonus" shall mean the Executive's bonus under the
Management by Objectives Bonus Plan described in Paragraph 4(b) below for
the applicable fiscal year of the Corporation, calculated, for purposes of
determining whether the targets contained therein have been met, under the
assumption that the results of operations and financial condition of the
Corporation (or any applicable subsidiary) as of the Executive's
termination date shall continue on the same basis through the end of such
fiscal year.
(3) In the event that the Executive's employment hereunder is
terminated (i) by the Corporation without "Cause" pursuant to Paragraph
2(b)(5) above (except in the event of a "Change in Control") or (ii) by
the Executive for "Good Reason" (except in the event of a "Change in
Control") pursuant to Paragraph 2(b)(3) above, then and in any such event,
the Corporation shall pay to the Executive, in addition to the payments
described in Paragraphs 3(a)(1) and 3(a)(2), an amount equal to two times
the annual rate of Base Salary being paid to the Executive at the time of
such termination.
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(4) In the event that the Executive's employment hereunder is
terminated (i) by the Executive for "Good Reason" because of a "Change in
Control" pursuant to Paragraph 2(b)(3) above, (ii) by the Corporation
under Paragraph 2(b)(5) above following a "Change in Control" or (iii) by
the Corporation under Paragraph 2(b)(5) in Contemplation of a Change in
Control or the Executive for "Good Reason" in Contemplation of a Change in
Control, then the Corporation shall pay to the Executive, in addition to
the payments described in Paragraphs 3(a)(1) and 3(a)(2), an amount equal
to two and one-half times the annual rate of Base Salary being paid to the
Executive at the time of such termination (or if the Executive's Base
Salary was then greater, on the date immediately preceding the date of the
Change in Control). For this purpose, "Contemplation of a Change in
Control" shall mean that the Corporation has received an offer, or is
engaging in other formal discussions, with respect to events which
subsequently result in a Change in Control.
(5) In the event that the Executive's employment hereunder is
terminated upon expiration of the Term (unless the Executive refused to
negotiate with the Corporation for an employment agreement with terms
substantially similar to this Agreement), then the Corporation shall pay
to the Executive an amount equal to the annual rate of Base Salary being
paid the Executive at the time of such termination.
(b) Stock Options. The Executive has been awarded options to purchase
shares of the Corporation's common stock under the Glenayre Technologies, Inc.
1996 Incentive Stock Plan and may in the future be awarded additional options to
purchase shares of the Corporation's or a successor corporation's common stock
under the Glenayre Technologies, Inc. 1996 Incentive Stock Plan or other option
plans (collectively, the "Options"), such Options having been granted, or to be
granted, for the number of shares and at a price per share specified in the
agreements between the Corporation (or a successor corporation) and the
Executive granted the Options. Notwithstanding any terms to the contrary
contained in such stock option agreements, upon the Executive's termination of
employment for any reason other than "Cause" (as that term is defined in
Paragraph 2(c) above) or his resignation without Good Reason other than at the
end of a Term, (i) all Options shall become fully vested in the Executive and
(ii) all Options shall become immediately exercisable and shall remain
exercisable for a period of 12 months following the date of the Executive's
termination of employment.
(c) Welfare Benefits. In the event that the Executive's employment
hereunder is terminated (i) by the Corporation because of the Executive's "Total
and Permanent Disability" pursuant to Paragraph 2(b)(2) above, (ii) because of
the Executive's death pursuant to Paragraph 2(b)(4) above, (iii) by the
Executive for "Good Reason" pursuant to Paragraph 2(b)(3) above, (iv) by the
Corporation under Paragraph 2(b)(5) above or (v) upon expiration of the Term
(unless the Executive refused to negotiate with the Corporation for an
employment agreement with terms substantially similar to this Agreement), then
and in any such event, Corporation shall provide medical and dental to the
Executive (and the Executive's dependents) for a period of 12
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months following such termination of employment at the Corporation's full
expense and at the same levels of coverage as such benefits are provided to
active employees of the Corporation. The Executive's right to continued medical
and dental coverage required under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") shall begin at the expiration of the one
year period described in this Paragraph 3(c).
4. Compensation and Benefits. Subject to the terms of this Agreement and
until the termination of the Term as provided in Paragraph 2 above, the
Corporation shall pay compensation and provide benefits to the Executive as
follows:
(a) Base Salary. The Corporation shall pay to the Executive an initial
salary of $400,000 per annum. Such base salary, as increased from time to time,
is referred to herein as the "Base Salary." The Base Salary shall be payable in
approximately equal monthly installments on the last business day of each month,
or in such other installments and at such other times as the parties hereto may
mutually agree upon. The Base Salary shall be increased (but not decreased)
effective on January 1, 2000 and on each January 1 thereafter during the Term in
the manner determined by the Board or its Compensation Committee in its absolute
discretion.
(b) Management by Objectives Bonus Plan. The Executive shall participate
at a 75% level in the Glenayre Management by Objectives Bonus Plan, as in effect
from time to time (the MBO Plan"). The Executive's level of participation in the
MBO Plan may be increased (but not decreased) from time to time as determined by
the Board or its Compensation Committee in its absolute discretion.
(c) 401(k) Plan. During the Term, the Executive shall be eligible to
participate in the Corporation's 401(k) voluntary deferred compensation program
(the "401(k) Plan") up to the maximum amount permitted by the terms of the
401(k) Plan, and the Corporation agrees to match the amounts of compensation
deferred up to the maximum amount permitted under the provisions of the 401(k)
Plan.
(d) Automobile or Automobile Allowance. The Corporation shall furnish an
automobile or, at the Corporation's election, an automobile allowance to the
Executive. Such automobile or automobile allowance (which shall not be less than
$900 per month) shall be commensurate with the Executive's senior position, and,
if the Executive is furnished an automobile, the Corporation shall pay all
reasonable expenses for the operation, insurance and maintenance of such
automobile.
(e) Vacation and Holidays. The Executive shall be entitled to take four
weeks of vacation (or, if more, the vacation provided under the Corporation's
standard vacation policy for senior executives) in each successive 12-month
period during the Term at such times as shall be mutually convenient to the
Executive and the Corporation. The Executive shall be entitled to all paid
holidays in accordance with the Corporation's policies.
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(f) Other Benefits. In addition to participation in all of the
compensation and incentive programs as described in this Agreement, the
Executive shall be entitled to participate in all bonus, compensation, savings,
stock option, and other incentive plans and programs and in all qualified and
non-qualified retirement plans, life, medical/dental insurance plans and
short-and long-term disability insurance plans of the Corporation, generally
available to senior executives of the Corporation at a level commensurate with
his position, subject to the eligibility requirements of the respective plan or
program.
(g) Reimbursement of Expenses. In addition to automobile expenses, the
Corporation shall reimburse the Executive for all reasonable expenses incurred
personally by him in performing his duties, including travel and entertainment.
5. Location of Office. The Executive's principal place of employment shall
be in Charlotte, North Carolina and he shall not be required to change such
principal place of employment.
6. Confidential Information.
(a) Covenant. The Executive shall not divulge, during the Term or at any
time thereafter, to any person not employed by the Corporation or its
subsidiaries or affiliates or otherwise engaged to render services to the
Corporation, its subsidiaries or affiliates, any material Confidential
Information except, during the Term only, as he in good faith believes desirable
and in the best interest of the Corporation.
(b) Definition of "Confidential Information." As used herein,
"Confidential Information" means:
(1) except to the extent generally known in the industry, the name,
address or requirements of any customer of the Corporation; or
(2) any other secret or confidential information relating to any
activity, invention or discovery of the Corporation not already in the
public domain that the Executive has or shall have acquired during his
employment by the Corporation or its subsidiaries or affiliates,
Provided, however, that this provision shall not preclude the Executive from
disclosing such Confidential Information as may be required by any applicable
law, regulation or directive or any governmental agency, court or other
authority having jurisdiction in the matter, or in the proper course of conduct
of the Corporation's business. In the event that any person seeks legally to
compel the Executive to disclose Confidential Information, the Executive shall
promptly provide the Corporation with notice so that the Corporation may have
opportunity to seek a protective order or other appropriate remedy.
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7. Indemnification. The Corporation agrees (i) to indemnify, defend and
hold harmless the Executive from and against any and all liabilities to which he
may be subject as a result of his employment hereunder (as a result of his
service as an officer or director of the Corporation or as an officer or
director of any of the Corporation's subsidiaries or affiliates) to the fullest
extent permitted by law, and (ii) to indemnify the Executive for all costs,
including attorney's fees and other professional fees and disbursements, of (A)
any legal action brought or threatened against him as a result of such
employment, or (B) any legal action in which the Executive is compelled to give
testimony as a result of his employment hereunder, to the fullest extent
permitted by, and subject to the limitations of, the laws of the State of
Delaware.
8. Reimbursement of Legal and Related Expenses. In the event that any
dispute shall arise between the Executive and the Corporation relating to his
rights under this Agreement, any other agreement between the Corporation and the
Executive, under any plan or program of the Corporation or with regard to his
employment with the Corporation or its termination, and the Executive has been
substantially successful in his claim, then the reasonable legal fees and
disbursements of the Executive in connection with such dispute shall be paid by
the Corporation. The Corporation shall pay the Executive's reasonable legal fees
in connection with entering into this Agreement.
9. Assignment. The Executive may not assign this Agreement or any of his
rights, benefits, obligations or duties hereunder to any other person, firm,
corporation or other entity. The Corporation may not assign this Agreement
except with all or substantially all of its assets and then only if the
assignees promptly deliver to Executive an assumption of this Agreement in a
form reasonably acceptable to Executive.
10. Excise Tax Gross-Up. The Executive shall be entitled to a gross-up of
any excise tax payable pursuant to Internal Revenue Code Section 280G in
accordance with Exhibit A hereto.
11. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered or on the fourth business day after being placed in the
United States mail by certified mail, return receipt requested, postage prepaid,
addressed to the parties hereto as follows (provided that notice of change of
address shall be deemed given only when actually received):
As to the Corporation: Glenayre Technologies, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Chairman of the Board
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As to the Executive: Xxxx X. Xxxxxxx
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
The address of any of the parties may be changed from time to time by such party
serving notice upon the other parties.
12. Law Applicable. This Agreement is made and executed with the intention
that the construction, interpretation and validity hereof shall be determined in
accordance with and governed by the laws of the State of North Carolina.
13. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Corporation, its successors and assigns. This Agreement shall be
binding upon and inure to the benefit of the Executive, his heirs and personal
representatives.
14. Entire Agreement; Modification. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes and cancels all prior or contemporaneous oral or written agreements
and understandings between them with respect to the subject matter hereof. This
Agreement may not be changed or modified orally but only by an instrument in
writing signed by the parties hereto, which instrument states that it is an
amendment to this Agreement.
15. Severability. Should any provision of this Agreement or any part
thereof be held invalid or unenforceable, the same shall not affect or impair
any other provision of this Agreement and shall not have any effect on or impair
the obligation of the Corporation or the Executive.
16. Execution. This Agreement is hereby executed in multiple
counterparts, each of which shall be deemed an original hereof.
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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be signed
by its officers and its corporate seal to be hereunto affixed, and the Executive
has hereunto set his hand and seal, all as of the day and year first above
written.
GLENAYRE TECHNOLOGIES, INC.
[CORPORATE SEAL)
By /s/ Xxxxx X. Xxxxxxxxx
---------------------------
ATTEST: Chairman of the Board
/s/ Xxxxx X. Xxxxxx
-------------------
Secretary
/s/ Xxxx X. Xxxxxxx (SEAL)
--------------------------
Xxxx X. Xxxxxxx
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Exhibit A
Parachute Gross Up
(a) In the event that the Executive shall become entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
"nature of compensation" (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Corporation, any person whose
actions result in a change of ownership or effective control covered by Section
280G(b)(2) of the Internal Revenue of 1986, as amended (the "Code") or any
person affiliated with the Corporation or such person) as a result of such
change in ownership or effective control (collectively the "Corporation
Payments"), and such Corporation Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed by any taxing authority), the Corporation shall pay to the
Executive at the time specified in subsection (d) below an additional amount
(the "Gross-up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Corporation Payments and any U.S.
federal, state, and for local income or payroll tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any U.S. federal,
state, and local income or payroll tax on the Corporation Payments, shall be
equal to the Corporation Payments.
(b) For purposes of determining whether any of the Corporation
Payments and Gross-up Payments (collectively the "Total Payments") will be
subject to the Excise Tax and the amount of such Excise Tax, (x) the Total
Payments shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless and except to the extent that, in the
opinion of the Corporation's independent certified public accountants appointed
prior to any change in ownership (as defined under Code Section 280G(b)(2)) or
tax counsel selected by such accountants (the "Accountants"), such Total
Payments (in whole or in part) either do not constitute "parachute payments,"
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Gross-up Payment,
the Executive shall be deemed to pay U.S. federal income taxes at the highest
marginal rate of U.S. federal income taxation in the calendar year in which the
Gross-up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
for the calendar year in which the Corporation Payment is to be made, net of the
maximum reduction in U.S. federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. In the event that
the Excise Tax is subsequently determined by the Accountants to be less than the
amount taken into account hereunder at the time the Gross-up Payment is made,
the Executive shall repay to the Corporation, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the prior
Gross-up Payment attributable to such reduction (plus the portion
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of the Gross-up Payment attributable to the Excise Tax and U.S. federal, state
and local income tax imposed on the portion of the Gross-up Payment being repaid
by the Executive if such repayment results in a reduction in Excise Tax or a
U.S. federal, state and local income tax deduction), plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Gross-up Payment
to be refunded to the Corporation has been paid to any U.S. federal, state and
local tax authority, repayment thereof (and related amounts) shall not be
required until actual refund or credit of such portion has been made to the
Executive, and interest payable to the Corporation shall not exceed the interest
received or credited to the Executive by such tax authority for the period it
held such portion. The Executive and the Corporation shall mutually agree upon
the course of action to be pursued (and the method of allocating the expense
thereof) if the Executive's claim for refund or credit is denied.
In the event that the Excise Tax is later determined by the
Accountant or the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-up Payment), the Corporation shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties payable with
respect to such excess) at the time that the amount of such excess is finally
determined.
(d) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following an event occurring which subjects the Executive to the Excise Tax;
provided, however, that if the amount of such Gross-up Payment or portion
thereof cannot be finally determined on or before such day, the Corporation
shall pay to the Executive on such day an estimate, as determined in good faith
by the Accountant, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code), subject to further payments pursuant to
subsection (c) hereof, as soon as the amount thereof can reasonably be
determined, but in no event later than the ninetieth day after the occurrence of
the event subjecting the Executive to the Excise Tax. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
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(e) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise Tax, the Executive
shall permit the Corporation to control issues related to the Excise Tax (at its
expense), provided that such issues do not potentially materially adversely
affect the Executive, but the Executive shall control any other issues. In the
event the issues are interrelated, the Executive and the Corporation shall in
good faith cooperate so as not to jeopardize resolution of either issue, but if
the parties cannot agree the Executive shall make the final determination with
regard to the issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive shall permit the
representative of the Corporation to accompany the Executive, and the Executive
and the Executive's representative shall cooperate with the Corporation and its
representative.
(f) The Corporation shall be responsible for all charges of the
Accountant.
(g) The Corporation and the Executive shall promptly deliver to each
other copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit A.
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