EXHIBIT 10.8.2.1
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT is entered into by and between Xxxxx Xxxxxxxx
Corporation, a Delaware corporation (the "Company") and Xxxxxx X. Xxxx (the
"Executive"), effective as of May 1, 1998.
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 enter into a new
Employment Agreement with Executive to assure that the Company will have the
continued dedication of the Executive. This Agreement contains the entire
agreement between the parties with respect to the matters specified herein and
supersedes all prior oral and written employment agreements, understandings and
commitments between the Company and Executive and any Executive Employment
Security Policy of the Company covering the Executive; except that the Option to
Purchase Agreement between the Company and Executive dated February 22, 1993,
relating to a painting located in Executive's office, shall remain in effect.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions
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(a) The "Effective Date" shall mean the date hereof, which is set forth in the
first paragraph of this Agreement.
(b) The "Employment Period" shall mean the period commencing on the Effective
Date and ending on the third anniversary of the Effective Date; provided,
however, that commencing on the first day of the month next following the
Effective Date and on the first day of each month thereafter (the most recent of
such dates is hereinafter referred to as the "Renewal Date"), the Employment
Period shall be automatically extended so as to terminate on the third
anniversary of such Renewal Date (but not later than the date when the Executive
attains age 65), unless the Company or Executive shall give notice to the other
that the Employment Period shall not be further extended prior to any such
Renewal Date.
2. Change of Control
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For the purpose of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i)
the then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 2; or
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(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof 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 occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation by the Company of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% 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 Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 30%
or more of, respectively, the then-outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
3. Employment Period
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The Company hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing on the
"Effective Date" and continuing during the "Employment Period," as defined in
Sections 1(a) and (b) above.
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4. Terms of Employment
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(a) Position and Duties
(i) Executive is currently employed as President and Chief Executive
Officer of the Company. During the Employment Period, (A) the Executive's
position (including titles), authority, duties and responsibilities shall be at
least commensurate with the most significant of those held, exercised and
assigned to the Executive at any time during the 120-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 50 miles from such
location.
(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 the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the 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 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
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(i) Base Salary
During the Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary") which shall be paid at a monthly rate at least
equal to twelve times the highest monthly base salary paid or payable, including
any base salary which has been earned but deferred, to the Executive by the
Company and its affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase, and the term "Annual Base Salary" as utilized in this Agreement shall
refer to Annual Base Salary as so increased; provided, however, that Executive's
Annual Base Salary may be reduced prior to a Change of Control as part of any
general, across the board salary reduction which applies in a comparable manner
to other officers or senior executives of the Company, but not by more than ten
percent (10%) (unless Executive agrees to accept a larger reduction) during any
calendar year. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
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(ii) Annual Bonus
In addition to Annual Base Salary, the Executive shall be eligible to
receive, for each fiscal year ending during the Employment Period, an annual
bonus (the "Annual Bonus") under the Company's Senior Executive Incentive
(Leadership) Compensation Plan, or any comparable bonus under any successor plan
(such plans, collectively, the "Annual Bonus Plans"), including any Annual Bonus
which has been earned but deferred. After a Change of Control, the Executive
shall be awarded for each fiscal year ending during the Employment Period an
Annual Bonus in cash at least equal to the Executive's average Annual Bonus for
the last three full fiscal years prior to the Change of Control (annualized in
the event that the Executive was not employed by the Company for the whole of
such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be
paid no 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.
(iii) Incentive, Savings and Retirement Plans
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings, retirement, deferral (including the plans
described in Section 6(a)(v) below), and nonqualified supplemental pension
(including the Benefit Restoration Plan) plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies. In no event shall such plans, practices, policies and programs
provide the Executive after a Change of Control with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, which are 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 120-day period immediately
preceding the Change of Control or, if more favorable to the Executive, those
provided generally at any time after the Change of Control to other peer
executives of the Company and its affiliated companies.
(iv) 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)
to the extent applicable generally to other peer executives of the Company and
its affiliated companies. In no event shall such plans, practices, policies and
programs provide the Executive after a Change of Control with benefits which are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Change of Control or, if more
favorable to the Executive, those provided generally at any time after the
Change of Control to other peer executives of the Company and its affiliated
companies.
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(v) Expenses
During the Employment Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by the Executive in
accordance with the policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive from time to time. After a
Change of Control, such reimbursement shall be made in accordance with the most
favorable policies, practices and procedures of the Company and its affiliated
companies in effect for the Executive at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits
During the Employment Period, the Executive shall be entitled to fringe
benefits, including, without limitation, if applicable, tax and financial
planning services, payment of club dues, and automobile lease and payment of
related expenses, in accordance with the plans, practices, programs and policies
of the Company and its affiliated companies in effect for the Executive from
time to time. After a Change of Control, such fringe benefits shall be provided
in accordance with the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Change of Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(vii) Office and Support Staff
During the Employment Period, the Executive shall be entitled to an office
and support staff in accordance with the practices and policies of the Company
and its affiliated companies in effect for the Executive from time to time.
After a Change of Control, 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 120-day period immediately preceding the Change
of Control or, if more favorable to the Executive, as provided generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) Vacation
During the Employment Period, the Executive shall be entitled to paid
vacation in accordance with the plans, policies, programs and practices of the
Company and its affiliated companies in effect for the Executive from time to
time. After a Change of Control, the Executive shall be entitled to vacation in
accordance with the most favorable plans, policies, programs and practices of
the Company and its affiliated companies as in effect for the Executive at any
time during the 120-day period immediately preceding the Change or Control or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
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5. Termination of Employment
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(a) 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 12(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" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for a period
of (i) ninety (90) consecutive calendar days or (ii) an aggregate of one hundred
fifty (150) calendar days in any fiscal year of the Company 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.
(b) Cause
The Company may terminate the Executive's employment during the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chairman or a senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a notice that the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason
The Executive's employment may be terminated by the Executive during the
Employment Period for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean:
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(i) without the express written consent of the Executive, the
assignment to the Executive of any duties or any other action by the Company
which results in a material diminution in the Executive's position (including
titles), authority, duties or responsibilities from those contemplated by
Section 4(a)(i) of this Agreement, 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;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(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;
(iii) the Company's requiring the Executive to be based at any office or
location more than 50 miles from the location where the Executive was employed
immediately preceding the Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c)
of this Agreement.
(d) Notice of Termination
Any termination during the Employment Period by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) 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). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination
"Date of Termination" means (i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Executive's employment is terminated by the Company other
than for Cause or Disability, the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the date of death of the Executive
or the Disability Effective Date, as the case may be.
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6. Obligations of the Company upon Termination
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(a) Good Reason; Other Than for Cause, Death or Disability
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within
30 days after the Date of Termination an amount equal to the present value,
determined in accordance with Section 280G(d)(4) of the Internal Revenue Code of
1986, as amended (the "Code"), of the aggregate of the following amounts under
A, B and C below; provided however, that prior to a Change of Control, the
Company, in its discretion, may determine to pay any such amount when it
otherwise would have been paid if the Executive's employment had not been
terminated until the end of the Employment Period:
(A) the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid and (2) the excess of (A)
the product of (x) (i) if a Change of Control does not occur during the fiscal
year which includes the Date of Termination, the Annual Bonus which would have
been payable to the Executive for such entire fiscal year or (ii) if a Change of
Control does occur during the fiscal year which includes the Date of
Termination, the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus
paid or payable, including any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year consisting of less than twelve
full months or during which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the "Highest Annual
Bonus") and (y) 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, over (B) any amounts previously paid to the Executive pursuant to
the terms of the Annual Bonus Plans as bonuses with respect to the year that
includes the Date of Termination (the sum of the amounts described in clauses
(1) and (2) shall be hereinafter referred to as the "Accrued Obligations"); and
(B) the amount equal to the product of (1) three (or the number of
years, including partial years, until the end of the Employment Period, if less)
and (2) the Executive's highest combined Annual Base Salary and Annual Bonus
during any of the last three full fiscal years prior to the Date of Termination;
and
(C) an amount equal to the difference between (a) the aggregate
benefit under the Company's qualified defined benefit retirement plans
(collectively, the "Retirement Plan") and any excess or supplemental defined
benefit retirement plans (including the Benefit Restoration Plan) in which the
Executive participates (collectively, the "SRP") which the Executive would have
accrued (whether or not vested) if the Executive's employment had continued for
three years after the Date of Termination, but not after the date on which the
Executive attains age 65, and (b) the actual vested benefit, if any, of the
Executive under the Retirement Plan and the SRP, determined as of the Date of
Termination (with the foregoing amounts to be computed on an actuarial present
value basis, based on the assumption that the Executive's compensation in each
of the three years following such termination would have been that required by
Section 4(b)(i) and Section 4(b)(ii), and using the actuarial assumptions in
effect for purposes of computing benefit entitlements under the Retirement Plan
and the SRP at
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the Date of Termination or, following a Change of Control, using actuarial
assumptions no less favorable to the Executive than the most favorable
assumptions which were in effect for such purposes at any time from the day
before the Change of Control through the Date of Termination;
(ii) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, 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 plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility, and
for purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
programs, practices and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to have
retired on the last day of such period;
(iii) if the Date of Termination occurs after a Change of Control, the
Company shall, at its sole expense as incurred (but in no event to exceed
$50,000), provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the Executive's sole
discretion;
(iv) the Executive shall be entitled to purchase at depreciated book
value the automobile (if any) which the Company was providing for the use of
such Executive, and to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, practice or policy or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits");
(v) the Executive shall be treated, for purposes of the Company's
Executive Deferred Compensation Plan, Executive Variable Deferred Compensation
Plan, Executive Deferred Retirement Plan, Executive Variable Deferred Retirement
Plan, and any successor or similar plans, as if he had three more years of
service, and attained an age three years older, than his actual years of service
and age as of the Date of Termination; provided, however, that Executive shall
be credited with the number of years of service and attained age (in addition to
his actual years of service and attained age on the Date of Termination) which
are required in order to satisfy the eligibility requirements for "early
retirement" benefits and to receive the retirement interest rate under such
plans, if the Date of Termination occurs after a Change of Control;
(vi) the Executive shall have the option to have assigned to him at no
cost and with no apportionment of prepaid premiums (to the extent possible under
the terms of the applicable policies) any assignable insurance policy owned by
the Company which relates specifically to the Executive; provided that the
Company shall have no obligation to pay off any loans against said insurance
policy, and the Executive shall reimburse the Company for the cash value of such
insurance policy (if any);
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(vii) the Executive shall be entitled to receive payments of deferred cash
incentive awards under the amended and restated Key Executive Long-Term
Incentive Plan ("LTIP") or any successor plan for performance cycles which
commence while the Executive is employed with the Company equivalent to the
payments which he would have received if he had remained employed with the
Company for three years after the Date of Termination (but not later than age
65), or such other payments (if greater) as may be provided under the LTIP upon
a Change of Control or otherwise; and
(viii) all stock options granted to Executive under the Company's stock
option plans shall become immediately vested on the Date of Termination.
If the Executive should die while receiving payments pursuant to this Section
6(a), the remaining payments which would have been made to the Executive if he
had lived shall be paid to the beneficiary designated in writing by the
Executive; or if there is no effective written designation, then to his spouse;
or if there is neither an effective written designation nor a surviving spouse,
then to his estate. Designation of a beneficiary or beneficiaries to receive
the balance of any such payments shall be made by written notice to the Company,
and the Executive may revoke or change any such designation of beneficiary at
any time by a later written notice to the Company.
(b) 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, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations 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. With respect to the provision of Other Benefits, after a Change of
Control the term "Other Benefits" as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as were in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Change of Control or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, 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 beneficiaries.
(c) Disability
If the Executive's employment is terminated by reason of the Executive's
Disability during the Employment Period in accordance with Section 5(a), this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, after a Change of Control the term "Other Benefits"
as utilized in this Section 6(c) shall include, and 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 generally
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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 were in effect generally with
respect to other peer executives and their families at any time during the 120-
day period immediately preceding the Change of Control or, if more favorable to
the Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason
If the Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further obligations to
the Executive other than the obligation to pay to the Executive (x) the Annual
Base Salary through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, or retires at age 65 or thereafter, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. 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.
7. Non-exclusivity of Rights
------------------------------
Nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice 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 contract or agreement 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 or any contract or agreement (other than this Agreement) with 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 or contract or agreement except as explicitly modified by this
Agreement. The Executive shall no longer be covered by any prior employment
agreement or any Executive Employment Security Policy of the Company after the
Effective Date of this Agreement.
8. Full Settlement; Offsets
-----------------------------
Except as provided in this Section 8, 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.
Executive shall not 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. However, the amount of any payments and
benefits provided for in this Agreement shall be reduced by one hundred percent
(100%) of any benefits and earned income (within the meaning of Section
911(d)(2)(A) of the Code) which is earned by the Executive for services rendered
to persons or entities other than the Company or its affiliates during or with
respect to
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the Employment Period or, after a Change of Control, during the 36-month period
after the Date of Termination. Medical and welfare benefits shall be offset as
provided in Section 6(a)(ii).
Not less frequently than annually (by December 31 of each year), the Executive
shall account to the Company with respect to all benefits and earned income
earned by the Executive which are required hereunder to be offset against
payments or benefits received by the Executive from the Company. If the Company
has paid amounts in excess of those to which the Executive is entitled (after
giving effect to the offsets provided above), the Executive shall reimburse the
Company for such excess by December 31 of such year. The requirements imposed
under this paragraph shall terminate on December 31 of the calendar year in
which the Employment Period ends or, after a Change of Control, December 31 of
the calendar year which includes the third anniversary of the Date of
Termination.
9. 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, but
determined without regard to any additional payments required under this Section
9) (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 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 9(c), all determinations required to
be made under this Section 9, 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 the certified
public accounting firm which serves as the Company's auditor immediately prior
to the Change of Control (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company or the Executive. In the
event that such Accounting Firm declines to act, the Company shall appoint
another nationally recognized accounting firm (which is acceptable to the
Executive) to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). 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 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. 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 9(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
12
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 fifteen 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 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, and
(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 defend, 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 9(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 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, however, 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 defend, 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 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.
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(d) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 9(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 9(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 9(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.
10. Confidential Information
-----------------------------
The Executive shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential business 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 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.
In no event shall an asserted or alleged violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
11. 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.
(a) 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.
12. Miscellaneous
------------------
(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of California, 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
14
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.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: If to the Company:
------------------- -----------------
Xxxxxx X. Xxxx Xxxxx Xxxxxxxx Corporation
000 Xxxxxxx Xxxxxx North Orange Grove Boulevard
Manhattan Beach, CA 90266 Xxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
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, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict compliance
with any provision hereof or any other provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
13. Arbitration; Attorneys Fees
--------------------------------
(a) The parties agree that any disputes, controversies or claims which arise
out of or are related to this Agreement, Executive's employment or the
termination of his employment, including, but not limited to, any claim relating
to the purported validity, interpretation, enforceability or breach of this
Agreement, and/or any other claim or controversy arising out of the relationship
between the Executive and Company (or the nature of the relationship) or the
continuation or termination of that relationship, including, but not limited to,
claims that a termination was for Cause or for Good Reason, claims for breach of
covenant, breach of an implied covenant of good faith and fair dealing, wrongful
termination, breach of contract, or intentional infliction of emotional
distress, defamation, breach of right of privacy, interference with advantageous
or contractual relations, fraud, conspiracy or other tort or property claims of
any kind, which are not settled by agreement between the parties, shall be
settled by arbitration in accordance with the then-current Rules of Practice and
Procedure for Employment Arbitration ("Rules") of the Judicial Arbitration and
Mediation Services, Inc. ("JAMS").
15
The arbitration shall be before a single arbitrator selected in accordance with
the JAMS Rules or otherwise by mutual agreement of the parties. The arbitration
shall take place in Los Angeles County, California, unless the parties agree to
hold the arbitration at another location. Depositions and other discovery shall
be allowed in accordance with the JAMS Rules. The arbitrator shall apply the
substantive law (and the law of remedies, if applicable) of the State of
California or federal law, or both, as applicable to the claim(s) asserted
(b) In consideration of the parties' agreement to submit to arbitration all
disputes with regard to this Agreement and/or with regard to any alleged
contract, or any other claim arising out of their conduct, the relationship
existing hereunder or the continuation or termination of that relationship, and
in further consideration of the anticipated expedition and the minimizing of
expense of this arbitration remedy, the arbitration provisions of this Agreement
shall provide the exclusive remedy, and each party expressly waives any right he
or it may have to seek redress in any other forum. The arbitrator, and not any
federal, state, or local court or agency, shall have exclusive authority to
resolve any dispute relating to the interpretation, applicability,
enforceability or formation of this Agreement, including but not limited to any
claim that all or any part of this Agreement is void or voidable. The
arbitration shall be final and binding upon the parties.
Either party may bring an action in any court of competent jurisdiction to
compel arbitration under this Agreement and to enforce an arbitration award.
Except as otherwise provided in this Agreement, both the Company and the
Executive agree that neither of them shall initiate or prosecute any lawsuit or
administrative action in any way related to any claim covered by this Agreement.
(c) Any claim which either party has against the other party that could be
submitted for resolution pursuant to this Section must be presented in writing
by the claiming party to the other party within one year of the date the
claiming party knew or should have known of the facts giving rise to the claim,
except that claims arising out of or related to the termination of the
Executive's employment must be presented by him within one year of the Date of
Termination. Unless the party against whom any claim is asserted waives the time
limits set forth above, any claim not brought within the time periods specified
shall be waived and forever barred, even if there is a federal or state statute
of limitations which would have given more time to pursue the claim.
(d) The Company shall advance the costs and expenses of the arbitrator. In any
arbitration to enforce any of the provisions or rights under this Agreement, the
unsuccessful party in such arbitration, as determined by the arbitrator, shall
pay to the successful party or parties all costs, expenses and reasonable
attorneys' fees incurred therein by such party or parties (including without
limitation such costs, expenses and fees on any appeals), and if such successful
party or parties shall recover an award in any such arbitration proceeding, such
costs, expenses and attorneys' fees shall be included as part of such award.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover an amount from the unsuccessful party for
costs, expenses and attorneys' fees that exceeds the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
(e) Any decision and award or order of the arbitrator shall be final and
binding upon the parties hereto and judgment thereon may be entered in the
Superior Court of the State of California or any other court having
jurisdiction.
16
(f) Each of the above terms and conditions shall have separate validity, and
the invalidity of any part thereof shall not affect the remaining parts.
(g) Any decision and award or order of the arbitrator shall be final and
binding between the parties as to all claims which were or could have been
raised in connection with the dispute to the full extent permitted by law. In
all other cases the parties agree that the decision of the arbitrator shall be a
condition precedent to the institution or maintenance of any legal, equitable,
administrative, or other formal proceeding by the employee in connection with
the dispute, and that the decision and opinion of the arbitrator may be
presented in any other forum on the merits of the dispute.
IN WITNESS WHEREOF, the Executive has executed this Agreement and, pursuant to
the authorization from the Compensation and Executive Personnel Committee of the
Board of Directors, the Company has caused this Agreement to be executed, all as
of the day and year first above written.
XXXXX XXXXXXXX CORPORATION EXECUTIVE
/s/ Xxxxxx X. xxx Xxxxxxxxxxxx /s/ Xxxxxx X. Xxxx
-------------------------------------- --------------------------
Xxxxxx X. xxx Xxxxxxxxxxxx Xxxxxx X. Xxxx
Senior Vice President, General Counsel
and Secretary
17
