EXHIBIT 10.1
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "AGREEMENT"), effective as of
November 21, 2005 (the "EFFECTIVE DATE"), by and between Xxxxx Xxxxx, Inc., a
Delaware corporation (the "COMPANY"), and Xxxxxxx X. Xxxxxxxx ("EXECUTIVE").
WHEREAS, the Company desires to employ Executive and to enter
into an agreement embodying the terms of such employment and considers it to be
in its best interests and in the best interests of its stockholders to employ
Executive during the term of this Agreement;
WHEREAS, Executive desires to accept such employment with the
Company and to enter into this Agreement; and
WHEREAS, Executive is willing to accept employment on the terms
hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein and for other good and valuable consideration, the parties
hereby agree as follows:
1. TERM OF EMPLOYMENT. Subject to the provisions of Section
10, this Agreement shall be effective for a term commencing on the
Effective Date and ending on the fourth (4th) anniversary of the
Effective Date (the "INITIAL TERM"); PROVIDED, HOWEVER, that such term
shall be automatically extended for successive twelve (12) month
periods (the Initial Term together with any extension shall be referred
to hereinafter as the "EMPLOYMENT TERM") unless, no later than ninety
(90) days prior to the expiration of the Initial Term or any extension
thereof, either party hereto shall provide written notice to the other
party hereto of its or his desire not to extend the term hereof
("NOTICE OF NONRENEWAL"), in which case Executive's employment
hereunder shall terminate as of the expiration of the Employment Term
unless earlier terminated in accordance with the provisions of Section
10.
2. POSITION.
(a) As of the Effective Date, Executive shall serve
as the President and Chief Executive Officer of the Company. In
such position, Executive shall have such authorities,
responsibilities and duties customarily exercised by a person
holding that position, including, without limitation, the
authority and responsibility for the management, operation,
strategic direction and overall conduct of the business of the
Company. Executive shall report directly to the Board of
Directors of the Company (the "BOARD").
(b) Executive shall become a member of the Board on
the Effective Date. During the Employment Term, Executive will
devote his entire business time and best efforts to the
performance of his duties hereunder and will not engage in any
other business, profession or occupation for compensation or
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otherwise which would conflict with the rendition of such
services without the prior written consent of the Board;
PROVIDED, HOWEVER, that Executive may (i) serve as a director,
trustee or officer or otherwise participate in not-for-profit
educational, welfare, social, religious and civic organizations;
(ii) with the prior approval of the Board, serve as a director
of a for-profit business which does not compete with the Company
or any of its subsidiaries or affiliates; and (iii) acquire
passive investment interests in one or more entities which do
not compete in any material manner with the Company or any
subsidiary or affiliate thereof, to the extent that such other
activities do not inhibit or interfere with the performance of
Executive's duties under this Agreement, do not conflict with
the written policies of the Company or any subsidiary or
affiliate thereof which have been communicated to Executive, and
do not exceed three percent (3%) of the outstanding equity
interests of any such entity.
(c) Executive's primary office shall be located at
the Company's executive headquarters, subject to travel on
Company business as may be necessary or appropriate to the
performance of Executive's duties and responsibilities
hereunder.
3. BASE SALARY. During the Employment Term, the Company
shall pay Executive a base salary (the "BASE SALARY") at the annual
rate of $825,000.00, payable in regular installments in accordance with
the Company's usual payroll practices. From time to time, the Board may
review and increase, but not decrease, Executive's Base Salary in its
sole discretion based on Executive's performance.
4. BONUS.
(a) Commencing in 2006, during the Employment Term,
Executive shall be afforded the opportunity to earn a cash bonus
for each calendar year ending during the Employment Term,
contingent upon the Company's achievement (as reasonably
determined by the Board or a committee thereof) of certain
specified target earnings before interest, taxes, depreciation
and amortization (the "EBITDA TARGET") established prior to, or
as soon as practicable after, each December 31st in respect of
the fiscal year commencing thereafter, by the Board or a
committee thereof in its discretion (but after consultation with
Executive). Such bonus award shall be as follows: (i) 50% of
Base Salary upon the Company's attainment of 95% of the EBITDA
Target, and for each whole percentage increase above 95% and
through 99% of the EBITDA Target, such amount shall be increased
by 10% of Base Salary, (ii) 100% of Base Salary upon the
Company's attainment of 100% of the EBITDA Target, and for each
whole percentage increase above 100% and through 104% of the
EBITDA Target, such amount shall be increased by 10% of Base
Salary, and (iii) 150% of Base Salary upon the Company's
attainment of 105% or greater of the EBITDA Target (the "ANNUAL
BONUS"). Notwithstanding the foregoing, the Annual Bonus in
respect of the Company's fiscal year ending December 31, 2006
shall be no less than 100% of Base Salary (the "2006 ANNUAL
BONUS"). The Annual Bonus shall be paid at the same time as
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annual bonuses are paid to other senior executives of the
Company. Other than as set forth in Section 10 below, Executive
must remain employed with the Company at the time the Annual
Bonus is paid in order to receive it.
(b) Within ninety (90) days following the Effective
Date, the Company shall pay to Executive a one-time signing
bonus of $330,000.00 (the "SIGNING BONUS"). Other than as set
forth in Section 10 below, Executive must remain employed with
the Company at the time the Signing Bonus is paid in order to
receive it.
5. STOCK OPTION GRANT. On the Effective Date, Executive
shall be granted a nonqualified stock option (the "OPTION") under the
Xxxxx Xxxxx Holdings, Inc. Management Stock Option Plan, effective as
of July 30, 2004 (the "PLAN"), to purchase such number of shares of the
common stock of Xxxxx Xxxxx Holdings, Inc. ("HOLDINGS"), par value
$0.01 per share (the "COMMON STOCK"), equal to five percent (5%) of the
outstanding Common Stock on a fully diluted basis as of the Effective
Date, assuming conversion of all outstanding Holdings preferred stock
to Common Stock and including all shares of Common Stock reserved for
issuance under the Plan. The Option shall be granted pursuant to the
Stock Option Agreement attached hereto as EXHIBIT A. Executive
acknowledges and agrees that the grant of the Option is conditional
upon and subject to Executive becoming a party to the "Stockholders
Agreement" (as defined in the Plan).
6. EMPLOYEE BENEFITS. Other than as specifically stated in
this Agreement, Executive shall be provided with employee pension and
welfare benefits on a comparable basis as such benefits are generally
provided by the Company from time to time to the Company's other senior
executives.
7. REIMBURSEMENT OF BUSINESS EXPENSES. During the
Employment Term, all reasonable business expenses incurred by Executive
in the performance of his duties hereunder shall be reimbursed by the
Company upon receipt of documentation of such expenses in a form
reasonably acceptable to the Company, and otherwise in accordance with
the Company's expense reimbursement policies.
8. VACATION. Executive shall be entitled to five (5) weeks
annual paid vacation.
9. RELOCATION. Executive shall be employed at the Company's
office in New York, New York. In connection with Executive's relocation
from Pleasanton, California to the greater New York City metropolitan
area (including New York, Connecticut and New Jersey ) (the "NEW YORK
TRI-STATE AREA"), the following reasonable out-of-pocket costs and
expenses shall be reimbursed by the Company in accordance with the
Company's expense reimbursement policies as in effect from time to
time. To the extent such reimbursements are taxable as compensation to
Executive, the Company shall provide Executive with a gross up payment
equal to the amount of all such taxes plus any taxes payable in
connection with the gross up payment.
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(a) Up to six (6) months of temporary housing costs
for Executive, to a maximum of $5,000.00 per month;
(b) Travel expenses incurred by Executive and his
spouse for the purpose of locating a new residence in the New
York Tri-State Area (business class airfare);
(c) All closing costs incurred by Executive in
connection with purchasing a new primary residence in the New
York Tri-State Area;
(d) Costs incurred by Executive in transporting his
household goods and personal effects from his primary residence
in Pleasanton, California to the new primary residence in the
New York Tri-State Area; and
(e) $30,000.00 to cover any costs and expenses
incurred by Executive and his family in connection with
relocating to the New York Tri-State Area other than those that
are specifically reimbursable in accordance with the foregoing
provisions of this Section 9.
10. TERMINATION. Notwithstanding any other provision of the
Agreement:
(a) FOR CAUSE BY THE COMPANY OR WITHOUT GOOD REASON
BY EXECUTIVE. The Employment Term, and Executive's employment
hereunder, may be terminated at any time by the Company for
"Cause" (as defined below) upon delivery of a "NOTICE OF
TERMINATION" (as defined in Section 10(g)) by the Board to
Executive. If Executive is terminated by the Company for Cause
pursuant to this Section 10(a) or if Executive voluntarily
resigns without "Good Reason" (as defined in Section 10(c)
below), Executive shall be entitled to receive (i) as soon as
reasonably practicable after his date of termination or such
earlier time as may be required by applicable statute or
regulation, his earned but unpaid Base Salary through the date
of termination, (ii) payment in respect of any vacation days
accrued but unused through the date of termination, to the
extent provided by Company policy, and (iii) reimbursement for
all business expenses properly incurred in accordance with
Company policy prior to the date of termination and not yet
reimbursed by the Company (the aggregate benefits payable
pursuant to clauses (i), (ii) and (iii) hereafter referred to as
the "ACCRUED OBLIGATIONS"), and except as provided herein he
shall have no further rights to any compensation (including any
Base Salary, Annual Bonus, 2006 Annual Bonus or Signing Bonus)
or any other benefits under this Agreement. All other accrued
and vested benefits, if any, due Executive following Executive's
termination of employment pursuant to this Section 10(a) shall
be determined and paid in accordance with the plans, policies
and practices of the Company; PROVIDED, HOWEVER, that Executive
shall not participate in any severance, separation pay or
termination plan, policy or program of the Company.
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For purposes of this Agreement, the following shall constitute
"CAUSE" for termination: (i) Executive's conviction of, or
pleading guilty to, a felony, (ii) intentional misconduct by
Executive (including the commission by Executive of any act of
fraud or embezzlement against the Company or any of its
subsidiaries), which is materially injurious (or if known to the
public could be materially injurious) to the reputation or
financial interests of the Company, including without
limitation, sexual or racial harassment of employees of the
Company, its subsidiaries or of persons engaged in business with
the Company or any of its subsidiaries, (iii) Executive's
intentional material breach of any covenant, in this Agreement
or otherwise, or Company policy regarding the protection of the
Company's business interests, including, without limitation,
covenants and policies addressing confidentiality and
non-competition, or (iv) Executive's willful refusal to follow
the lawful instructions of the Board after having received prior
written notice of such refusal and Executive has not corrected
such refusal (if capable of correction) within ten (10) days
following Executive's receipt of such written notice.
(b) DISABILITY OR DEATH. The Employment Term, and
Executive's employment hereunder, shall terminate immediately
upon his death or, following delivery of a Notice of Termination
by the Company to Executive, if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of
ninety (90) consecutive days or one-hundred twenty (120) days
during any consecutive six (6) month period to perform his
duties with substantially the same level of quality as
immediately prior to such incapacity (such incapacity is
hereinafter referred to as "DISABILITY"). Following termination
of Executive's employment hereunder for Disability or death,
Executive or Executive's estate (as the case may be) shall be
entitled to receive (i) within five (5) days following
termination, the Accrued Obligations and (ii) subject to
Sections 10(h) and 11(e), (A) within five (5) days following
termination, any earned but unpaid Annual Bonus in respect of
any of the Company's fiscal years preceding the fiscal year in
which the termination occurs, (B) a pro-rated Annual Bonus in
respect of the year of termination equal to the product of (x)
the amount of Annual Bonus that would have been payable to
Executive had his employment not so terminated based on the
actual percentage attainment of that year's EBITDA Target and
(y) a fraction, the numerator of which is the number of days
elapsed in the calendar year in which such termination occurs
through such termination and the denominator of which is 365,
payable when such annual bonuses are paid to other senior
executive officers of the Company (the "Pro-Rated Annual
Bonus"); PROVIDED that if Executive's employment terminates in
2006, the Pro-Rated Annual Bonus shall only include such amount,
if any, in excess of the guaranteed 2006 Annual Bonus, (C) any
unpaid Signing Bonus, and (D) if unpaid, the guaranteed 2006
Annual Bonus. Except as provided herein, Executive or
Executive's estate (as the case may be) shall have no further
rights to any compensation (including any Base Salary or Annual
Bonus) or any other benefits under this Agreement. All other
accrued and vested benefits, if any, due Executive following
Executive's termination for Disability or death shall be
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determined in accordance with the plans, policies and practices
of the Company; PROVIDED, HOWEVER, that Executive (or his
estate, as the case may be) shall not participate in any
severance, separation pay or termination plan, policy or program
of the Company.
(c) WITHOUT CAUSE BY THE COMPANY OR FOR GOOD REASON
BY EXECUTIVE. The Employment Term, and Executive's employment
hereunder, may be terminated by the Company without Cause (other
than by reason of Executive's Disability) following the delivery
of a Notice of Termination to Executive or by Executive for
"Good Reason" (as defined below) following the delivery of a
Notice of Termination to the Company. If Executive's employment
is terminated by the Company without Cause (other than by reason
of Executive's Disability) or by Executive for Good Reason then
Executive shall receive (i) within five (5) days following
termination, the Accrued Obligations and (ii) subject to
Sections 10(h) and 11(e), (A) within five (5) days following
termination, any earned but unpaid Annual Bonus in respect of
any of the Company's fiscal years preceding the fiscal year in
which the termination occurs, (B) the Pro-Rated Annual Bonus,
(C) any unpaid Signing Bonus, (D) if unpaid, the guaranteed 2006
Annual Bonus , (E) cash severance in the form of two (2) times
the sum of (x) the Base Salary at the rate in effect at the time
of termination and (y) the "Severance Bonus" (as defined below),
payable in equal monthly installments over a period of
twenty-four (24) months (the "SEVERANCE PERIOD") in accordance
with the Company's usual payroll practices, with the first such
installment to be paid on the first usual payroll date following
Executive's termination of employment, and (F) continued
participation in the health insurance benefits of the Company
that are provided from time to time to employees of the Company
during the Severance Period at the same cost to Executive as
that charged to other active employees of the Company; PROVIDED,
that the Company's obligation to provide health insurance
benefits shall cease with respect to such benefits at the time
Executive becomes eligible for such benefits from another
employer. To the extent that the health insurance benefits
provided for in this Section 10(c) are not permissible after
termination of employment under the terms of the benefit plans
of the Company then in effect (and cannot be provided through
the Company's paying the applicable premium for Executive in
accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA")), the Company shall pay to
Executive such amount as is necessary to provide Executive,
after tax, with an amount equal to the cost of acquiring, for
Executive and his spouse and dependents, if any, on a non-group
basis, for the required period, those health insurance benefits
that would otherwise be lost to Executive and his spouse and
dependents as a result of Executive's termination, after taking
into account any amount Executive would have to pay for such
benefits had they been provided through the Company as described
above. Notwithstanding the above, if necessary to avoid
additional or accelerated taxation pursuant to Section 409A of
the Internal Revenue Code of 1986, as amended (the "Code") in
respect of payments to which Executive is entitled pursuant to
this Section 10(c), Executive shall not receive such payments
until the first regular payroll date which occurs at
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least six months following the date of his termination, at which
time Executive shall receive a single lump sum payment for all
amounts that would have been payable in respect of the period
preceding such date but for the delay imposed on account of
Section 409A of the Code, and the remainder of such payments
shall thereafter be paid in equal monthly installments for the
remainder of the Severance Period. Except as provided herein,
Executive shall have no further rights to any compensation
(including any Base Salary or Annual Bonus) or any other
benefits under this Agreement. All other accrued and vested
benefits, if any, due Executive following a termination pursuant
to this Section 10(c) shall be determined in accordance with the
plans, policies and practices of the Company; PROVIDED, HOWEVER,
that Executive shall not participate in any severance,
separation pay or termination plan, policy or program of the
Company.
For purposes of this Agreement, the "SEVERANCE BONUS" shall
mean:
(i) if a termination under this Section
10(c) occurs prior to the Company's determination of the
2006 Annual Bonus, the target Annual Bonus for the year
of termination;
(ii) if such termination occurs on or after
the Company's determination of the 2006 Annual Bonus,
but before the Company's determination of the Annual
Bonus for the Company's 2007 fiscal year, the 2006
Annual Bonus; and
(iii) if such termination occurs on or after
the Company's determination of the Annual Bonus for the
2007 fiscal year, the average of the Annual Bonus in
respect of the two (2) years prior to such termination;
PROVIDED, HOWEVER, that for the purposes of the preceding
clauses (ii) and (iii), the 2006 Annual Bonus shall be
determined based on the percentage of the EBITDA Target actually
attained for the Company's 2006 fiscal year, without regard to
the minimum guaranteed amount for 2006.
For purposes of this Agreement, "GOOD REASON" shall mean:
(i) the assignment to Executive of any
duties materially and adversely inconsistent with
Executive's position as President and Chief Executive
Officer, which results in a material and adverse change
in Executive's status, offices or titles with the
Company;
(ii) the failure of Executive to be elected
or reelected to the Board; or
(iii) a reduction in Executive's Base Salary
or Annual Bonus opportunity;
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PROVIDED, HOWEVER, that any event described in clause
(i) or clause (iii) shall not constitute Good Reason
unless Executive has given the Company prior written
notice of such event and the Company has not cured such
event (if capable of cure) within (10) days following
receipt of such notice. For avoidance of doubt, Good
Reason shall not include the delivery of a Notice of
Nonrenewal by the Company to Executive.
(d) NONRENEWAL BY THE COMPANY. The Employment Term,
and Executive's employment hereunder, shall terminate at the end
of the Employment Term following the delivery of a Notice of
Nonrenewal by the Company to Executive. Upon such termination,
Executive shall receive (i) the Accrued Obligations and (ii)
subject to Sections 10(h) and 11(e), (A) cash severance in the
form of two (2) times the Base Salary at the rate in effect at
the time of termination, payable in equal monthly installments
over the Severance Period in accordance with the Company's usual
payroll practices, with the first such installment to be paid on
the first usual payroll date following the date of such
termination of employment, and (B) continued participation in
the health insurance benefits of the Company that are provided
from time to time to employees of the Company during the
Severance Period at the same cost to Executive as that charged
to other active employees of the Company; provided, that the
Company's obligation to provide health insurance benefits shall
cease with respect to such benefits at the time Executive
becomes eligible for such benefits from another employer. To the
extent that the health insurance benefits provided for in this
Section 10(d) are not permissible after termination of
employment under the terms of the benefit plans of the Company
then in effect (and cannot be provided through the Company's
paying the applicable premium for Executive in accordance with
COBRA), the Company shall pay to Executive such amount as is
necessary to provide Executive, after tax, with an amount equal
to the cost of acquiring, for Executive and his spouse and
dependents, if any, on a non-group basis, for the required
period, those health insurance benefits that would otherwise be
lost to Executive and his spouse and dependents as a result of
Executive's termination, after taking into account any amount
Executive would have to pay for such benefits had they been
provided through the Company as described above. Except as
provided herein, Executive shall have no further rights to any
compensation (including any Base Salary or Annual Bonus) or any
other benefits under this Agreement. All other accrued and
vested benefits, if any, due Executive following a termination
pursuant to this Section 10(d) shall be determined in accordance
with the plans, policies and practices of the Company; provided,
however, that Executive shall not participate in any severance,
separation pay or termination plan, policy or program of the
Company.
(e) TERMINATION IN CONNECTION WITH A CHANGE IN
CONTROL. Notwithstanding anything contained in this Agreement to
the contrary, if Executive's employment is terminated within
twenty-four (24) months following a "CHANGE IN CONTROL" (as
defined in the Stock Option Agreement attached hereto as EXHIBIT
A) during the Employment Term by the Company without Cause or by
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Executive for Good Reason, then, subject to Sections 10(h) and
11(e), Executive shall be entitled to any and all of the
payments and benefits set forth for such terminations in Section
10(c); PROVIDED, HOWEVER, that the cash severance payment
described in clause (ii)(E) of Section 10(c) shall be payable in
a single lump sum.
(f) EXCISE TAX GROSS-UP. The following provisions
shall apply only at a time when the Company has stock which is
"readily tradable on an established securities market or
otherwise" (within the meaning of Section 280G(b)(5)(A)(ii)(I)
of the Code):
(i) If it is determined (as hereafter
provided) that any payment or distribution by the
Company to or for the benefit of Executive, whether paid
or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or
by reason of any other agreement, policy, plan, program
or arrangement of the Company, including without
limitation any restricted stock, stock option, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "PAYMENT"),
would be subject to the excise tax imposed by Section
4999 of the Code (or any successor provision thereto),
or to any similar tax imposed by state or local law, or
any interest or penalties with respect to such excise
tax (such tax or taxes, together with any such interest
and penalties, are hereafter collectively referred to as
the "EXCISE TAX"), then Executive shall be entitled to
receive an additional payment or payments (a "GROSS-UP
PAYMENT") in an amount such that, after payment by
Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including
any Excise Tax, imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(ii) Subject to the provisions of Section
10(f)(vi) of this Agreement, all determinations required
to be made under this Section 10(f), including whether
an Excise Tax is payable by Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment, shall
be made by a nationally recognized firm of certified
public accountants (the "ACCOUNTING FIRM") chosen by the
Company. The Company shall direct the Accounting Firm to
submit its determination and detailed supporting
calculations to both the Company and Executive within
fifteen (15) calendar days after the date of the event
giving rise to the Payment or the date of Executive's
termination of employment, if applicable, and any other
such time or times as may be requested by the Company or
Executive. If the Accounting Firm determines that any
Excise Tax is payable by Executive, the Company shall
pay the required Gross-Up Payment to Executive within
five (5) business days after receipt of such
determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by Executive,
it shall, at the same time as it makes such
determination, furnish Executive
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with an opinion that he has substantial authority not to
report any Excise Tax on his federal, state, local
income or other tax return. Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment
shall be binding upon the Company and Executive. As a
result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto)
and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which shall not have
been made by the Company should have been made (an
"UNDERPAYMENT"), consistent with the calculations
required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies
pursuant to Section 10(f)(vi) hereof and Executive
thereafter is required to make a payment of any Excise
Tax, Executive shall direct the Accounting Firm to
determine the amount of the Underpayment that has
occurred and to submit its determination and detailed
supporting calculations to both the Company and
Executive as promptly as possible. Any such Underpayment
shall be promptly paid by the Company to, or for the
benefit of, Executive within five (5) business days
after receipt of such determination and calculations.
(iii) The Company and Executive shall each
provide the Accounting Firm access to and copies of any
books, records and documents in the possession of the
Company or Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with
the preparation and issuance of the determination
contemplated by Section 10(f)(ii) of this Agreement.
(iv) The federal, state and local income or
other tax returns filed by Executive shall be prepared
and filed on a consistent basis with the determination
of the Accounting Firm with respect to the Excise Tax
payable by Executive. Executive shall make proper
payment of the amount of any Excise Tax, and, at the
request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal
income tax return as filed with the Internal Revenue
Service (the "IRS") and corresponding state and local
tax returns, if relevant, as filed with the applicable
taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment. If
prior to the filing of Executive's federal income tax
return, or corresponding state or local tax return, if
relevant, the Accounting Firm determines that the amount
of the Gross-Up Payment should be reduced, Executive
shall, within five (5) business days pay to the Company
the amount of such reduction.
(v) The fees and expenses of the Accounting
Firm for its services in connection with the
determinations and calculations contemplated by Section
10(f)(ii) and Section 10(f)(iv) of this Agreement
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shall be borne by the Company and paid as incurred. If
such fees and expenses are initially advanced by
Executive, the Company shall reimburse Executive the
full amount of such fees and expenses within five (5)
business days after receipt from Executive of a
statement therefor and reasonable evidence of his
payment thereof.
(vi) Executive shall notify the Company in
writing of any claim by the IRS that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as
practicable but no later than ten (10) business days
after Executive actually receives notice of such claim
and Executive shall further apprise the Company of the
nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known
by Executive). Executive shall not pay such claim prior
to the earlier of (x) the expiration of the thirty (30)
calendar-day period following the date on which he gives
such notice to the Company and (y) the date that any
payment of amount with respect to such claim is due. If
the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest
such claim, Executive shall:
(1) provide the Company with any
written records or documents in his possession
relating to such claim reasonably requested by
the Company;
(2) take such action in connection
with contesting such claim as the Company shall
reasonably request in writing from time to time,
including without limitation accepting legal
representation with respect to such claim by an
attorney competent in respect of the subject
matter and reasonably selected by the Company;
(3) cooperate with the Company in
good faith in order effectively to contest such
claim; and
(4) permit the Company to participate
in any proceedings relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and
shall indemnify and hold harmless Executive, on an
after-tax basis, for and against 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 limiting the foregoing provisions of this
Section 10(f)(vi), the Company shall control all
proceedings taken in connection with the contest of any
claim contemplated by this Section 10(f)(vi) and, at its
sole option, may pursue
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or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim (provided that
Executive may participate therein at his own cost and
expense) and may, at its option, either direct Executive
to pay the tax claimed and xxx for a refund or contest
the claim in any permissible manner, and 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, that
if the Company directs Executive to pay the tax claimed
and xxx for a refund, the Company shall advance the
amount of such payment to Executive on an interest-free
basis and shall indemnify and hold 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; and
provided further, that any extension of the statute of
limitations relating to payment of taxes for the taxable
year of Executive with respect to which the contested
amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of
any such contested claim shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder, and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by
the IRS or any other taxing authority.
(vii) If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 10
(f)(vi) hereof, Executive receives any refund with
respect to such claim, Executive shall (subject to the
Company's complying with the requirements of Section
10(f)(vi) hereof) promptly pay to the Company the amount
of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto).
If, after the receipt by Executive of an amount advanced
by the Company pursuant to Section 10(f)(vi) hereof, a
determination is made that Executive shall not be
entitled to any refund with respect to such claim and
the Company does not notify Executive in writing of its
intent to contest such denial or refund prior to the
expiration of thirty (30) calendar 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 pursuant
to this Section 10(f).
(viii) If it is ultimately determined (by IRS
private letter ruling or closing agreement, court
decision or otherwise) that any Gross-Up Payments and/or
advances and/or Underpayments and/or any other amounts
paid or made by the Company pursuant to this Section
10(f) were not necessary to accomplish the purpose of
this Section 10(f), Executive shall promptly cooperate
with the Company to correct such overpayments (by way of
assigning any refund to the Company as provided herein,
by direct repayment or otherwise) in a manner consistent
with the purpose of
13
this Section 10(f), which is to protect Executive by
making him whole, but not more than whole, on an
after-tax basis, from the application of the Excise Tax.
(g) NOTICE OF TERMINATION. Any purported termination
of employment by the Company or Executive shall be communicated
by a written Notice of Termination to Executive or the Company,
respectively, delivered in accordance with Section 13(j) hereof.
For purposes of this Agreement, a "NOTICE OF TERMINATION" shall
mean a notice which shall indicate the specific termination
provision in the Agreement relied upon and the date of
termination, and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
employment under the provision so indicated. The date of
termination of Executive's employment shall be the date so
stated in the Notice of Termination, which date shall be, in the
event of a termination by Executive without Good Reason, no less
than sixty (60), or in the event of a termination by Executive
for Good Reason or by the Company without Cause, no less than
thirty (30), days following the delivery of a Notice of
Termination; PROVIDED, HOWEVER, that in the case of a
termination of Executive's employment by the Company without
Cause or by Executive for any reason, the Company may require
during the notice period that Executive do no work for the
Company and not appear at the Company's offices, and such action
shall not be deemed Good Reason or otherwise a breach of this
Agreement by the Company.
(h) RELEASE. Notwithstanding any other provision of
this Agreement to the contrary, Executive acknowledges and
agrees that any and all payments to which Executive is entitled
under this Section 10 which are described as being subject to
this Section 10(h) are conditioned upon and subject to
Executive's execution of, and not having revoked within any
applicable revocation period, a general release and waiver, in
such reasonable and customary form as shall be prepared by the
Company, of all claims Executive may have against the Company
and its directors, officers, subsidiaries and affiliates, except
as to (i) matters covered by provisions of this Agreement that
expressly survive the termination of this Agreement (including
rights to enforce this Agreement), (ii) rights to
indemnification and insurance under the Charter, By-Laws and
directors and officers insurance policies maintained by the
Company and (iii) rights to which Executive is entitled by
virtue of his participation in the employee benefit plans,
policies and arrangements of the Company.
11. RESTRICTIVE COVENANTS.
(a) NON-COMPETITION; NON-SOLICITATION. At all times
during the Employment Term and the Severance Period, or, in the
event Executive's employment is terminated by the Company for
Cause or by Executive without Good Reason, at all times during
the period of two (2) years commencing on and following the date
of such termination, Executive agrees that he will not, directly
or indirectly, without the prior written consent of the Board,
be employed by, or
14
act as a consultant or lender to or in association with, or as a
director, officer, employee, partner, owner, joint venturer,
member or otherwise, of any person, firm, corporation,
partnership, limited liability company, association or other
entity that engages in the chain drug business in the greater
New York metropolitan area (other than by beneficial ownership
of up to 2% of the outstanding voting stock of a publicly-traded
company that is or owns such a competitor). Executive further
agrees that at all times during the Employment Term and for two
(2) years following Executive's termination of employment with
the Company for any reason, Executive will not directly or
indirectly (i) solicit or hire or encourage the solicitation or
hiring of any person who was an employee of the Company at any
time on or after the date of such termination (unless more than
six (6) months shall have elapsed between the last day of such
person's employment by the Company and the first date of such
solicitation or hiring) or (ii) induce or attempt to induce any
employee of the Company to leave the employ of the Company or in
any way interfere with the relationship between the Company and
any employee thereof.
(b) NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
Executive recognizes that the services Executive performs for
the Company are special, unique and extraordinary in that
Executive may acquire confidential information, trade secrets or
other competitive information concerning the operations of the
Company, the use or disclosure of which could cause the Company
substantial loss and damages which could not be readily
calculated, and for which no remedy at law would be adequate.
Accordingly, Executive agrees that Executive will not at any
time during Executive's employment with the Company or
thereafter, except in performance of Executive's obligations to
the Company hereunder, disclose, either directly or indirectly,
any Confidential Information (as hereinafter defined) that
Executive may learn by reason of his association with the
Company. The term "CONFIDENTIAL INFORMATION" shall mean any
past, present or future confidential or secret plans, programs,
documents, agreements, internal management reports, financial
information or other material relating to the business,
strategies, services or activities of the Company, including,
without limitation, information with respect to the Company's
operations, processes, products, inventions, business practices,
finances, principals, vendors, suppliers, customers, potential
customers, marketing methods, costs, prices, contractual
relationships, including leases, regulatory status, compensation
paid to employees or other terms of employment, and trade
secrets, market reports, customer investigations, customer lists
and other similar information that is proprietary information of
the Company. Notwithstanding the foregoing, Executive may
disclose such Confidential Information when required to do so by
a court of competent jurisdiction, by any governmental agency
having supervisory authority over the business of the Company
and/or its affiliates, as the case may be, or by any
administrative body or legislative body (including a committee
thereof) with jurisdiction to order Executive to divulge,
disclose or make accessible such information; provided, further,
that in the event that Executive is ordered by any
15
such court or other government agency, administrative body or
legislative body to disclose any Confidential Information,
Executive shall (i) promptly notify the Company of such order,
(ii) at the written request of the Company, diligently contest
such order at the sole expense of the Company as expenses occur,
and (iii) at the written request of the Company, seek to obtain,
at the sole expense of the Company, such confidential treatment
as may be available under applicable laws for any information
disclosed under such order.
(c) MUTUAL NONDISPARAGEMENT. Executive agrees
(whether during or after Executive's employment with the
Company) not to make any public statements that disparage the
Company or its subsidiaries or affiliates, the officers,
directors, managers or shareholders of the Company or its
subsidiaries or affiliates, or any products or services of the
Company or its subsidiaries or affiliates; PROVIDED, that normal
competitive statements made by Executive which do not cite or
otherwise refer to Executive's employment by the Company shall
not be subject to this Section 11(c). The Company shall instruct
its directors and executive officers not to make any public
statements, by press release or other formally released
announcement, that disparage Executive. Notwithstanding the
above, statements made in the course of sworn testimony in
administrative, judicial or arbitral proceedings (including,
without limitation, depositions in connection with such
proceedings) shall not be subject to this Section 11(c).
(d) AFFILIATE TRANSACTIONS. Executive shall not
cause, or to his knowledge allow, the Company to engage,
directly or indirectly, in any transaction with any family
member of Executive, or with any entity controlled, directly or
indirectly, by Executive and/or his family members, in each case
without the advance written consent of the Board.
(e) ENFORCEMENT. Executive hereby expressly
acknowledges and agrees that the restrictions contained in this
Section 11 are reasonable and necessary to protect the Company's
legitimate interests, that the Company would not have entered
into this Agreement in the absence of such restrictions, and
that any violation of such restrictions will result in
irreparable harm to the Company. Executive agrees that the
Company shall be entitled to preliminary and permanent
injunctive relief (without the necessity of proving actual
damages) as well as an equitable accounting of all earnings,
profits and other benefits arising from any violation of the
restrictions contained in Section 11, which rights shall be
cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In addition, the Company
shall be entitled to immediately cease paying any amounts
remaining due or providing any benefits to Executive pursuant to
Section 10 upon a determination by the Board that Executive has
violated any provision of Section 11; PROVIDED that any such
withheld amounts and benefits shall be paid promptly following a
subsequent determination by the Board or a tribunal with
authority over such matter (which determination by a tribunal is
final and not subject to further appeal, or as to which the time
period to appeal has expired) that Executive had not in fact
violated any provision of
16
Section 11 during the time with respect to which such amount
and/or benefits were withheld. Notwithstanding the provisions of
Section 13(d), the Company and Executive agree irrevocably and
unconditionally (i) that any legal proceeding arising out of
Section 11 may be brought at the Company's election only in the
United States District Court for the Southern District of New
York or if such court will not accept jurisdiction, in any court
of general jurisdiction in New York, or, if not in court, by
arbitration in accordance with Section 13(c), (ii) to the
non-exclusive jurisdiction of such court in any such proceeding,
and (iii) to waive any objection to the laying of venue of any
such proceeding in any such court. Executive and the Company
also irrevocably and unconditionally consent to the service of
any process, pleadings, notices or other papers in connection
with any such proceeding.
(f) SURVIVABILITY. The duties and obligations of
Executive to act or not act pursuant to this Section 11 shall
survive the termination of this Agreement and Executive's
employment hereunder for any reason, including, without
limitation, any termination of Executive's employment by the
Company without Cause or by Executive for Good Reason, or in
connection with a Change in Control pursuant to Section 10(e).
12. INDEMNIFICATION. The Company agrees that if Executive is
made a party, or is threatened to be made a party, to any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(a "PROCEEDING"), by reason of the fact that he is or was a director,
officer or employee of the Company or is or was serving at the request
of the Company as a director, officer, member, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
Executive shall be indemnified and held harmless by the Company to the
fullest extent authorized by the Company's articles of incorporation or
bylaws or resolutions of the Board, against all cost, expense,
liability and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or other liabilities or penalties
and amounts paid or to be paid in settlement) reasonably incurred or
suffered by Executive in connection therewith, and such indemnification
shall continue as to Executive even if he has ceased to be a director,
member, employee or agent of the Company or other entity, with respect
to acts or omissions which occurred prior to his cessation of
employment with the Company, and shall inure to the benefit of
Executive's heirs, executors and administrators.
13. MISCELLANEOUS.
(a) EXECUTIVE'S REPRESENTATIONS AND COVENANTS.
Executive hereby represents and warrants to the Company that (i)
the execution, delivery and performance of this Agreement by
Executive does not and shall not conflict with, breach, violate
or cause a default under any contract, agreement, instrument,
order, judgment or decree to which Executive is a party or by
which he is bound; and (ii) Executive is not a party to or bound
by an employment agreement, noncompete agreement or
confidentiality agreement with any other person or
17
entity which would interfere with the performance of his duties
hereunder. Executive hereby covenants that he shall not use any
confidential information or trade secrets of any person or party
other than the Company and its subsidiaries and affiliates in
connection with the performance of his duties hereunder.
(b) NO MITIGATION; OFFSET. In the event of any
termination of Executive's employment hereunder, Executive shall
be under no obligation to seek other employment or otherwise
mitigate the obligations of the Company under this Agreement.
Except as provided in Sections 10(c) and 10(d), there shall be
no offset against any amounts due under this Agreement on
account of any remuneration attributable to any subsequent
employment that Executive may obtain. The Company may offset any
payments due Executive with any amounts owed to the Company by
Executive at the time of the termination of Executive's
employment for any reason and by any damages the Company
realizes as a result of Executive's breach of any provision of
this Agreement.
(c) RESOLUTION OF DISPUTES AND REIMBURSEMENT OF
LEGAL COSTS. The Company and Executive agree that any
controversy or claim arising out of or relating to this
Agreement (other than a controversy under Section 11 of this
Agreement (Restrictive Covenants)), or the breach thereof, shall
be settled by arbitration administered by the American
Arbitration Association in accordance with its Commercial
Arbitration Rules then in effect. Venue for any arbitration
pursuant to this Agreement will lie in New York, New York. One
of the arbitrators shall be appointed by the Company, one shall
be appointed by Executive and the third shall be appointed by
the first two arbitrators. If the first two arbitrators cannot
agree on the third arbitrator within 30 days following the
appointment of the second arbitrator, then the third arbitrator
shall be appointed by the Association and shall be experienced
in the resolution of disputes under employment agreements for
senior executives of major corporations. Any award entered by
the arbitrators shall be final, binding and nonappealable and
judgment may be entered thereon by either party in accordance
with applicable law in any court of competent jurisdiction. This
arbitration provision shall be specifically enforceable. The
arbitrators shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by
virtue of the Agreement. Unless otherwise awarded by the
arbitrators, each party shall be responsible for its own
expenses relating to the conduct of the arbitration (including
reasonable attorneys' fees and expenses) and shall share the
fees of the American Arbitration Association and the
arbitrators, if applicable, equally.
(d) GOVERNING LAW; CONSENT TO JURISDICTION. THIS
AGREEMENT WILL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE WHOLLY PERFORMED WITHIN THAT STATE, WITHOUT
REGARD TO THE CONFLICT OF LAWS PROVISIONS OF ANY JURISDICTION
18
WHICH WOULD CAUSE THE APPLICATION OF ANY LAW OTHER THAN THAT OF
THE STATE OF NEW YORK. ANY ACTION TO ENFORCE THIS AGREEMENT
AND/OR THE EXHIBITS HERETO (OTHER THAN AN ACTION WHICH MUST BE
BROUGHT BY ARBITRATION PURSUANT TO SECTION 13(c)) MUST BE
BROUGHT IN, AND THE PARTIES HEREBY CONSENT TO THE JURISDICTION
OF, A COURT SITUATED IN NEW YORK, NEW YORK. EACH PARTY HEREBY
WAIVES THE RIGHTS TO CLAIM THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.
(e) JURY TRIAL WAIVER. THE PARTIES EXPRESSLY AND
KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL IN THE EVENT ANY
ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
EXECUTIVE'S EMPLOYMENT WITH THE COMPANY IS LITIGATED OR HEARD IN
ANY COURT.
(f) ENTIRE AGREEMENT/AMENDMENTS. This Agreement,
together with the Exhibits hereto, contains the entire
understanding of the parties with respect to the employment of
Executive by the Company. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the
parties with respect to the subject matter herein other than
those expressly set forth herein. Neither this Agreement nor the
Exhibits hereto may be altered, modified, or amended except by
written instrument signed by the parties hereto. Sections 11 and
12 shall survive the termination of Executive's employment with
the Company, except as otherwise specifically stated therein.
(g) NO WAIVER. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver of such party's rights or
deprive such party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(h) SEVERABILITY. In the event that any one or more
of the provisions of this Agreement shall be or become invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions of this Agreement
shall not be affected thereby.
(i) SUCCESSORS. This Agreement is personal to
Executive and shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by
Executive's legal representatives. This Agreement shall inure to
the benefit of and be binding upon the Company and its
successors and assigns. 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.
19
(j) NOTICE. For the purpose of this Agreement,
notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally, if delivered by overnight
courier service, if sent by facsimile transmission or if mailed
by United States registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses or sent
via facsimile to the respective facsimile numbers, as the case
may be, as set forth below, or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt; PROVIDED, HOWEVER, that (i) notices
sent by personal delivery or overnight courier shall be deemed
given when delivered; (ii) notices sent by facsimile
transmission shall be deemed given upon the sender's receipt of
confirmation of complete transmission, and (iii) notices sent by
United States registered mail shall be deemed given two days
after the date of deposit in the United States mail.
If to the Company, to:
Xxxxx Xxxxx, Inc.
000 Xxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
If to Executive, to such address as shall most
currently appear on the records of the Company.
(k) WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state and
local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
(l) LEGAL FEES. The Company shall reimburse the
reasonable legal fees incurred by Executive in connection with
the negotiation and preparation of this Agreement, computed at
the regular hourly rates of Executive's counsel, upon the
presentation to the Company of a reasonably detailed invoice
therefor; PROVIDED that the amount of such reimbursement shall
not exceed $50,000.00.
(m) COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the
same instrument.
20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxxx
------------------------------
XXXXXXX X. XXXXXXXX
XXXXX XXXXX, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Name:
Title:
