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TERMINATION PROTECTION AGREEMENT
AGREEMENT effective March 17, 2000 between Xxxxxx X.
Xxxxxxx & Sons, Inc. and Xxx Xxxxxx (the "Executive").
Executive is a skilled and dedicated employee who has
important management responsibilities and talents which benefit the Company. The
Company believes that its best interests will be served if Executive is
encouraged to remain with the Company. The Company has determined that
Executive's ability to perform Executive's responsibilities and utilize
Executive's talents for the benefit of the Company, and the Company's ability to
retain Executive as an employee, will be significantly enhanced if Executive is
provided with fair and reasonable protection from the risks of a change in
ownership or control of SCL. Accordingly, the Company and Executive agree as
follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this
Agreement which are defined in Schedule A shall have the meanings set forth in
Schedule A.
2. Effective Date; Term.
This Agreement shall be effective as of March 17, 2000 (the
"Effective Date") and shall remain in effect until March 31, 2003 (the "Term");
provided, however, that commencing with March 31, 2001 and on each anniversary
thereof (each an "Extension Date"), the Term shall be automatically extended for
an additional one-year period, unless the Company or Executive provides the
other party hereto written notice before the applicable Extension Date that the
Term shall not be so extended. Notwithstanding the foregoing, this Agreement
shall, if in effect on the date of a Change of Control, remain in effect for two
years following the Change of Control.
3. Change of Control Benefits.
If Executive's employment with the Company is terminated at
any time within the two years following a Change of Control by the Company
without Cause, or by Executive for Good Reason (the effective date of either
such termination hereafter referred to as the "Termination Date"), Executive
shall be entitled to the payments and benefits provided hereafter in this
Section 3 and as set forth in this Agreement. If Executive's employment by the
Company is terminated prior to a Change of Control by the Company (i) at the
request of a party (other than the Company or SCL) involved in the Change of
Control or (ii) otherwise in connection with or in anticipation of a Change of
Control that subsequently occurs, Executive shall be entitled to the benefits
provided hereafter in this Section 3 and as set forth in this Agreement, and
Executive's Termination Date shall be deemed to have occurred immediately
following the Change of Control. Notwithstanding the foregoing, in the event
there is another agreement (e.g. an employment agreement) between the Company
and Executive in effect upon the Termination Date, which agreement by its terms
provides for termination payments or benefits, under the applicable
circumstances (whether or not in connection with a change of control), that are
greater than the applicable payments and benefits provided in any of subsections
(a) through (g) of this
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Section 3 (the "Other Benefits"), then Executive shall receive the Other
Benefits in lieu of any payments or benefits under such subsection. For example,
if Executive is covered by an employment agreement that provides for a higher
amount of cash severance, in the event Executive is terminated by the Company
without Cause, than that provided by Section 3(a) hereof, such higher amount of
cash severance would be payable in lieu of the cash severance set forth in
Section 3(a), but the payments and benefits set forth in Section 3(b) through
(g) would remain applicable. Notice of termination without Cause or for Good
Reason shall be given in accordance with Section 12, and shall indicate the
specific termination provision hereunder relied upon, the relevant facts and
circumstances and the Termination Date.
x. Xxxxxxxxx Payments. Within fifteen business days
after the Termination Date, the Company shall pay
Executive a cash lump sum equal to:
(1) two times Executive's Base Salary in effect
on the date of the Change of Control or the
Termination Date, whichever is higher;
provided that if any reduction of the Base
Salary, or any failure to increase the Base
Salary pursuant to an agreement between
Executive and the Company, has occurred,
then the Base Salary on either date shall be
as in effect immediately prior to such
reduction or after giving effect to such
increase, as the case may be; and
(2) two times Executive's Target Bonus in effect
on the date of the Change of Control or the
Termination Date, whichever is higher;
provided that if any reduction of the Target
Bonus, or any failure to increase the Target
Bonus pursuant to an agreement between
Executive and the Company, has occurred,
then the Target Bonus on either date shall
be as in effect immediately prior to such
reduction or after giving effect to such
increase, as the case may be; and
(3) Executive's Target Bonus (as determined in
(2), above) multiplied by a fraction, the
numerator of which shall equal the number of
days Executive was employed by the Company
in the Company fiscal year in which the
Termination Date occurs and the denominator
of which shall equal 365.
b. Treatment of Stock Options. Any unvested stock
options outstanding on the date of the Change of
Control (and any options into which such options
are converted or options granted in substitution
for such unvested options) shall become fully
exercisable, and shall remain exercisable for the
period applicable to vested options under the
applicable option agreement.
c. Continuation of Benefits. Until the second
anniversary of the Termination Date, the Company
shall, at its expense, provide Executive and his
or her
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spouse and dependents with medical, life insurance
and disability coverages at the level provided to
Executive immediately prior to the Change of Control;
provided, however, that if Executive becomes employed
by a new employer, continuing coverage from the
Company will become secondary to any coverage
afforded by the new employer.
d. Payment of Earned But Unpaid Amounts. Within
fifteen business days after the Termination Date,
the Company shall pay Executive the Base Salary
through the Termination Date, any Bonus earned but
unpaid as of the Termination Date for any
previously completed fiscal year of the Company,
all compensation previously deferred by Executive
but not yet paid and reimbursement for any
unreimbursed expenses properly incurred by
Executive in accordance with Company policies
prior to the Termination Date. Executive shall
also receive such employee benefits, if any, to
which Executive may be entitled from time to time
under the employee benefit or fringe benefit
plans, policies or programs of the Company, other
than any Company severance policy (payments and
benefits in this subsection (d), the "Accrued
Benefits").
e. Additional Benefit Plan Service and Age. For
purposes of eligibility for retirement, for early
commencement or actuarial subsidies under any
Company pension, medical reimbursement or life
insurance plan (or any such alternative
contractual arrangement that the Executive may
have with the Company), Executive will be credited
with an additional two years of service and age
beyond that accrued as of the Termination Date;
provided that if any benefits afforded by this
Agreement, including the benefits arising from the
grant of additional service and age, cannot be
provided under the qualified pension plan of the
Company due to the qualification provisions of the
Code, the benefit, or its equivalent in value, shall
be provided under a nonqualified pension plan of the
Company.
f. Supplemental Retirement and Profit Sharing Benefits.
Executive will become fully vested in any unfunded
pension benefit provided under any nonqualified
pension plan, program or arrangement in which he or
she participates (including, without limitation, the
Benefit Equalization Plan and the Supplemental
Retirement Account Plan).
g. Outplacement Counseling. For the two-year period
following the Termination Date (or, if earlier,
the date Executive first obtains full-time
employment after the Termination Date), the
Company shall reimburse all reasonable expenses
incurred by Executive for professional
outplacement services by qualified consultants
selected by Executive.
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4. Mitigation.
Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, and, subject to Section 3(c), compensation earned from
such employment or otherwise shall not reduce the amounts otherwise payable
under this Agreement. No amounts payable under this Agreement shall be subject
to reduction or offset in respect of any claims which the Company (or any other
person or entity) may have against Executive.
5. Gross-Up.
a. Subject to Section 5(b) below, in the event it shall
be determined that any payment, benefit or
distribution (or combination thereof by the Company,
any of its affiliates, or one or more trusts
established by the Company for the benefit of its
employees, to or for the benefit of Executive
(whether paid or payable or distributed or
distributable pursuant to the terms of this
Agreement, or otherwise) (a "Payment") is subject to
the excise tax imposed by Section 4999 of the Code or
any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax,
together with any such interest and penalties,
hereinafter collectively referred to as the "Excise
Tax"), Executive shall be entitled to receive an
additional payment (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, without
limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and the
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.
b. Notwithstanding the provisions of Section 5(a), if
it shall be determined that Executive is entitled
to a Gross-Up Payment, but the Payments do not
exceed 105% of the greatest amount (the "Reduced
Amount") that could be paid to Executive such that
the receipt of the Payments would not give rise to
any Excise Tax, then no Gross-Up Payment shall be
made to Executive and the Payments, in the
aggregate, shall be reduced to be equal to the
Reduced Amount.
c. All determinations required to be made under this
Section 5, including whether and when a Gross-Up
Payment is required and the amount of such Gross-
Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by
PricewaterhouseCoopers or such other nationally
recognized certified public accounting firm as may
be designated by the Company (the "Accounting
Firm") which shall provide detailed supporting
calculations both to the Company and Executive
within ten business days of the receipt of notice
from Executive that there
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has been a Payment, or such earlier time as is
requested by the Company; provided that for purposes
of determining the amount of any Gross-Up Payment,
Executive shall be deemed to pay federal income tax
at the highest marginal rates applicable to
individuals in the calendar year in which any such
Gross-Up Payment is to be made and deemed to pay
state and local income taxes at the highest effective
rates applicable to individuals in the state or
locality of Executive's residence or place of
employment in the calendar year in which any such
Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be
obtained from deduction of such state and local
taxes, taking into account limitations applicable to
individuals subject to federal income tax at the
highest marginal rates. All fees and expenses of the
Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this
Section 5, shall be paid by the Company to Executive
(or to the appropriate taxing authority on
Executive's behalf) when due. If the Accounting Firm
determines that no Excise Tax is payable by
Executive, it shall so indicate to Executive in
writing. Any determination by the Accounting Firm
shall be binding upon the Company and Executive. As a
result of the uncertainty in the application of
Section 4999 of the Code, it is possible that the
amount of the Gross-Up Payment determined by the
Accounting Firm to be due to (or on behalf of)
Executive was lower than the amount actually due
("Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 5(d) and
Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
d. 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 any Gross-Up Payment. Such notification
shall be given as soon as practicable but no later
than ten business days after 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.
Executive shall not pay such claim prior to the
expiration of the thirty 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 Executive in writing
prior to the expiration of such period that it
desires to contest such claim, 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
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Company in good faith in order to effectively 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 indemnify and hold 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 5(d), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego 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
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, further, that if the Company directs
Executive to pay such claim 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 or with
respect to any imputed income with respect to such
advance; provided, further, that if Executive is
required to extend the statute of limitations to
enable the Company to contest such claim, Executive
may limit this extension solely to such contested
amount. 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 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.
e. If, after the receipt by Executive of an amount
paid or advanced by the Company pursuant to this
Section 5, Executive becomes entitled to receive
any refund with respect to a Gross-Up Payment,
Executive shall (subject to the Company's
complying with the requirements of Section 5(d))
promptly pay to the Company the amount of such
refund received (together with any interest paid
or credited thereon after taxes applicable
thereto). If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section
5(d), 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 of
refund prior to the expiration of thirty days
after such determination, then such advance shall
be forgiven and shall not be
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required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of
the Gross-Up Payment required to be paid.
6. Termination for Cause.
Nothing in this Agreement shall be construed to prevent the
Company from terminating Executive's employment for Cause. If Executive is
terminated for Cause, the Company shall have no obligation to make any payments
under this Agreement, except for the Accrued Benefits.
7. Indemnification; Director's and Officer's Liability Insurance.
Executive shall, after the Termination Date, retain all rights
to indemnification under applicable law or under the Company's Certificate of
Incorporation or By-Laws, as they may be amended or restated from time to time.
In addition, the Company shall maintain Director's and Officer's liability
insurance on behalf of Executive, at the level in effect immediately prior to
the Termination Date, for the two year period following the Termination Date,
and throughout the period of any applicable statute of limitations.
8. Costs of Proceedings.
Each party shall pay its own costs and expenses in connection
with any legal proceeding (including arbitration), relating to the
interpretation or enforcement of any provision of this Agreement, except that
the Company shall pay such costs and expenses, including attorneys' fees and
disbursements, of Executive if Executive prevails in such proceeding.
9. Assignment.
Except as otherwise provided herein, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the Company and
Executive and their respective heirs, legal representatives, successors and
assigns. If SCL shall be merged into or consolidated with another entity, the
provisions of this Agreement shall be binding upon and inure to the benefit of
the entity surviving such merger or resulting from such consolidation. SCL shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of SCL, by agreement, expressly to assume 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. The provisions of
this Section 9 shall continue to apply to each subsequent employer of Executive
hereunder in the event of any subsequent merger, consolidation or transfer of
assets of such subsequent employer.
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10. Withholding.
Notwithstanding any other provision of this Agreement, the
Company may, to the extent required by law, withhold applicable federal, state
and local income and other taxes from any payments due to Executive hereunder.
11. Applicable Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles thereof.
12. Notice.
For the purpose of this Agreement, any notice and all other
communication provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or overnight courier or
three days after it has been mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses 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.
If to the Company:
Xxxxxx X. Xxxxxxx & Sons, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
If to Executive:
To the most recent address of Executive set forth in the personnel
records of the Company.
13. Entire Agreement; Modification.
This Agreement constitutes the entire agreement between the
parties and, except as expressly provided herein, supersedes all other prior
agreements expressly concerning the effect of a Change of Control on the
relationship between the Company and the other members of the Company and
Executive. Except as expressly provided herein, this Agreement shall not
interfere in any way with the right of the Company to reduce Executive's
compensation or other benefits or terminate Executive's employment, with or
without Cause. Any rights that Executive shall have in that regard shall be as
set forth in any applicable employment agreement between Executive and the
Company. This Agreement may be changed only by a written agreement executed by
the Company and Executive. Notwithstanding anything in this Agreement to the
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contrary, this Agreement shall not be effective to the degree necessary to
preserve "pooling of interests" accounting treatment (as reasonably determined
by the Company).
14. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the 20th day of March, 2000.
XXXXXX X. XXXXXXX & SONS, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------
Title: Executive Vice President
- Human Resources
/s/ Xxx Xxxxxx
---------------------------------
EXECUTIVE
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SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a
different meaning, the following terms, when capitalized, have the meaning
indicated:
I. "Act" means the Securities Exchange Act of 1934, as amended.
II. "Base Salary" means Executive's annual rate of base salary in
effect on the date in question.
III. "Bonus" means the amount payable to Executive under the Company's
applicable annual bonus plan with respect to a fiscal year of the Company.
IV. "Cause" means either of the following:
(1) If Executive has an employment agreement, the
definition contained therein; otherwise
(2) (i) conviction of a felony under the laws of the
United States or any state thereof or Canada, or (ii)
Executive's willful malfeasance or willful misconduct
in connection with Executive's duties hereunder, or
Executive's repeated willful refusal to perform
Executive's duties (not including any duties in
excess of Executive's duties immediately prior to the
Change of Control) which, in each case, results in
demonstrable harm to the financial condition or
business reputation of the Company or any of its
subsidiaries or affiliates.
V. "Change of Control" means the first to occur of any of the
following:
(1) any "person" or "group" (as described in the Act)
becomes the beneficial owner of 25% or more of the
combined voting power of the then outstanding voting
securities with respect to the election of the SCL
Board of Directors, and also holds more than any
group or person who is the beneficial owner, on the
Effective Date, of over 20% of SCL common shares.
"Person" does not include any SCL or Company employee
benefit plan, any company the shares of which are
held by SCL's shareholders in substantially the same
proportion as they held SCL stock, or any
testamentary trust or estate;
(2) any merger, consolidation, amalgamation, plan of
arrangement, reorganization or similar transaction
involving SCL, other than, in the case of any of the
foregoing, a transaction in which SCL shareholders
immediately prior to the transaction hold immediately
thereafter, in the same proportion as immediately
prior to the transaction, not less than
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50.1% of the combined voting power of the then
outstanding voting securities with respect to the
election of the board of directors of the resulting
entity;
(3) any change in a majority of SCL's Board of Directors
within a 24-month period unless the change was
approved by a majority of the Incumbent Directors;
(4) any liquidation or sale of all or substantially
all of the assets of SCL; or
(5) any other transaction so denominated by SCL's Board
of Directors.
VI. "Code" means the Internal Revenue Code of 1986, as amended.
VII. "Company" means Xxxxxx X. Xxxxxxx & Sons, Inc. and, after a Change
of Control, any successor or successors thereto.
VIII. "Good Reason" means any of the following actions on or after a
Change of Control, without Executive's express prior written approval, other
than due to Executive's Permanent Disability or death:
(1) any decrease in, or any failure to increase in
accordance with an agreement between Executive and
the Company, Base Salary or Target Bonus;
(2) any decrease in Executive's pension benefit
opportunities or any material diminution in the
aggregate employee benefits, in each case, afforded
to the Executive immediately prior to the Change of
Control; for this purpose employee benefits shall
include, but not be limited to life insurance,
medical and disability benefits, flexible perquisites
and matching gifts;
(3) any diminution in Executive's title or substantial
diminution in duties or responsibilities (other than
solely as a result of a Change of Control in which
SCL immediately thereafter is no longer publicly
held); or
(4) any relocation of Executive's principal place of
business of 35 miles or more, other than normal
travel consistent with past practice.
Executive shall have six months from the time Executive first
becomes aware of the existence of Good Reason to resign for Good Reason.
IX. "Incumbent Director" means a member of SCL's Board of Directors at
the beginning of the period in question, including any director who was not a
member of SCL's Board of Directors at the beginning of such period but was
elected or nominated to the Board of Directors by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors (so long as such director was not nominated
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by a person who has expressed an intent to effect a Change of Control or engage
in a proxy or other control contest).
X. "Permanent Disability" means inability, by reason of any physical or
mental impairment, to substantially perform the significant aspects of his
regular duties which inability has lasted for six months and is reasonably
expected to be permanent.
XI. "Publicly Traded Company" means a company whose common equity
securities (including American Depositary Shares or American Depositary Receipts
relating to such equity securities) are traded or quoted on a principal United
States, Canadian or European stock market or trading system, and are owned by
more than 1,000 shareholders.
XII. "SCL" means The Seagram Company Ltd. and, after a Change of
Control, any successor or successors thereto.
XIII. "Target Bonus" means the target Bonus established for Executive,
whether expressed as a percentage of Base Salary or a dollar amount.
