Exhibit 10.19
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT (the "AMENDMENT") is made as of the 13th day of March
2000 and shall hereby constitute the first amendment to the employment
agreement, dated October 27, 1997, and effective as of June 18, 1997 (the
"AGREEMENT"), and is made by and among Xxxxx Xxxxx, Inc., a Delaware
corporation (the "COMPANY") and Xxxxxxx Xxxx (the "EXECUTIVE"). Capitalized
terms that are not otherwise defined in this Amendment shall have the meanings
assigned to them in the Agreement.
W I T N E S S E T H:
WHEREAS, the Executive and the Company entered into the Agreement,
effective June 18, 1997 and Executive is currently employed by the Company under
the Agreement; and
WHEREAS, pursuant to Section 34 of the Agreement (as numbered prior to
this Amendment), the Company and the Executive may amend the agreement by an
instrument in writing, signed by the Executive and the Chairman of the Board of
Directors of the Company; and
WHEREAS, the parties desire to enter into this Amendment, which
Amendment shall be effective as of the date first set forth above;
NOW THEREFORE, and in consideration of the foregoing and the mutual
agreements set forth herein, the parties, intending to be legally bound, agree
as follows:
1. EARNINGS AMOUNT. The following definition is hereby inserted in
Section I of the Agreement after the definition of "EBITDA ACHIEVEMENT FACTOR"
and before the definition of "EMPLOYMENT RELATED AGREEMENTS":
"EARNINGS AMOUNT" shall mean, as of the Termination Date, the greater
of :
(i) for any period during the Term of Employment, the largest dollar
amount equal to the sum of the Base Salary, Incentive Bonus and Target
Bonus earned by the Executive (or deferred by him) during such period,
and
(ii) the dollar amount equal to the result of the following formula:
(S + MTB + MIB) x Y, where
S= Base Salary earned by the Executive during the period immediately
prior to the Termination Date,
MTB = the maximum Target Bonus the Executive could have earned during
the period immediately prior to the Termination Date,
MTB = the maximum Incentive Bonus the Executive could have earned
during the period immediately prior to the Termination Date, and
Y = an appreciation rate of 10% per annum through the end of the then
current Term of Employment.
2. EMPLOYMENT RELATED AGREEMENTS. The definition of "EMPLOYMENT RELATED
AGREEMENT" in Section 1 of the Agreement is hereby deleted in its entirety and
replaced by the following:
"EMPLOYMENT RELATED AGREEMENTS" shall mean this Agreement, the DLJ
Note, the Company Note, the Non-Qualified Stock Option Agreement, the
Non-Qualified Performance Stock Option Agreement and the Non-Qualified
Super-Performance Stock Option Agreement, as such documents may be amended from
time to time.
3. TERM OF EMPLOYMENT. Section 2(a) of the Agreement is hereby deleted
and replaced by the following:
(a) The Company will employ the Executive and the Executive
will enter the employ of the Company, for the period set forth in this
Section 2, in the positions set forth in Section 3 and upon the other
terms and conditions herein provided. The initial term of employment
under this Agreement (the "INITIAL TERM") will be for the period
beginning on the Start Date and ending on the fifth anniversary
thereof, unless earlier terminated as provided in Section 16.
4. THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Section 15(a) of the
Agreement is hereby deleted and replaced by the following:
(a) The Company will establish a Supplemental Executive
Retirement Plan (the "SERP") which will provide the Executive (or in
the event of the Executive's earlier death, his Beneficiary) with a
lump sum payment (the "SERP PAYMENT") equal to the Actuarial
Present Value (as defined below) of an annual retirement benefit,
commencing as of the first day of the month following the month in
which the Executive attains (or, in the event of his death, would have
attained) age 65 and payable during his lifetime, of 1.33 percent of
the Earnings Amount times the number of years of his Term of
Employment.
5. SEVERANCE BENEFITS. (a) Section 17(a)(ii) is hereby deleted and
replaced with the following:
(ii) CONTINUATION OF BASE SALARY AND BONUS. Subject to
Section 17(a)(viii), the Company will pay the Executive,
in substantially equal installments in accordance with
the Company's standard payroll practices, for the
twenty-four-month period immediately following the
Termination Date (the "CONTINUATION PERIOD") an amount
equal to the product of:
(A) the Earnings Amount and
(B) five.
(b) Section 17(a)(viii) is hereby deleted and replaced by the
following:
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(viii) EXTENSION OF CONTINUATION PERIOD. If:
(A) the Termination Date is on or prior to the sixth
anniversary of the Start Date.
(B) the Termination Date is within the one-year
period following the date of a Sale of the Company,
(C) EBITDA for the calendar year ended immediately
prior to the Termination Date equals or exceeds the Base
EBITDA Target for such year, and
(D) as of the Termination Date the business units
which constituted the Company prior to its sale are at least
anticipated (as reasonably determined by the Company's outside
auditors) to achieve the Base EBITDA Target for the year in
which occurs the Termination Date,
then the Continuation Period referred to in Section 17(a)(ii)
shall be extended to thirty-six months.
6. SEVERANCE BENEFITS PERTAINING TO THE SERP. (a) Section 17(a)(vii) is
hereby deleted and replaced by the following:
(vii) SERP. The Executive (or his Beneficiary) shall be
entitled, commencing upon attaining age 65 (or the Termination Date, if
later), to the SERP Payment determined pursuant to Section 15(a), based
on the Earnings Amount, and deeming the Term of Employment for purposes
of Section 15(a) to equal 20 years. The SERP Payment specified in this
Section 17(a)(vii) will be in full satisfaction of all obligations
under the SERP.
(b) Section 17(c)(v) of the Agreement is hereby deleted and replaced by
the following:
(v) SERP. The Executive (or his Beneficiary) will be entitled
to the SERP Payment, commencing on the date the Executive
attains or would have attained age 65 (or his Termination Date, if
later) determined pursuant to Section 15(a), based on the Earnings
Amount and based on a Term of Employment, for purposes of
Section 15(a), equal to 20 years. The SERP Payment specified in this
Section 17(c)(v) will be in full satisfaction of all obligations under
the SERP.
7. GROSS-UP: SECTION 280G OF THE CODE. The following is added to the
Agreement as Section 18 thereof and the prior Sections 18 through 34 are
renumbered accordingly as Sections 19 through 35.
18. GROSS-UP: SECTION 280G OF THE CODE. Notwithstanding
anything herein to the contrary. If it is determined that any portion
of the Payments (as hereinafter defined) provided in this Agreement
would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any interest or penalties thereon,
is herein referred to as an "EXCISE TAX"), then the Executive shall be
entitled to an additional cash payment (a "GROSS-UP PAYMENT") in an
amount that will place the Executive in the same after tax economic
position that the Executive would have enjoyed if the Exotic Tax had
not applied to the Payment. The amount of the Gross-Up Payment shall
be determined by a nationally recognized accounting firm agreed upon by
Executive and the Company (the "ACCOUNTING FIRM"). No Gross-Up
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Payments shall be payable hereunder if the Accounting Firm determines
that the Payments are not subject to an Excise Tax. The Accounting Firm
shall be paid by the Company for services performed hereunder.
PAYMENT means (1) any amount due or paid to the Executive
under this Agreement. (ii) any amount that is due or paid to the
Executive under any plan, program or arrangement of the Company and its
subsidiaries, and (iii) any amount of benefits that is due or payable
to the Executive under this Agreement or under any plan, program or
arrangement of the Company and its subsidiaries or affiliates not
otherwise covered under clause (i) or (ii) hereof which must reasonably
be taken into account under Section 280G of the Code and the
regulations pertinent thereto in determining the amount of the
"PARACHUTE PAYMENTS" received by the Executive, including, without
limitation, any amounts which must be taken into account under the Code
and regulations as a results of (x) the acceleration of the vesting of
Options or any other equity compensation that the Executive may receive
in the future.
(b) DETERMINATION OF GROSS-UP PAYMENT. Subject to the
provision of Section 18(c), all determinations required under this
Section 18, including whether a Gross-Up Payment is required, the
amount of the Payments constituting excess parachute payments, and the
amount of the Gross-Up Payment, shall be made by the Accounting Firm,
which shall provide detailed supporting calculations both to the
Executive and the Company within fifteen days of any date reasonably
requested by the Executive or the Company on which a determination
under this Section 18 is necessary or advisable. The Company shall pay
the Executive in cash the initial Gross-Up Payments within 5 days of
the receipt by the Executive and the Company of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, the Company shall cause the Accounting Firm
to provide the Executive with an opinion that the Accounting Firm has
substantial authority under the Code and regualtions promulgated
thereunder not to report an Excise Tax on the Executive's federal
income tax return. Any determination by the Accounting Firm shall be
binding upon the Executive and the Company. If the initial Gross-Up
Payment is insufficient to completely place the Executive in the same
after-tax economic position that the Executive would have enjoyed if
the Excise Tax had not applied to the Payments (hereinafter an
"UNDERPAYMENT"), the Company, after exhausting its remedies under
Section 18(c) below, shall promptly pay the Executive in cash an
additional Gross-UP Payment in respect of the Underpayment.
(c) PROCEDURES. 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 a Gross-Up
Payment. Such notice shall be given as soon as practicable after the
Executive knows of such claim and shall appraise the Company of the
nature of the claim and the date on which the claim is requested to be
paid. The Executive agrees not to pay the claim until the expiration of
the thirty day period following the date on which the Executive
nofities the Company, or such shorter period ending on the date the
taxes with respect to such claim are due (the "NOTICE PERIOD"). If the
Company notifies the Executive in writing prior to the expiration of
the Notice Period that it desires to contest the claim, the Executive
shall: (i) give the Company any information reasonably requested by the
Company relating to the claim; (ii) take such action in connection with
the claim as the Company may reasonably request, including without
limitation accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company and reasonably
acceptable to the Executive; (iii) cooperate with the Company in good
faith in contesting the claim; and (iv) permit the Company to
participate in any proceedings relating to the claim. The Executive
shall permit the Company to control all proceedings related to the
claim and, at its option, permit the Company to pursue or forgo any and
all administrative appeals, proceedings, hearings, and conferences with
the taxing authority in respect of such claim. If requested by the
Company, the Executive agrees either to pay the tax claimed and xxx for
a refund or contest the claim in any permissible manner and to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdictions and in one or more
appellate courts as the Company shall determine: PROVIDED, HOWEVER,
that, if the Company directs the Executive to pay such
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claim and pursue a refund, the Company shall advance the amount of such
payment to the Executive on an after-tax and interest-free basis (the
"ADVANCE"). The Company's control of the contest related to the claim
shall be limited to the issues related to the Gross-Up Payment and the
Executive shall be entitled to settle or contest, as the case may be,
any other issues raised by the Internal Revenue Service or other taxing
authority. If the Company does not notify the Executive in writing
prior to the end of the Notice Period of its desire to contest the
claim, the Company shall pay the Executive in cash an additional
Gross-Up Payment in respect of the excess parachute payments that are
the subject of the claim, and the Executive agrees to pay the amount of
the Excise Tax that is the subject of the claim so the applicable
taxing authority in accordance with applicable law.
(d) REPAYMENTS. If, after receipt by the Executive of an
Advance, the Executive becomes entitled to a refund with respect to the
claim to which such Advance relates, the Executive shall pay the
Company the amount of the refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after receipt by
the Executive of an Advance, a determination is made that the Executive
shall not be entitled to any refund with respect to the claim and the
Company does not promptly notify the Executive of its intent to contest
the denial of refund, then the amount of the Advance shall not be
required to be repaid by the Executive and the amount thereof shall
offset the amount of the additional Gross-Up Payment then owing to the
Executive.
(e) FURTHER ASSURANCES. The Company shall indemnify the
Executive and hold the Executive harmless, on an after-tax basis, from
any costs, expenses, penalties, fines, interest or other liabilities
("LOSSES") incurred by the Executive with respect to the exercise by
the Company of any of its rights under this Section 18, including,
without limitation, any Losses related to the Company's decision to
contest a claim or any imputed income to the Executive resulting from
any Advance or action taken on the Executive's behalf by the Company
hereunder. The Company shall pay all legal fees and expenses incurred
under this Section 18, and shall promptly reimburse the Executive for
the reasonable expenses of the Accounting Firm, including, without
limitation, the fees and expenses related to the opinion referred to in
Section 18(b).
8. CONTINUING EFFECT OF THE AGREEMENT. This Agreement shall continue in
full force and effect as amended herein.
9. ATTORNEYS FEES. The Company shall pay or reimburse Executive for all
reasonable legal fees and costs incurred in the drafting, negotiation and
execution of this Amendment.
10. COUNTERPARTS. This Amendment may be executed by the parties hereto
in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
THE EXECUTIVE
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
XXXXX XXXXX INC.
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Chairman of the Board
(in compliance with the employment
agreement, dated October 27, 1997, and
effective as of June 18, 1997)
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: Chairman of the Compensation
Committee of the Board of
Directors
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