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EXHIBIT (c)(5)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 22,
1999, among United States Filter Corporation (the "Company"), Vivendi ("Parent")
and Xxxxxxx X. Xxxxxxxx (the "Employee").
WITNESSETH
WHEREAS, Employee is currently Chairman of the Board of Directors,
Chief Executive Officer and President of the Company; and
WHEREAS, the Company has entered, as of even date herewith, into
that certain Agreement and Plan of Merger (the "Merger Agreement") by and among
Parent, Eau Acquisition Corp. and the Company, dated as of March 22, 1999,
pursuant to which, among other things, the Company shall become a subsidiary of
Parent (such transaction or series of transactions, the "Transaction"); and
WHEREAS, Parent desires to insure the continued availability to the
Company of the Employee's services, managerial skills and business experience
following consummation of the Transaction and his commitment not to compete with
the Company for a certain period of time, and the Employee is willing to render
such services and provide such commitment, all upon and subject to the terms and
conditions contained in this Agreement; and
WHEREAS, the Employee and the Company previously entered into a
certain written First Amended and Restated Employment Agreement, effective as of
September 30, 1998 (the "Prior Agreement"), and now desire to supercede the
Prior Agreement in its entirety, contingent upon consummation of the
Transaction; and
WHEREAS, in addition to the terms and conditions of employment set
forth herein, the parties wish to set forth herein provisions with respect to
certain payments being made to the Employee pursuant to the Prior Agreement and
the Merger Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, the Company and the Employee agree as
follows:
1. Employment and Employment Term.
(a) Employment.
Subject to the terms and provisions set forth in this Agreement, the
Company hereby employs the Employee during the Employment Term (as
hereinafter defined) as Chairman of the Board of Directors of the
Company (the "Board") and its Chief Executive Officer, and Parent
agrees to cause the Employee to be elected as Chairman of the Board,
a member of the Executive Committee of Vivendi Water Branch, and a
director of Generale des Eaux during the Employment Term, and the
Employee hereby accepts such employment.
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(b) Employment Term.
The period of employment under this Agreement (the "Employment
Term") shall commence as of the date on which the Effective Time (as
defined in the Merger Agreement) occurs (the "Effective Date") and
shall continue for a period of four (4) years thereafter, or until
earlier terminated as herein provided.
2. Positions, Responsibilities and Duties.
(a) In General.
During the Employment Term, the Employee shall be employed as, and
the Company shall at all times cause the Employee to be, the Chief
Executive Officer of the Company. In addition, Parent agrees to
cause the Employee to be elected as Chairman of the Board, a member
of the Executive Committee of Vivendi Water Branch, and a director
of Generale des Eaux during the Employment Term. In such positions,
the Employee shall have the duties, responsibilities and authority
normally associated with the office and position of chairman and
chief executive officer of a corporation of the Company's size and
type and as a director of companies of the size and type of Vivendi
Water Branch and Generale des Eaux. No other employee of the Company
shall have authority and responsibilities that are equal to or
greater than those of the Employee. All other officers and other
employees of the Company shall report directly to the Employee or
the Employee's designees. The Employee will be responsible in
conjunction with the President of Generale des Eaux for studying and
implementing the world-wide integration of Vivendi Water Branch and
the Company. The Employee will report to the Chairman of Parent and
the Chairman of Generale des Eaux in the context of such
integration. The Chairman of Parent and the Employee may mutually
agree to provide the Employee with specific responsibilities or
projects on a case-by-case basis in the context of the development
of Parent's world-wide operations and activities (e.g., developing
opportunities for initial public offerings of Parent's United States
utilities and related entities).
(b) Time.
During the Employment Term, the Employee shall devote such time as
is reasonably necessary to perform the duties associated with his
offices and positions as set forth herein and shall use his best
efforts to perform faithfully and efficiently the duties and
responsibilities contemplated by this Agreement. Notwithstanding the
foregoing, the Employee may devote reasonable time to activities
other than those required under this Agreement, including the
supervision of his personal investments, and activities involving
professional, charitable, educational, religious and similar types
of organizations, speaking engagements, membership on the boards of
directors of other corporations, and similar type activities, to the
extent that such other activities do not inhibit or prohibit the
performance of the Employee's duties under this Agreement or
conflict in any way with the business of the Com-
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pany; provided, however, that the Employee shall not serve on the
board of any commercial business or hold any other position with
respect to any commercial business without the consent of the Board,
which consent shall not be unreasonably withheld.
3. Compensation and Benefits.
(a) Base Salary.
During the Employment Term, the Employee shall receive an initial
base salary ("Base Salary") of $950,000 per annum, payable in
accordance with the Company's payroll practices generally applicable
to the Company's senior executives. Such Base Salary shall be
reviewed for increase but not decrease by the Board not less
frequently than annually during the Employment Term. In conducting
any such annual review, the Board shall take into account any change
in the Employee's responsibilities, increases in the compensation of
other senior executives of the Company or of its competitors or
other comparable executives and companies, the performance of the
Employee and other pertinent factors. If increased, such increased
Base Salary shall then constitute "Base Salary" for purposes of this
Agreement.
(b) Cash Incentive Compensation.
(i) During the Employment Term, the Employee shall be entitled to
participate in all incentive compensation plans and programs
maintained generally by the Company for the benefit of its
senior executives.
(ii) Without limiting the foregoing, for each fiscal year of the
Company ending with or within the Employment Term, the
Employee shall have the opportunity to earn an annual
incentive of not less than sixty percent (60%) of his then
current Base Salary, subject to such performance goals as may
from time to time be determined by the Executive Committee of
Parent. Each such annual incentive shall be paid at the same
time that annual incentives are generally paid to the
Company's other senior executives, but no later than the end
of the third month of the fiscal year next following the
fiscal year for which such annual incentive is paid, unless
the Employee shall elect prior to the year to which such
annual incentive relates to defer the receipt or alter the
payment thereof.
(c) Equity Grant.
In consideration for the Employee's services hereunder and the
covenants set forth in Section 7, the Company shall, or the Parent
shall on behalf of the Company in satisfaction of the Company's
obligation, deliver to the Employee an aggregate of 289,056 shares
of Parent common stock (the "Stock Grant"), subject to the terms of
this Section 3(c). On each of the first four (4) anniversaries of
the Effective
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Date (each, a "Grant Date"), the Company shall, or the Parent shall
on behalf of the Company, deliver to the Employee 72,264 shares of
Parent common stock, representing one quarter (1/4) of the Stock
Grant, if the Employee is employed hereunder as of such Grant Date;
provided, however, that in the event that the Employee's employment
hereunder is terminated because of his death or Disability, that
portion of the Stock Grant not already delivered to the Employee
shall be immediately delivered to the Employee (or his estate or
beneficiaries, if applicable); and provided, further, that if the
Employee's employment hereunder is terminated by the Employee for
Good Reason (as defined in Section 4(b)(iv)) or by the Company
without Cause (as defined in Section 4(b)(vii)), the portions of the
Stock Grant not already delivered shall be delivered on the
scheduled Grant Dates so long as the Employee is not in violation of
Section 7(b) (as determined, if applicable, by arbitration under
Section 9(i)) and the Employee provides consulting services to the
Company during the remainder of the scheduled Employment Term, as
may be reasonably requested by the Parent Executive Committee from
time to time, for which services the Company shall reimburse the
Employee for his reasonable expenses incurred in the performance
thereof. In the event that the Employee's employment hereunder is
terminated by the Employee without Good Reason (as defined in
Section 4(b)(iv)), or by the Company for Cause (as defined in
Section 4(b)(vii)) or the Employee violates Section 7(b) (as
determined, if applicable, by arbitration under Section 9(i)), the
Employee shall forfeit all rights to receive any portion of the
Stock Grant for which the Grant Date had not occurred as of the Date
of Termination. The number and kind of shares to be granted under
this Section 3(c) shall be equitably adjusted to reflect changes in
Parent's capitalization, such as a stock split or extraordinary
dividend, or corporate transactions, such as a merger, spin-off,
recapitalization or consolidation. With respect to each share of
Parent common stock to be granted under this Section 3(c) that has
not been forfeited and with respect to which the Employee (or his
estate or beneficiaries, if applicable) has not yet become a
shareholder, the Company shall pay to the Employee an amount in cash
equal to the regular quarterly cash dividend, if any, paid by the
Parent on its common stock. Such payment shall be made within ten
(10) days following the applicable dividend payment date.
(d) Employee Benefits.
During the Employment Term, the Employee and/or the Employee's
family, as the case may be, shall be entitled to participate in
employee benefit plans and programs provided or maintained generally
by the Company to its senior executives (including, without
limitation, pension, profit sharing, savings, medical, disability,
life and accident plans and programs and deferred compensation plans
and programs).
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(e) Vacation and Fringe Benefits.
(i) During the Employment Term, the Employee shall be entitled to
paid vacation and fringe benefits as provided generally to
senior executives of the Company.
(ii) Without limiting the foregoing, during the Employment Term,
the Company will lease for the Employee an automobile for the
Employee's business and private use, the make and model of
which shall be at least comparable to the make and model
provided to the Employee immediately preceding the Effective
Date, and the Company will pay all deposit requirements,
servicing and maintenance costs, insurance premiums and the
cost of the gasoline for authorized business use. The term of
any one such automobile lease shall not exceed thirty-six (36)
months other than at the discretion of the Employee.
(f) Office and Support Staff.
During the Employment Term, the Employee shall be entitled to an
office or offices of a size and with furnishings and other
appointments, and to personal secretarial and other assistance, at
least substantially equivalent to that provided to the Employee as
of the date of this Agreement.
(g) Expense Reimbursement.
During the Employment Term, the Employee shall be entitled to
receive prompt reimbursement for all usual, customary and
reasonable, business-related expenses incurred by the Employee in
performing his duties and responsibilities hereunder in accordance
with the practices and procedures of the Company as in effect with
respect to senior executives of the Company.
(h) Indemnification.
The Company shall maintain directors and officers liability
insurance in commercially reasonable amounts (as reasonably
determined by the Board) to the extent provided as of the date of
this Agreement, and the Employee shall be covered under such
insurance to the same extent as other directors and senior
executives of the Company. The Employee shall be eligible for
indemnification by the Company under the Company by-laws as
currently in effect, and the Company agrees that it shall not take
any action that would impair the Employee's rights to
indemnification under the Company by-laws, as currently in effect.
(i) Payments and Benefits in Connection with the Transaction.
The Employee shall, as of the Effective Date, be entitled to receive
a lump sum in cash from the Company equal to five (5) times the sum
of (x) his Base Salary in
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effect as of the Effective Date, plus (y) the Employee's target
bonus under the Company's Annual Incentive Compensation Plan for the
year in which the Effective Date occurs. Such amount shall be paid
to the Employee within five (5) business days following the
Effective Date (provided such amount has not been paid under the
Prior Agreement or the Company's Executive Severance Pay Plan prior
to such date) but in no event shall such amount exceed $7,500,000.
In addition, the Employee's benefit in the U.S. Filter Supplemental
Executive Retirement Plan shall become fully vested as of the
Effective Date.
4. Termination of Employment.
(a) Termination Due to Death or Disability.
The Company may terminate the Employee's employment hereunder due to
Disability (as hereinafter defined). In the event of the Employee's
death or a termination of the Employee's employment by the Company
due to Disability, the Employee or his estate or his legal
representative, as the case may be, shall be entitled to receive
from the Company:
(i) any unpaid Base Salary through the Date of Termination (as
defined in Section 4(b)(iv));
(ii) an immediate lump sum in cash equal to the minimum annual
incentive (determined without regard to any performance goals)
provided by Section 3(b)(ii) for the year in which the Date of
Termination (as defined in Section 4(b)(iv)) occurs multiplied
by a fraction, the numerator of which is the number of days of
such fiscal year through such Date of Termination and the
denominator of which is 365;
(iii) an immediate lump sum amount equal to the sum of (A) two times
the minimum annual incentive (determined without regard to any
performance goals) provided by Section 3(b)(ii) for the year
in which the Date of Termination (as defined in Section
4(b)(iv)) occurs plus (B) twenty-four (24) times the monthly
rate of Base Salary at the rate in effect on the Date of
Termination (as defined in Section 4(b)(iv));
(iv) a lump sum amount, payable within five (5) days following the
Date of Termination (as defined in Section 4(b)(iv)), in
respect of any deferred compensation (including, without
limitation, interest or other credits on such deferred
amounts), any accrued vacation pay and any reimbursement for
expenses incurred but not yet paid prior to such Date of
Termination; and
(v) any other compensation or benefits which may be owed or
provided to or in respect of the Employee in accordance with
the terms and provisions of this Agreement or any plans and
programs of the Company.
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For purposes of this Agreement, "Disability" means the Employee's
inability to render, for a period of six (6) consecutive months,
services hereunder by reason of permanent disability, as determined
by the written medical opinion of an independent medical physician
mutually acceptable to the Employee and the Company. If the Employee
and the Company cannot agree as to such an independent medical
physician each shall appoint one medical physician and those two
physicians shall appoint a third physician who shall make such
determination.
(b) Termination for Any Other Reason.
(i) In the event that the Employee's employment hereunder is
terminated by the Employee for Good Reason (as defined in
Section 4(b)(v)) or by the Company without Cause (as defined
in Section 4(b)(vii)) (other than for Disability), then the
Company shall pay the Employee (A) any unpaid Base Salary
through the Date of Termination (as defined in Section
4(b)(iv)), plus (B) an amount equal to the minimum annual
incentive (determined without regard to any performance goals)
provided in Section 3(b)(ii) for the year in which the Date of
Termination (as defined in Section 4(b)(iv)) occurs multiplied
by a fraction, the numerator of which is the number of days
from the beginning of such fiscal year through such Date of
Termination (as defined in Section 4(b)(iv)), and the
denominator of which is 365, plus (C) any previously vested
benefits, such as previously vested retirement benefits, plus
(D) any deferred compensation (including, without limitation,
interest or other credits on such deferred amounts), any
accrued vacation pay and any reimbursement for expenses
incurred but not yet paid prior to such Date of Termination
(collectively, the "Accrued Obligations").
(ii) Furthermore, and in addition to the foregoing, in the event
that the Employee's employment with the Company is terminated
by the Employee for Good Reason or by the Company without
Cause (other than Disability), then the Company shall also pay
the Employee, within five (5) business days following the Date
of Termination (as defined in Section 4(b)(iv)), a lump sum in
cash equal to the number of years (including fractions
thereof) remaining in the Employment Term (without taking into
account such early termination thereof) multiplied by the sum
of (x) his then current Base Salary plus (y) the target annual
incentive bonus for the year in which such Date of Termination
occurs (determined without regard to any performance goals).
(iii) In the event that the Employee's employment hereunder is
terminated by the Employee without Good Reason or by the
Company for Cause, the Company shall pay the Employee the
Accrued Obligations (other than the amounts under Section
4(b)(i)(B)).
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(iv) For purposes of this Agreement, "Date of Termination" means
(A) in the case of Disability, the last day of the six (6)
month period referred to in Section 4(a), and (B) in all other
cases, the actual date on which the Employee's employment
terminates during the Term of Employment.
(v) For purposes of this Agreement, "Good Reason" for the
Employee's termination of his employment hereunder shall mean,
without the Employee's prior written consent, (A) the
relocation of the Company's principal offices more than 150
miles from its location immediately prior to the Effective
Date or the Company requiring the Employee to be based at any
location other than such principal offices, (B) a breach by
the Company of any material provision of this Agreement which
is not cured within five (5) business days following written
notification of such breach, or (C) the occurrence of a Change
in Control (as defined in Section 4(b)(vi)).
(vi) "Change in Control" shall mean the occurrence of any of the
following:
(A) the acquisition by any Person (including any group
deemed to be a "person" under Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor provision
to either of the foregoing) of direct or indirect
"beneficial ownership" (within the meaning of Rule 13d-3
under the Exchange Act) of securities of the Parent
representing 50% or more of the combined voting power of
the securities of the Parent;
(B) during any period of two (2) consecutive years (not
including any period prior to the Effective Date),
individuals who at the beginning of such period
constitute the board of directors of Parent (the "Parent
Board"), and any new director (other than a director
whose initial assumption of office is in connection with
an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the
election of directors of Parent) whose election by the
Parent Board or nomination for election by the Parent's
stockholders was approved by a vote of at least
two-thirds of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was previously
so approved, cease for any reason to constitute at least
a majority thereof;
(C) there is consummated a merger, consolidation,
recapitalization, reorganization or other similar
transaction (any such transaction, a "Business
Combination") between the Parent or any direct or
indirect subsidiary of the Parent and any other
corporation, other
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than (1) a Business Combination which would result in
the voting securities of the Parent outstanding
immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding
or by being converted into voting securities of the
surviving entity or any parent thereof) at least 50% of
the combined voting power of the securities of the
Parent or such surviving entity or any parent thereof
outstanding immediately after such Business Combination,
or (2) a merger or consolidation effected to implement a
recapitalization of the Parent (or similar transaction)
in which no Person is or becomes the "beneficial owner,"
directly or indirectly, of securities of the Parent
representing 50% or more of the combined voting power of
the Parent's then outstanding securities;
(D) the Parent is placed under judicial administration or
supervision in connection with the Parent's filing for
bankruptcy;
(E) there is consummated an agreement for the sale or
disposition by the Parent of all or substantially all of
the Parent's assets, other than a sale or disposition by
the Parent of all or substantially all of the Parent's
assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by
stockholders of the Parent in substantially the same
proportions as their ownership of the Parent immediately
prior to such sale;
(F) the Parent ceases to be the beneficial owner, directly
or indirectly, of securities of the Company representing
more than 50% of the combined voting power of the
Company's securities; or
(G) there is consummated a sale or other disposition of all
or substantially all of the assets of the Company, other
than a sale or disposition of all or substantially all
of the Company's assets to an entity, at least 50% of
the combined voting power of the voting securities of
which are owned by stockholders of the Parent in
substantially the same proportions as their ownership of
the Parent immediately prior to such sale.
(vii) Termination by the Company of the Employee for "Cause" as used
in this Agreement shall be limited to the following: the
Employee's conviction of, or a plea of guilty to, a felony
involving moral turpitude or willful violation of Section 7(b)
or the Employee's willful gross negligence, material
misconduct or material breach of this Agreement, resulting in
material injury to the Company. For purposes of this
definition, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in
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good faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the
Company. No termination for Cause shall be effective without
(A) a resolution adopted by a majority of the Parent Executive
Committee which sets forth the act (or failure to act)
constituting Cause for termination, (B) if such act or failure
to act is susceptible to cure, a reasonable period to effect
such cure, and (C) opportunity for a hearing in arbitration,
using the rules of the American Arbitration Association, as
such rules are in effect in Los Angeles, California on the
date of delivery of demand for arbitration, and otherwise in
accordance with Section 9(i).
(c) Continuation of Employee Benefits.
Upon the termination of the Employee's employment hereunder for any
reason, the Company shall continue, until the fourth anniversary of the
Effective Date, to cover the Employee and/or the Employee's family under
those life, disability, accident and health insurance benefits that were
applicable to the Employee on the Date of Termination at benefit levels
and on terms and conditions (including with respect to cost to the
Employee and/or the Employee's family) no less favorable than that to
which the Employee and/or his family was entitled immediately prior to his
Date of Termination (except for any changes made with respect to active
senior executives of the Company); provided, however, that, in the event
Employee's employment hereunder is terminated for Disability, such
coverage shall continue for twenty-four (24) months following the Date of
Termination. In the event that the Employee and/or the Employee's family's
participation in any such program is barred, the Company shall arrange to
provide the Employee and/or the Employee's family with benefits
substantially similar to those which the Employee and/or the Employee's
family would otherwise have been entitled to receive under such plans and
programs from which continued participation is barred. Following the
continuation period described in this subsection, the Employee and the
Employee's family shall be entitled to elect continuation coverage under
Section 601 et seq. of the Employee Retirement Income Security Act, as
amended, if permitted by applicable law.
(d) No Mitigation or Offset.
The Company agrees that, if the Employee's employment with the Company
terminates, the Employee is not required to seek other employment or to
attempt in any way to reduce any amounts payable to or in respect of the
Employee by the Company pursuant to this Agreement. Further, the amount of
any payment or benefit provided for in this Agreement shall not be reduced
by any compensation earned by the Employee as the result of employment by
another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Employee to the Company or otherwise, except
with respect to Section 4(c) benefits
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to the extent the Employee receives substantially equivalent benefits from
a successor employer.
5. Additional Tax Payments.
(a) Excise Tax Gross-Up.
If any payment or benefit to which the Employee becomes entitled in
connection with the Transaction pursuant to this Agreement, the
Merger Agreement or otherwise (the "Total Payments") will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor tax that may
hereafter be imposed) (the "Excise Tax"), the Company shall pay to
the Employee at the time specified below, an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Employee, after deduction of any Excise Tax on the Total Payments
and any taxes on the Total Payments other than the Excise Tax and
any federal, state and local income and employment tax and Excise
Tax upon the payment provided for by this subsection, shall be equal
to the Total Payments. For purposes of determining whether any of
such payments or benefits will be subject to the Excise Tax, and the
amount of such Excise Tax, the Company and the Employee shall rely
upon the assumption and determinations of Xxxxxx Xxxxxxxx LLP or
such other certified accounting firm as may be mutually agreed upon
by the Employee and the Company (the "Accounting Firm"). All fees
and expenses of the Accounting Firm shall be borne solely by the
Company. Any determinations by the Accounting Firm shall be binding
upon the Company and the Employee, and they agree to take a position
consistent with such determination (i) on any return, report,
information return or other document (including, without limitation,
any related or supporting information) with respect to taxes of the
Company or the Employee, (ii) in any proceeding, formal or informal,
before any taxing authority, and (iii) otherwise. In the event that
the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time the Gross-Up Payment is
determined, the Employee shall repay to the Company at the time that
the amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction (plus
the portion of the Gross-Up Payment attributable to the Excise Tax
and federal and state and local income and employment tax imposed on
the Gross-Up Payment being repaid by him if such repayment results
in reduction in Excise Tax and/or a federal and state and local
income and employment tax deduction) plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time the Gross-Up Payment
is determined (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest payable with respect to
such excess at the rate provided in section 1274(b)(2)(B) of the
Code) at the time that the amount of such excess is finally
determined. The Gross-Up Pay-
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ment shall be paid within five (5) business days after the amount
thereof is determined, but in no event later than thirty (30) days
prior to the date on which payment of the Excise Tax in respect of
which such Gross-Up Payment is determined is due. If the amounts of
any payments under this Agreement cannot be finally determined on or
before the payment date otherwise scheduled for payment, the Company
shall pay to the Employee on such date an estimate, as determined in
good faith by the Company, of the minimum amount of such payment and
shall pay the remainder of such payments (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined. In the event that the amount
of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company
to the Employee payable on the fifth day after demand by the Company
(together with interest at the rate provided in section
1274(b)(2)(B) of the Code).
Notwithstanding the foregoing, and subject to the Company's and
Parent's obligations under Section 5(b), the Company shall not be
required to pay a Gross-Up Payment with respect to an amount of the
Excise Tax equal to the excess of (i) over (ii), where (i) equals
the Excise Tax that actually becomes due with respect to the Total
Payments and (ii) equals that amount of Excise Tax that would have
become due with respect to the Total Payments assuming that, with
respect to the Company stock options granted to the Employee on
October 9, 1998 (the "October Grant"), (x) the cash payout of the
October Grant pursuant to Section 2.9 of the Merger Agreement was
subject to Q&A 24(c) of the proposed Treasury Regulations
promulgated under section 280G of the Code (the "Regulations") and
(y) for purposes of Q&A 24(c)(2) under the Regulations, the
percentage used to calculate the amount reflecting the lapse of the
obligation to continue to perform services was one percent (1%)
(such excess amount shall hereinafter be referred to as the "Option
Excise Tax").
(b) Company's Tax Position.
The Company shall, and the Parent shall cause the Company to, take
the position (i) on any return, report, information return or other
document (including, without limitation, any related or supporting
information) with respect to taxes of the Company or the Employee,
(ii) in any proceeding, formal or informal, before any taxing
authority, and (iii) otherwise, that the Option Excise Tax is not
due, and the Company shall not, nor shall the Parent cause the
Company to, withhold any amounts in respect thereof without the
prior written consent of the Employee. The Company shall, at its own
expense, contest in good faith any assessment or proposed assessment
by the Internal Revenue Service (the "IRS") against the Company in
respect of the Excise Tax with respect to the Option Excise Tax. The
Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Employee or the Company of the Option Excise Tax.
Such notification shall be given as soon as
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practicable but no later than ten (10) business days after the
Employee is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim
is requested to be paid. The Employee shall also give the Company
any information reasonably requested by the Company relating to such
claim; 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' cooperate with the Company in good faith in order
effectively to contest such claim; and permit the Company to
participate in any proceedings relating to such claim. Such contest
shall include pursuing any and all administrative and judicial
remedies available to the Company. In the event that there is a
Final Determination (as defined below) pursuant to which the IRS
makes an assessment against the Company in respect of the Option
Excise Tax, the Company shall remit such amount to the IRS and the
Company shall be entitled to reimbursement of such amount. The
Company shall effect such reimbursement only by means of withholding
from the final tranche of the Stock Grant a number of shares having
a value equal to the amount of the Option Excise Tax (rounding down
to the next whole share); provided, however, that the Company shall
be entitled to withhold from any cash payments to the Employee
following the payment of such tranche of the Stock Grant an amount
equal to the remainder of such Option Excise Tax.
For purposes of this Agreement, "Final Determination" shall mean:
(x) a decision, judgment, decree, or other order by any court of
competent jurisdiction, which decision, judgment, decree, or
other order has become final and not subject to further
appeal; or
(y) a closing agreement entered into under section 7121 of the
Code or any other binding settlement agreement entered into
with the IRS, in either case with the consent of the Employee,
which consent shall not be unreasonably withheld.
6. Legal Fees.
The Company shall pay to the Employee all legal fees and expenses
reasonably incurred by the Employee in disputing in good faith any issue
hereunder relating to the termination of the Employee's employment, in
seeking in good faith to obtain or enforce any benefit or right provided
by this Agreement or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within
five (5) business days after delivery of the Employee's written requests
for payment accompanied with such evidence of fees and expenses incurred
as the Company reasonably may require.
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7. Protective Covenants.
(a) Compensation, Benefits Suspended if Section 7(b) Breached.
Except as more specifically provided with respect to the Stock Grant
in Section 3(c), the Employee agrees that if, during the Employment
Term, he breaches his obligations under Section 7(b), any payments
and benefits to which the Employee would otherwise have been
entitled shall be suspended for one (1) year, or, if less, the
remaining balance of the period with respect to which the Employee
would otherwise be so entitled to such payments and benefits, which
payments and benefits shall be deemed immediately forfeited. Nothing
herein shall prohibit the Employee from being a stockholder in a
mutual fund or a diversified investment company or a passive owner
of not more than two percent of the outstanding stock of any class
of a corporation any equity securities of which are publicly traded,
so long as the Employee has no active participation in the business
of such corporation.
(b) Non-Disclosure; Non-Compete; Non-Solicitation.
The Employee shall not, at any time during the Employment Term or
thereafter, make use of or disclose, directly or indirectly, any
trade secret, customer lists or other confidential or secret
information of the Company not available to the public generally or
to the competitors of the Company ("Confidential Information")
except to the extent that such Confidential Information becomes a
matter of public record or is otherwise available to the general
public, other than as a result of any act or omission of the
Employee, or is required to be disclosed by any law, regulation or
order of any court or regulatory commission, department or agency.
Promptly following the Date of Termination, the Employee shall
surrender to the Company all records, memoranda, notes, plans,
reports, computer tapes and software and other documents and data
relating to any Confidential Information or the business of the
Company that he may then possess or have under his control (together
with all copies thereof); provided, however, that the Employee may
retain copies of such documents as are necessary for the preparation
of his federal or state income tax returns. In consideration for the
payments under this Agreement and any payments received by the
Employee pursuant to the Transaction for his equity interests in the
Company, during the scheduled Employment Term (notwithstanding any
earlier termination of the Employment Term), the Employee will not
in any manner directly or indirectly, through any person, firm or
corporation, alone or as a member of a partnership or as an officer,
director, stockholder, investor or employee of or consultant to any
other corporation or enterprise or otherwise engage or assist any
other person, firm, corporation or enterprise in engaging in any
business then being conducted by the Company (but not later than as
of the Date of Termination) in any geographic area in which the
Company is then conducting such business. In consideration for the
payments under this Agreement and any payments received by the
Employee pursuant to the Transaction for his
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equity interests in the Company, the Employee will not during the
scheduled Employment Term (notwithstanding any earlier termination
of the Employment Term) in any manner, directly or indirectly induce
or attempt to induce any employee of the Company to terminate or
abandon his or her employment for any purpose whatsoever.
(c) False, Defamatory, or Disparaging Statements.
The Employee agrees that after his Date of Termination, he shall not
make any false, defamatory or disparaging statements about the
Company, or the officers or directors of the Company. Promptly after
the Employee's Date of Termination, the Company agrees that it shall
instruct the officers and the directors of the Company not to make
any false, defamatory or disparaging statements about the Employee
after such Date of Termination.
(d) Injunctions to Prevent Breaches of Protective Covenants.
The parties hereto agree that the Company would be damaged
irreparably in the event any provision of paragraphs (b) or (c),
next above, were not performed by the Employee in accordance with
their respective terms or were otherwise breached and that money
damages would be an inadequate remedy for any such nonperformance or
breach. Therefore, the Company or its successors or assigns shall be
entitled, in addition to any other rights and remedies existing in
their favor, to an injunction or injunctions to prevent any breach
or threatened breach of any such provisions and to enforce such
provisions specifically (without posting a bond or other security).
The parties hereto agree that the Employee would be damaged
irreparably in the event any provision of paragraph (c), next above,
were not performed by the Company in accordance with its terms or
were otherwise breached and that money damages would be an
inadequate remedy for any such nonperformance or breach. Therefore,
the Employee shall be entitled, in addition to any other rights and
remedies existing in his favor, to an injunction or injunctions to
prevent any breach or threatened breach of any such provisions and
to enforce such provision specifically (without posting a bond or
other security).
8. Successors.
(a) The Employee.
This Agreement is personal to the Employee and, without the prior
express written consent of the Company, shall not be assignable by
the Employee, except that the Employee's rights to receive any
compensation or benefits under this Agreement may be transferred or
disposed of pursuant to testamentary disposition, intestate
succession or pursuant to a domestic relations order of a court of
competent jurisdiction. This Agreement shall inure to the benefit of
and be enforceable by the Employee's heirs, beneficiaries and/or
legal representatives.
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(b) The Company.
This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. The Company shall require
any successor to all or substantially all of the business and/or
assets of the Company, whether direct or indirect, by purchase,
merger, consolidation, acquisition of stock, or otherwise, by an
agreement in form and substance satisfactory to the Employee,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would be required to
perform if no such succession had taken place.
9. Miscellaneous.
(a) Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, applied without reference to
principles of conflict of laws.
(b) Amendments.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
(c) Notices.
All notices and other communications hereunder shall be in writing
and shall be given by hand-delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Company: UNITED STATES FILTER CORPORATION
00-000 Xxxx Xxxxxx
Xxxx Xxxxxx, XX 00000
If to the Employee: XXXXXXX X. XXXXXXXX
00000 Xxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
With a copy to: XXXXXXX XXXXXXX, ESQ.
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
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or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notices and communications
shall be effective when actually received by the addressee.
(d) Withholding.
The Company may withhold from any amounts payable under this
Agreement such federal, state or local income taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(e) Severability.
If any provision of this Agreement as applied to any part or to any
circumstances will be adjudged by a court to be invalid or
unenforceable, the same will in no way affect any other provision of
this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement.
The parties hereto intend this Agreement to be enforced as written.
If any provision or any part thereof is held to be invalid or
unenforceable because of the duration thereof, the level of
restrictions or the geographic scope thereof, all parties agree that
the court or arbitrator making such determination will have the
power to reduce the duration, restrictions or geographic scope of
such provision, and/or to delete specific words or phrases in an its
modified form such provision will then be enforceable.
(f) Captions.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
(g) Beneficiaries/References.
The Employee shall be enabled to select (and change) a beneficiary
or beneficiaries to receive any compensation or benefit payable
hereunder following the Employee's death, and may change such
election, in either case by giving the Company written notice
thereof. In the event of the Employee's death or a judicial
determination of his incompetence, reference in this Agreement to
the Employee shall be deemed, where appropriate, to refer to the
Employee's beneficiary(ies), estate or legal representative(s).
(h) Entire Agreement.
This Agreement contains the entire agreement between the parties
concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with
respect to the subject matter hereof, including without limitation
the Prior Agreement and the Company's Executive Severance Pay Plan.
However, nothing
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in this Agreement shall adversely affect the Employee's rights to
benefits vested and accrued prior to the Effective Date, other than
benefits which vest or accrue upon a "Change of Control" as defined
in the Prior Agreement and the Company's Executive Severance Pay
Plan, as the case may be. The Employee expressly agrees and
acknowledges that the payments for his Company stock options set
forth in Section 2.9 of the Merger Agreement are the sole payments
in connection with or with respect to his Company stock options to
which he is or will be entitled, and that the Prior Agreement has
not been amended subsequent to September 30, 1998.
(i) Arbitration.
(i) Any dispute, controversy or claim arising out of or
relating to this Agreement, a breach thereof or the
coverage or enforceability of this Section 9(i) shall be
settled by arbitration in Los Angeles, California (or
such other location as the Company and the Employee may
mutually agree), conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association, as such rules are in effect in Los Angeles
on the date of delivery of demand for arbitration. The
arbitration of any such issue, including the
determination of the amount of damages, shall be to the
exclusion of any court of law. This provision shall not
limit, nor be limited by, any additional right to seek
injunctive relief under Section 7(d).
(ii) There shall be three arbitrators, one to be chosen by
each party at will within ten (10) days from the date of
delivery of demand for arbitration and the third
arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a
third arbitrator within ten (10) days after the last of
the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either
party, by the American Arbitration Association. The
decision of a majority of the arbitrators shall be final
and binding on both parties and their respective heirs,
executors, administrators, personal representatives,
successors and assigns. Judgment upon any award of the
arbitrators may be entered in any court having
jurisdiction, or application may be made to any such
court for the judicial acceptance of the award and for
an order of enforcement.
(iii) The Company shall pay the fees and expenses incurred in
connection with any arbitration arising out of this
Agreement, unless a majority of the arbitrators
concludes that such arbitration procedure was not
instituted in good faith by the Employee.
(j) Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of
its obligations under this
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Agreement will not violate any agreement between the Company and any
other person, firm or organization or any applicable laws or
regulations.
(k) Survivorship.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement or the Employee's
employment hereunder to the extent necessary to the intended
preservation of such rights and obligations.
10. Termination of Agreement.
This Agreement shall be void and of no further force or effect upon the
termination of the Merger Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
March 22, 1999.
PARENT:
VIVENDI
By: /s/ Xxxx-Xxxxx Xxxxxxx
-------------------------------------
Its: Chairman and Chief Executive Officer
-------------------------------------
(title)
COMPANY:
UNITED STATES FILTER CORPORATION,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Its: Executive Vice President, CFO
-----------------------------------
(title)
EMPLOYEE:
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
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