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Exhibit 10(u)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of the 30th
day of September, 1999 (the "Effective Date") by and between THE FIRST YEARS
INC., a Massachusetts corporation (the "Company") and XXXXXX X. XXXXXX, of
Marstons Xxxxx, Massachusetts (the "Executive").
The Executive is currently serving as Chairman, President and Chief Executive
Officer of the Company, and the Board of Directors of the Company (the "Board of
Directors") desires to secure the continued employment of the Executive in
accordance herewith;
The Company is party to an employment agreement (the "Employment Agreement")
with the Executive dated March 23, 1995 and amended on January 16, 1997;
The Executive is willing to commit himself to be employed by the Company on the
terms and conditions herein set forth and in lieu of the terms and conditions of
the Employment Agreement; and
The parties desire to enter into this Agreement as of the Effective Date,
setting forth the terms and conditions for the employment relationship of the
Executive with the Company;
NOW, THEREFORE, in consideration of the mutual premises and the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. OPERATION OF AGREEMENT, EMPLOYMENT AND TERM.
(a) OPERATION. This Agreement shall commence on the Effective Date,
immediately upon its execution by the parties.
(b) EMPLOYMENT. The Company agrees to employ the Executive, and the
Executive agrees to be employed by the Company, in accordance with
the terms and provisions of this Agreement.
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(c) TERM.
(i) INITIAL TERM. The term of this Agreement shall commence on
the Effective Date and shall continue until the fifth (5th)
anniversary of the Effective Date (the "Initial Term"),
subject to earlier termination of the Agreement in
accordance with Section 4 of this Agreement.
(ii) RENEWAL TERMS. Unless either party gives to the other party
at least ninety (90) days prior written notice that the
Agreement shall terminate on the expiration of the Initial
Term or any subsequent Renewal Term of this Agreement, this
Agreement shall continue in full force and effect for
further successive terms of five (5) years on the same terms
and conditions as are set forth herein, subject to earlier
termination of this Agreement in accordance with Section 4
of this Agreement and any written amendments agreed to by
the parties. For purposes of this Agreement, a "Renewal
Term" shall be defined as any successive term of five (5)
years following the Initial Term and the "Term" shall be
defined as the Initial Term and any subsequent Renewal
Terms.
2. DUTIES AND POWERS OF EXECUTIVE.
(a) POSITION.
(i) During the Term, the Executive shall serve in his current
positions as Chairman, President, and Chief Executive
Officer of the Company. The Executive shall report directly
and solely to the Board of Directors. During the Term, the
Board shall not remove the Executive from the positions of
Chairman, President, and Chief Executive Officer of the
Company.
(ii) During the Term, and excluding any periods of vacation, sick
leave, and disability to
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which the Executive is entitled, the Executive shall devote
substantially all of his attention and time during normal
business hours to the business and affairs of the Company
and shall use his reasonable best efforts to carry out his
responsibilities faithfully and efficiently. It shall not
be considered a violation of the foregoing for the Executive
to serve on corporate, industry, civic or charitable boards
or committees, as long as such activities do not materially
interfere with the performance of his responsibilities with
the Company in accordance with this Agreement.
(b) BOARD MEMBERSHIP. The Company agrees to nominate the Executive for
election to the Board as a member of the management slate at each
Annual Meeting of Stockholders during the Term at which the
Executive's director class comes up for election. The Executive
agrees to serve on the Board if elected.
(c) LOCATION. The Company's current headquarters and executive offices
are in Avon, Massachusetts. The Executive's services shall be
performed at such location except for such reasonable travel
obligations as are substantially consistent with the Executive's
travel obligations as of the Effective Date. Throughout the Term,
the Executive shall be provided with appropriate office space and
secretarial services commensurate with his title, position, and on
a basis no less favorable than that of the Executive on the
Effective Date.
3. COMPENSATION.
The Executive shall receive the following compensation for his services
hereunder to the Company:
(a) SALARY. During the Term, the Executive's annual base salary ("Base
Salary") shall be THREE HUNDRED SIXTY-FOUR THOUSAND DOLLARS
($364,000), payable in accordance with the Company's general
payroll practices as are in effect from time to time.
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Executive's Base Salary shall be reviewed at least annually by the
Compensation Committee of the Board of Directors (the "Committee")
or by the Board of Directors, and may be increased from time to
time by the Committee or the Board of Directors during the Term.
The Executive's Base Salary shall not be reduced after any
increase in Base Salary is made by the Committee or the Board of
Directors, and the term "Base Salary" as used in this Agreement
shall refer to the Base Salary as so increased. Notwithstanding
the discretion of the Committee and the Board of Directors to
increase the Executive's Base Salary, if the Committee does not
increase the Base Salary for any fiscal year during the Term, the
Base Salary nonetheless will automatically be increased for such
fiscal year by an amount equal to the average of the increases in
Base Salary in respect of the (3) fiscal years ended prior to such
fiscal year.
(b) ANNUAL INCENTIVE COMPENSATION. During the Term, the Executive
shall be eligible to participate in all annual incentive
compensation plans, including all cash-based and equity-based
compensation plans, on a basis no less favorable than that of the
Executive on the Effective Date and in accordance with the
Company's practices in effect on the Effective Date and in effect
from time to time throughout the Term.
(c) LIFE AND DISABILITY INSURANCE POLICIES. The Company shall, during
the Term, pay the annual premium or premiums on (i) a life
insurance policy or policies, the total face amount of which shall
not exceed seven and a half million dollars ($7,500,000); and (ii)
a long-term disability insurance policy with the Xxxx Xxxxxx Life
Insurance Company or a similar long-term disability insurance
policy with any other insurance carrier providing substantially
similar benefits.
(d) BENEFITS. During the Term, the Executive shall be eligible to
participate in all savings, retirement, pension, profit-sharing,
401-K, and welfare (including without limitation, group medical,
dental, hospitalization, disability, life insurance) plans, the
medical reimbursement plan
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for certain officers of the Company, and fringe benefit plans,
practices, policies and programs on a basis no less favorable than
that of the Executive on the Effective Date (the "Benefits").
(e) AUTOMOBILE. During the Term, the Company shall make available to
the Executive, at the Company's cost and expense, an automobile of
a type and quality similar to the automobile being provided to the
Executive on the Effective Date. The Company will also pay all
expenses related to the repair, maintenance, and operation of such
automobile.
(f) FINANCIAL, TAX PLANNING AND ESTATE PLANNING. During the Term, the
Company shall provide the Executive with financial planning
services, including tax-related advice and estate planning
services, without cost or expense to him.
(g) VACATION AND OTHER ABSENCES. The Executive shall be entitled to
paid vacation and other paid absences, whether for holidays,
illness, personal time, or any similar purposes during the Term in
accordance with the Company's policies applicable to the Executive
as of the Effective Date, provided however that the Executive
shall always be entitle to at least five (5) weeks of paid
vacation in each calendar year.
(h) EXPENSES. The Company shall reimburse the Executive for all
reasonable expenses, including those for travel and entertainment,
incurred by him in the performance of his duties hereunder, in
accordance with policies established from time to time by the
Board of Directors or the Compensation Committee of the Board of
Directors.
4. TERMINATION OF EMPLOYMENT.
(a) BY THE COMPANY FOR ANY REASON OTHER THAN FOR CAUSE PRIOR TO A
CHANGE OF CONTROL. The Company may terminate the Executive's
employment for any reason prior to the occurrence of a Change of
Control. If the Company terminates the Executive's employment for
any reason other than for Cause prior to the occurrence of a
Change of Control, the Executive
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shall be entitled to the payments and benefits set forth in
Section 5(a) of this Agreement.
(b) BY THE EXECUTIVE FOR GOOD REASON PRIOR TO A CHANGE OF CONTROL. The
Executive may terminate his employment for Good Reason prior to
the occurrence of a Change of Control. If the Executive terminates
his employment for Good Reason prior to the occurrence of a Change
of Control, the Executive shall be entitled to the payments and
benefits set forth in Section 5(a) of this Agreement. For purposes
of this Agreement, "Good Reason" shall mean the occurrence,
without the written consent of the Executive, of an event
constituting a material breach of this Agreement (including
without limitation, a breach of any clause of Sections 2 or 3 of
this Agreement) by the Company that has not been fully cured
within ten (10) days after written notice thereof has been given
by the Executive to the Company.
(c) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death or Disability, in which
case the Executive shall be entitled to the applicable payments
and benefits set forth in Section 5(b) of this Agreement. For
purposes of this Agreement, "Disability" shall be deemed to occur
if, as a result of the Executive's incapacity due to physical or
mental illness, (i) the Executive shall have been absent from the
full-time performance of his duties with the Company for a period
of twelve (12) consecutive months; (ii) the Company shall have
given the Executive a Notice of Termination for Disability (as
defined in Paragraph (i) of this Section 4) and, (iii) within
thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of
his duties.
(d) BY THE EXECUTIVE FOR ANY REASON FOLLOWING A CHANGE OF CONTROL. The
Executive may terminate his employment for any reason, in his
discretion, within three (3) years following the occurrence of a
Change of Control, in which case the Executive shall be entitled
to the payments and benefits set forth in Section 5(c) of this
Agreement. For
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purposes of this Agreement, the Executive's termination of his
employment within three (3) months prior to the occurrence of a
Change of Control shall be treated as a termination of employment
within three (3) years following a Change of Control.
(e) BY THE COMPANY FOR ANY REASON FOLLOWING A CHANGE OF CONTROL. The
Company may terminate the Executive's employment for any reason
within three (3) years following the occurrence of a Change of
Control, and in such case the Executive shall be entitled to the
payments and benefits set forth in Section 5(c) of this Agreement.
For purposes of this Agreement, the Company's termination of the
Executive's employment other than for Disability or death within
three (3) months prior to the occurrence of a Change of Control
shall be treated as a termination within three (3) years following
a Change of Control.
(f) BY THE COMPANY FOR CAUSE PRIOR TO A CHANGE OF CONTROL. The Company
may terminate the Executive's employment for Cause, but only prior
to the occurrence of a Change of Control, and in such case, the
Executive shall be entitled to the payments and benefits set forth
in Section 5(d) of this Agreement. For purposes of this Agreement,
"Cause" shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the
Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered to the
Executive by the Board of Directors, which demand specifically
identifies the manner in which such Board believes that the
Executive has not substantially performed the Executive's duties;
or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily
or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) 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 good faith and without reasonable belief that
the Executive's act, or failure to act,
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was in the best interest of the Company, and (y) in the event of a
dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the
Company establishes to the Board of Directors by clear and
convincing evidence that Cause exists in accordance with Section
4(i).
(g) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON PRIOR TO THE
OCCURRENCE OF A CHANGE OF CONTROL. The Executive may terminate his
employment other than for Good Reason prior to the occurrence of a
Change of Control, and in such case the Executive shall be
entitled to the payments and benefits set forth in Section 5(d) of
this Agreement.
(h) DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall be
deemed to have occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any
securities acquired directly from the Company) representing
25% or more of the combined voting power of the Company's
then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a
transaction described in Clause (i) of paragraph (iii)
below; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving;
individuals who, on the date hereof, constitute the Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest), whose appointment or
election by the Board was approved or recommended by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors on the
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date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of the
Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities
of the Company 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 60% of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation;
or (B) a merger or consolidation effected to implement a
re-capitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including
in the securities beneficially owned by such Person any
securities acquired directly from the Company) representing
25% or more of the combined voting power of the Company's
then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition of the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting
securities of which are owned by stockholders of the Company
in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
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For purposes of this Section 4(h) "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange
Act; "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time; and "Person" shall
have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (A) the
Company or any of its subsidiaries; (B) a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company or any of its "affiliates" within the meaning
set forth in Rule 12b-2 promulgated under Section 12 of the
Exchange Act; (C) an underwriter temporarily holding
securities pursuant to an offering of such securities; or
(D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
(i) NOTICE OF TERMINATION. Any termination by the Company or by
the Executive shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section
10(b) of this Agreement. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this
Agreement, relied upon; (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the
Executive's employment under the provision so indicated; and
(iii) if the Date of Termination (as defined in Section
4(j)) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more
than thirty (30) days after the giving of such notice). The
failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive
from asserting such fact or circumstance in enforcing the
Executive's rights hereunder. Further, a Notice of
Termination for Cause is required to include a copy of a
resolution duly adopted by the affirmative vote of not less
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than three-quarters (3/4) of the membership of the Board of
Directors (excluding the Executive if the Executive is then
a member of such Board) at a meeting of such Board which was
called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before such Board) finding that, in the
good faith opinion of such Board, the Executive was guilty
of conduct set forth in clauses (i) or (ii) of the
definition of Cause herein, and specifying the particulars
thereof in detail.
(j) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Executive for
Good Reason, or for any reason, the date of receipt of the
Notice of Termination or any later date specified therein,
as the case may be; (ii) if the Executives' employment is
terminated by the Company, the date on which the Company
notifies the Executive of such termination (except in the
event of a termination for Cause); (iii) if the Executive's
employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time
performance of his duties during such thirty (30) day
period); and (iv) if the Executive's employment is
terminated by reason of death, the date of death.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) TERMINATION BY THE EXECUTIVE FOR GOOD REASON OR BY THE COMPANY
OTHER THAN FOR CAUSE PRIOR TO A CHANGE OF CONTROL. If the
Executive shall terminate his employment for Good Reason prior to
a Change of Control, or if the Company shall terminate the
Executive's employment for any reason other than for Cause prior
to the occurrence of a Change of Control, the Executive shall be
entitled to the following benefits:
(i) ACCRUED OBLIGATION. The Company shall pay to the Executive a
lump sum amount in cash equal to the sum of (A) the
Executive's
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Base Salary through the Date of Termination to the extent
not theretofore paid; and (B), any accrued vacation pay and
any other amounts due the Executive as of the Date of
Termination, in each case to the extent not theretofore
paid. (The amounts specified in Clauses (A) and (B) shall be
hereinafter referred to as the "Accrued Obligation".) The
amounts specified in this Section 5(a)(i) shall be paid
within ten (10) days after the Date of Termination;
(ii) PAYMENTS. The Company shall pay to the Executive within ten
(10) days following the Date of Termination a lump sum
amount in cash equal to the greater of:
(A) the sum of (x) Executive's Base Salary which would have
been paid to the Executive for the remaining years and
months of the Initial or the Renewal Term then in effect on
the Date of Termination at the annual Base Salary rate then
in effect on the Date of Termination, and (y) the targeted
amount of Annual Incentive Compensation which would have
been paid to the Executive for the remaining years and
months of the Initial or Renewal Term but at an annual rate
no less than the highest amount of Annual Incentive
Compensation in respect of the three most recent fiscal
years of the Company ended prior to the Date of Termination;
or,
(B) three (3) times the sum of the Executive's Base Salary
then in effect on the Date of Termination, and the highest
amount of Annual Incentive Compensation paid to the
Executive in respect of the three most recent fiscal years
of the Company ended prior to the Date of Termination;
(iii) BENEFITS. The Executive will continue to participate in the
Benefits set forth in Sections 3(d), (e), (f), (g), and (h)
of this Agreement, in effect on the Date of
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Termination, for a period equal to the greater of (A) the
remainder of the Initial or Renewal Term then in effect on
the Date of Termination, or (B) three (3) years from the
Date of Termination (the "Benefit Period"). For purposes of
the application of all Benefit plans, the Executive shall be
treated as if he had remained in the employ of the Company
for the Benefit Period. In the event the Executive is not
permitted to participate in any Benefit plan, including
without limitation any pension or 401-K plans, the Company
will make equivalent payments to the Executive on an
after-tax basis equal to the payments which would have been
made to such plans;
(iv) MEDICAL BENEFITS. Notwithstanding the foregoing Paragraph
(iii), with respect to medical, dental, hospitalization and
medical reimbursement benefits provided to the Executive on
the Date of Termination ("Medical Benefits"), the Executive
will continue to participate in such Medical Benefits until
the Executive is eligible for and entitled to coverage under
Medicare; provided, however, that to the extent such Medical
Benefits cannot be provided to Executive under the terms of
any Plan, the Company shall pay to the Executive, on an
after-tax basis, an amount necessary for Executive to
acquire substantially equivalent Medical Benefits until the
Executive is eligible for and entitled to coverage under
Medicare, and provided further that such Medical Benefits
shall terminate if the Executive becomes employed by or is
otherwise affiliated with another party that provides
benefits substantially equivalent to the Medical Benefits;
(v) LIFE AND DISABILITY INSURANCE. For a period equal to the
greater of (A) the remainder of the Initial or Renewal Term
then in effect on the Date of Termination or (B) three (3)
years from the Date of
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Termination, the Company will continue to pay the annual
premium or premiums on the life insurance policy or policies
and the long-term disability insurance policy as described
in Section 3(c) of this Agreement; and
(vi) STOCK OPTIONS. With respect to each option to purchase
common stock of the Company held by the Executive on the
Date of Termination, all such options shall become
immediately exercisable in full and each option may be
exercised by the Executive until the earlier of (A) the
three (3) year anniversary date of the Date of Termination
or the expiration of the Initial or Renewal Term then in
effect on the Date of Termination, whichever is longer; or
(B), the expiration date of such option. Notwithstanding the
foregoing, any incentive stock options ("ISO's") held by
the Executive on the Date of Termination may not be
exercised more than three (3) months after the Date of
Termination.
(b) TERMINATION BY REASON OF DISABILITY OR DEATH. If the Executive's
employment terminates by reason of Disability or death, the
Executive shall be entitled to the following benefits:
(i) ACCRUED OBLIGATION. The Company shall pay to the Executive
(or, in the event of his death, to his legal representative)
the Accrued Obligation within ten (10) days after the Date
of Termination;
(ii) BASE SALARY. The Company shall continue to pay the Executive
(or, in the event of his death, his legal representative)
(A) for a period of one (1) year following the Date of
Termination the Executive's Base Salary in effect
immediately prior to the Date of Termination, in accordance
with the Company's general payroll practices; provided,
however, that in the event of termination of Executive's
employment by reason of Disability, such Base Salary
payments shall
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be reduced by the amount of any disability insurance
proceeds paid to the Executive under any individual or group
policies, the premiums of which had been paid by the Company
or by the Executive and reimbursed by the Company; and (B),
a pro-rata portion of any Annual Incentive Compensation
earned by the Executive in respect of the fiscal year in
which occurs the Date of Termination, payable in accordance
with the Company's practices with respect to the payment of
bonuses;
(iii) STOCK OPTIONS. With respect to any vested options to
purchase the common stock of the Company, including ISO's,
held by the Executive on the Date of Termination, the
Executive (or, in the event of his death, his legal
representative) may exercise such options until the earlier
of one (1) year from the Date of Termination or the
expiration date of such option. With respect to any unvested
non-qualified stock options held by the Executive on the
Date of Termination, such non-qualified options shall
continue to vest for a period of one (1) year from the Date
of Termination; and
(iv) BENEFITS. In the event of termination by reason of
Disability, the Executive shall, for a period of one (1)
year from the Date of Termination, continue to participate
in all the Benefits set forth in Section 3(d) of this
Agreement, in effect on the Date of Termination; provided,
however, that if such Benefits cannot be provided because of
a prohibition in the terms of any Benefit plan, the Company
shall provide a substantially equivalent Benefit on an
after-tax basis.
(c) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Company shall
terminate the Executive's employment within three (3) years
following the occurrence of a Change of Control, or if the
Executive shall terminate his employment for any reason, at his
discretion, within three (3) years
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following a Change of Control, the Executive shall be entitled to
the following benefits:
(i) ACCRUED OBLIGATION. The Company shall pay to the Executive
the Accrued Obligation within ten (10) days after the Date
of Termination.
(ii) PAYMENTS. The Company shall pay to the Executive a lump sum
amount in cash, within ten (10) days following the Date of
Termination, equal to two and ninety-nine one-hundredths
(2.99) times the sum of (A) the Executive's Base Salary then
in effect on the Date of Termination, and (B) the highest
amount of Annual Incentive Compensation paid to the
Executive in respect of the three most recent fiscal years
of the Company ended prior to the Date of Termination;
(iii) BENEFITS. The Executive will continue to participate in the
benefits set forth in Sections 3(d), (e), (f), (g), and (h)
of this Agreement, in effect on the Date of Termination, for
a period of three (3) years from the Date of Termination.
For purposes of the application of all Benefit plans, the
Executive shall be treated as if he had remained in the
employ of the Company for such three-year period. In the
event the Executive is not permitted to participate in any
Benefit plan, including without limitation any pension or
401-K plans, the Company will make equivalent payments to
the Executive on an after-tax basis equal to the payments
which would have been made to such plans;
(iv) MEDICAL BENEFITS. Notwithstanding the foregoing Paragraph
(iii), with respect to medical, dental, hospitalization and
medical reimbursement benefits provided to the Executive on
the Date of Termination ("Medical Benefits), the Executive
will continue to participate in such Medical Benefits until
the Executive is eligible for and entitled to coverage under
Medicare; provided, however, that to the extent such
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Medical Benefits cannot be provided to Executive under the
terms of any Plan, the Company shall pay to the Executive,
on an after-tax basis, an amount necessary for Executive to
acquire substantially equivalent Medical Benefits until the
Executive is eligible for and entitled to coverage under
Medicare; and provided further that such Medical Benefits
shall terminate if the Executive becomes employed by or is
otherwise affiliated with another party that provides
benefits substantially equivalent to the Medical Benefits;
(v) LIFE AND DISABILITY INSURANCE. For a period of three (3)
years from the Date of Termination, the Company will
continue to pay the annual premium or premiums on the life
insurance policy or policies and the long-term disability
insurance policy as described in Section 3(c) of this
Agreement; and
(vi) STOCK OPTIONS. With respect to each option to purchase
common stock of the Company held by the Executive on the
Date of Termination, all such options shall become
immediately exercisable in full, and each option may be
exercised by the Executive until the earlier of (A) the
three (3) year anniversary date of the Date of Termination
or (B) the expiration date of such option. Notwithstanding
the foregoing, any incentive stock options ("ISO's") held by
the Executive on the Date of Termination may not be
exercised more than three (3) months after the Date of
Termination.
(d) TERMINATION FOR OTHER REASON. If the Executive's employment shall
be terminated by the Company for Cause prior to the occurrence of
a Change of Control, or by the Executive other than for Good
Reason prior to the occurrence of a Change of Control, the Company
shall not have any further obligations to the Executive under this
Agreement other than the obligation to pay to the Executive the
Accrued Obligation within ten (10) days of the Date of Termination
and any post-employment
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benefits to which the Executive is entitled under the terms of the
Company's employee benefit plans.
(e) LEGAL FEES. The Company shall also pay to the Executive all
reasonable legal fees and expenses incurred by the Executive in
disputing in good faith any issue hereunder relating to the
termination of the Executive'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
Internal Revenue Code (the "Code") to any payment or benefit
provided hereunder. Such payments shall be made within ten (10)
business days after delivery of the Executive's written requests
for payment accompanied with such evidence of fees and expenses
incurred as is reasonable.
(f) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(i) Anything in this Agreement to the contrary notwithstanding,
in the event that any "payments in the nature of
compensation" within the meaning of Section 280G of the Code
by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments
required under this Section 5(f) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (the excise tax
imposed by Section 4999 of the Code, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall
be entitled to receive an additional payment (a "Gross-up
Payment") in an amount such that after payment by the
Executive of all taxes imposed upon the Gross-up Payment,
including without limitation, any income taxes, FICA taxes
(and
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any interest and penalties imposed with respect to income
taxes or any other taxes) and Excise Tax, the Executive
retains an amount of the Gross-up Payment equal to the
Excise Tax imposed upon the Payment.
(ii) Subject to the provisions of Section 5(f)(iii) below, all
determinations required to be made under this Section 5(f),
including whether and when a Gross-up Payment is required
and the amount of such Gross-up Payment, and the assumptions
to be utilized in arriving at such determination, shall be
made by the accounting firm representing the Company at such
time (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as accountant or auditor
for the individual, entity or group effecting the Change of
Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be paid by the
Executive and then reimbursed to him by the Company. Any
Gross-up Payment, as determined pursuant to this Section
5(f), shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no
Excise Tax is payable, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of
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Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is
possible that Gross-up Payments which will not have been
made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its
remedies pursuant to Section 5(f)(iii) and the Executive
thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the
Underpayment that has occurred within 15 business days of
receipt of notice from the Executive that there has been an
Under-payment, and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(iii) The Executive shall notify the Company in writing of any
assertion by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-up Payment (An "Assertion"). Such notification shall
be given as soon as practicable after the Executive is
informed in writing of such Assertion, and shall apprise the
Company of the nature of such Assertion and the date on
which such Assertion is requested to be paid. The Executive
shall not pay such Assertion prior to the expiration of the
thirty (30) day period following the date on which it gives
such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such
Assertion is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it
desires to contest such Assertion, the Executive shall:
(A) give the Company any information reasonably requested by
the Company relating to such Assertion;
(B) take such action in connection with contesting such
Assertion as the
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Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such Assertion by an
attorney selected by the Company and reasonably
acceptable to the Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such Assertion; and
(D) permit the Company to participate in any proceedings
relating to such Assertion; 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 the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment
of costs and expenses. Without limitation on the
foregoing provisions of this Section 5(f)(iii), 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 Assertion and may, at its
sole option, either direct the Executive to pay the tax
claimed and xxx for a refund or contest the Assertion in
any permissible manner; and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal in a court of initial
jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the
Company directs the Executive to pay such Assertion and
xxx for a
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refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and
shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and
further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable
year of the Executive with respect to which such
contested amount is claimed to be due is limited solely
to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with
respect to which a Gross-up Payment would be payable
hereunder, and the Executive shall be entitled to settle
or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f)(iii), the Executive
becomes entitled to receive any refund with respect to such
Assertion, the Executive shall (subject to the Company's
complying with the requirements of Section 5(f)(iii))
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 5(f)(iii), a determination is made that the
Executive shall not be entitled to any refund with respect
to such Assertion, and the Company does not notify the
executive in writing of its intent to contest such denial of
refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be
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forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof,
the amount of Gross-up Payment required to be paid.
6. RESTRICTIONS AND OBLIGATIONS OF THE EXECUTIVE.
The parties agree and acknowledge that the principal consideration for
the agreement to make and provide the payments and benefits provided in
Section 5(a) of this Agreement from the Company to the Executive is the
Executive's compliance with the undertakings set forth in this Section.
(a) Except as provided below, Executive agrees if his employment is
terminated for any of the reasons set forth in Sections 4(a) or
4(b), then for a period of three (3) years following the Date of
Termination he shall not (i) directly or indirectly, whether as
owner, partner, shareholder, agent, consultant, co-venturer,
employee or otherwise, or through any person as hereafter defined,
engage in the business of developing or selling products which are
competitive with the products that at the termination of his
employment are being sold or under development by the Company in
any of the countries in which the Company is doing business on the
Date of Termination ("Restricted Business"); or (ii) employ,
recruit, or otherwise solicit or induce any employee, agent,
distributor, supplier, customer, or consultant of the Company to
terminate their employment or otherwise cease their relationship
with the Company.
(b) This Section 6(a) shall not bind the Executive following the
termination of the Executive's employment if a Change of Control
occurs after the Date of Termination of his employment during the
three (3) year period referenced in Section 6(a).
(c) For purposes of this section, the term "Person" shall mean an
individual, a corporation, an association, a partnership, an
estate, a trust, and any other entity or organization.
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(d) Notwithstanding the foregoing, the Executive may purchase, for
passive investment purposes not intended to circumvent this
Agreement, on a national securities exchange or in the
"over-the-counter" market any securities listed on such exchange
or in such market, but such purchases shall not exceed 5% of any
class of such securities of any Restricted Business.
(e) In the event that any provision of this section is determined by
any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time, or over too great
a range of activities, it shall be interpreted to extend only over
the maximum period of time, or range of activities, as to which it
may be enforceable.
7. FULL SETTLEMENT; MITIGATION.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform their obligations hereunder shall
not be subject to any set-off, counterclaim, recoupment, defense or
other Assertion, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of
the amounts (including amounts for damages for breach) payable to the
Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive obtains other
employment.
8. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret, confidential information, knowledge or data
relating to the Company or any of its affiliates and their respective
businesses which shall have been obtained by the Executive during his
employment by the Company or any of their affiliates and that shall not
have been or now or hereafter have become public knowledge (other than
by acts by the Executive or representatives of the Executive in
violation of this Agreement). The Executive shall not, without the
prior written consent of the Company or as may otherwise be required by
law or legal process,
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communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
9. SUCCESSORS.
(a) ASSIGNMENT BY EXECUTIVE. This Agreement is personal to the
Executive and, without the prior written consent of the Company,
shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal
representatives.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Company and their respective successors
and assigns.
(c) ASSUMPTIONS. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets thereof to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform this Agreement if no
succession had taken place.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts,
without reference to its principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended, modified, repealed, waived, extended or discharged except
by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal, waiver,
extension or discharge is sought. No person, other than pursuant
to a resolution of the Board of Directors, shall have authority on
behalf of the Company to agree to amend, modify, repeal, waive,
extend or discharge any provision of
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this Agreement or take any other action in respect thereto.
(b) 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 to the Company's headquarters and, in
the case of the executive, to the address on the signature page of
this Agreement or, in either case, to such other address as any
party shall have subsequently furnished to the other parties in
writing. Notice and communications shall be effective when
actually received by the addressee.
(c) SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) TAXES. The Company may withhold from any amounts due and payable
under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or
regulation.
(e) NO WAIVER. Any party's failure to insist upon strict compliance
with any provision hereof or the failure to assert any right such
party may have hereunder, including, without limitation, the right
of the Executive to terminate his employment pursuant to Sections
4(b), 4(d) and 4(g) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) ENTIRE AGREEMENT; SURVIVAL. This Agreement entered into as of the
date hereof between the Company and the Executive contains the
entire agreement of the Executive and the Company with respect to
the subject matter of the Agreement, and all promises,
representations, understandings, arrangements and prior
agreements, including without limitation the Employment Agreement,
are merged into, and superseded by, this Agreement. Any provision
hereof which by its terms applies in whole or part
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after a termination of the Executive's employment hereunder shall
survive such termination.
IN WITNESS WHEREOF, the Executive has executed this Agreement and, pursuant to
due authorization from its Board of Directors, the company has caused this
Agreement to be executed as of the day and year first above written.
THE FIRST YEARS INC.
/s/ Xxxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxx
--------------------------- ---------------------------
Xxxxxx X. Xxxxxx
Name: Xxxx X. Xxxxx
-------------------------
Title: Senior Vice President,
----------------------
Treasurer and Chief
----------------------
Financial Officer
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