EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This agreement made as of the 2nd day of January, 2002
BETWEEN:
ALDERWOODS GROUP SERVICES INC.
(the "Company")
-And-
XXXXXXX X. XXXX
(the "Executive")
WHEREAS:
The Company is a wholly-owned subsidiary of Alderwoods Group, Inc.
("AGI"), a Delaware corporation that is the holding entity for a
corporate group engaged in the operation of funeral homes, insurance
and cemeteries in Canada, the United States and England; and
The Company and the Executive wish to enter into a written Employment
Agreement which will provide the Executive with an incentive to
continue in his position as Senior Vice President, Legal and Asset
Management of the Company for the term of this Agreement.
IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:
DEFINITIONS
1. "CHANGE IN CONTROL" means any one of the following events that occurs
during the term of this Agreement other than pursuant to a plan of
reorganization submitted by AGI and confirmed by the U.S. Bankruptcy
Court:
a) the acquisition by any individual, entity or group (a
"Person") of beneficial ownership of 30% or more of the
combined voting power of the then-outstanding Voting Stock (as
defined below) of AGI; provided, however, that the following
acquisitions will not constitute a Change in Control: (1) any
issuance of Voting Stock of AGI directly from AGI that is
approved by the Incumbent Board (as defined below), (2) any
acquisition by AGI of Voting Stock of AGI, (3) any acquisition
of Voting Stock of AGI by any employee benefit plan (or
related trust) sponsored or maintained by AGI or any
subsidiary of AGI, or (4) any acquisition of Voting Stock of
AGI by any Person pursuant to a Business Combination (as
defined below) that would not constitute a Change in Control;
b) the consummation of a reorganization, amalgamation, merger or
consolidation, a sale or other disposition of all or
substantially all of the assets of AGI, or any other
transaction (each, a "Business Combination") in which all or
substantially all of the individuals and entities who were
the beneficial owners of Voting Stock of AGI immediately prior
to such Business Combination beneficially own, directly or
indirectly, immediately following such Business Combination
less than 40% of the combined voting power of the then
outstanding shares of Voting Stock of the entity resulting
from such Business Combination;
c) individuals who, as of the Effective Date, constitute the
Board of Directors of AGI (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a Director
subsequent to such Effective Date whose election, or
nomination for election by AGI's stockholders, was approved by
a vote of at least two-thirds of the Directors then comprising
the Incumbent Board (either by a specific vote or by approval
of the proxy statement of AGI in which such person is named as
a nominee for director, without objection to such nomination)
will be deemed to have been a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or
removal of Directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
d) the approval by the stockholders of AGI of a complete
liquidation or dissolution of AGI, except pursuant to a
Business Combination that would not constitute a Change in
Control.
2. "CONSTRUCTIVE DISCHARGE" means the termination of the Executive's
employment by the Executive following the occurrence of one or more of
the following events (regardless of whether any other reason, other
than Just Cause, exists for the termination of Executive's employment):
a) the geographic relocation of the Executive's place of
employment by the Company by more than 50 miles from Xxxxxxx,
Xxxxxxx;
b) any material reduction by the Company in the Executive's job
duties or responsibilities;
c) any material reduction by the Company in the Executive's level
of compensation or benefits;
d) any adverse change by the Company or AGI to the Executive's
title or function;
e) harassment by a representative or affiliate of the Company; or
f) any circumstance in which the Executive was induced by the
actions of the Company to terminate his employment other than
on a purely voluntary basis.
3. "EFFECTIVE DATE" has the meaning set forth in the "Fourth Amended Joint
Plan of Reorganization of Xxxxxx Group International, Inc., Its Parent
Corporation and Certain of Their Debtor Subsidiaries."
4. "JUST CAUSE" means willful misconduct or willful neglect of duty by the
Executive, including, but not limited to, intentional wrongful
disclosure of confidential or proprietary information of the Company or
AGI or any of its subsidiaries; intentional wrongful engagement in any
competitive activity prohibited by paragraph 20; and the intentional
material breach of any provision of this Agreement.
5. "SERVICES" has the meaning set forth in the Management Services
Agreements, dated as of January 2, 2002, by and between the Company and
AGI and the Company and certain subsidiaries of AGI.
6. "TERMINATION WITHOUT JUST CAUSE" includes, but is not limited to, any
unilateral change in the material terms and conditions of the
Executive's employment.
7. "VOTING STOCK" means securities entitled to vote generally in the
election of directors.
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ENTIRE AGREEMENT
8.
a) The Executive and the Company agree that this Agreement
represents the entire agreement between the parties and that
any and all prior agreements, written or verbal, express or
implied, between the parties relating to or in any way
connected with the employment of the Executive by the Company
or any related, associated, affiliated, predecessor or parent
corporations are declared null and void and are superseded by
the terms of this Agreement. There are no representations,
warranties, forms, conditions, undertakings, or collateral
agreements, express, implied or statutory between the parties
other than as expressly set forth in this Agreement. No waiver
or modification of this Agreement shall be valid unless in
writing and duly executed by both the Company and the
Executive.
b) The Executive acknowledges and agrees that, as of the
Effective Date, the Key Employee Retention Program will
terminate and be of no further force or effect with respect to
the Executive.
EMPLOYMENT
9. The Company agrees to employ the Executive, and the Executive agrees to
be employed by the Company, in the position of Senior Vice President,
Legal and Asset Management for the term of this Agreement. The
Executive also agrees that, as part of the Executive's duties, the
Executive shall occupy and perform the office of Senior Vice President,
Legal and Asset Management of AGI, on behalf of the Company, for the
term of this Agreement. As used in this Agreement, the phrase "term of
this Agreement" means the period beginning on the Effective Date and
ending on the earlier of January 2, 2004, or the effective date of the
termination of Executive's employment. Notwithstanding anything to the
contrary in this Agreement, paragraph 16(b) shall survive and remain in
effect following the term of this Agreement.
10. The Executive agrees that he will at all times faithfully,
industriously, and to the best of his skill, ability, and talents,
perform all of the duties required of his position in a manner which is
in the best interests of the Company and in accordance with the
Company's objectives, and will devote his full working time and
attention to these duties. The Executive acknowledges and agrees that
the duties required of his position include, without limitation, the
provision of Services on behalf of, and for the account of, the
Company.
COMPENSATION
11.
a) In consideration for the Executive's continued performance of
his duties as Senior Vice President, Legal and Asset
Management, the Executive will receive a base salary of
$300,000 U.S. per annum. The amount of such salary shall be
subject to review and improvement on a periodic basis in
accordance with Company practice, but in no event shall such
amount be reduced. The Executive's base salary is payable in
accordance with the Company's customary payroll practices and
is subject to deductions required by applicable law.
b) The Company shall reimburse the Executive for all reasonable
expenses incurred by the Executive during the term of this
Agreement in the course of the Executive performing his duties
under this Agreement. These reimbursements shall be consistent
with the Company's policies in effect from time to time with
respect to travel, entertainment and other reimbursable
business expenses, subject to the Company's requirements
applicable generally with respect to reporting and
documentation of such expenses.
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SHORT TERM INCENTIVE PLAN - ANNUAL BONUS
12. The Executive will be entitled to participate in a short term incentive
plan as adopted by the Company from time to time in a manner
commensurate with his position and level of responsibility with the
Company. The bonus payable under such plan will be paid in full within
90 days after the end of each year.
13. The short term incentive plan bonus is subject to the following
conditions and exceptions:
a) In order to qualify for and receive the annual bonus, the
Executive must be employed by the Company or its successor at
the time the bonus is paid unless the Executive is terminated
(1) without Just Cause or (2) by reason of Constructive
Discharge in compliance with paragraph 17. If the Executive's
employment is terminated without Just Cause or by reason of
Constructive Discharge after the end of the year but before
the bonus amount is paid, the Executive shall receive the
bonus for that completed year calculated in accordance with
terms of the short term incentive plan. The payment shall be
made by the Company within seven days of the termination and
will be subject to deductions required by applicable law. If
the bonus amount has not been determined within seven days of
the termination it will be paid in full within 90 days of the
subject year end.
b) If, before the end of a year, the Executive's employment is
terminated by the Company or its successor without Just Cause,
the bonus which the Executive will be entitled to receive
under paragraph 16 for that year will be equal to the
Executive's pro rata portion of the bonus for the year of
termination (for the number of days elapsed in the current
year), based on the achievement of the applicable performance
criteria through the date of termination.
STOCK OPTION PLAN
14. The Executive is eligible for participation in AGI's equity incentive
plan or plans. Stock options will be granted to the Executive as
determined by the Board of Directors of AGI.
BENEFITS
15. The Executive will be eligible to participate in the following benefit
plans:
a) GROUP BENEFITS. The Executive will participate in the
Company's Group Benefit Plan and any other group perquisites
all as in effect from time to time.
b) VEHICLE ALLOWANCE. The Executive will be entitled to a vehicle
allowance of $500.00 per month plus operating expenses with no
allowance for auto insurance coverage.
c) CLUB MEMBERSHIP. The Executive will be entitled to the amount
of $1,000.00 per year for club memberships as directed by the
Executive.
TERMINATION OF EMPLOYMENT
16. The parties agree that the Executive's employment under this Agreement
may be terminated as follows:
a) by the Company, without notice of termination or pay in lieu
thereof, for Just Cause;
b) by the Company, not following a Change in Control as set forth
in paragraph 17 below, at its sole discretion and for any
reason other than Just Cause upon payment to the Executive in
a lump sum, within seven days of such termination, of an
amount equal to:
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i) 12 months' base salary; provided, however, that if
the Executive's employment is terminated prior to the
first anniversary of the Effective Date, he shall be
entitled to a lump sum payment in an amount equal to
24 months' base salary;
ii) The amount of any unpaid bonus earned by the
Executive up to and including the date of termination
calculated in accordance with paragraph 13(b); and
iii) The amount of any unpaid salary or vacation earned by
the Executive up to and including the date of
termination.
Payments identified in sub paragraphs (i) - (iii) will be
subject to deductions required by applicable law;
c) by the Company for any reason other than Just Cause or by
reason of Constructive Discharge, following a Change in
Control, both in compliance with paragraph 17 below; or
d) by the Executive, for any reason, upon thirty (30) days
advance written notice to the Company in which case the
Company will have no further obligation to the Executive under
this Agreement or otherwise except to pay the Executive the
unpaid portion, if any, of the Executive's base salary payable
for the period through the date of termination of the
Executive's employment.
CHANGE IN CONTROL
17. If a Change in Control occurs and, within two years of the effective
date of the Change in Control, the Executive's employment is terminated
by the Company without Just Cause or by reason of Constructive
Discharge, the Company shall, within seven days of the date of
termination, pay to the Executive in a lump sum the following payments:
i) 24 months' base salary;
ii) The replacement value of all Executive's benefit
coverage, including the full vesting of all stock
options (exercised or not) granted to the Executive,
and all monies due from the Registered Retirement
Savings Plan, following the date of the Executive's
termination (such benefit coverage being calculated
over 24 months following termination);
iii) Two times the amount of incentive pay (in an amount
equal to not less than the highest aggregate
incentive pay earned by the Executive in any of the
three fiscal years immediately preceding the year in
which the Change in Control occurred);
iv) The amount of any unpaid bonus earned by the
Executive for a completed year, calculated in
accordance with paragraph 13; and
v) The amount of any unpaid salary or vacation earned by
the Executive up to and including the date of
termination.
Payments identified in paragraphs (i) - (v) will be subject to deductions
required by applicable law. Any termination of employment of the Executive by
the Company or the removal of the Executive from the office or position in the
Company or AGI that occurs (A) not more than 365 days prior to the date on which
a Change in Control occurs and (B) following the commencement of any discussion
with a third party that ultimately results in a Change in Control will be deemed
to be a termination or removal of the Executive after a Change in Control for
purposes of this Agreement.
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CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
18. In the event that it is determined (as hereinafter provided) that any
payment (other than the Gross-Up Payments provided for in this
paragraph 18 and Annex A) or distribution by the Company, AGI or any of
its affiliates 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 pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including, without limitation,
the lapse or termination of any restriction on the vesting or
exercisability of any benefit under any of the foregoing (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
United States Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision thereto), by reason of being considered
"contingent on a change in ownership or control," within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any
similar tax imposed by U.S. state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then the Executive will be entitled to receive
an additional payment or payments (collectively, a "Gross-Up Payment").
The Gross-Up Payment will be in an amount such that, after payment by
the Executive of all U.S. taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment. For
purposes of determining the amount of the Gross-Up Payment, the
Executive will be considered to pay any applicable U.S. federal, state
and local income taxes at the highest rate applicable to the Executive
in effect in the year in which the Gross-Up Payment will be made, net
of the maximum reduction in U.S. federal income tax that could be
obtained from deduction of such state and local taxes.
19. The obligations set forth in paragraph 18 will be subject to the
procedural provisions described in Annex A.
CONFIDENTIAL INFORMATION; COMPETITIVE ACTIVITY
20. The Executive agrees that he will not, without the prior written
consent of the Company, during the term of this Agreement or at any
time thereafter, disclose to any person not employed by the Company, or
use in connection with engaging in competition with the Company, any
confidential or proprietary information of the Company. For purposes of
this Agreement, the term "confidential or proprietary information"
includes all information of any nature and in any form that is owned by
the Company and that is not publicly available (other than by
Executive's breach of this paragraph 20) or generally known to persons
engaged in businesses similar or related to those of the Company.
Confidential or proprietary information will include, without
limitation, the Company's financial matters, customers, employees,
industry contracts, strategic business plans, product development (or
other proprietary product data), marketing plans, and all other secrets
and all other information of a confidential or proprietary nature. The
foregoing obligations imposed by this paragraph 20 will not apply (i)
during the Term, in the course of the business of and for the benefit
of the Company, (ii) if such confidential or proprietary information
has become, through no fault of the Executive, generally known to the
public or (iii) if the Executive is required by law to make disclosure
(after giving the Company notice and an opportunity to contest such
requirement).
21. In addition, during the term of this Agreement and for a period of 12
months thereafter, the Executive will not, without the prior written
consent of the Company, which consent will not be unreasonably
withheld:
a) Engage in any Competitive Activity. For purposes of this
Agreement, "Competitive Activity" means the Executive's
participation in the management of any business enterprise if
such enterprise engages in substantial and direct competition
with the Company and such enterprise's sales of any product or
service competitive with any product or service of the Company
amounted to 10% of such enterprise's net sales for its most
recently completed fiscal year and if the Company's net sales
of said product or service amounted to 10% of the Company's
net sales for its most recently completed fiscal year.
"Competitive Activity" will not include (i) the mere ownership
of securities in any such enterprise and the exercise of
rights appurtenant thereto or (ii) participation in the
management of any such enterprise other than in connection
with the competitive operations of such enterprise.
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b) On behalf of the Executive or on behalf of any person, firm or
company, directly or indirectly, attempt to influence,
persuade or induce, or assist any other person in so
persuading or inducing, any employee of the Company or any of
its subsidiaries to give up, or to not commence, employment or
a business relationship with the Company or any of its
subsidiaries.
22. The Executive and the Company agree that the covenants contained in
paragraphs 20 and 21 are reasonable under the circumstances, and
further agree that if, in the opinion of any court of competent
jurisdiction, any such covenant is not reasonable in any respect, such
court will have the right, power and authority to excise or modify any
provision or provisions of such covenants as to the court will appear
not reasonable and to enforce the remainder of the covenants as so
amended. The Executive acknowledges and agrees that the remedy at law
available to the Company for breach of any of his obligations under
this paragraph 22 would be inadequate and that damages flowing from
such a breach may not readily be susceptible to being measured in
monetary terms. Accordingly, the Executive acknowledges, consents and
agrees that, in addition to any other rights or remedies that the
Company may have at law, in equity or under this Agreement, upon
adequate proof of his violation of any such provision of this
Agreement, the Company will be entitled to immediate injunctive relief
and may obtain a temporary order restraining any threatened or further
breach, without the necessity of proof of actual damage.
23. For purposes of paragraphs 20, 21 and 22, the term "Company" will also
include AGI and any subsidiary of AGI.
GENERAL
24. The parties confirm that the provisions of this Agreement are fair and
reasonable and that the total compensation and benefits payable under
paragraphs 16, 17 or 18 are reasonable estimates of the damages which
would be suffered by the Executive. Any amount paid under paragraphs
16, 17 or 18 shall be in full satisfaction of all claims whatsoever
relating to the Executive's employment or for the termination of the
Executive's employment, including claims for salary, bonus, benefits,
vacation pay, termination pay and/or severance pay pursuant to the
Ontario EMPLOYMENT STANDARDS ACT, as amended, including sections 57 and
58 thereof.
25. Any payment made to the Executive under paragraphs 16, 17 or 18 of this
Agreement shall be paid to the Executive by the Company regardless of
any offer of alternate employment made to the Executive by the Company
or by any other prospective employer, whether accepted by the Executive
or not. The Executive will not be required to mitigate any damages
arising from this Agreement and any amounts and benefits to be provided
to the Executive hereunder shall not be reduced or set off against any
amounts earned by the Executive from alternate employment, including
self-employment, or by other means.
26. Any payment other than for base salary made to the Executive under this
Agreement shall be made by way of a lump sum payment or, at the
Executive's option, in such other manner as he may direct, less
deductions required by applicable law.
27. Where the context requires, the singular shall include the plural and
the plural shall include the singular. Masculine pronouns shall be
deemed to be read as feminine pronouns and VICE VERSA. Words importing
persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations and VICE VERSA.
28. The division of this Agreement into paragraphs and the insertion of
headings are for the convenience of reference only and shall not affect
the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement only and not to any particular paragraph and include any
agreement or instrument supplemental or ancillary to the Agreement.
References herein to paragraphs are to paragraphs of this Agreement
unless something in the subject matter or context is inconsistent
therewith.
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29. All dollar amounts identified in this contract are in U.S. currency.
30. The parties' respective rights and obligations under paragraphs 16(b),
18, 19, 20, 21, 22, 34 and 35 will survive any termination or
expiration of this Agreement or the termination of the Executive's
employment for any reason whatsoever.
GOVERNING LAWS
31. This Agreement shall be governed by the laws of the Province of Ontario
without giving effect to the principles of conflict of laws thereof.
Each party to this Agreement hereby consents and submits himself or
itself to the jurisdiction of the courts of the Province of Ontario for
the purposes of any legal action or proceeding arising out of this
Agreement.
SEVERABILITY
32. All terms and covenants contained in this Agreement are severable and
in the event that any of them is held to be invalid by any competent
court in the Province of Ontario, the invalid provision shall be
deleted and the balance of this Agreement shall be interpreted as if
such invalid clause or covenant were not contained herein.
CONTINUITY
33. This Agreement shall be binding upon and enure to the benefit of (i)
the Executive and his heirs, executors, administrators and legal
representatives and (ii) the Company, its related corporations,
affiliates, and associates, and any other entity or organization which
shall succeed to substantially all or any distinct portion of the
business, divisions or property of the Company or its related
corporations, affiliates, and associates, whether by means of
amalgamation, merger, consolidation, acquisition, and/or sale of all or
part of the shares or assets of the Company or otherwise, including by
operation of law or by succession to the business of AGI pursuant to a
Plan of Reorganization approved by a Bankruptcy Court. In addition, the
Company will require any such successor expressly to assume and agree,
by written agreement, to perform this Agreement in the same manner and
to the same extent the Company would be required to perform if no such
succession had taken place.
LEGAL ADVICE
34. The Executive acknowledges that he has obtained or has had an
opportunity to obtain independent legal advice in connection with this
Agreement, and further acknowledges that he has read, understands, and
agrees to be bound by all of the terms and conditions contained herein.
35. The Company agrees to reimburse the Executive for all reasonable legal
expenses incurred in connection with any dispute involving the
Executive, the Company, its related corporations, affiliates,
successors, or assigns, or any other third party, as between any of
them, arising from the validity, interpretation, or enforcement of this
Agreement or any of its terms, including all reasonable legal expenses
incurred by the Executive in respect of any action or actions commenced
by the Executive to obtain, enforce, or retain any right, benefit or
payment provided for in this Agreement regardless of whether such
expenses are incurred during the term of the Agreement or after;
provided that, in regard to such matters, the Executive has not acted
in bad faith or with no colorable claim of success. However, the
Company shall not be required to reimburse the Executive for any legal
costs or expenses in relation to any action commenced by the Company to
enforce the confidentiality or non-competition provisions hereof and in
respect of which in a court of competent jurisdiction the Company is
the prevailing party for either preliminary or final remedy.
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NOTICE
36. Any demand, notice or other communication to be given in connection
with this Agreement shall be given by personal delivery, by registered
mail or by electronic means of communication addressed to the recipient
as follows:
TO THE EXECUTIVE:
Xxxxxxx X. Xxxx
11th Floor, Atria III
0000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
TO THE COMPANY:
Alderwoods Group Services Inc.
11th Floor, Atria III
0000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: President and Chief Executive Officer
WITH A COPY TO:
Alderwoods Group, Inc.
000 Xxx Xxxxxx
Xxxxx 0000, Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: President and Chief Executive Officer
or such other address, individual or electronic communication as may be
designated by notice given by either party to the other.
ADDITIONAL
37. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such
party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
38. Nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person, other than (1) the parties to
this Agreement, (2) any permitted assignees of the Company and the
Executive, and (3) AGI, as contemplated by paragraphs 8(b), 9, 10, 14,
20, 21, 22 and 23, any rights or remedies under or by reason of this
Agreement and AGI shall be a third party beneficiary of this Agreement.
...CONTINUED
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IN WITNESS WHEREOF the Executive has executed and the Company has caused its
duly authorized representative to execute this Agreement as of the date set
forth on the first page of this Agreement.
ALDERWOODS GROUP SERVICES INC.
By: /s/ XXXX X. XXXXXXX
-------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President and Chief Executive Officer
WITNESS:
/s/ AZALEA ANGELES /s/ XXXXXXX X. XXXX
------------------------------ -----------------------------------------------
Xxxxxxx X. Xxxx
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ANNEX A
EXCISE TAX GROSS-UP PROCEDURAL PROVISIONS
1. Subject to the provisions of paragraph 5 of this Annex, all
determinations required to be made under paragraph 18 of this Agreement
and this Annex A, including whether an Excise Tax is payable by the
Executive and the amount of such Excise Tax and whether a Gross-Up
Payment is required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, will be made by a U.S.
nationally recognized accounting firm (the "National Firm") selected by
the Executive in his sole discretion. The Executive will direct the
National Firm to submit its determination and detailed supporting
calculations to both the Company and the Executive within 30 calendar
days after the date of his termination of employment, if applicable,
and any such other time or times as may be requested by the Company or
the Executive. If the National Firm determines that any Excise Tax is
payable by the Executive, the Company will pay the required Gross-Up
Payment to the Executive within five business days after receipt of
such determination and calculations with respect to any Payment to the
Executive. If the National Firm determines that no Excise Tax is
payable by the Executive with respect to any material benefit or amount
(or portion thereof), it will, at the same time as it makes such
determination, furnish the Company and the Executive with an opinion
that the Executive has substantial authority not to report any Excise
Tax on his U.S. federal, state or local income or other tax return with
respect to such benefit or amount. As a result of the uncertainty in
the application of Section 4999 of the Code and the possibility of
similar uncertainty regarding applicable U.S. state or local tax law at
the time of any determination by the National Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to paragraph
5 of this Annex and the Executive thereafter is required to make a
payment of any Excise Tax, the Executive will direct the National Firm
to determine the amount of the Underpayment that has occurred and to
submit its determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any such
Underpayment will be promptly paid by the Company to, or for the
benefit of, the Executive within five business days after receipt of
such determination and calculations.
2. The Company and the Executive will each provide the National Firm
access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be,
reasonably requested by the National Firm, and otherwise cooperate with
the National Firm in connection with the preparation and issuance of
the determinations and calculations contemplated by paragraph 1 of this
Annex. Any determination by the National Firm as to the amount of the
Gross-Up Payment will be binding upon the Company and the Executive.
3. The U.S. federal, state and local income or other tax returns filed by
the Executive will be prepared and filed on a consistent basis with the
determination of the National Firm with respect to the Excise Tax
payable by the Executive. The Executive will report and make proper
payment of the amount of any Excise Tax, and at the request of the
Company, provide to the Company true and correct copies (with any
amendments) of his federal income tax return as filed with the U.S.
Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive's federal income tax
return, or corresponding state or local tax return, if relevant, the
National Firm determines that the amount of the Gross-Up Payment should
be reduced, the Executive will within five business days pay to the
Company the amount of such reduction.
4. The fees and expenses of the National Firm for its services in
connection with the determinations and calculations contemplated by
paragraph 1 of this Annex will be borne by the Company. If such fees
and expenses are initially paid by the Executive, the Company will
reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
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5. The Executive will notify the Company in writing of any claim by the
U.S. Internal Revenue Service or any other U.S. taxing authority that,
if successful, would require the payment by the Company of a Gross-Up
Payment. Such notification will be given as promptly as practicable but
no later than 10 business days after the Executive actually receives
notice of such claim and the Executive will further apprise the Company
of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the
Executive). The Executive will not pay such claim prior to the
expiration of the 30-calendar-day period following the date on which he
gives such notice to the Company or, if earlier, the date that any
payment of amount with respect to such claim is due. If the Company
notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive will:
(A) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested
by the Company;
(B) take such action in connection with contesting
such claim as the Company reasonably requests in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any
proceedings relating to such claim;
PROVIDED, HOWEVER, that the Company will bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and will indemnify and hold harmless the
Executive, on an after-tax basis, for and against any Excise Tax or
income or other tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing provisions of this
paragraph 5, the Company will control all proceedings taken in
connection with the contest of any claim contemplated by this paragraph
5 and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may,
at its option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim 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 determines;
PROVIDED, HOWEVER, that if the Company directs the Executive to pay the
tax claimed and xxx for a refund, the Company will advance the amount
of such payment to the Executive on an interest-free basis and will
indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and
PROVIDED FURTHER, HOWEVER, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim will be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
the Executive will 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.
6. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph 5 of this Annex, the Executive receives
any refund with respect to such claim, the Executive will (subject to
the Company's complying with the requirements of such paragraph 5)
promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to paragraph 5 of this Annex, a determination
is made that the Executive is not entitled to any refund with respect
to such claim and the Company does not notify the Executive in writing
of its intent to contest such denial or refund prior to the expiration
of 30 calendar days after such determination, then such advance will be
forgiven and will not be required to be repaid and the amount of any
such advance will offset, to the
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extent thereof, the amount of Gross-Up Payment required to be paid by
the Company to the Executive pursuant to paragraph 18 of this Agreement
and this Annex A.
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