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EXHIBIT 10.4
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this
"Amendment") is entered into this 12th day of June, 1997 ("EFFECTIVE DATE"), by
and between THE MORNINGSTAR GROUP INC., a Delaware corporation ("COMPANY") and
C. Xxxx Xxxxxxxxxxx ("EXECUTIVE").
A. The Company has previously entered into an Employment
Agreement with the Executive dated as of October 1, 1996 (the "Agreement").
B. The Company and Executive desire to amend the
Agreement in certain respects in recognition of the additional efforts of
Executive to assist in and prepare for any potential change in ownership, and
to encourage Executive to diligently perform his duties and responsibilities to
ensure a smooth transition following any change in ownership.
For good and valuable consideration, including the mutual
covenants herein, the parties hereto agree as follows:
1. Capitalized terms defined in the Agreement and used
but not otherwise defined herein are used herein as so defined.
2. Section VIII of the Agreement is hereby amended by
adding the following subsection (F):
"F. Excise Taxes.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if it is determined that any
payment or distribution by the Company to or for the benefit of 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 Subsection VIII (F) (a "Payment") would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") , or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an additional
payment ("Gross-Up Payment") in an amount such that after payment by Executive
of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-up Payment equal to
the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this paragraph "a", if it is determined that Executive is
entitled to a Gross-Up Payment, but that Executive, after taking into account
the Payments and the Gross-Up Payment, would not receive a net after-tax
benefit of at least $50,000 (taking into account both income taxes and any
Excise Tax)
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as compared to the net after-tax proceeds to Executive resulting from an
elimination of the Gross-Up Payment and a reduction of the payments, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall
be made to Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
b. Subject to the provisions of paragraph "c" of this
Subsection VIII (F), all determinations required to be made under this
Subsection VIII (F), including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be used in
arriving at such determination, shall be made by a certified public accounting
firm selected by the Company and reasonably acceptable to Executive (the
"Accounting Firm"), which shall be retained to provide detailed supporting
calculations both to the Company and Executive within 15 business days of the
receipt of notice from Executive that there has been a Payment, or such earlier
time as is requested by the Company. If the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, 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 solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Subsection VIII (F), shall be paid by
the Company to Executive within five (5) days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code 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. If the Company exhausts its remedies pursuant to paragraph "c" of
this Subsection VIII (F) and Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive.
c. Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten (10) business days after
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid or appealed. Executive shall not pay such claim prior to the expiration
of the 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 claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such
claim, Executive shall:
(1) give the Company any information reasonable requested
by the Company relating to such claim,
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(2) take such action in connection with contesting such
claims 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,
(3) cooperate with the Company in good faith in order to
effective contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this paragraph "c", the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and xxx for a refund or to contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall advance the amount of such
payment to Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of 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 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.
d. If, after the receipt by Executive of an amount
advanced by the Company pursuant to paragraph "c" of this Subsection VIII (F),
Executive becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Company's complying with the requirements of
paragraph "c" of this Subsection VIII (F) 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 Executive of an
amount advanced by the Company pursuant to paragraph "c" of this Subsection
VIII (F), a determination is made that Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify Executive in
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writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be 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."
3. Except as expressly amended by this Amendment, the
Agreement shall continue in full force and effect in the form in which it
existed immediately prior to the execution and delivery of this Amendment.
4. This Amendment may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same document.
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IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the date and year first above written.
THE MORNINGSTAR GROUP INC.
/s/ XXXXXXX X. XXXXXX
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Name: Xxxxxxx X. Xxxxxx
Title: Vice President and Secretary
EXECUTIVE:
/s/ C. XXXX XXXXXXXXXXX
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C. Xxxx Xxxxxxxxxxx
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