January 1, 1996
Xxxxxx X. Xxxxxx
Executive Vice President
Mycogen Corporation
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxxxx:
We are pleased to inform you that the Board of Directors (the "Board")
of Mycogen Corporation (the "Company") has authorized an employment package
for you which will provide certain assurances concerning the terms and
conditions of your continued employment with the Company and will allow you
to participate in a program of severance benefit payments should your
employment terminate. The purpose of this letter agreement (the "Agreement")
is to document the terms of your employment package by providing you with a
formal employment contract.
The Company considers it essential to the continuing operation of the
Company and in the best interests of its shareholders to assure the
continuous dedication of key management personnel. It is recognized in the
context of public ownership that a termination of an employee's employment
without cause may be sought and that such circumstances could prove
distracting to key executives and detrimental to the ongoing management and
administration of the Company. Such distraction is not in the best interest
of the shareholders of the Company. Accordingly, the Board has determined to
discourage the inevitable distraction to you in the face of potentially
disturbing circumstances inherent in any uncertainty regarding your
employment status. This Agreement is intended to secure and encourage your
ongoing retention by providing separation benefits in the event that your
employment is altered as hereinafter described. In order to induce you to
remain in the employ of the Company, and in consideration of the your
agreement set forth in Sections 10, 11, 12 and 13 of Part Two hereof, the
Company agrees to pay the severance payments and benefits set forth in this
Employment Agreement, under the circumstances described herein.
This Agreement supersedes any written employment agreement between you
and the Company prior to the date hereof.
Part One of this Agreement sets forth certain definitional provisions to
be in effect for purposes of determining your benefit entitlements. Part Two
specifies the terms and conditions which will apply to your continued
employment with the Company, including the severance payments and benefits to
which you will become entitled in the event your employment should be
terminated. Part Three provides an additional gross-up bonus to you in the
particular circumstance where the payment of or separation benefits generates
the imposition of an excise tax by the Internal Revenue Service. Part Four
provides for certain additional rights and
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responsibilities of both yourself and the Company. Part Five concludes this
Agreement with a series of general terms and conditions applicable to your
employment benefits.
PART ONE -- DEFINITIONS
DEFINITIONS. For purposes of this Agreement, including in particular
the severance payments and benefits to which you may become entitled under
Part Three, the following definitions will be in effect:
"CHANGE IN CONTROL" means:
(i) a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change
the State of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company in liquidation or dissolution of the Company
or a sale/leaseback of all or substantially all of the Company's assets (with
or without a purchase option);
(iii) a transfer of all or substantially all of the Company's assets
pursuant to a partnership or joint venture agreement or similar arrangement
where the Company's resulting interest is or becomes fifty percent (50%) or
less;
(iv) any reverse merger in which the Company is the surviving entity
but in which fifty percent (50%) or more of the Company's outstanding voting
stock is transferred to holders different from those who held the stock
immediately prior to such merger;
(v) on or after the date hereof, a change in ownership of the Company
through an action or series of transactions, such that any person is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the securities of the
combined voting power of the Company's outstanding securities;
(vi) a change in the composition of the Board such that the
individuals elected to the Board at the last meeting of the shareholders at
which there is not a contested election subsequently cease to comprise a
majority of the Board; or
(vii) the occurrence of any other event constituting a "change in
control" under Code Section 280G or the Treasury regulations promulgated
thereunder.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"EMPLOYEE" means Xxxxxx X. Xxxxxx.
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"EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under
Section 3 of ERISA.
"EMPLOYMENT PERIOD" means the period of your employment with the Company
governed by the terms and provisions of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as in effect from time to time.
"INVOLUNTARY TERMINATION" means the termination of your employment with
the Company:
(i) involuntarily upon your discharge, dismissal, or the Company's
failure to renew this Agreement pursuant to Section 3 of Part Two, whether or
not in connection with a Change in Control; or
(ii) voluntarily or involuntarily, provided such termination occurs in
connection with (a) a change in your position with the Company which
materially reduces your level of responsibility or changes your title, (b) a
reduction in your level of compensation (including base salary, fringe
benefits and any non-discretionary bonuses or other incentive payments earned
pursuant to objective standards or criteria) by more than ten percent (10%),
or (c) a relocation of your principal place of employment by more than fifty
(50) miles or a change in your responsibilities such that you must spend more
than twenty percent (20%) of your working days outside of the San Diego,
California area, AND such change, reduction or relocation is effected without
your written concurrence.
"OPTION" means any option granted to you under the Stock Option Plan
which is outstanding at the time of your Involuntary Termination.
"STOCK OPTION PLAN" means the Company's 1992 Stock Option Plan
(including the predecessor 1983 Stock Option Plan), as amended through the
date hereof.
"RESTRICTED STOCK ISSUANCE PLAN" means the 1990 Restricted Stock
Issuance Plan, as revised on April 18, 1991, and as further amended through
the date hereof.
"TERMINATION FOR CAUSE" will mean an Involuntary Termination of your
employment for one or more alleged acts of fraud, embezzlement, misappropriation
of proprietary information or any other verifiable misconduct adversely
affecting the business reputation of the Company in a material manner.
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PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT
The following terms and conditions will govern your employment with the
Company throughout the Employment Period and will also, to the extent
indicated below, remain in effect following your termination date.
1. EMPLOYMENT AND DUTIES. The Company will continue to employ you as
an executive officer in the position of Executive Vice President. You agree
to continue in such employment for the duration of the Employment Period and
to perform in good faith and to the best of your ability all services which
may be required of you in your executive position and to be available to
render such services at all reasonable times and places in accordance with
reasonable directives and assignments issued by the Board or your superiors.
During your Employment Period, you will devote your full time and effort to
the business and affairs of the Company within the scope of your executive
office. Your principal place of operations will be at the Company's
corporate offices in San Diego, California. You may, however, be required to
travel periodically to Company facilities in other geographic locations in
connection with your duties.
2. TERM OF AGREEMENT. This Agreement shall be effective as of the date
hereof. The term of this Agreement shall continue in effect from such date
for a period of one (1) year from such date, subject to the provisions of
this Part Two, unless sooner terminated by the parties in accordance with the
provisions hereof. No termination or expiration of this Agreement shall
affect any rights, obligations or liabilities of Employee or the Company that
shall have accrued on or prior to the date of termination or expiration.
3. AUTOMATIC EXTENSION. Commencing on the first anniversary of the
effective date hereof, and on each succeeding anniversary of the date hereof,
the term of this Agreement shall automatically be extended for one (1)
additional year unless, not later than three (3) months preceding such
anniversary date, the Company shall have given written notice pursuant to
Section 6 of Part Five that it will not extend the term of this Agreement.
The automatic extension of the term of this Employment Agreement pursuant to
this Section 3 shall not be a modification of this Agreement in any
significant respect within the meaning of Section 280G of the Code and the
rules and regulations thereunder.
4. COMPENSATION.
A. For service in the 1996 calendar year, your base salary will be
the annual rate of $165,000. Your annual rate of base salary will be subject
to adjustment each calendar year by the Board.
B. Your base salary will be paid at periodic intervals in
accordance with the Company's payroll practices for salaried employees.
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C. You will be entitled to such bonuses (if any) for service
rendered during the Employment Period as the Board may determine in its sole
discretion based upon the recommendation of the Company's Chief Employee
Officer and such additional factors as the Board deems appropriate, including
your individual performance and the Company's profitability.
D. The Company will deduct and withhold, from the compensation
payable to you hereunder, any and all applicable Federal, State and local
income and employment withholding taxes and any other amounts required to be
deducted or withheld by the Company under applicable statute or regulation.
5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement from
the Company for all customary, ordinary and necessary business expenses
incurred by you in the performance of your duties hereunder, PROVIDED you
furnish the Company with vouchers, receipts and other substantiation of such
expenses within thirty (30) days after they are incurred.
6. FRINGE BENEFITS. During the Employment Period, you will be eligible
to participate in any group life insurance plan, group medical and/or dental
insurance plan, accidental death and dismemberment plan, short-term
disability program and other employee benefit plans, including profit sharing
plans, cafeteria benefit programs, and stock option plans, which are made
available to executives and for which you qualify.
7. VACATION. You will accrue paid vacation benefits during the
Employment Period in accordance with the Company policy in effect for
executive officers.
8. DEATH OR DISABILITY.
A. Upon your death or disability during the Employment Period, the
employment relationship created pursuant to this Agreement will immediately
terminate, and no further compensation will become payable to you pursuant to
Part Two, Section 4. In connection with such termination, the Company will
only be required to pay you (or your estate) any unpaid compensation earned
under Part Two, Section 4 for services rendered through the date of your
death or disability, together with a special termination payment equal to the
additional amount of base salary you would have earned hereunder had your
employment continued for an additional thirty (30) days.
B. You will be deemed disabled if you are, in the Company's
reasonable opinion, unable by reason of any permanent physical or mental
injury or illness to substantially perform the services required of you
hereunder either for a period in excess of one hundred eighty (180) days or
for a period of one hundred eighty (180) days in the aggregate during any two
hundred seventy (270) day period. In such event, you will be deemed disabled
as of the end of such one hundred eightieth (180th) day.
C. Upon death or disability the terms of The Stock Plan will apply.
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9. SEVERANCE BENEFITS.
A. You will be entitled to receive the severance benefits
specified below in the event there should occur an Involuntary Termination of
your employment (other than a Termination for Cause) prior to January 1,
1999, whether or not effected in connection with a Change in Control:
(i) SEVERANCE BENEFIT. The Company will make a severance
payment to you, in one lump sum within fifteen (15) days of the date of your
Involuntary Termination, in an aggregate amount equal to three (3) times the sum
of (a) the average annual rate of base salary and (b) the average bonus paid to
you by the Company, in each case for service rendered in the two (2) immediately
preceding calendar years. If a bonus was paid for only one of those calendar
years, then the clause (b) amount will be equal to that bonus.
(ii) WELFARE BENEFITS. For a period of thirty-six (36)
months, Employee (and his dependents, as applicable) shall be provided by the
Company with the same life, health and disability plan participation,
benefits and other coverages to which he was entitled as an employee
immediately before the Involuntary Termination. In the event that under
applicable law or the terms of the relevant Employee Benefit Plans such
participation, benefits and/or coverage cannot be provided to Employee
following his Involuntary Termination, such coverage and/or benefits shall be
provided directly by the Company pursuant to this Agreement on a comparable
basis. In its sole discretion, the Company may obtain such coverage and
benefits for Employee through private insurance acquired at the Company's
expense. Amounts paid or payable to or on behalf of Employee pursuant to any
"employee welfare benefit plan", as defined in ERISA, providing health and/or
disability benefits, that is sponsored by the Company or an affiliate of the
Company, shall be credited against amounts due under this Section 9.A.(ii).
To the maximum extent permitted by applicable law, the benefits provided
under this Section 9.A.(ii) shall be in discharge of any obligations of the
company or any rights of Employee under the benefit continuation provisions
under Section 4980A of the Code and Part VI of Title I of the Employee
Retirement Income Security Act ("COBRA") or any other legislation of similar
import.
(iii) UNVESTED STOCK. Any unvested shares of the Company's
Common Stock which you hold under the Restricted Stock Issuance Plan at the
time of such Involuntary Termination will immediately vest in full.
(iv) OPTION ACCELERATION. Each of your Options under the
Stock Option Plan will (to the extent not then otherwise exercisable)
automatically accelerate so that each such Option will become immediately
exercisable for the total number of shares purchasable thereunder. Each such
accelerated Option, together with all of your other vested Options, will
remain exercisable for a period of three (3) years following your Involuntary
Termination and may be exercised for any or all of the accelerated shares in
accordance with the exercise provisions of the Option agreement evidencing
the grant.
B. You will be entitled to receive the severance benefits specified
below in the event there
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should occur an Involuntary Termination of your employment (other than a
Termination for Cause) at any time after January 1, 1999, whether or not
effected in connection with a Change in Control:
(i) SEVERANCE BENEFIT. The Company will make a severance
payment to you, in one lump sum within fifteen (15) days of the date of your
Involuntary Termination, in an aggregate amount equal to two (2) times the
sum of (a) the average annual rate of base salary and (b) the average bonus
paid to you by the Company, in each case for service rendered in the two (2)
immediately preceding calendar years. If a bonus was paid for only one of
those calendar years, then the clause (b) amount will be equal to that bonus.
(ii) WELFARE BENEFITS. For a period of twenty-four (24)
months, Employee (and his dependents, as applicable) shall be provided by the
Company with the same life, health and disability plan participation,
benefits and coverages to which he was entitled as an employee immediately
before the Involuntary Termination. In the event that under applicable law
or the terms of the relevant Employee Benefit Plans such participation,
benefits and/or coverage cannot be provided to Employee following his
Involuntary Termination, such coverage and/or benefits shall be provided
directly by the Company pursuant to this Agreement on a comparable basis. In
its sole discretion, the Company may obtain such coverage and benefits for
Employee through private insurance acquired at the Company's expense.
Amounts paid or payable to or on behalf of Employee pursuant to any "employee
welfare benefit plan", as defined in ERISA, providing health and/or
disability benefits, that is sponsored by the Company or an affiliate of the
Company, shall be credited against amounts due under this Section B.A.(ii).
To the maximum extent permitted by applicable law, the benefits provided
under this Section B.A.(ii) shall be in discharge of any obligations of the
company or any rights of Employee under the benefit continuation provisions
under COBRA or any other legislation of similar import.
(iii) UNVESTED STOCK. Any unvested shares of the Company's
common stock which you hold under the Restricted Stock Issuance Plan at the
time of such Involuntary Termination will immediately vest in full.
(iv) OPTION ACCELERATION. Each of your Options under the
Stock Option Plan will (to the extent not then otherwise exercisable)
automatically accelerate so that each such Option will become immediately
exercisable for the total number of shares purchasable thereunder. Each such
accelerated Option, together with all of your other vested Options, will
remain exercisable for a period of three (3) years following your Involuntary
Termination and may be exercised for any or all of the accelerated shares in
accordance with the exercise provisions of the Option agreement evidencing
the grant.
10. RESTRICTIVE COVENANT. During the Employment Period:
(i) You will devote your full working time and effort to the
performance of your duties as an executive officer of the Company.
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(ii) You will not directly or indirectly, whether for your
own account or as an employee, consultant or advisor, provide services to any
business enterprise other than the Company, unless otherwise authorized by
the Company in writing.
8
However, you will have the right to perform such incidental
services as are necessary in connection with (a) your private passive
investments, (b) your charitable or community activities, and (c) your
participation in trade or professional organizations, but only to the extent
such incidental services do not interfere with the performance of your
services hereunder.
11. NON-SOLICITATION. During any period for which you are receiving
compensation payments pursuant to Part Two, Section 4 and one (1) year
thereafter, you will not directly or indirectly solicit any Company employee
to leave the Company's employ for any reason or interfere in any other manner
with the employment relationships at the time existing between the Company
and its current employees.
12. CONFIDENTIALITY.
A. You hereby acknowledge that the Company may, from time to time
during the Employment Period, disclose to you confidential information
pertaining to the Company's business and affairs and client base, including
(without limitation) customer lists and accounts, other similar items
indicating the source of the Company's income and information pertaining to
the salaries, duties and performance levels of the Company's employees. You
will not, at any time during or after such Employment Period, disclose to any
third party or directly or indirectly make use of any such confidential
information, including (without limitation) the names, addresses and
telephone numbers of the Company's customers, other than in connection with,
and in furtherance of, the Company's business and affairs. Nothing contained
in this paragraph shall be construed to prevent Employee from disclosing the
amount of his salary.
B. All documents and data (whether written, printed or otherwise
reproduced or recorded) containing or relating to any such proprietary
information of the Company which come into your possession during the
Employment Period will be returned by you to the Company immediately upon the
termination of the Employment Period or upon any earlier request by the
Company, and you will not retain any copies, notes or excerpts thereof.
Notwithstanding the foregoing, Employee shall be entitled to retain his file
or rolodex containing names, addresses and telephone numbers and personal
diaries and calendars; provided, however, that Employee shall continue to be
bound by the terms of Section 12.A. above to the extent such retained
materials constitute confidential information.
C. Your obligations under this Section 12 will continue in effect
after the termination of your employment with the Company, whatever the
reason or reasons for such termination, and the Company will have the right
to communicate with any of your future or prospective employers concerning
your continuing obligations under this Section 12.
13. OWNERSHIP RIGHTS.
A. All materials, ideas, discoveries and inventions pertaining to
the Company's business or clients, including (without limitation) all patents
and copyrights, patent applications, patent renewals and extensions and the
names, addresses and telephone numbers of customers,
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will belong solely to the Company.
B. All materials, ideas, discoveries and inventions which you may
devise, conceive, develop or reduce to practice (whether individually or
jointly with others) during the Employment Period will be the sole property
of the Company and are hereby assigned by you to the Company, except for any
idea, discovery or invention (i) for which no Company equipment, supplies,
facility or trade secret information is used, (ii) which is developed
entirely on your own time and (iii) which neither (a) relates at the time of
conception or reduction to practice, to the Company's business or any actual
or demonstrably-anticipated research or development program of the Company
nor (b) results from any work performed by you for the Company. The
foregoing exception corresponds to the assignment of inventions precluded by
California Labor Code Section 2870, attached as Exhibit A.
C. You will, at all times whether during or after the Employment
Period, assist the Company, at the Company's sole expense, in obtaining,
maintaining, defending and enforcing patents, copyrights and other
proprietary rights of the Company. Such assistance will include (without
limitation) the execution of documents and assistance and cooperation in
legal proceedings.
D. You will continue to be bound by all the terms and provisions
of your existing Proprietary Information and Invention Agreements with the
Company, and nothing in this document will be deemed to modify or affect your
duties and obligations under those other agreements.
14. TERMINATION OF EMPLOYMENT.
A. The Company (or any successor entity resulting from a Change
in Control) may terminate your employment under this Agreement at any time
for any reason, with or without cause, by providing you with at least thirty
(30) days prior written notice. However, such notice requirement will not
apply in the event there is a Termination for Cause under subparagraph D
below.
B. In the event there is an Involuntary Termination of your
employment with the Company (other than Termination for Cause) during the
Employment Period, you will become entitled to the benefits specified in Part
Two, Section 9 in addition to any unpaid compensation earned by you under
Part Two, Section 4 for services rendered prior to such termination.
C. Should your employment with the Company terminate by reason of
your death or disability during the Employment Period, no severance benefits
will be payable to you under Part Two, Section 9, and only the limited death
or disability benefits provided under Part Two, Section 8 will be payable, to
the extent applicable.
D. The Company may at any time, upon written notice, terminate
your employment hereunder for any act qualifying as a Termination for Cause.
Such termination will
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be effective immediately upon such notice.
E. Upon such Termination for Cause, the Company will only be
required to pay you any unpaid compensation earned by you pursuant to Part
Two, Section 4 for services rendered through the date of such termination,
and no termination or severance benefits will be payable to you under Part
Two, Section 9.
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PART THREE -- INTERNAL REVENUE CODE LIMITATIONS
1. CODE LIMITATIONS. Notwithstanding anything to the contrary in this
Agreement, if Employee is entitled to benefits hereunder following the
occurrence of a Change in Control, in no event shall the present value of
benefits payable under this Agreement, taken together with Employee's
benefits under the Stock Option Plan and Restricted Stock Issuance Plan and
other applicable sources, that, in the opinion of counsel (as identified in
Section 3 of this Part Three), are considered "parachute payments" under
Section 4999 of the Code, be reduced by the excise tax imposed by Section
4999 of the Code. In the event that such benefits so taken together would
exceed the amount which is exempt from the excise tax imposed by Section 4999
of the Code, the Company shall pay to Employee an additional amount (the
"Gross-Up Payment") such that the net amount retained by Employee, after
deduction for the amount of any excise tax under Section 4999 and any
interest charges or penalties in respect of the imposition of such excise tax
(but not any federal, state or local income tax) on the present value of such
benefits, and any federal, state and local income tax, excise tax and
penalties and interest, if applicable, upon the additional payment provided
for by this Section 1, shall be equal to the present value of such benefits.
For purposes of determining the additional amount to be paid to Employee
pursuant to this Section 1, Employee shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the additional payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality of
his residence on the date the additional payment is made, net of the maximum
reduction in federal income taxes which could be obtained from deduction from
such state and local taxes.
2. DEFINITIONS APPLICABLE TO THIS PART THREE. For purposes of this
Part Three, the term "parachute payment" shall have the meaning ascribed to
it under Section 280G(b)(2) of the Code, and "present value" shall be
determined in accordance with Section 280G(d)(4) of the Code.
3. INTERPRETATION. This Part Three shall be interpreted so as to
avoid the imposition of excise taxes on Employee under Section 4999 of the
Code, or to minimize such taxes. In applying the provisions of this Part
Three if, for any reason, an exemption from the application of the rules of
Section 4999 of the Code shall be available under the terms of said Section
or under any applicable regulations or rulings thereunder, such exemption
shall be fully applied. All payments under this Agreement or otherwise that
are, in the opinion of counsel (as identified in this Section 3), parachute
payments shall be taken into account in applying the provisions of this Part
Three, and no others. In application of the provisions of this Part Three,
calculations necessary to be made pursuant to the provisions of this Part
Three and interpretation of the Code and applicable regulations for purposes
of compliance with this Part Three shall be made by the private law firm
serving as executive compensation and tax counsel to the Board immediately
prior to the Change in Control, and the determination of such counsel made in
good faith shall be binding and conclusive upon both the Company and
Employee. All fees and expenses of such law firm pertaining thereto shall be
borne by the Company. Payments shall be made pursuant to this Agreement
notwithstanding that the status of any payment as a parachute payment has not
been finally determined by the Internal Revenue Service or any court of
competent jurisdiction, or by
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arbitration as provided in Section 3 of Part Four. Any Gross-Up Payment, as
determined pursuant to Section 1 of this Part Three, shall be paid by the
Company to Employee within five (5) days of the receipt of the law firm's
determination. If the law firm determines that no excise tax is payable by
Employee, it shall furnish Employee with a written opinion that failure to
report the excise tax on Employee's applicable federal income tax return
would not result in the imposition of a negligence (or similar) penalty. Any
determination by the law firm shall be binding upon the Company and Employee.
As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the law firm hereunder, it
is possible that Gross-Up Payments will not have been made in full by the
Company, consistent with the calculations required to be made hereunder (with
such shortfall as "Underpayment"). In the event that the Company exhausts
its remedies pursuant to Section 4 of this Part Three and Employee thereafter
is required to make a payment of any excise tax, the law 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 Employee.
4. INTERNAL REVENUE SERVICE CLAIMS. Employee 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 and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Employee shall not pay such claim 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 claim is due). If the Company
notifies Employee in writing prior to the expiration of such period that it
desires to contest such claim, Employee shall:
(a) give the Company any information reasonably requested by the
Company relating to such claim (without requiring a waiver of Employee's
attorney-client privilege);
(b) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) 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 Employee harmless, on an
after-tax basis, for any excise tax or income tax (including interest and
penalties and respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 4, 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
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conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Employee 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
Employee to pay such claim and sue for a refund, the Company shall advance
the amount of such payment to Employee, on an interest-free basis, and shall
indemnify and hold Employee 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
statue of limitations relating to payment of taxes for the taxable years of
Employee with respect to which such contested amount is claimed to be due is
limited solely to issues relating 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 shall be payable hereunder and Employee 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.
5. INTERNAL REVENUE SERVICE REFUNDS. If, after the receipt by
Employee of an amount advanced by the Company pursuant to Section 4 of this
Part Three, Employee becomes entitled to receive any refund with respect to
such claim, Employee shall (subject to the Company's complying with the
requirements of Section 4 of this Part Three), 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 Employee
of any amount advanced by the Company pursuant to Section 4 of this Part
Three, a determination is made that Employee shall not be entitled to any
refund with respect to such claim and the Company does not notify Employee in
writing of its intent to contest such denial or refund prior to the
expiration of thirty (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.
PART FOUR - ADDITIONAL RIGHTS AND RESPONSIBILITIES
1. MITIGATION. Employee shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise. The provisions of this Agreement, and any payment
provided for hereunder, shall not reduce any amounts otherwise payable, or in
any way diminish Employee's existing rights which would accrue solely as a
result of the passage of time, under any Company Employee Benefit Plan,
"Payroll practice" (as defined in ERISA), compensation arrangement, incentive
plan, stock option or other stock-related plan.
2. LEGAL COSTS. If any legal action or other proceeding is brought by
Employee for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, Employee shall be entitled to recover
reasonable attorneys fees and other costs incurred in that action or
proceeding, in addition to any other relief to which he may be entitled, in
the event and to the extent that
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Employee prevails in such action or other proceeding. Notwithstanding
anything hereinabove to the contrary, as between Employee and the Company,
the Company shall bear all legal costs and expenses of defending the validity
of this Agreement against any third party. The Company shall bear all legal
costs and expenses incurred in contesting or disputing the characterization
of any amounts paid pursuant to this Agreement as being nondeductible under
Section 280G of the Code or subject to imposition of an excise tax under
Section 4999 of the Code.
3. FULL SETTLEMENT. The Company's obligations to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by an set-off, counterclaim, recoupment,
defense or other claim, or other action which the Company may have against
Employee or others.
PART FIVE -- MISCELLANEOUS PROVISIONS
1. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company, including, without
limitation, any corporation or corporations acquiring directly or indirectly
all or substantially all of the stock, business or assets of the Company
whether by merger, consolidation, division, sale or otherwise (and such
successor shall thereafter be deemed "the Company" for the purposes of this
Employment Agreement). The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Employee, to expressly assume
and agree to perform this Employment Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Employment Agreement entitling Employee to the benefits
hereunder, as though Employee was subject to Involuntary Termination. This
Agreement shall be binding upon and inure to the benefit of Employee, his
successors, assigns, executors, administrators or beneficiaries.
2. DEATH. Should you die before receipt of all the separation
payments to which you may become entitled under Part Two, Section 9, then
such payment or payments will be made, on the due date or dates hereunder had
you survived, to the executors or administrators of your estate. Should you
die before you exercise your outstanding vested options, then each such
option may be exercised, within twelve (12) months after your death, by the
executors or administrators of your estate or by person to whom the option is
transferred pursuant to your will or in accordance with the laws of
inheritance. In no event, however, may any such vested option be exercised
after the specified expiration date of the option term.
3. INDEMNIFICATION. The indemnification provisions for Officers and
Directors under the Company's Bylaws will (to the maximum extent permitted by
law) be extended to you, during the period following your Involuntary
Termination, with respect to any and all matters, events or transactions
occurring or effected during your Employment Period.
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