EMPLOYMENT AGREEMENT
Exhibit 10.7
THIS EMPLOYMENT AGREEMENT between AptarGroup, Inc., a Delaware corporation (the “Company”),
and Xxxxxxx X. Xxxxx (the “Executive”) entered into on December 1, 2003 is amended and restated as
of July18, 2008. In consideration of the covenants contained herein, the parties agree as follows:
1. Employment. The Company shall employ the Executive, and the Executive agrees to be
employed by the Company, upon the terms and subject to the conditions set forth herein for the
period beginning on December 1, 2003 and ending on December 1, 2006, unless earlier terminated
pursuant to Section 4 hereof; provided, however, that such term shall automatically
be extended as of each December 1, commencing December 1, 2004, for one additional year unless
either the Company or the Executive shall have terminated this automatic extension provision by
written notice to the other party at least 30 days prior to the automatic extension date; and
provided further that in no event shall such term extend beyond December 1, 2013.
The term of employment in effect from time to time hereunder is hereinafter called the “Employment
Period.”
2. Position and Duties. During the Employment Period, the Executive shall serve as
the Executive Vice President, Chief Financial Officer and Secretary or in such other executive
position as determined by the Chief Executive Officer of the Company (the “Company CEO”) and shall
have the normal duties, responsibilities and authority of an executive serving in such position,
subject to the direction of the Company CEO. The Executive shall have the title of Executive Vice
President, Chief Financial Officer and Secretary or such other title denoting an executive office
as determined by the Company CEO and shall report to the Company CEO or such other executive
officer of the Company as determined by the Company CEO. During the Employment Period, the
Executive shall devote his best efforts and his full business time to the business and affairs of
the Company.
3. Compensation and Benefits. (a) The Company shall pay the Executive a salary
during the Employment Period, in monthly installments, initially at the rate of $335,000 per annum.
The Company CEO may, in his sole discretion (i) increase (but not decrease) such salary from time
to time and (ii) award a bonus to the Executive for any calendar year during the Employment Period.
(b) The Company shall reimburse the Executive for all reasonable expenses incurred by him in
the course of performing his duties under this Agreement which are consistent with the Company’s
policies in effect from time to time.
(c) During the Employment Period, the Executive shall be entitled to participate in the
Company’s executive benefit programs on the same basis as other executives of the Company having
the same level of responsibility, which programs consist of those benefits (including insurance,
vacation, company car or car allowance and/or other benefits) for which substantially all of the
executives of the Company are from time to time generally eligible, as determined from time to time
by the Board of Directors of the Company (the “Board”).
(d) In addition to participation in the Company’s executive benefit programs pursuant to
Section 3(c), the Executive shall be entitled during the Employment Period to:
| (i) | additional term life insurance coverage in an amount equal to the Executive’s salary, but only if and so long as such additional coverage is available at standard rates from the insurer providing term life insurance coverage under the executive benefit programs or a comparable insurer acceptable to the Company; provided, that if the Executive is not participating in such additional life insurance coverage and if the Employment Period ends on account of the Executive’s death, the Company shall pay to the Executive’s estate (or such person or persons as the Executive may designate in a written instrument signed by him and delivered to the Company prior to his death) amounts equal to one-half of the amounts the Executive would have received as salary (based on the Executive’s salary then in effect) had the Employment Period remained in effect until the second anniversary of the date of the Executive’s death, at the times such amounts would have been paid. | ||
| (ii) | supplementary long-term disability coverage in an amount which will increase maximum covered annual compensation to 66 2/3% of the executive’s annual salary; but only if and so long as supplementary coverage is available at standard rates from the insurer providing long-term disability coverage under the executive benefit program or a comparable insurer acceptable to the Company. |
4. Termination of Employment. (a) The Employment Period shall end upon the first to
occur of: (i) the expiration of the term of this Agreement pursuant to Section 1 hereof, (ii)
retirement of the Executive (“Retirement”), (iii) termination of the Executive’s employment by the
Company on account of the Executive’s having become unable (as determined by the Board in good
faith) to regularly perform his duties hereunder by reason of illness or incapacity for a period of
more than six consecutive months (“Termination for Disability”), (iv) termination of the
Executive’s employment by the Company for Cause (“Termination for Cause”), (v) termination of the
executive’s employment by the Company other than a Termination for Disability or a Termination for
Cause (“Termination Without Cause”), (vi) the Executive’s death or (vii) termination of the
Executive’s employment by the Executive for any reason following written notice to the Company at
least 90 days prior to the date of such termination (“Termination by the Executive”). All
references in this Agreement to the Executive’s termination of employment and to the end of the
Employment Period shall mean a separation from service within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”).
(b) For purposes of this Agreement, “Cause” shall mean (i) the commission of a felony
involving moral turpitude, (ii) the commission of a fraud, (iii) the commission of any act
involving dishonesty with respect to the Company or any of its subsidiaries or affiliates, (iv)
gross negligence or willful misconduct with respect to the Company or any of its subsidiaries or
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affiliates, (v) breach of any provision of Section 5 or Section 6 hereof or (vi) any other
breach of this Agreement which is material and which is not cured within 30 days following written
notice thereof to the Executive by the Company.
(c) If the Employment Period ends for any reason set forth in Section 4(a), except as
otherwise provided in this Section 4, the Executive shall cease to have any rights to salary, bonus
(if any) or benefits hereunder, other than (i) any unpaid salary accrued through the date of such
termination, (ii) any bonus payable, but only if such termination occurs during the third or fourth
quarter of the Company’s fiscal year, such bonus to be prorated in accordance with Company policy,
(iii) any unpaid expenses which shall have been incurred as of the date of such termination and
(iv) to the extent provided in any benefit plan in which the Executive has participated, any plan
benefits which by their terms extend beyond termination of the Executive’s employment.
Notwithstanding the foregoing, if the Employment Period ends on account of Termination by the
Executive other than for Good Reason (as defined in Section 4(i) hereof) pursuant to Section 4(h)
hereof or Termination for Cause, the Executive shall not be entitled to any unpaid bonus accrued
through the date of such termination.
(d) If the Employment Period ends on account of Retirement, the Company shall make no payments
to the Executive other than as provided in Section 4(c) hereof.
(e) If the Employment Period ends on account of Termination for Disability, in addition to the
amounts described in Section 4(c) hereof, the Executive shall receive the disability benefits to
which he is entitled under any disability benefit plan in which the Executive has participated as
an employee of the Company.
(f) If the Employment Period ends on account of the Executive’s death, the Company shall pay
to the Executive’s estate (or such person or persons as the Executive may designate in a written
instrument signed by him and delivered to the Company prior to his death) amounts equal to one-half
of the amounts the Executive would have received as salary (based on the Executive’s salary then in
effect) had the Employment Period remained in effect until the second anniversary of the date of
the Executive’s death, at the times such amounts would have been paid.
(g) If the Employment Period ends on account of Termination without Cause, in addition to the
amounts described in Section 4(c) hereof, the Company shall, subject to Section 4(l) hereof, pay to
the Executive amounts equal to the amounts the Executive would have received as salary (based on
the Executive’s salary then in effect) had the Employment Period remained in effect until the date
on which (without any extension thereof, or, if previously extended, without any further extension
thereof) it was then scheduled to end, at the times such amounts would have been paid, less any
payments to which the Executive shall be entitled during such salary continuation period under any
disability benefit plan in which the Executive has participated as an employee of the Company;
provided, however, that in the event of the Executive’s death during the salary
continuation period, the Company shall pay to the Executive’s estate (or such person or persons as
the Executive may designate in a written instrument signed by him and delivered to the Company
prior to his death) amounts during the remainder of the salary continuation period equal to
one-half of the amounts which would have been paid to the Executive but for his death. It is
expressly understood that the Company’s
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payment obligations under this Section 4(g) shall cease in the event the Executive shall
breach any provision of Section 5 or Section 6 hereof.
(h) Notwithstanding the foregoing provisions of this Section 4, in the event of a Change in
Control (as defined in Appendix A hereto), the employment of the Executive hereunder shall not be
terminated by the Company or any successor to the Company within two years following such Change in
Control unless the Executive receives written notice of such termination from the Company or such
successor at least 30 days prior to the date of such termination. In the event of such termination
of employment by the Company or such successor other than a Termination for Cause, Retirement, a
Termination for Disability or due to the Executive’s death (in which case the provisions of Section
4(c), 4(d), 4(e) or 4(f), as the case may be, shall apply), within two years following a Change in
Control, or in the event that the Executive terminates his employment hereunder for Good Reason (as
defined in Section 4(i) hereof) within two years following a Change in Control:
(1) the Company shall, subject to Section 4(l) hereof, pay to the Executive within 30
days following the date of termination, in addition to the amounts and benefits described
in Sections 4(c)(i), (iii) and (iv) hereof:
(A) a cash amount equal to the sum of (i) the Executive’s annual bonus in an
amount at least equal to the highest annualized (for any fiscal year consisting of
less than 12 full months or with respect to which the Executive has been employed by
the Company for less than 12 full months) bonus paid or payable, including by reason
of any deferral, to the Executive by the Company and its affiliated companies in
respect of the three fiscal years of the Company (or such portion thereof during
which the Executive performed services for the Company if the Executive shall have
been employed by the Company for less than such three fiscal year period)
immediately preceding the fiscal year in which the Change in Control occurs,
multiplied by a fraction, the numerator of which is the number of days in the fiscal
year in which the Change in Control occurs through the date of termination and the
denominator of which is 365 or 366, as applicable, and (ii) any accrued vacation pay
to the extent not theretofore paid; plus
(B) a lump-sum cash amount (subject to any applicable payroll or other taxes
required to be withheld) in an amount equal to (i) two (2) times the Executive’s
highest annual base salary from the Company and its affiliated companies in effect
during the 12-month period prior to the date of termination, plus (ii) two (2) times
the Executive’s highest annualized (for any fiscal year consisting of less than 12
full months or with respect to which the Executive has been employed by the Company
for less than 12 full months) bonus, paid or payable, including by reason of any
deferral, to the Executive by the Company and its affiliated companies in respect of
the three fiscal years of the Company (or such portion thereof during which the
Executive performed services for the Company if the Executive shall have been
employed by the Company for less than such three fiscal year period) immediately
preceding the fiscal year in which the Change in Control occurs; provided,
however, that any amount paid pursuant
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to this Section 4(h)(1)(B) shall be paid in lieu of any other amount of severance
relating to salary or bonus continuation to be received by the Executive upon
termination of employment of the Executive under any severance plan, policy or
arrangement of the Company;
(2) for a period of two years commencing on the date of termination, the Company shall
continue to keep in full force and effect all policies of medical, disability and life
insurance with respect to the Executive and his dependents with the same level of coverage,
upon the same terms and otherwise to the same extent as such policies shall have been in
effect immediately prior to the date of termination or, if more favorable to the Executive,
as provided generally with respect to other peer executives of the Company, and the Company
and the Executive shall share the costs of the continuation of such insurance coverage in
the same proportion as such costs were shared immediately prior to the date of termination;
and
(3) the Company shall pay to the Executive any compensation previously deferred by the
Executive (together with any interest and earnings thereon) in accordance with the terms of
the plans pursuant to which such compensation was deferred.
The Executive agrees that he shall not terminate his employment hereunder, other than for Good
Reason, within one year following a Change in Control unless the Company or any successor to the
Company receives written notice of such termination from the Executive at least six months prior to
the date of such termination.
(i) For purposes of this Agreement “Good Reason” shall mean (x) a reduction by the Company in
the Executive’s rate of annual salary in effect immediately prior to the Change in Control, (y) a
material reduction in any benefit afforded to the Executive pursuant to any benefit plan of the
Company in effect immediately prior to the Change in Control, unless all comparable executives of
the Company suffer a substantially similar reduction or (z) the relocation of the Executive’s
office to a location more than 60 miles from his current office.
(j) Notwithstanding anything in this Agreement to the contrary, in the event it shall be
determined that any payment or distribution by the Company or its affiliated companies 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 4(j) or Appendix B hereto) (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 (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled
to receive, subject to Section 4(l) hereof, an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by the 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, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. Notwithstanding the foregoing provisions of this Section 4(j), if it shall be
determined that the Executive is entitled to
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a Gross-Up Payment, but that the 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) as compared to the net after-tax proceeds to the
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 the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount. All procedures relating to the
determination and payment of the Gross-Up Payment are set forth in Appendix B hereto.
(k) If the Employment Period ends solely on account of the expiration of the term of this
Agreement pursuant to Section 1 hereof and not for any other reason set forth in this Section 4,
the Executive shall, subject to Section 4(l) hereof, be entitled to receive the amounts the
Executive would have received as salary (based on the Executive’s salary then in effect) at the
times such amounts would otherwise have been paid, and the medical and life insurance benefits the
Executive and his dependents otherwise would have received, had the Employment Period remained in
effect for one year following the date of such termination. It is expressly understood that the
Company’s payment obligations under this Section 4(k) shall cease in the event the Executive shall
breach any provision of Section 5 or Section 6 hereof.
(l) Notwithstanding any other provision of this Agreement, if on the date that the Employment
Period ends, (i) the Company is a publicly traded corporation and (ii) the Company determines that
the Executive is a “specified employee,” as defined in Section 409A of the Code, then to the extent
that any amount payable under this Agreement (A) is payable as a result of the separation of the
Executive’s service, (B) constitutes the payment of nonqualified deferred compensation within the
meaning of Section 409A of the Code and (C) under the terms of this Agreement would be payable
prior to the six-month anniversary of the date on which the Employment Period ends, such payment
shall be delayed until the earlier of (1) the six-month anniversary of the date on which the
Employment Period ends and (2) the death of the Executive. Notwithstanding the requirement of
Section 4(h)(1) hereof that payments to the Executive thereunder be made in a lump sum, if a Change
in Control within the meaning of this Agreement does not constitute a “change in control event”
within the meaning of Section 409A of the Code, the amounts payable pursuant to Section 4(h)(1)
hereof shall be paid to the Executive, but with respect to the timing thereof, such payments shall
be made in the installments, and during the period, described in Section 4(g) hereof. Each amount
payable under this Agreement as a result of the separation of the Executive’s service shall
constitute a “separately identified amount” within the meaning of Treasury Regulation
§1.409A-2(b)(2). This Agreement shall be interpreted and construed in a manner that avoids the
imposition of taxes and other penalties under Section 409A of the Code (“409A Penalties”). In the
event the terms of this Agreement would subject the Executive to 409A Penalties, the Company and
the Executive shall cooperate diligently to amend the terms of this Agreement to avoid such 409A
Penalties, to the extent possible. Any reimbursement (including any advancement) payable to the
Executive pursuant to this Agreement shall be conditioned on the submission by the Executive of all
expense reports reasonably required by the Company under any applicable expense reimbursement
policy, and shall be paid to the Executive within 30 days following receipt of such expense reports
(or invoices), but in no event later than the last day of the calendar year following the calendar
year in which the Executive incurred the reimbursable expense. Any amount of expenses eligible for
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reimbursement during a calendar year shall not affect the amount of expenses eligible for
reimbursement during any other calendar year. The right to reimbursement pursuant to this
Agreement shall not be subject to liquidation or exchange for any other benefit. Notwithstanding
the foregoing, under no circumstances shall the Company be responsible for any taxes, penalties,
interest or other losses or expenses incurred by the Executive due to any failure to comply with
Section 409A of the Code.
5. Confidential Information. The Executive acknowledges that the information,
observations and data obtained by him while employed by the Company pursuant to this Agreement, as
well as those obtained by him while employed by the Company or any of its subsidiaries or
affiliates or any predecessor thereof prior to the date of this Agreement, concerning the business
or affairs of the Company or any of its subsidiaries or affiliates or any predecessor thereof
(“Confidential Information”) are the property of the Company or such subsidiary or affiliate.
Therefore, the Executive agrees that he shall not disclose to any unauthorized person or use for
his own account any Confidential Information without the prior written consent of the Company CEO
unless and except to the extent that such Confidential Information becomes generally known to and
available for use by the public other than as a result of the Executive’s acts or omissions to act.
The Executive shall deliver to the Company at the termination of the Employment Period, or at any
other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes
and software and other documents and data (and copies thereof) relating to the Confidential
Information or the business of the Company or any of its subsidiaries or affiliates which he may
then possess or have under his control.
6. Noncompetition; Nonsolicitation. (a) The Executive acknowledges that in the
course of his employment with the Company pursuant to this Agreement he will become familiar, and
during the course of his employment by the Company or any of its subsidiaries or affiliates or any
predecessor thereof prior to the date of this Agreement he has become familiar, with trade secrets
and customer lists of and other confidential information concerning the Company and its
subsidiaries and affiliates and predecessors thereof and that his services have been and will be of
special, unique and extraordinary value to the Company.
(b) The Executive agrees that during the Employment Period and for one year thereafter in the
case of either Termination for Good Reason following a Change in Control or Termination without
Cause, or for two years thereafter in the case of termination of employment for any other reason,
the (“Noncompetition Period’) he shall not in any manner, directly or indirectly, through any
person, firm or corporation, alone or as a member of a partnership or as an officer, director,
stockholder, investor or employee of or in any other corporation or enterprise or otherwise, engage
or be engaged, or assist any other person, firm corporation or enterprise in engaging or being
engaged, in any business then actively being conducted by the Company in any geographic area in
which the Company is conducting such business (whether through manufacturing or production, calling
on customers or prospective customers, or otherwise). Notwithstanding the foregoing, subsequent to
the Employment Period the Executive may engage or be engaged, or assist any other person, firm,
corporation or enterprise in engaging or being engaged, in any business activity which is not
competitive with a business activity being conducted by the Company at the time subsequent to the
Employment Period that the Executive first engages or assists in such business activity.
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(c) The Executive further agrees that during the Noncompetition Period he shall not in any
manner, directly or indirectly (i) induce or attempt to induce any employee of the Company or of
any of its subsidiaries or affiliates to terminate or abandon his employment, or any customer of
the Company or any of its subsidiaries or affiliates to terminate or abandon its relationship, for
any purpose whatsoever, or (ii) in connection with any business to which Section 6(b) applies, call
on, service, solicit or otherwise do business with any then current or prospective customer of the
Company or of any of its subsidiaries or affiliates.
(d) Nothing in this Section 6 shall prohibit the Executive from being (i) a stockholder in a
mutual fund or a diversified investment company or (ii) a passive owner of not more than 2% of the
outstanding stock of any class of a corporation any securities of which are publicly traded, so
long as the Executive has no active participation in the business of such corporation.
(e) If, at the time of enforcement of this Section 6, a court holds that the restrictions
stated herein are unreasonable under circumstances then existing, the parties hereto agree that the
maximum period, scope or geographical area reasonable under such circumstances shall be substituted
for the stated period, scope or area and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area permitted by law.
7. Enforcement. Because the services of the Executive are unique and the Executive
has access to confidential information of the Company, the parties hereto agree that the Company
would be damaged irreparably in the event any provision of Section 5 or Section 6 hereof were not
performed in accordance with its terms or were otherwise breached and that money damages would be
an inadequate remedy for any such nonperformance or breach. Therefore, the Company or its
successors or assigns shall be entitled, in addition to other rights and remedies existing in their
favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such
provisions and to enforce such provisions specifically (without posting a bond or other security).
8. Survival. Sections 5, 6 and 7 hereof shall survive and continue in full force and
effect in accordance with their respective terms, notwithstanding any termination of the Employment
Period.
9. Notices. Any notice provided for in this Agreement shall be in writing and shall
be either personally delivered, or sent by certified mail, return receipt requested, postage
prepaid, addressed (a) if to the Executive, to 0000 Xxxxxxx Xxxxx, Xxxxxxx Xxxx, XX 00000, and if
to the Company, to AptarGroup, Inc., 000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx X, Xxxxxxx Xxxx, Xxxxxxxx
00000, attention: Xxxxx Xxxxxxxx, President and Chief Executive Officer or (b) to such other
address as either party shall have furnished to the other in accordance with this Section 9.
10. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not
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affect any other provision or any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained herein.
11. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or between the parties, written
or oral, which may have related in any manner to the subject matter hereof.
12. Successors and Assigns. This Agreement shall inure to the benefit of and be
enforceable by the Executive and his heirs, executors and personal representatives, and the Company
and its successors and assigns. Any successor or assignee of the Company shall assume the
liabilities of the Company hereunder.
13. Governing Law. This Agreement shall be governed by the internal laws (as opposed
to the conflicts of law provisions) of the State of Illinois.
14. Amendment and Waiver. The provisions of this Agreement may be amended or waived
only with the prior written consent of the Company and the Executive, and no course of conduct or
failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.
| APTARGROUP, INC. | ||||||||
| By: Name: |
/s/ Xxxxx Xxxxxxxx
|
|||||||
| Title: | President and Chief Executive Officer | |||||||
| EXECUTIVE: | ||||||
| /s/ Xxxxxxx X. Xxxxx
|
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Appendix A to
Employment Agreement
Employment Agreement
DEFINITION OF CHANGE IN CONTROL
“Change in Control” means:
(1) the acquisition by any individual, entity or group (a “Person”), including any “person”
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), of beneficial ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of more than 50% of either (i) the then outstanding shares of common stock
of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the
then outstanding securities of the Company entitled to vote generally in the election of directors
(the “Outstanding Company Voting Securities”); provided, however, that the
following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from
the Company (excluding any acquisition resulting from the exercise of a conversion or exchange
privilege in respect of outstanding convertible or exchangeable securities unless such outstanding
convertible or exchangeable securities were acquired directly from the Company), (B) any
acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the Company or (D) any
acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the
Company, if, immediately after such reorganization, merger or consolidation, each of the conditions
described in clauses (i), (ii) and (iii) of subsection (3) of this Appendix A shall be satisfied;
and provided further that, for purposes of clause (B), if any Person (other than
the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company) shall become the beneficial owner of more than 50%
of the Outstanding Company Common Stock or more than 50% of the Outstanding Company Voting
Securities by reason of an acquisition by the Company and such Person shall, after such acquisition
by the Company, become the beneficial owner of any additional shares of the Outstanding Company
Common Stock or any additional Outstanding Company Voting Securities and such beneficial ownership
is publicly announced, such additional beneficial ownership shall constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of such Board; provided, however,
that any individual who becomes a director of the Company subsequent to the date hereof whose
election, or nomination for election by the Company’s stockholders, was approved by the vote of at
least a majority of the directors then comprising the Incumbent Board shall be deemed to have been
a member of the Incumbent Board; and provided further, that no individual who was
initially elected as a director of the Company as a result of an actual or threatened solicitation
by a Person other than the Board for the purpose of opposing a solicitation by any other Person
with respect to the election or removal of directors or any other actual or threatened solicitation
of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have
been a member of the Incumbent Board;
A - 1
(3) consummation of a reorganization, merger or consolidation unless, in any such case,
immediately after such reorganization, merger or consolidation, (i) 50% or more of the then
outstanding shares of common stock of the corporation resulting from such reorganization, merger or
consolidation and 50% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals or entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such reorganization, merger or consolidation and in
substantially the same proportions relative to each other as their ownership, immediately prior to
such reorganization, merger or consolidation, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company,
any employee benefit plan (or related trust) sponsored or maintained by the Company or the
corporation resulting from such reorganization, merger or consolidation (or any corporation
controlled by the Company) and any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, more than 50% of the Outstanding
Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, more than 50% of the then outstanding shares of common stock of such
corporation or more than 50% of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such reorganization, merger
or consolidation; or
(4) consummation of (i) a plan of complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of the assets of the Company other than
to a corporation with respect to which, immediately after such sale or other disposition, (A) 50%
or more of the then outstanding shares of common stock thereof and 50% or more of the combined
voting power of the then outstanding securities thereof entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities immediately prior to such sale or other
disposition and in substantially the same proportions relative to each other as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the
Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or
such corporation (or any corporation controlled by the Company) and any Person which beneficially
owned, immediately prior to such sale or other disposition, directly or indirectly, more than 50%
of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of
common stock thereof or more than 50% of the combined voting power of the then outstanding
securities thereof entitled to vote generally in the election of directors and (C) at least a
majority of the members of the board of directors thereof were members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board providing for such sale
or other disposition.
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Appendix B to
Employment Agreement
Employment Agreement
PROVISIONS RELATING TO
GROSS-UP PAYMENT
GROSS-UP PAYMENT
(a) Subject to the provisions of Paragraph (b) of this Appendix B, all determinations required
to be made under Section 4(j), 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 Company’s public accounting firm (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 in Control, the
Executive shall appoint another nationally recognized public 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 borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to Section 4(j) and this Appendix B
shall be paid by the Company to the Executive within five days of the receipt of the Accounting
Firm’s determination, but in no event later than the last day of the calendar year following the
calendar year in which the related tax is remitted to the Internal Revenue Service. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, 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 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 Paragraph (b) of this Appendix B 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 and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(b) The 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 10 business days after
the 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. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on which the Executive
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 the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the Executive shall:
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(1) give the Company any information reasonably requested by the Company relating to such
claim,
(2) 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,
(3) cooperate with the Company in good faith in order effectively to 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 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 Paragraph (b), 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 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 shall determine; provided further, that if
the Company directs the Executive to pay such claim and xxx for a 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 provided further, 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.
(c) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Paragraph (b) of this Appendix B, the Executive becomes entitled to receive, and receives, any
refund with respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Paragraph (b)) 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 Paragraph (b) of this Appendix B, a
determination is made that the Executive shall not be 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
of refund prior to the expiration of 30 days after
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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.
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