1
Exhibit 10(vv)
TERMINATION PROTECTION AGREEMENT
AGREEMENT effective June 15, 2000 between Xxxxxx X. Xxxxxxx & Sons,
Inc. and Xxxxx Xxxxxxxx, Xx. (the "Executive").
Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company. The Company
believes that its best interests will be served if Executive is encouraged to
remain with the Company. The Company has determined that Executive's ability to
perform Executive's responsibilities and utilize Executive's talents for the
benefit of the Company, and the Company's ability to retain Executive as an
employee, will be significantly enhanced if Executive is provided with fair and
reasonable protection from the risks of a change in ownership or control of SCL.
Accordingly, the Company and Executive agree as follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this Agreement
which are defined in Schedule A shall have the meanings set forth in Schedule A.
2. Effective Date; Term.
This Agreement shall be effective as of June 15, 2000 (the
"Effective Date") and shall remain in effect until June 15, 2003 (the "Term");
provided, however, that commencing with June 15, 2001 and on each anniversary
thereof (each an "Extension Date"), the Term shall be automatically extended for
an additional one-year period, unless the Company or Executive provides the
other party hereto written notice before the applicable Extension Date that the
Term shall not be so extended. Notwithstanding the foregoing, this Agreement
shall, if in effect on the date of a Change of Control, remain in effect for
three years following the Change of Control, and such additional periods
necessary to give effect to this Agreement.
3. Change of Control Benefits.
(i) From and after a Change of Control, any termination of Executive's
employment (other than termination by the Company for Cause or termination by
reason of death or Permanent Disability) shall be treated as a retirement for
purposes of all option plans or agreements and other stock-based plans, programs
or agreements of the Company and SCL in which Executive participates as of such
Change of Control. One effect of such deemed retirement with respect to
Executive's stock options outstanding on the date hereof will be to make such
stock options exercisable for the duration of their original terms.
(ii) If Executive's employment with the Company is terminated at any time
within the three years following a Change of Control by the Company without
Cause, or by Executive for Good Reason (the effective date of either such
termination hereafter referred to as the "Termination Date"), Executive shall be
entitled to the payments and benefits provided in this Section 3 and as set
forth in this Agreement. If Executive's employment by the Company is terminated
prior to a Change of Control by the Company (i) at the request of a party (other
than the Company or SCL) involved in the Change of Control or (ii) otherwise in
connection with or
2
2
in anticipation of a Change of Control that subsequently occurs, Executive shall
be entitled to the benefits provided in this Section 3 and as set forth in this
Agreement, and Executive's Termination Date shall be deemed to have occurred
immediately following the Change of Control. Notwithstanding the foregoing, in
the event there is another agreement (e.g. an employment agreement) between the
Company and Executive in effect upon the Termination Date, which agreement by
its terms provides for termination payments or benefits, under the applicable
circumstances (whether or not in connection with a change of control), that are
greater than the applicable payments and benefits provided in any of subsections
(a) through (g) of this Section 3(ii) (the "Other Benefits"), then Executive
shall receive the Other Benefits in lieu of any payments or benefits under such
subsection. For example, if Executive is covered by an employment agreement that
provides for a higher amount of cash severance, in the event Executive is
terminated by the Company without Cause, than that provided by Section 3(a)
hereof, such higher amount of cash severance would be payable in lieu of the
cash severance set forth in Section 3(a), but the payments and benefits set
forth in Section 3(b) through (g) would remain applicable. Notice of termination
without Cause or for Good Reason shall be given in accordance with Section 12,
and shall indicate the specific termination provision hereunder relied upon, the
relevant facts and circumstances and the Termination Date.
a Severance Payments. Within fifteen business days after the
Termination Date, the Company shall pay Executive a cash lump
sum equal to:
(1) three times Executive's Base Salary in effect on the
date of the Change of Control or the Termination Date,
whichever is higher; provided that if any reduction of
the Base Salary, or any failure to increase the Base
Salary pursuant to an agreement between Executive and
the Company, has occurred, then the Base Salary on
either date shall be as in effect immediately prior to
such reduction or after giving effect to such increase,
as the case may be; and
(2) three times Executive's Target Bonus in effect on the
date of the Change of Control or the Termination Date,
whichever is higher; provided that if any reduction of
the Target Bonus, or any failure to increase the Target
Bonus pursuant to an agreement between Executive and the
Company, has occurred, then the Target Bonus on either
date shall be as in effect immediately prior to such
reduction or after giving effect to such increase, as
the case may be; and
(3) Executive's Target Bonus (as determined in (2), above)
multiplied by a fraction, the numerator of which shall
equal the number of days Executive was employed by the
Company in the Company fiscal year in which the
Termination Date occurs and the denominator of which
shall equal 365.
b Treatment of Stock Options. Any unvested stock options
outstanding on the date of the Change of Control (and any
options into which such options are converted or options
granted in substitution for such unvested options) shall
become fully exercisable, and shall remain exercisable for
3
3
the period applicable to vested options under the applicable
option agreement, after giving effect to Section 3(i) hereof.
c Continuation of Benefits. Until the third anniversary of the
Termination Date, the Company shall, at its expense, provide
Executive and his spouse and dependents with medical, life
insurance and disability coverages at the level provided to
Executive immediately prior to the Change of Control;
provided, however, that if Executive becomes employed by a new
employer, continuing coverage from the Company will become
secondary to any coverage afforded by the new employer.
d Payment of Earned But Unpaid Amounts. Within fifteen business
days after the Termination Date, the Company shall pay
Executive the Base Salary through the Termination Date, any
Bonus earned but unpaid as of the Termination Date for any
previously completed fiscal year of the Company, all
compensation previously deferred by Executive but not yet paid
and reimbursement for any unreimbursed expenses properly
incurred by Executive in accordance with Company policies
prior to the Termination Date. Executive shall also receive
such employee benefits, if any, to which Executive may be
entitled from time to time under the employee benefit or
fringe benefit plans, policies or programs of the Company,
other than any Company severance policy (payments and benefits
in this subsection (d), the "Accrued Benefits").
e Additional Benefit Plan Service and Age. For purposes of
eligibility for retirement, for early commencement or
actuarial subsidies under any Company pension, medical
reimbursement or life insurance plan (or any such alternative
contractual arrangement that the Executive may have with the
Company), Executive will be credited with an additional three
years of service and age beyond that accrued as of the
Termination Date; provided that if any benefits afforded by
this Agreement, including the benefits arising from the grant
of additional service and age, cannot be provided under the
qualified pension plan of the Company due to the qualification
provisions of the Code, the benefit, or its equivalent in
value, shall be provided under a nonqualified pension plan of
the Company.
f Supplemental Retirement and Profit Sharing Benefits. Executive
will become fully vested in any unfunded pension benefit
provided under any nonqualified pension plan, program or
arrangement in which he participates (including, without
limitation, the Benefit Equalization Plan and the Supplemental
Retirement Account Plan).
g Outplacement Counseling. For the three-year period following
the Termination Date, (or, if earlier, until the date
Executive first obtains full-time employment after the
Termination Date), the Company shall reimburse all reasonable
expenses incurred by Executive for professional outplacement
services by qualified consultants selected by Executive.
4. Mitigation.
4
4
Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment or
otherwise, and, subject to Section 3(ii)(c), compensation earned from such
employment or otherwise shall not reduce the amounts otherwise payable under
this Agreement. No amounts payable under this Agreement shall be subject to
reduction or offset in respect of any claims which the Company (or any other
person or entity) may have against Executive.
5. Gross-Up.
a In the event it shall be determined that any payment, benefit
or distribution (or combination thereof) by the Company, any
of its affiliates, or one or more trusts established by the
Company for the benefit of its employees, to or for the
benefit of Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement, or
otherwise) (a "Payment") is subject to the excise tax imposed
by Section 4999 of 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,
hereinafter collectively referred to as the "Excise Tax"),
Executive shall be entitled to receive an additional payment
(a "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 the 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.
b All determinations required to be made under this Section 5,
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
PricewaterhouseCoopers or such other nationally recognized
certified public accounting firm as may be designated by the
Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive
within ten 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; provided that for purposes of
determining the amount of any Gross-Up Payment, Executive
shall be deemed to pay federal income tax at the highest
marginal rates applicable to individuals in the calendar year
in which any such Gross-Up Payment is to be made and deemed to
pay state and local income taxes at the highest effective
rates applicable to individuals in the state or locality of
Executive's residence or place of employment in the calendar
year in which any such Gross-Up Payment is to be made, net of
the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes, taking
into account limitations applicable to individuals subject to
federal income tax at the highest marginal rates. All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as
5
5
determined pursuant to this Section 5, shall be paid by the
Company to Executive (or to the appropriate taxing authority
on Executive's behalf) when due. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it
shall so indicate to Executive in writing. 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, it is possible that the amount of
the Gross-Up Payment determined by the Accounting Firm to be
due to (or on behalf of) Executive was lower than the amount
actually due ("Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 5(c) 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 any Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. Executive shall not pay such claim prior
to the expiration of the thirty 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 (i)
give the Company any information reasonably requested by the
Company relating to such claim, (ii) 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, (iii) cooperate with the Company in good faith in
order to effectively contest such claim and (iv) 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 Section 5(c),
the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and xxx for a refund or
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
6
6
one or more appellate courts, as the Company shall determine;
provided, further, 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; provided, further, that if
Executive is required to extend the statute of limitations to
enable the Company to contest such claim, Executive may limit
this extension solely to such contested amount. 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 paid or
advanced by the Company pursuant to this Section 5, Executive
becomes entitled to receive any refund with respect to a
Gross-Up Payment, Executive shall (subject to the Company's
complying with the requirements of Section 5(c)) promptly pay
to the Company the amount of such refund received (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 Section 5(c), 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 writing of its intent to contest such
denial of refund prior to the expiration of thirty 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 the
Gross-Up Payment required to be paid.
6. Termination for Cause.
Nothing in this Agreement shall be construed to prevent the Company
from terminating Executive's employment for Cause. If Executive is terminated
for Cause, the Company shall have no obligation to make any payments under this
Agreement, except for the Accrued Benefits.
7. Indemnification; Director's and Officer's Liability Insurance.
Executive shall, after the Termination Date, retain all rights to
indemnification under applicable law or under the Company's Certificate of
Incorporation or By-Laws, as they may be amended or restated from time to time.
In addition, the Company shall maintain Director's and Officer's liability
insurance on behalf of Executive, at the level in effect immediately prior to
the Termination Date, for the three year period following the Termination Date,
and throughout the period of any applicable statute of limitations.
7
7
8. Costs of Proceedings.
Each party shall pay its own costs and expenses in connection with
any legal proceeding (including arbitration), relating to the interpretation or
enforcement of any provision of this Agreement, except that the Company shall
pay such costs and expenses, including attorneys' fees and disbursements, of
Executive if Executive prevails in such proceeding.
9. Assignment.
Except as otherwise provided herein, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Company and Executive
and their respective heirs, legal representatives, successors and assigns. If
SCL shall be merged into or consolidated with another entity, the provisions of
this Agreement shall be binding upon and inure to the benefit of the entity
surviving such merger or resulting from such consolidation. SCL shall require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of SCL, by
agreement, expressly to assume and agree to perform this 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. The provisions of this Section 9 shall
continue to apply to each subsequent employer of Executive hereunder in the
event of any subsequent merger, consolidation or transfer of assets of such
subsequent employer.
10. Withholding.
Notwithstanding any other provision of this Agreement, the Company
may, to the extent required by law, withhold applicable federal, state and local
income and other taxes from any payments due to Executive hereunder.
11. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflicts of laws
principles thereof.
12. Notice.
For the purpose of this Agreement, any notice and all other
communication provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or overnight courier or
three days after it has been mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
If to the Company:
Xxxxxx X. Xxxxxxx & Sons, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
8
8
If to Executive:
To the most recent address of Executive set forth in the personnel records
of the Company.
13. Entire Agreement; Modification.
This Agreement constitutes the entire agreement between the parties
and, except as expressly provided herein, supersedes all other prior agreements
expressly concerning the effect of a Change of Control on the relationship
between the Company and the other members of the Company and Executive. Except
as expressly provided herein, this Agreement shall not interfere in any way with
the right of the Company to reduce Executive's compensation or other benefits or
terminate Executive's employment, with or without Cause. Any rights that
Executive shall have in that regard shall be as set forth in any applicable
employment agreement between Executive and the Company. This Agreement may be
changed only by a written agreement executed by the Company and Executive.
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
not be effective to the degree necessary to preserve "pooling of interests"
accounting treatment (as reasonably determined by the Company).
14. Counterparts.
This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
15th day of June, 2000.
XXXXXX X. XXXXXXX & SONS, INC.
/s/ Xxxx Xxxxxx
------------------------------
By:
Title: EVP HR
/s/ Xxxxx Xxxxxxxx, Xx.
------------------------------
XXXXX XXXXXXXX, XX.
9
SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a
different meaning, the following terms, when capitalized, have the meaning
indicated:
I "Act" means the Securities Exchange Act of 1934, as amended.
II "Base Salary" means Executive's annual rate of base salary in effect
on the date in question.
III "Bonus" means the amount payable to Executive under the Company's
applicable annual bonus plan with respect to a fiscal year of the Company.
IV "Cause" means either of the following:
(1) If Executive has an employment agreement, the definition
contained therein; otherwise
(2) (i) conviction of a felony under the laws of the United States
or any state thereof or Canada, or (ii) Executive's willful
malfeasance or willful misconduct in connection with
Executive's duties hereunder, or Executive's repeated willful
refusal to perform Executive's duties (not including any
duties in excess of Executive's duties immediately prior to
the Change of Control) which, in each case, results in
demonstrable harm to the financial condition or business
reputation of the Company or any of its subsidiaries or
affiliates.
V "Change of Control" means the first to occur of any of the
following:
(1) any "person" or "group" (as described in the Act) becomes the
beneficial owner of 25% or more of the combined voting power
of the then outstanding voting securities with respect to the
election of the SCL Board of Directors, and also holds more
than any group or person who is the beneficial owner, on the
Effective Date, of over 20% of SCL common shares. "Person"
does not include any SCL or Company employee benefit plan, any
company the shares of which are held by SCL's shareholders in
substantially the same proportion as they held SCL stock, or
any testamentary trust or estate;
(2) any merger, consolidation, amalgamation, plan of arrangement,
reorganization or similar transaction involving SCL, other
than, in the case of any of the foregoing, a transaction in
which SCL shareholders immediately prior to the transaction
hold immediately thereafter, in the same proportion as
immediately prior to the transaction, not less than 50.1% of
the combined voting power of the then outstanding voting
10
A-2
securities with respect to the election of the board of
directors of the resulting entity;
(3) any change in a majority of SCL's Board of Directors within a
24-month period unless the change was approved by a majority
of the Incumbent Directors;
(4) any liquidation or sale of all or substantially all of the
assets of SCL; or
(5) any other transaction so denominated by SCL's Board of
Directors.
VI "Code" means the Internal Revenue Code of 1986, as amended.
VII "Company" means Xxxxxx X. Xxxxxxx & Sons, Inc. and, after a Change
of Control, any successor or successors thereto.
VIII "Good Reason" means any of the following actions on or after a
Change of Control, without Executive's express prior written approval, other
than due to Executive's Permanent Disability or death:
(1) any decrease in, or any failure to increase in accordance with
an agreement between Executive and the Company, Base Salary or
Target Bonus;
(2) any decrease in Executive's pension benefit opportunities or
any material diminution in the aggregate employee benefits, in
each case, afforded to the Executive immediately prior to the
Change of Control; for this purpose employee benefits shall
include, but not be limited to life insurance, medical and
disability benefits, flexible perquisites and matching gifts;
(3) any diminution in Executive's title or reporting relationship,
or substantial diminution in duties or responsibilities (other
than solely as a result of a Change of Control in which SCL
immediately thereafter is no longer publicly held);
(4) any relocation of Executive's principal place of business of
35 miles or more, other than normal travel consistent with
past practice; or
(5) Executive's notice of termination of employment within the
thirty-day period following the first anniversary of a Change
of Control, unless upon such first anniversary Executive is
serving as the Chief Executive Officer (i) of SCL, and SCL is
a Publicly Traded Company; or (ii) if SCL is not a Publicly
Traded Company, then of a Publicly Traded Company that
directly or indirectly owns at least 50.1% of the combined
voting power of the then outstanding voting securities with
respect to the election of the board of directors of SCL or
its successor.
11
A-3
Except as provided in (5) above, Executive shall have six months
from the time Executive first becomes aware of the existence of Good Reason to
resign for Good Reason.
IX "Incumbent Director" means a member of SCL's Board of Directors at
the beginning of the period in question, including any director who was not a
member of SCL's Board of Directors at the beginning of such period but was
elected or nominated to the Board of Directors by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors (so long as such director was not nominated by a person
who has expressed an intent to effect a Change of Control or engage in a proxy
or other control contest).
X "Permanent Disability" means Executive's inability, by reason of any
physical or mental impairment, to substantially perform the significant aspects
of his regular duties which inability has lasted for six months and is
reasonably expected to be permanent.
XI "Publicly Traded Company" means a company whose common equity
securities (including American Depositary Shares or American Depositary Receipts
relating to such equity securities) are traded or quoted on a principal United
States, Canadian or European stock market or trading system, and are owned by
more than 1,000 shareholders.
XII "SCL" means The Seagram Company Ltd. and, after a Change of Control,
any successor or successors thereto.
XIII "Target Bonus" means the target Bonus established for Executive,
whether expressed as a percentage of Base Salary or a dollar amount.
