EMPLOYMENT AGREEMENT
This agreement made as of the 1st day of November, 2000
BETWEEN:
THE XXXXXX GROUP INC.
(the "Company")
-And-
XXXX X. XXXXX
(the "Chairman")
WHEREAS:
The Company is engaged in the operation of funeral homes and cemeteries
in Canada, the United States and England;
The Company and the Chairman have previously (on October 21, 1999)
entered into a short-term agreement providing for the services of the
Chairman (the "October Agreement"); and
The Company and the Chairman wish to enter into a new agreement which
will provide the Chairman with an incentive to continue in his position
as Chairman of the Company for a longer term than contemplated by the
October Agreement.
IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:
DEFINITIONS
1. "CHANGE IN CONTROL" means any one of the following events that occurs
during the term of this Agreement other than pursuant to a plan of
reorganization submitted by the Company and confirmed by the Bankruptcy
Court:
a) the acquisition by any individual, entity or group (a
"Person") of beneficial ownership of 30% or more of the
combined voting power of the then outstanding Voting Stock (as
defined below) of the Company; provided, however, that the
following acquisitions will not constitute a Change in
Control: (1) any issuance of Voting Stock of the Company
directly from the Company that is approved by the Incumbent
Board (as defined below), (2) any acquisition by the Company
of Voting Stock of the Company, (3) any acquisition of Voting
Stock of the Company by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
subsidiary of the Company, or (4) any acquisition of Voting
Stock of the Company by any Person pursuant to a Business
Combination (as defined below) that would not constitute a
Change in Control;
b) the consummation of a reorganization, amalgamation, merger or
consolidation, a sale or other disposition of all or
substantially all of the assets of the Company, or other
transaction (each, a "Business Combination") in which all or
substantially all of the individuals and entities who were
the beneficial owners of Voting Stock of the Company
immediately prior to such Business Combination beneficially
own, directly or indirectly, immediately following such
Business Combination less than 40% of the combined voting
power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Combination;
c) individuals who, as of the effective date of the plan of
reorganization confirmed by the Bankruptcy Court, constitute
the Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a
Director subsequent to such effective date whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds of the Directors
then comprising the Incumbent Board (either by a specific vote
or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without
objection to such nomination) will be deemed to have been a
member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of Directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
d) the approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to
a Business Combination that would not constitute a Change in
Control.
2. "JUST CAUSE" means wilful misconduct or wilful neglect of duty by the
Chairman, including, but not limited to, intentional wrongful
disclosure of confidential or proprietary information of the Company or
any of its subsidiaries; intentional wrongful engagement in any
competitive activity prohibited by paragraph 21; and the intentional
material breach of any provision of this Agreement.
3. "STATED GOOD REASON" means the occurrence, other than pursuant to a
plan of reorganization confirmed by the Bankruptcy Court, of one or
more of the following events (regardless of whether any other reason,
other than Just Cause, exists for the termination of Chairman's
employment):
a) the geographic relocation by more than 25 miles of the
Chairman's principal work location, excluding, however, the
relocation of the Company's principal executive offices in
connection with a plan of reorganization confirmed by the
Bankruptcy Court;
b) any material reduction in the Chairman's job duties or
responsibilities;
c) any material reduction in the Chairman's level of compensation
or benefits;
d) any adverse change to the Chairman's title or function;
e) any change in the organizational reporting relationship
between the Chairman and the Board of Directors;
f) harassment; or
g) any circumstance in which the Chairman was induced by the
actions of the Company to terminate his employment other than
on a purely voluntary basis.
4. "TERMINATION WITHOUT JUST CAUSE" includes, but is not limited to, any
unilateral change in the material terms and conditions of the
Chairman's employment.
5. "VOTING STOCK" means securities entitled to vote generally in the
election of directors.
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ENTIRE AGREEMENT
6. The Chairman and the Company agree that this Agreement represents the
entire employment agreement between the parties and that any and all
prior agreements, written or verbal, express or implied, between the
parties relating to or in any way connected with the employment of the
Chairman by the Company or any related, associated, affiliated,
predecessor or parent corporations are declared null and void and are
superseded by the terms of this Agreement. There are no
representations, warranties, forms, conditions, undertaking, or
collateral agreements, express, implied or statutory between the
parties other than as expressly set forth in this Agreement. No waiver
or modification of this Agreement shall be valid unless in writing and
duly executed by both the Company and the Chairman.
EMPLOYMENT
7. The Company and the Chairman agree that the Chairman shall commence
employment with the Company on the effective date of the Company's Plan
of Reorganization (the "Employment Date"), such employment to be for a
fixed term ending August 1, 2004. As used in this Agreement, the phrase
"term of this Agreement" means the period ending on the earlier of
August 1, 2004, or the effective date of the termination of Chairman's
employment. Prior to the Employment Date, the Company shall pay fees
for the services of the Chairman pursuant to clause 3 ("Base Fees") of
the October Agreement.
8. The Chairman agrees that he will at all times faithfully,
industriously, and to the best of his skill, ability, and talents,
perform all of the duties required of his position in a manner which is
in the best interests of the Company and in accordance with the
Company's objectives.
COMPENSATION
9. a) Commencing from the Employment Date, the Chairman will
receive a base salary of $500,000 U.S. per annum which amount
of such shall be subject to review and improvement on a
periodic basis in accordance with Company practice, but in no
event shall such amount be reduced. The Chairman's base salary
is payable in accordance with the Company's customary payroll
practices and is subject to deductions required by applicable
law.
b) The Company shall reimburse the Chairman for all reasonable
expenses incurred by the Chairman during the term of this
Agreement in the course of the Chairman performing his duties
under this Agreement. These reimbursements shall be consistent
with the Company's policies in effect from time to time with
respect to travel, entertainment and other reimbursable
business expenses, subject to the Company's requirements
applicable generally with respect to reporting and
documentation of such expenses.
SHORT TERM INCENTIVE PLAN - ANNUAL BONUS
10. The Chairman will be entitled to participate in a short term incentive
plan as adopted by the Company from time to time, subject to a maximum
of 100% of the Chairman's annual base salary, less deductions required
by applicable law. The bonus payable under such plan will be paid in
full within 90 days after the end of each year. With the exception of
the bonus that becomes payable under paragraphs 14, 15 or 16, the
Chairman's entitlement to a bonus under the short term incentive plan
will be based entirely on the financial performance of the Company as
determined under the terms of such incentive plan. Prior to the
Employment Date, Doncaster Consolidated Ltd. will be entitled to short
term incentive bonuses pursuant to the Corporate Incentive Plan of the
Company's Key Employee Retention Program, and the October Agreement.
11. The short term incentive plan bonus is subject to the following
conditions and exceptions:
a) In order to qualify for and receive the annual bonus, the
Chairman must be employed by the Company or its successor at
the time the bonus is paid unless the Chairman is terminated
without
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Just Cause or the Chairman resigns in compliance with
paragraphs 15 or 16. If the Chairman's employment is
terminated without Just Cause or the Chairman resigns in
compliance with paragraphs 15 or 16 after the end of the year
but before the bonus amount is paid, the Chairman shall
receive the bonus for that completed year calculated in
accordance with terms of the short term incentive plan. The
payment shall be made by the Company within seven days of the
termination or resignation and will be subject to deductions
required by applicable law. If the bonus amount has not been
determined within seven days of the termination or resignation
it will be paid in full within 90 days of the subject year
end.
b) If, before the end of a year, the Chairman's employment is
terminated by the Company or its successor without Just Cause
or the Chairman resigns in compliance with paragraphs 15 or
16, the bonus which the Chairman will be entitled to receive
under paragraphs 14, 15 or 16 for that year will be equal to
the bonus that would have been paid for the full year based
upon a bonus level equal to 100% of the Chairman's base salary
without regard to the financial performance of the Company,
but will be prorated on the basis of the number of days in the
year up to and including the date of termination.
STOCK OPTION PLAN
12. The Chairman is eligible for participation in the Company's stock
option plan or plans. Twenty percent of the pool of stock options
granted to management employees pursuant to such plan or plans within
180 days of the effective date of the plan of reorganization confirmed
by the Bankruptcy Court will be granted to the Chairman, with a vesting
period of 3 years (25% 1ST year, 25% 2ND year, and 50% 3rd year), it
being understood that all such options granted to the Chairman will
vest prior to August 1, 2004. Further grants of stock options shall be
as determined by the Board of Directors of the reorganized company.
BENEFITS
13. The Chairman will continue to participate in the following benefit
plans:
a) GROUP BENEFITS
The Chairman will participate in the Company's Group Benefit
Plan and any other group perquisites all as in effect from
time to time.
b) VEHICLE ALLOWANCE
The Chairman will be entitled to a vehicle allowance of
$1,000.00 U.S. per month plus auto insurance and operating
expense coverage for the term of this Agreement.
c) FINANCIAL PLANNING
The Chairman will be entitled to the amount of $10,000.00.
U.S. per year for the purposes of obtaining financial and
retirement planning services, expenses and advice for the term
of this Agreement, as directed by the Chairman.
d) CLUB MEMBERSHIP
The Chairman will be entitled to the amount of $2,500.00 U.S.
per year for club memberships as directed by the Chairman.
TERMINATION OF EMPLOYMENT
14. The parties agree that the Chairman's employment under this Agreement
may be terminated as follows:
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a) by the Company, in writing, without notice of termination or
pay in lieu thereof, for Just Cause; or,
b) by the Company, in writing, at its sole discretion and for any
reason other than Just Cause upon payment to the Chairman in a
lump sum, within seven days of such termination, of an amount
equal to:
i) 24 months' base salary;
ii) the replacement value of all Chairman's benefit
coverage, including the full vesting of all stock
options granted to the Chairman, exercised or not,
and all monies due from the Registered Retirement
Savings Plan, following the date of the Chairman's
termination (such benefit coverage being calculated
over 24 months following resignation or termination);
iii) the amount of any unpaid bonus earned by the Chairman
up to and including the date of termination
calculated in accordance with paragraph 11. Such
bonus shall be payable regardless of the financial
performance of the Company; and
iv) the amount of any unpaid salary or vacation earned by
the Chairman up to and including the date of
termination.
Payments identified in sub-paragraphs (i) - (iv) will be subject to deductions
required by applicable law.
CHANGE IN CONTROL
15. If a Change in Control occurs and, within two years of the effective
date of the Change in Control, the Company, in writing, terminates the
Chairman without Just Cause or the Chairman submits a written
resignation for Stated Good Reason to the Board of Directors of the
Company, the Company shall, within seven days of the date of
resignation or termination, pay to the Chairman in a lump sum the
following payments:
i) 24 months' base salary;
ii) the replacement value of all Chairman's benefit
coverage, including the full vesting of all stock
options granted to the Chairman, exercised or not,
and all monies due from the Registered Retirement
Savings Plan, following the date of the Chairman's
termination termination (such benefit coverage being
calculated over 24 months following resignation or
termination);
iii) the amount of any unpaid bonus earned by the Chairman
up to and including the date of termination
calculated in accordance with paragraph 11. Such
bonus will be payable regardless of the financial
performance of the Company; and
iv) the amount of any unpaid salary or vacation earned by
the Chairman up to and including the date of
resignation or termination.
Payments identified in sub-paragraphs (i) - (iv) will be subject to deductions
required by applicable law.
VOLUNTARY RESIGNATION DUE TO CHANGE IN CONTROL
16. In the event that an agreement is reached which would result in a
Change of Control, but the Change of Control has not yet occurred, the
Chairman can, for any reason, submit his resignation in writing to the
Company prior to the effective date of the Change in Control. Any such
resignation will be effective as of the date of the Change in Control,
and the Chairman shall continue to work for the Company up until that
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date. Further, if the Chairman resigns in these circumstances and
continues to work for the Company until the effective date of Change in
Control, then on the effective date of the Change in Control the
Company shall pay to the Chairman a lump sum amount equal to the
payments prescribed under paragraph 15 (i) - (iv). In the event that
the Change in Control does not occur, the Chairman shall not be
entitled to the payments prescribed under paragraph 15 (i) - (iv), and
the resignation shall be deemed to not have been tendered.
17. Immediately prior to the effective date of a Change in Control, the
Company shall allow the Chairman to exercise all stock options or share
appreciation rights, whether vested or not, granted to the Chairman
including shares with respect to which such options would not otherwise
be exercisable. The Chairman shall be entitled to receive all dividends
declared and paid by the Company upon a Change of Control on the shares
received by the Chairman following the exercise of the Chairman's stock
options or share appreciation rights.
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
18. In the event that it is determined (as hereinafter provided) that any
payment (other than the Gross-Up Payments provided for in this
paragraph 18 and Annex A) or distribution by the Company or any of its
affiliates to or for the benefit of the Chairman, whether paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation the
lapse or termination of any restriction on the vesting or
exercisability of any benefit under any of the foregoing (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
United States Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision thereto), by reason of being considered
"contingent on a change in ownership or control" of the Company, within
the meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by U. S. state or local law, or
any interest or penalties with respect to such tax (such tax or taxes,
together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Chairman will
be entitled to receive an additional payment or payments (collectively,
a "Gross-Up Payment"). The Gross-Up Payment will be in an amount such
that, after payment by the Chairman of all U. S. taxes (including any
interest or penalties imposed with respect to such taxes), including
any Excise Tax imposed upon the Gross-Up Payment, the Chairman retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment. For purposes of determining the amount of the Gross-Up
Payment, the Chairman will be considered to pay any applicable U. S.
federal, state and local income taxes at the highest rate applicable to
the Chairman in effect in the year in which the Gross-Up Payment will
be made, net of the maximum reduction in U. S. federal income tax that
could be obtained from deduction of such state and local taxes.
19. The obligations set forth in paragraph 18 will be subject to the
procedural provisions described in Annex A.
CONFIDENTIAL INFORMATION; COMPETITIVE ACTIVITY
20. a) The Chairman agrees that he will not, without the prior
written consent of the Company, during the term of this
Agreement or at any time thereafter, disclose to any person
not employed by the Company, or use in connection with
engaging in competition with the Company, any confidential or
proprietary information of the Company. For purposes of this
Agreement, the term "confidential or proprietary information"
includes all information of any nature and in any form that is
owned by the Company and that is not publicly available (other
than by Chairman's breach of this paragraph 20) or generally
known to persons engaged in businesses similar or related to
those of the Company. Confidential or proprietary information
will include, without limitation, the Company's financial
matters, customers, employees, industry contracts, strategic
business plans, product development (or other proprietary
product data), marketing plans, and all other secrets and all
other information of a confidential or proprietary nature. For
purposes of the preceding two sentences, the term "Company"
will also include any subsidiary of the Company. The foregoing
obligations imposed by this paragraph 20 will not apply (i)
during the Term, in the course of the business of and for the
benefit of the Company, (ii) if such confidential or
proprietary information has become, through no fault of the
Chairman, generally known to the
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public or (iii) if the Chairman is required by law to make
disclosure (after giving the Company notice and an opportunity
to contest such requirement).
b) The Chairman agrees that, upon termination of this Agreement
for any reason, the Chairman will return to the Company, in
good condition, all property of the Company in his possession
or under his control.
21. In addition, during the term of this Agreement and for a period of 12
months thereafter, the Chairman will not, without the prior written
consent of the Company, which consent will not be unreasonably
withheld:
a) Engage in any Competitive Activity. For purposes of this
Agreement, "Competitive Activity" means the Chairman's
participation in the management of any business enterprise if
such enterprise engages in substantial and direct competition
with the Company and such enterprise's sales of any product or
service competitive with any product or service of the Company
amounted to 10% of such enterprise's net sales for its most
recently completed fiscal year and if the Company's net sales
of said product or service amounted to 10% of the Company's
net sales for its most recently completed fiscal year.
"Competitive Activity" will not include (i) the mere ownership
of securities in any such enterprise and the exercise of
rights appurtenant thereto or (ii) participation in the
management of any such enterprise other than in connection
with the competitive operations of such enterprise.
b) On behalf of the Chairman or on behalf of any person, firm or
company, directly or indirectly, attempt to influence,
persuade or induce, or assist any other person in so
persuading or inducing, any employee of the Company or any of
its subsidiaries to give up, or to not commence, employment or
a business relationship with the Company or any of its
subsidiaries.
22. a) The Chairman and the Company agree that the covenants
contained in paragraphs 20 and 21 are reasonable under the
circumstances, and further agree that if in the opinion of any
court of competent jurisdiction any such covenant is not
reasonable in any respect, such court will have the right,
power and authority to excise or modify any provision or
provisions of such covenants as to the court will appear not
reasonable and to enforce the remainder of the covenants as so
amended. The Chairman acknowledges and agrees that the remedy
at law available to the Company for breach of any of his
obligations under this paragraph 22 would be inadequate and
that damages flowing from such a breach may not readily be
susceptible to being measured in monetary terms. Accordingly,
the Chairman acknowledges, consents and agrees that, in
addition to any other rights or remedies that the Company may
have at law, in equity or under this Agreement, upon adequate
proof of his violation of any such provision of this
Agreement, the Company will be entitled to immediate
injunctive relief and may obtain a temporary order restraining
any threatened or further breach, without the necessity of
proof of actual damage.
b) During the term of this Agreement, the Chairman will not serve
as Chairman or employee of, nor consultant to, any other
company or business without the prior express approval of:
(i) the Creditors' Committee of the Company, prior to the
effective date of the confirmed Plan of
Reorganization of the Company; or
(ii) a majority of the independent Directors of the
Company, after the effective date of the confirmed
Plan of Reorganization of the Company.
The provisions of this paragraph 22 (b) are in addition to,
and in no way derogate from, any and all other provisions of
this Agreement.
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GENERAL
23. The parties confirm that the provisions of this Agreement are fair and
reasonable and that the total compensation and benefits payable under
paragraphs 14, 15 or 16 are reasonable estimates of the damages which
would be suffered by the Chairman. Any amount paid under paragraphs 14,
15 or 16 shall be in full satisfaction of all claims whatsoever
relating to the Chairman's employment or for the termination of the
Chairman's employment, including claims for salary, bonus, benefits,
vacation pay, termination pay and/or severance pay pursuant to the
Ontario EMPLOYMENT STANDARDS ACT, as amended, including sections 57 and
58 thereof.
24. Any payment made to the Chairman under paragraphs 14, 15 or 16 of this
Agreement shall be paid to the Chairman by the Company regardless of
any offer of alternate employment made to the Chairman by the Company
or by any other prospective employer, whether accepted by the Chairman
or not. The Chairman will not be required to mitigate any damages
arising from this Agreement and any amounts and benefits to be provided
to the Chairman hereunder shall not be reduced or set off against any
amounts earned by the Chairman from alternate employment, including
self-employment, or by other means.
25. Any payment other than for base salary made to the Chairman under this
Agreement shall be made by way of a lump sum payment or, at the
Chairman's option, in such other manner as he may direct, less
deductions required by applicable law.
26. Where the context requires, the singular shall include the plural and
the plural shall include the singular. Masculine pronouns shall be
deemed to be read as feminine pronouns and VICE VERSA. Words importing
persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations and VICE VERSA.
27. The division of this Agreement into paragraphs and the insertion of
headings are for the convenience of reference only and shall not affect
the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement only and not to any particular paragraph and include any
agreement or instrument supplemental or ancillary to the Agreement.
References herein to paragraphs are to paragraphs of this Agreement
unless something in the subject matter or context is inconsistent
therewith.
28. All dollar amounts identified in this contract are in U.S. $ currency.
29. The parties' respective rights and obligations under paragraphs 21, 22,
33 and 34 will survive any termination or expiration of this Agreement
or the termination of the Chairman's employment for any reason
whatsoever.
GOVERNING LAWS
30. This Agreement shall be governed by the laws of the Province of
Ontario.
SEVERABILITY
31. All terms and covenants contained in this Agreement are severable and
in the event that any of them is held to be invalid by any competent
court in the Province of Ontario, the invalid provision shall be
deleted and the balance of this Agreement shall be interpreted as if
such invalid clause or covenant were not contained herein.
CONTINUITY
32. a) This Agreement shall be binding upon and enure to the benefit
of (i) the Chairman and his heirs, executors, administrators
and legal representatives and (ii) the Company, its related
corporations, affiliates, and associates, and any other entity
or organization which shall succeed to substantially
8
all or any distinct portion of the business, divisions or
property of the Company or its related corporations,
affiliates, and associates, whether by means of amalgamation,
merger, consolidation, acquisition, and/or sale of all or part
of the shares or assets of the Company or otherwise, including
by operation of law or by succession to the business of the
Company pursuant to a Plan of Reorganization approved by the
Bankruptcy Court. In addition, the Company will require any
such successor expressly to assume and agree, by written
agreement, to perform this Agreement in the same manner and to
the same extent the Company would be required to perform if no
such succession had taken place.
b) If the Chairman should die while any amount would still be
payable to the Chairman hereunder if the Chairman had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the devisee, legatee or other designee of the
Chairman or, if there is no such designee, to the estate of
the Chairman.
LEGAL ADVICE
33. The Chairman acknowledges that he has obtained or has had an
opportunity to obtain independent legal advice in connection with this
Agreement, and further acknowledges that he has read, understands, and
agrees to be bound by all of the terms and conditions contained herein.
34. The Company agrees to reimburse the Chairman for all reasonable legal
expenses incurred in connection with any dispute involving the
Chairman, the Company, its related corporations, affiliates,
successors, or assigns, or any other third party, as between any of
them, arising from the validity, interpretation, or enforcement of this
Agreement or any of its terms, including all reasonable legal expenses
incurred by the Chairman in respect of any action or actions commenced
by the Chairman to obtain, enforce, or retain any right, benefit or
payment provided for in this Agreement regardless of whether such
expenses are incurred during the term of this Agreement or after;
provided that, in regard to such matters, the Chairman has not acted in
bad faith or with no colorable claim of success. However, the Company
shall not be required to reimburse the Chairman for any legal costs or
expenses in relation to any action commenced by the Company to enforce
the confidentiality and non-competition provisions hereof and in
respect of which in a court of competent jurisdiction the Company is
the prevailing party for either preliminary or final remedy.
NOTICE
35. Any demand, notice or other communication to be given in connection
with this Agreement shall be given in writing by personal delivery, by
registered mail or by electronic means of communication addressed to
the recipient as follows:
TO THE CHAIRMAN:
Xxxx X. Xxxxx
00 Xxxxxxxx Xxxxx, X.X. #0
Xxx Xxxxx, Xxxxxxx X0X 0X0
TO THE COMPANY:
The Xxxxxx Group Inc.
11th Floor
0000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Senior Vice-President, Legal & Asset Management
WITH A COPY TO:
9
The Xxxxxx Group Inc.
000 Xxx Xxxxxx
Xxxxx 0000, Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Senior Vice-President, Legal & Asset Management
or such other address, individual or electronic communication as may be
designated by notice given by either party to the other.
ADDITIONAL
36. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such
party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
37. This Agreement shall be effective only upon the concurrent execution of
two agreements as follows:
(i) execution of this Employment Agreement by the Chairman
following execution by the Company; and concurrently
(ii) execution of an "Amending Agreement" by the Chairman following
execution by the Company and Doncaster Consolidated Ltd. and
Doncaster Racing Ltd.
...CONTINUED
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IN WITNESS WHEREOF the Chairman has hereunto set his hand and the parties
corporate have affixed hereto their corporate seals attested by the hand of
their duly authorized officers as of the date set forth on the first page of
this Agreement.
THE XXXXXX GROUP INC.
Per:
--------------------------------
Per:
--------------------------------
CHAIRMAN, COMPENSATION COMMITTEE
WITNESS:
------------------------------------- --------------------------------
XXXX. X. XXXXX
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ANNEX A
EXCISE TAX GROSS-UP PROCEDURAL PROVISIONS
1. Subject to the provisions of paragraph 5 of this Annex, all
determinations required to be made under paragraph 18 of this Agreement
and this Annex A, including whether an Excise Tax is payable by the
Chairman and the amount of such Excise Tax and whether a Gross-Up
Payment is required to be paid by the Company to the Chairman and the
amount of such Gross-Up Payment, if any, will be made by a U. S.
nationally recognized accounting firm (the "National Firm") selected by
the Chairman in his sole discretion. The Chairman will direct the
National Firm to submit its determination and detailed supporting
calculations to both the Company and the Chairman within 30 calendar
days after the date of his termination of employment, if applicable,
and any such other time or times as may be requested by the Company or
the Chairman. If the National Firm determines that any Excise Tax is
payable by the Chairman, the Company will pay the required Gross-Up
Payment to the Chairman within five business days after receipt of such
determination and calculations with respect to any Payment to the
Chairman. If the National Firm determines that no Excise Tax is payable
by the Chairman with respect to any material benefit or amount (or
portion thereof), it will, at the same time as it makes such
determination, furnish the Company and the Chairman with an opinion
that the Chairman has substantial authority not to report any Excise
Tax on his U. S. federal, state or local income or other tax return
with respect to such benefit or amount. As a result of the uncertainty
in the application of Section 4999 of the Code and the possibility of
similar uncertainty regarding applicable U. S. state or local tax law
at the time of any determination by the National Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to paragraph
5 of this Annex and the Chairman thereafter is required to make a
payment of any Excise Tax, the Chairman will direct the National Firm
to determine the amount of the Underpayment that has occurred and to
submit its determination and detailed supporting calculations to both
the Company and the Chairman as promptly as possible. Any such
Underpayment will be promptly paid by the Company to, or for the
benefit of, the Chairman within five business days after receipt of
such determination and calculations.
2. The Company and the Chairman will each provide the National Firm access
to and copies of any books, records and documents in the possession of
the Company or the Chairman, as the case may be, reasonably requested
by the National Firm, and otherwise cooperate with the National Firm in
connection with the preparation and issuance of the determinations and
calculations contemplated by paragraph 1 of this Annex. Any
determination by the National Firm as to the amount of the Gross-Up
Payment will be binding upon the Company and the Chairman.
3. The U. S. federal, state and local income or other tax returns filed by
the Chairman will be prepared and filed on a consistent basis with the
determination of the National Firm with respect to the Excise Tax
payable by the Chairman. The Chairman will report and make proper
payment of the amount of any Excise Tax, and at the request of the
Company, provide to the Company true and correct copies (with any
amendments) of his federal income tax return as filed with the U. S.
Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Chairman's federal income tax
return, or corresponding state or local tax return, if relevant, the
National Firm determines that the amount of the Gross-Up Payment should
be reduced, the Chairman will within five business days pay to the
Company the amount of such reduction.
4. The fees and expenses of the National Firm for its services in
connection with the determinations and calculations contemplated by
paragraph 1 of this Annex will be borne by the Company. If such fees
and expenses are initially paid by the Chairman, the Company will
reimburse the Chairman the full amount of such fees and expenses within
five business days after receipt from the Chairman of a statement
therefor and reasonable evidence of his payment thereof.
5. The Chairman will notify the Company in writing of any claim by the U.
S. Internal Revenue Service or any other U. S. taxing authority that,
if successful, would require the payment by the Company of a Gross-
A-1
Up Payment. Such notification will be given as promptly as practicable
but no later than 10 business days after the Chairman actually receives
notice of such claim and the Chairman will further apprise the Company
of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the
Chairman). The Chairman will not pay such claim prior to the expiration
of the 30-calendar-day period following the date on which he gives such
notice to the Company or, if earlier, the date that any payment of
amount with respect to such claim is due. If the Company notifies the
Chairman in writing prior to the expiration of such period that it
desires to contest such claim, the Chairman will:
(A) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested
by the Company;
(B) take such action in connection with contesting
such claim as the Company reasonably requests in writing from time to
time, including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company will bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and will indemnify and hold harmless the
Chairman, on an after-tax basis, for and against any Excise Tax or
income or other tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing provisions of this
paragraph 5, the Company will control all proceedings taken in
connection with the contest of any claim contemplated by this paragraph
5 and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that the
Chairman may participate therein at his own cost and expense) and may,
at its option, either direct the Chairman to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and
the Chairman agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company determines; provided,
however, that if the Company directs the Chairman to pay the tax
claimed and xxx for a refund, the Company will advance the amount of
such payment to the Chairman on an interest-free basis and will
indemnify and hold the Chairman harmless, on an after-tax basis, from
any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Chairman with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim will be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
the Chairman will be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other
taxing authority.
6. If, after the receipt by the Chairman of an amount advanced by the
Company pursuant to paragraph 5 of this Annex, the Chairman receives
any refund with respect to such claim, the Chairman will (subject to
the Company's complying with the requirements of such paragraph 5)
promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Chairman of an amount advanced
by the Company pursuant to paragraph 5 of this Annex, a determination
is made that the Chairman is not entitled to any refund with respect to
such claim and the Company does not notify the Chairman in writing of
its intent to contest such denial or refund prior to the expiration of
30 calendar days after such determination, then such advance will be
forgiven and will not be required to be repaid and the amount of any
such advance will offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid by the Company to the Chairman pursuant to
paragraph 18 if this Agreement and this Annex A.
A-2
