EMPLOYMENT AGREEMENT
This agreement made as of the 1st day of November, 2000
BETWEEN:
THE XXXXXX GROUP INC.
(the "Company")
-And-
XXXX X. XXXXXXX
(the "Executive")
WHEREAS:
The Company is engaged in the operation of funeral homes and cemeteries
in Canada, the United States and England;
The Xxxxxx Group Inc. and the Executive had previously entered into an
Employment Agreement (the "Previous Employment Agreement"); and
The Company and the Executive wish to enter into an amended written
Employment Agreement which will provide the Executive with an incentive
to continue in his position as President and Chief Executive Officer of
the Company for the term of this 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
Executive, 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 Executive's
employment):
a) the geographic relocation by more than 25 miles of the
Executive'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 Executive's job duties or
responsibilities;
c) any material reduction in the Executive's level of
compensation or benefits;
d) any adverse change to the Executive's title or function;
e) any change in the organizational reporting relationship
between the Executive and the Board of Directors;
f) harassment; or
g) any circumstance in which the Executive 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
Executive's employment.
5. "VOTING STOCK" means securities entitled to vote generally in the
election of directors.
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ENTIRE AGREEMENT
6. a) The Executive and the Company agree that this Agreement
represents the entire 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 Executive 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 subject only to paragraph 6(b)
hereof. 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
Executive.
b) The following item is excluded from the operation and effect
of paragraph (a) preceding, and such excluded item continues
in full force and effect and is hereby reconfirmed and
incorporated by this reference as part of this Agreement: all
of the agreement of the parties reflected in paragraph 6
("Corporate Incentive Plan") of the Previous Employment
Agreement.
EMPLOYMENT
7. The Company agrees to continue the employment of the Executive, and the
Executive agrees to continue in the employ of the Company, in his
current position as President and Chief Executive Officer to 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 Executive's
employment.
8. The Executive 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, and will devote his full working time and
attention to these duties.
COMPENSATION
9. a) In consideration for the Executive's continued performance of
his duties as President and Chief Executive Officer, the
Executive will receive a base salary as follows: a) $425,000
U.S. per annum for the period through December 31, 2000; b)
$500,000 U.S. per annum for the period from January 1, 2001
until the earlier of June 1, 2001 or the effective date of the
plan of reorganization confirmed by the Bankruptcy Court; c)
for the period beginning at the earlier of June 1, 2001 or the
effective date of the plan of reorganization, $600,000 U.S.
per annum. The amount of such salary 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 Executive'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 Executive for all reasonable
expenses incurred by the Executive during the term of this
Agreement in the course of the Executive 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 Executive 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 Executive'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
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each year. With the exception of the bonus that becomes payable under
paragraph 15, 16 or 17, the Executive'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. The short term incentive entitlement of this
paragraph 10 includes entitlement pursuant to the Corporate Incentive
Plan of the Company's Key Employee Retention Program.
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
Executive must be employed by the Company or its successor at
the time the bonus is paid unless the Executive is terminated
without Just Cause or the Executive resigns in compliance with
paragraphs 16 or 17. If the Executive's employment is
terminated without Just Cause or the Executive resigns in
compliance with paragraphs 16 or 17 after the end of the year
but before the bonus amount is paid, the Executive 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 Executive's employment is
terminated by the Company or its successor without Just Cause
or the Executive resigns in compliance with paragraphs 16 or
17, the bonus which the Executive will be entitled to receive
under paragraphs 15, 16 or 17 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 Executive's 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 Executive 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 Executive, 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
Executive 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.
REORGANIZATION INCENTIVE
13. a) The parties acknowledge that pursuant to paragraphs 4 and 5
of the Previous Employment Agreement, Executive was eligible
to receive both a Confirmation Incentive Payment and a Value
Added Payment based upon the finalized content of the
Company's Plan of Reorganization and the timing of the
effective date of its confirmation. The parties further
acknowledge that the work leading to finalization of the
Company's Plan of Reorganization and its confirmation has been
substantially completed.
b) Accordingly the parties agree that in lieu of the Confirmation
Incentive Payment and Value Added Payment as specified in the
Previous Employment Agreement, Executive will qualify for a
one-time incentive payment of $1,500,000 (U.S.) payable within
15 days of the effective date of the Plan of Reorganization
being confirmed by the Bankruptcy Court. Executive agrees to
purchase, no later than 30 days after payment of this
incentive, shares of common stock of the Company having an
aggregate value equal to 25% of the net after-tax incentive.
Executive will retain such shares through the term of this
Agreement.
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BENEFITS
14. The Executive will continue to participate in the following benefit
plans:
a) GROUP BENEFITS
The Executive 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 Executive 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 Executive 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 Executive.
d) CLUB MEMBERSHIP
The Executive will be entitled to the amount of $2,500.00 U.S. per year
for club memberships as directed by the Executive.
TERMINATION OF EMPLOYMENT
15. The parties agree that the Executive's employment under this Agreement
may be terminated as follows:
a) by the Company, without notice of termination or pay in lieu
thereof, for Just Cause; or,
b) by the Company, at its sole discretion and for any reason
other than Just Cause upon payment to the Executive 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 Executive's benefit
coverage, including the full vesting of all stock
options issued (exercised or not ) granted to the
Executive, and all monies due from the Registered
Retirement Savings Plan, following the date of the
Executive's termination (such benefit coverage being
calculated over 24 months following resignation or
termination);
iii) The amount of any unpaid bonus earned by the
Executive 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 Executive up to and including the date of
termination.
Payments identified in sub paragraphs (i) - (iv) will be subject to deductions
required by applicable law.
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CHANGE IN CONTROL
16. If a Change in Control occurs and, within two years of the effective
date of the Change in Control, the Company terminates the Executive
without Just Cause or the Executive 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 Executive in a lump sum the following payments:
i) 24 months' base salary;
ii) the replacement value of all Executive's benefit
coverage, including the full vesting of all stock
options issued (exercised or not ) granted to the
Executive, and all monies due from the Registered
Retirement Savings Plan, following the date of the
Executive's termination (such benefit coverage being
calculated over 24 months following termination);
iii) The amount of any unpaid bonus earned by the
Executive up to and including the date of termination
calculated in accordance with paragraph 12. 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 Executive up to and including the date of
resignation or termination.
Payments identified in paragraphs (i) - (iv) will be subject to deductions
required by applicable law.
VOLUNTARY RESIGNATION DUE TO CHANGE IN CONTROL
17. 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
Executive 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 Executive shall continue to work for the Company up until that
date. Further, if the Executive 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 Executive a lump sum amount equal to the
payments prescribed under paragraph 16 (i) - (iv). In the event that
the Change in Control does not occur, the Executive shall not be
entitled to the payments prescribed under paragraph 16 (i) - (iv), and
the resignation shall be deemed to not have been tendered.
18. Immediately prior to the effective date of a Change in Control, the
Company shall allow the Executive to exercise all stock options or
share appreciation rights, whether vested or not, granted to the
Executive including shares with respect to which such options would not
otherwise be exercisable. The Executive shall be entitled to receive
all dividends declared and paid by the Company upon a Change of Control
on the shares received by the Executive following the exercise of the
Executive's stock options or share appreciation rights.
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
19. In the event that it is determined (as hereinafter provided) that any
payment (other than the Gross-Up Payments provided for in this
paragraph 19 and Annex A) or distribution by the Company or any of its
affiliates 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 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
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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
Executive 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 Executive 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 Executive 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 Executive will be considered to pay
any applicable U. S. federal, state and local income taxes at the
highest rate applicable to the Executive 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.
20. The obligations set forth in paragraph 19 will be subject to the
procedural provisions described in Annex A.
CONFIDENTIAL INFORMATION; COMPETITIVE ACTIVITY
21. The Executive 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
Executive's breach of this paragraph 21) 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 21 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 Executive, generally known to the public or (iii) if the
Executive is required by law to make disclosure (after giving the
Company notice and an opportunity to contest such requirement).
22. In addition, during the term of this Agreement and for a period of 12
months thereafter, the Executive 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 Executive'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 Executive 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.
23. The Executive and the Company agree that the covenants contained in
paragraphs 21 and 22 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
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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 Executive acknowledges and agrees that the
remedy at law available to the Company for breach of any of his
obligations under this paragraph 23 would be inadequate and that
damages flowing from such a breach may not readily be susceptible to
being measured in monetary terms. Accordingly, the Executive
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.
GENERAL
24. The parties confirm that the provisions of this Agreement are fair and
reasonable and that the total compensation and benefits payable under
paragraphs 15, 16 or 17 are reasonable estimates of the damages which
would be suffered by the Executive. Any amount paid under paragraphs
15, 16 or 17 shall be in full satisfaction of all claims whatsoever
relating to the Executive's employment or for the termination of the
Executive'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.
25. Any payment made to the Executive under paragraphs 15, 16 or 17 of this
Agreement shall be paid to the Executive by the Company regardless of
any offer of alternate employment made to the Executive by the Company
or by any other prospective employer, whether accepted by the Executive
or not. The Executive will not be required to mitigate any damages
arising from this Agreement and any amounts and benefits to be provided
to the Executive hereunder shall not be reduced or set off against any
amounts earned by the Executive from alternate employment, including
self-employment, or by other means.
26. Any payment other than for base salary made to the Executive under this
Agreement shall be made by way of a lump sum payment or, at the
Executive's option, in such other manner as he may direct, less
deductions required by applicable law.
27. 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.
28. 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.
29. All dollar amounts identified in this contract are in U.S. $ currency.
30. The parties' respective rights and obligations under paragraphs 19, 20,
21, 22, 23, 34 and 35 will survive any termination or expiration of
this Agreement or the termination of the Executive's employment for any
reason whatsoever.
GOVERNING LAWS
31. This Agreement shall be governed by the laws of the Province of
Ontario.
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SEVERABILITY
32. 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
33. This Agreement shall be binding upon and enure to the benefit of (i)
the Executive 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 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.
LEGAL ADVICE
34. The Executive 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.
35. The Company agrees to reimburse the Executive for all reasonable legal
expenses incurred in connection with any dispute involving the
Executive, 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 Executive in respect of any action or actions commenced
by the Executive 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 the Agreement or after;
provided that, in regard to such matters, the Executive has not acted
in bad faith or with no colorable claim of success. However, the
Company shall not be required to reimburse the Executive for any legal
costs or expenses in relation to any action commenced by the Company to
enforce the confidentiality or 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
36. 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 EXECUTIVE:
Xxxx X. Xxxxxxx
0 Xxxxxxx Xxxxx
Xxxx , Xxxxxxx , X0X 0X0
TO THE COMPANY:
9
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:
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
37. 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.
38. This Agreement shall be effective upon the date of its execution by the
Executive following execution by the Company.
...CONTINUED
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IN WITNESS WHEREOF the Executive has hereunto set his hand and the Company has
affixed hereto its corporate seal attested by the hand of its duly authorized
officer 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. XXXXXXX
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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 19 of this Agreement
and this Annex A, including whether an Excise Tax is payable by the
Executive and the amount of such Excise Tax and whether a Gross-Up
Payment is required to be paid by the Company to the Executive 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 Executive in his sole discretion. The Executive will direct the
National Firm to submit its determination and detailed supporting
calculations to both the Company and the Executive 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 Executive. If the National Firm determines that any Excise Tax is
payable by the Executive, the Company will pay the required Gross-Up
Payment to the Executive within five business days after receipt of
such determination and calculations with respect to any Payment to the
Executive. If the National Firm determines that no Excise Tax is
payable by the Executive 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 Executive with an opinion
that the Executive 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 Executive thereafter is required to make a
payment of any Excise Tax, the Executive 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 Executive as promptly as possible. Any such
Underpayment will be promptly paid by the Company to, or for the
benefit of, the Executive within five business days after receipt of
such determination and calculations.
2. The Company and the Executive will each provide the National Firm
access to and copies of any books, records and documents in the
possession of the Company or the Executive, 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 Executive.
3. The U. S. federal, state and local income or other tax returns filed by
the Executive 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 Executive. The Executive 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 Executive'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 Executive 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 Executive, the Company will
reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
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5. The Executive 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-Up
Payment. Such notification will be given as promptly as practicable but
no later than 10 business days after the Executive actually receives
notice of such claim and the Executive 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
Executive). The Executive 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 Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive 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
Executive, 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
Executive may participate therein at his own cost and expense) and may,
at its 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 determines;
PROVIDED, HOWEVER, that if the Company directs the Executive to pay the
tax claimed and xxx for a refund, the Company will advance the amount
of such payment to the Executive on an interest-free basis and will
indemnify and hold the Executive 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
Executive 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 Executive 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 Executive of an amount advanced by the
Company pursuant to paragraph 5 of this Annex, the Executive receives
any refund with respect to such claim, the Executive 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 Executive of an amount advanced
by the Company pursuant to paragraph 5 of this Annex, a determination
is made that the Executive is not 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 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
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extent thereof, the amount of Gross-Up Payment required to be paid by
the Company to the Executive pursuant to paragraph 19 if this Agreement
and this Annex A.
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