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PHAR-MOR SEVERANCE AGREEMENT
THIS PHAR-MOR SEVERANCE AGREEMENT ("Agreement") is made as of the day
of , 1997, by and between PHAR- MOR, INC., a Pennsylvania corporation (the
"Corporation"), and XXXXXX X. XXXX ("X.X. Xxxx").
WHEREAS, the parties hereto previously entered into that certain
Employment Agreement dated as of September 11, 1995 (the "Employment
Agreement");
WHEREAS, the parties hereto desire to terminate X.X. Xxxx'x employment
with the Corporation and to treat such termination as "Without Cause" for
purposes of the Employment Agreement; and
WHEREAS, the parties hereto desire to set forth herein the terms and
conditions of their understandings and agreements.
NOW, THEREFORE, in consideration of the mutual promises herein
contained the parties agree as follows:
1. Recitals. The foregoing recitals are, by this reference,
incorporated herein and made a substantive part of this Agreement. Unless
otherwise defined herein, all capitalized terms shall have the meanings ascribed
to them in the Employment Agreement.
2. Termination. The Corporation and X.X. Xxxx hereby agree
that X.X. Xxxx'x employment with the Corporation shall terminate effective as of
Closing (the "Effective Date") under that certain Xxxxxxxx Xxxxxx LLC Interests
Redemption and Exchange Agreement dated as of , 1997. The parties agree that
such termination shall for purposes of the Employment Agreement be treated as a
termination "Without Cause".
3. Severance. In satisfaction of the Corporation's
obligations under Section 5.20 of the Employment Agreement, the Corporation
agrees to the following:
a. On the Effective Date, the Corporation shall
make a lump-sum cash payment to X.X. Xxxx in the total amount of $5,000,000,
less the amount of any Annual Bonus actually paid to X.X. Xxxx by the
Corporation prior to the Effective Date with respect to the Corporation's fiscal
year 1997. If sooner than the Effective Date, the Corporation shall pay to X.X.
Xxxx his Annual Bonus for fiscal year 1997 at the same time as the Corporation
pays annual bonuses to any of its other senior executives for such fiscal year.
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b. In addition, on or before September 28, 1998,
the Corporation shall pay to X.X. Xxxx seventy-five percent (75%) of any
Long-Term Performance Payment payable to X.X. Xxxx for the three (3) year period
ended June 30, 1998. The Long-Term Performance Payment shall be calculated in
accordance with Schedule 1 attached hereto.
c. On the Effective Date, the Corporation shall
also pay to X.X. Xxxx the deferred compensation payable to him from his
non-qualified management deferral plan account with the Corporation in the
original amount of $325,429.21, plus any return on such account through the
Effective Date.
d. From the Effective Date to the third (3d)
anniversary of the Effective Date, the Corporation shall continue to provide the
medical, hospitalization, dental and disability benefits and reimbursements as
described in and previously provided under Section 4.20 of the Employment
Agreement. Thereafter, X.X. Xxxx shall be entitled to his statutory rights under
Cobra. The current disability insurance coverages are described on Schedule 2
attached hereto.
e. From the Effective Date to the third (3d)
anniversary of the Effective Date, the Corporation shall continue to reimburse
X.X. Xxxx on a net after-tax basis for the life insurance coverage as described
in and previously provided under Section 3.00 of the Employment Agreement. The
applicable policies and face amounts are set forth on Schedule 2 attached
hereto.
f. The Corporation acknowledges, ratifies and
confirms that (i) X.X. Xxxx shall, after the Effective Date, continue to be the
legal and beneficial owner of options (the "Options") to purchase (a) up to
256,250 shares of the Corporation's common stock (par value $0.01 per share) at
a purchase price of $8.00 per share (the "Original Options"), (b) up to 5,000
shares of the Corporation's common stock (par value $0.01 per share) at a
purchase price of $7.06 per share (the "1995 Director Options"), (c) up to 5,000
shares of the Corporation's common stock (par value $0.01 per share) at a
purchase price of $6.1719 per share (the "1996 Director Options") and (d) up to
125,000 shares of the Corporation's common stock (par value $0.01 per share) at
a purchase price of $5.4375 per share, provided that the Corporation's
shareholders approve an increase in the number of the Corporation's shares of
authorized common stock (the "1997 Options") (the shares to be issued upon
exercise of any of the Original Options, the 1995 Director Options, the 1996
Director Options and/or the 1997 Options are collectively referred to herein as
the "Option Shares"), (ii) the Options shall be one hundred percent (100%)
vested as of the Effective Date (provided, however, that, as to the 1997
Options,
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one-third (1/3) may be exercised immediately and thereafter, one-third (1/3) may
be exercised on or after June 5, 1998 and one-third (1/3) may be exercised on or
after June 5, 1999), (iii) the Original Options shall be exercisable by X.X.
Xxxx in whole or in part until February 11, 2000, (iv) the 1995 Director Options
and the 1996 Director Options shall be exercisable by X.X. Xxxx in whole or in
part until October 2, 2000 and October 1, 2001, respectively, (v) the 1997
Options shall be exercisable by X.X. Xxxx in whole or in part until June 5, 2004
and (vi) the Options shall include the following:
(1) The Corporation covenants and agrees that, unless X.X. Xxxx elects
otherwise, the Options shall, to the fullest extent possible under
applicable Federal income tax laws and under the Plan, be treated and
reported as incentive stock options as defined under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and any
remaining Options shall be treated as nonqualified stock options. The
Corporation covenants and agrees that, upon written request by X.X.
Xxxx, the Corporation shall accept the surrender by X.X. Xxxx of X.X.
Xxxx'x right to exercise all or any portion of the Options and pay in
consideration therefor within ten (10) days following such surrender
an amount equal to the difference obtained by subtracting the exercise
price of the Option Shares which are the subject of such surrendered
Option(s) from the fair market value (as determined by the closing
trading price per share of the Corporation's common stock for the
business day immediately prior to the date of such exercise) of the
Option Shares which are the subject of such surrendered Option(s) on
the date of such surrender (such amount not to be less than zero),
such payment to be in cash.
(2) With respect to the Options (and the shares of the Corporation's
capital stock to be received upon exercise of the Options), X.X. Xxxx
shall have such rights, benefits and protections, pro rata and in pari
passu and on the same terms and conditions as are equal to the best
rights, benefits and protections as have been provided or may in the
future be provided to any executive of the Corporation or its
subsidiaries, regarding their respective options, warrants, stock
rights and/or shares of capital stock in the Corporation (collectively
or individually, "Equity"), concerning terms of payment for the
acquisition of
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Equity, registration rights and anti-dilution
protection granted with respect to Equity and any
re-pricing of Equity that is more favorable than the
exercise price of the Options.
(3) In the event of any conflict, inconsistency or
ambiguity between the terms and provisions of this
Agreement and the terms and provisions of the Stock
Option Plan and/or the Initial Stock Option
Agreement, the terms and provisions of this Agreement
shall govern and control for all purposes and in all
respects in order to provide X.X. Xxxx with the
maximum benefit of all of the foregoing.
(4) The loan provisions of Section 4.11 of the
Employment Agreement shall terminate and be of no
force or effect.
g. From the Effective Date through the second
(2nd) anniversary of the Effective Date, the Corporation shall continue to
provide X.X. Xxxx with a Washington, D.C. office and full-time secretarial
services as previously provided under Section 2.30 of the Employment Agreement.
For purposes of this paragraph 3g, the Corporation agrees (i) to continue to
retain Xxxx Xxxxxx as an employee of the Corporation at her present salary (plus
an annual four percent (4%) increase) and benefits levels (which is reflected on
Schedule 3 attached hereto) and (ii) to pay the office rent (not to exceed
$30,000 per year) and utilities (plus landlord passthroughs, if any) but
excluding telephone charges on office space used by X.X. Xxxx in Washington,
D.C. or another location of his choosing.
4. [Intentionally left blank.]
5. Tax Adjustment Payments; Indemnification; Letter of Credit;
Agreed Tax Reporting.
a. The Corporation and X.X. Xxxx shall prepare
and file their respective Federal income tax returns on the basis that no
payments made or to be made by the Corporation to X.X. Xxxx under this Agreement
(other than payments, if any, under this paragraph 5) are "excess parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"). If all or any portion of the amount payable to
X.X. Xxxx under this Agreement (together with all other payments of cash or
property, whether pursuant to this Agreement or otherwise, including, without
limitation, the issuance of Options or Option Shares or the granting, exercise
or termination of options therefor, or the payments or benefits made or granted
under paragraph 3 above) constitutes or is
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subsequently determined to constitute "excess parachute payments" within the
meaning of Section 280G of the Code, that are subject to the excise tax imposed
by Section 4999 of the Code (or any similar tax or assessment), then the
Corporation shall pay X.X. Xxxx an amount equal to the sum of: (i) such excise
or other similar taxes, plus (ii) any interest, fines and penalties resulting
from any underpayment of tax or estimated tax, plus (iii) an amount necessary to
pay to X.X. Xxxx any income, excise or other tax assessment incurred or to be
incurred by X.X. Xxxx with respect to the amounts specified in (i) and (ii)
above, and the payment provided by this clause (iii). Any such payment shall be
made immediately by the Corporation upon the earliest to occur of (x) assessment
against X.X. Xxxx of such tax, penalties or interest, (y) determination by X.X.
Xxxx and his tax advisors that he is obligated to make an estimated tax payment
in connection with any of the amounts specified in clause (iii) above or (z)
preparation by X. X. Xxxx of a tax return for filing after a final determination
by a Taxing Authority in an Indemnified Tax Contest that any portion of the
payments made to X.X. Xxxx under this Agreement are "parachute payments" under
Section 280G of the Code, that reports any of the amounts specified in clauses
(i), (ii) or (iii) above. In furtherance of the foregoing, the Corporation
hereby agrees to indemnify and hold harmless (including advance payment of
expenses) X.X. Xxxx from and against any loss, cost, penalty or expense
(including attorneys' and accountants' fees incurred by him) in connection with
any actual, threatened or potential assertion or assessment of any excise tax
under Section 4999 of the Code (or any similar tax or assessment) relating to
any benefit or payment received by X.X. Xxxx under this Agreement.
b. On the Effective Date, the Corporation shall
do the following:
(1) The Corporation shall deliver to X.X.
Xxxx the opinion of Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx, in form and content
reasonably satisfactory to X.X. Xxxx and his tax advisors, that there is a
reasonable basis to take a position in the preparation and filing of Federal
income tax returns, and a realistic possibility of sustaining on the merits such
position, that the payments and benefits received by X.X. Xxxx under this
Agreement are not "excess parachute payments" under Section 280G of the Code and
are not subject to the excise tax imposed by Section 4999 of the Code (or any
similar tax or assessment). The Corporation shall also deliver to X.X. Xxxx
complete copies of any analyses, memoranda or opinions prepared by Deloitte &
Touche, LLP in connection with this tax issue.
(2) The Corporation shall deliver to X.X.
Xxxx an unconditional and irrevocable sight draft letter of credit in the face
amount of $2,933,513 issued by a federally-
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regulated money center financial institution satisfactory to X.X. Xxxx, in his
sole discretion, that shall name X.X. Xxxx as beneficiary thereunder and, upon
presentment, shall be drawable by X.X. Xxxx. As between the parties hereto, it
is agreed that X.X. Xxxx may draw upon the letter of credit upon the first to
occur of (i) receipt by X.X. Xxxx of a notice of assessment from an applicable
governmental tax authority in connection with an excise tax under Section 4999
of the Code (or any similar tax or assessment), (ii) determination by X.X. Xxxx
and his tax advisors that X.X. Xxxx'x liability for taxes, penalties and
interest if the IRS successfully challenges the tax reporting position described
in paragraph 5a above would, or is reasonably likely to, exceed the amount of
the letter of credit, (iii) failure by the Corporation to satisfy any of its
obligations under paragraph 5a above, or (iv) thirty (30) days or less prior to
the expiration date of such letter of credit, unless such letter of credit is
renewed or a new letter of credit that conforms to the requirements of this
paragraph 5b(2) is substituted therefor in a face amount equal to the amount set
forth above plus such additional interest as may accrue through the expiration
date of such renewed or new letter of credit plus the gross up payment that
would be due in connection with such additional interest under clause (iii) of
paragraph 5a above. The Corporation shall remain fully liable for its
obligations under this Agreement, notwithstanding any amounts drawn under the
letter of credit (but amounts so drawn shall be credited against such
obligations), and X.X. Xxxx shall retain any and all legal and equitable rights
and remedies in connection therewith. X.X. Xxxx may exercise such rights and
remedies at any time and from time to time in any order that he chooses, and any
failure to exercise a right or remedy in any one instance shall not preclude its
subsequent exercise. The letter of credit shall be in form and content
reasonably satisfactory to X.X. Xxxx and shall have an initial term of three (3)
years and shall thereafter be renewed (or a new letter of credit meeting the
requirements of this paragraph 5b(2) is substituted therefor) for additional one
(1) year periods until the later of (i) expiration of any applicable statute of
limitations on assessment (except where the applicable statute of limitations
remains open solely due to X.X. Xxxx'x failure to file a tax return or fraud) or
(ii) a final determination in any pending Indemnified Tax Contest. Upon the
reasonable determination of X.X. Xxxx'x tax advisors that all applicable
statutes of limitation have expired and that X.X. Xxxx has no unresolved
obligation for taxes, penalties or interest relating to "excess parachute
payments" and that all of the Corporation's obligations under paragraph 5a above
have been fully satisfied, X.X. Xxxx shall deliver to the Corporation any
amounts held by him that were previously drawn under the letter of credit and
not applied toward the Corporation's obligations under paragraph 5a above. In
the event that X.X. Xxxx draws upon the letter of credit pursuant to any of the
events described in paragraph
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5b(2)(i) - (iv) above, X.X. Xxxx shall, promptly after such draw on the letter
of credit is received by him, notify the Corporation thereof. The Corporation
shall have fifteen (15) days following such notice to fully and completely cure
the event that led to such draw. If the Corporation (x) fully and completely
cures such event within such period and (y) causes the letter of credit required
under this paragraph 5b(2) to be reinstated (on the same terms and conditions
imposed under this paragraph 5b(2)) within such period, then X.X. Xxxx shall
repay such drawn amounts to the Corporation.
c. In connection with the payments made pursuant
to paragraphs 3a, c, d and e above, the Corporation shall prepare and file with
the Social Security Administration and any other applicable governmental
authority a Form W-2 in the form of Exhibit "A" attached hereto. Payments by the
Corporation to X.X. Xxxx shall be subject to withholding as required by law (and
payments under paragraph 3e above shall be grossed-up so that X.X. Xxxx incurs
no net tax cost in connection therewith). Notwithstanding the foregoing, the
parties agree that the Corporation shall not withhold taxes or other payroll
deductions or otherwise report income to X.X. Xxxx on any tax reporting form
relating to the Corporation's satisfaction of its obligations under paragraph 3g
above.
d. In the event of any determination or proposed
determination by the Internal Revenue Service or other taxing authority (a "Tax
Authority") affecting X.X. Xxxx'x liability for taxes, interest, or penalties
subject to indemnity under paragraph 5a above (an "Indemnified Adverse Tax
Effect"), X.X. Xxxx agrees that the Corporation's representatives shall be
authorized to conduct or participate in administrative and/or judicial
proceedings in which such Indemnified Adverse Tax Effect is contested (an
"Indemnified Tax Contest") to the extent provided below:
(1) Right of Corporation to Pursue
Indemnified Tax Contest. Subject to the terms and conditions of this paragraph
5d, the Corporation may, but is not required to, conduct or participate in any
Indemnified Tax Contest at its own expense. The Corporation shall have thirty
(30) days following notice of an Indemnified Tax Contest to notify X.X. Xxxx of
its exercise of its right under this paragraph 5d(1) to conduct or participate
in the Indemnified Tax Contest. Any failure by the Corporation to so notify X.X.
Xxxx and exercise such right, shall be conclusively deemed an irrevocable waiver
by the Corporation of such rights and thereafter X.X. Xxxx shall have no
obligation to maintain the tax reporting position described in paragraph 5a
above and X.X. Xxxx shall be free to pursue any position he, in his sole
discretion, deems appropriate or desirable, including, without limitation,
filing an amended return, drawing on the
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letter of credit and paying the excise tax liability (plus penalties and
interest, if any). The Corporation shall only have such rights to conduct or
participate under this paragraph 5d so long as it maintains, on its own behalf,
the tax reporting position set forth in paragraph 5a above. Upon the
Corporation's timely notice and exercise of its rights under this paragraph
5d(1), X.X. Xxxx agrees not to voluntarily consent to assessment of tax with
respect to and to the extent of the Indemnified Adverse Tax Effect. X.X. Xxxx
shall promptly notify the Company of (i) his receipt of any notice of audit for
any of the years for which there may be an Indemnified Adverse Tax Effect and
(ii) the occurrence of an event which causes an Indemnified Tax Contest to
exist. The term "conduct or participate in" as used in this paragraph 5 shall
include (x) the right to attend, through representatives of the Corporation's
choice, all meetings, interviews, and conferences by and between X.X. Xxxx
and/or his representatives and representatives of the Internal Revenue Service,
where, but only to the extent that, the subjects thereof include an Indemnified
Adverse Tax Effect and (y) the right to submit to X.X. Xxxx for filing any
protest, petition, or claim for refund or any other filing or submission
regarding an Indemnified Adverse Tax Effect.
(2) Execution of Documents Necessary to
Conduct of Indemnified Tax Contest. X.X. Xxxx will execute such documents as may
be reasonably required to facilitate the Corporation's ability to conduct or
participate in any Indemnified Tax Contest; provided, however, X.X. Xxxx shall
not be required in any event to execute a power of attorney authorizing
representatives of the Corporation to act on his behalf (other than a limited
power of attorney on IRS Form 2848-D authorizing the Corporation's outside tax
counsel to receive copies of all IRS notices and correspondence relating to an
Indemnified Adverse Tax Effect), and shall not be required to execute extensions
of the statute of limitations on assessment which are not limited solely to
assessment of taxes causing the Indemnified Adverse Tax Effect.
(3) Separation of Proceedings by Piggy-Back
Settlement Agreement. If the asserted legal basis for an Indemnified Adverse Tax
Effect, if sustained, would necessarily also require an increase in tax
liabilities of the Corporation (a "Related Tax Increase"), the Corporation shall
use its best efforts to cause the Related Tax Increase to be contested directly
by the Corporation on its own behalf, so that X.X. Xxxx'x liability for such
Indemnified Adverse Tax Effect may be resolved pursuant to a "piggy-back"
settlement agreement under which X.X. Xxxx agrees with the relevant Tax
Authority to be bound to tax treatment consistent with any final determination
with respect to the Related Tax Increase.
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(4) Corporation's Participation in Tax
Audits. If an Indemnified Adverse Tax Effect is an issue under consideration in
an audit of the returns of X.X. Xxxx, the Corporation shall be authorized to
participate in such audit only with respect to, and to the extent of, issues
related to an Indemnified Adverse Tax Effect.
(5) Corporation's Right to Convert Contest
to Refund Proceedings. If an Indemnified Adverse Tax Effect is an issue under
consideration in an audit of the returns of X.X. Xxxx, and the Corporation has
given adequate assurance of the availability of funds provided by the
Corporation to immediately and fully pay such Indemnified Adverse Tax Effect
when assessed, X.X. Xxxx will, if the Corporation so requests, file a Form 870
or amended return permitting the assessment of the Indemnified Adverse Tax
Effect with respect to such issue, and after assessment and payment thereof,
X.X. Xxxx will execute all documents as are reasonably required for the
Corporation to then contest such Indemnified Adverse Tax Effect through a claim
for refund, including a judicial challenge to the administrative denial of any
such claim for refund. In the event such Indemnified Adverse Tax Effect is
converted to a refund proceeding, the Corporation shall be authorized to control
the conduct of such refund proceeding so long as the Indemnified Adverse Tax
Effect is the only issue in the refund proceeding.
(6) Participation of Corporation in
Litigation Controlled by X.X. Xxxx. In any litigation with a Tax Authority in
which the Indemnified Adverse Tax Effect is an issue, the Corporation shall be
permitted to participate in such litigation (or, as provided in subparagraph
5d(5) above, control such litigation), but only with respect to, and to the
extent of, the Indemnified Adverse Tax Effect, including providing a response to
such issue in the context of such litigation.
(7) Cooperation and Information Sharing.
The Corporation and X.X. Xxxx will provide each other with such cooperation,
assistance and information as either of them reasonably may request of the other
to facilitate the presentation or adjudication of an issue concerning an
Indemnified Adverse Tax Effect. At any time, upon the request of any party, the
other party will promptly and duly execute and deliver, or cause to be promptly
and duly executed and delivered, such further instruments and documents and take
such further action as may reasonably be required to effectuate the provisions
of this paragraph 5d.
(8) Final Determination. In the event that
an indemnification payment has been made to X.X. Xxxx pursuant to
paragraph 5a in order to permit the conduct of a refund
proceeding under subparagraph 5d(5) hereof, and a refund is
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finally determined and issued as a result of such proceeding, the amount of the
indemnification obligation of the Corporation under paragraph 5a shall be
recomputed to reflect such outcome (and the collateral consequences thereof) and
any excess indemnity payment determined to have been paid by the Corporation in
view of the determination in such refund proceeding shall, along with any
statutory interest payments received by X.X. Xxxx (after deduction for any
related tax liability) in connection with such a refund of tax, be returned by
X.X. Xxxx to the Corporation (net of any then outstanding indemnity obligations
of the Corporation to X.X. Xxxx). X.X. Xxxx agrees promptly to execute such
documents as reasonably requested by the Corporation to recover excise or income
tax paid to taxing authorities as a consequence of an Indemnified Adverse Tax
Effect. The full amount of such refund(s), including interest (after deduction
by X.X. Xxxx for any related tax liability), actually received by X.X. Xxxx
shall be held in trust by X.X. Xxxx for the Corporation's benefit and shall be
promptly paid by X.X. Xxxx to the Corporation.
(9) No Limitations or Restrictions on X.X.
Xxxx. Notwithstanding the foregoing provisions of this paragraph 5, nothing
herein shall be interpreted to require X.X. Xxxx to take, or prohibit him from
taking, any action that, if taken or not taken (as applicable), would, or
reasonably could be expected to, adversely affect or impede his ability to
conduct, contest, defend or settle any matter that is not an Indemnified Adverse
Tax Effect, including, without limitation, his ability to file a petition in the
U.S. Tax Court to contest any matters unrelated to an Indemnified Adverse Tax
Effect that are raised in a notice of proposed deficiency from the Internal
Revenue Service. So long as the Corporation is not in breach or default of any
of its obligations, representations or warranties under this Agreement, X.X.
Xxxx shall not concede or compromise an Indemnified Adverse Tax Effect in a
manner that would prevent judicial review of the determination of the
Indemnified Adverse Tax Effect without the Corporation's prior written consent.
(10) X.X. Xxxx'x Right to Terminate. Upon
the occurrence of (i) failure by the Corporation to exercise its rights under
paragraph 5d(1) above to conduct or participate in an Indemnified Tax Contest,
(ii) any breach or default by the Corporation of any of its representations,
warranties, covenants or indemnifications provided under this Agreement (or any
other agreement by the Corporation for X.X. Xxxx'x benefit) and if any such
breach or default is not fully and completely cured within ten (10) days
following notice thereof to the Corporation, then, in either case, X.X. Xxxx
may, in addition to all of his other legal and equitable rights and remedies,
terminate the Corporation's rights, and X.X. Xxxx'x obligations, under this
paragraph 5d; it being understood and agreed that, notwithstanding X.X. Xxxx'x
exercise of such termination right,
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the Corporation shall remain fully responsible for all of its obligations and
liabilities under this Agreement (including specifically its obligations under
paragraph 5a above) and X.X. Xxxx shall thereafter have no duty or obligation to
pursue or permit the Corporation to pursue an Indemnified Tax Contest.
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6. Corporation's Representations and Warranties. The
Corporation represents and warrants that, as of the date hereof, and as of the
Effective Date, each of the following representations and warranties is, and
shall be, true, complete and correct:
a. The Corporation has the full power, right,
authority and legal capacity to enter into, execute and deliver this Agreement
and to perform all of its obligations hereunder.
b. This Agreement has been duly executed and
delivered by the Corporation, has been duly authorized by all necessary
corporate action and is the valid and binding obligation of the Corporation,
enforceable in accordance with its terms.
c. The Corporation is not the debtor in any
bankruptcy or insolvency proceeding, nor is it insolvent, nor will the
performance of any actual or potential obligations under this Agreement render
the Corporation insolvent.
7. Release.
a. Effective as of the Effective Date, the
Corporation, on behalf of itself and its Affiliates, officers, directors,
employees, agents and representatives (collectively, the "Phar-Mor Parties"),
hereby agrees to release, acquit and discharge X.X. Xxxx, whether in his
capacity as an officer, employee, director or shareholder (including release of
any entity through which X.X. Xxxx holds any indirect share ownership in the
Corporation) of the Corporation or otherwise, and his heirs, agents and
representatives, successors and assigns (collectively, the "Haft Parties"), from
any and all claims, actions, causes of action, liabilities, obligations and
responsibilities of any kind whatsoever, known or unknown, mature or contingent,
that the Phar-Mor Parties have, have had or may hereafter have, against any of
the Haft Parties, directly or indirectly, in connection with any act, event or
omission occurring or failing to occur at any time on or before the Effective
Date. In furtherance and not in limitation of the Corporation's release under
this paragraph 7a, the Corporation specifically acknowledges and agrees that
X.X. Xxxx is free to pursue any and all business opportunities, investments and
employment of any kind whatsoever, whether arising on, before or after the
Effective Date, as he may desire without restriction of any kind, and the
Corporation hereby expressly waives any claims against X.X. Xxxx or any of his
Affiliates with respect thereto. For purposes of this Agreement, "Affiliate"
shall, with respect to any person, mean any individual or entity, directly or
indirectly, controlled by, controlling or in common control with such person.
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b. X.X. Xxxx, on behalf of himself and the Haft
Parties, hereby agrees to release, acquit and discharge the Corporation and its
officers, directors, and employees from any and all claims, actions, causes of
action, liabilities, obligations and responsibilities of any kind whatsoever,
known or unknown, mature or contingent that the Haft Parties have, have had or
may in the future have, against the Corporation, directly or indirectly, in
connection with any act, event or omission occurring or failing to occur, at any
time on or before the Effective Date; provided, however, that nothing contained
in this paragraph 6b shall be deemed a release by X.X. Xxxx of (i) his rights,
or the Corporation's obligations, under this Agreement or that certain Stock
Option Agreement dated September 11, 1995 between the Corporation and X.X. Xxxx
(the "Option Agreement") or under any pension, profit sharing, option or other
compensation or benefit plan of the Corporation in which he has participated
prior to the Effective Date or with respect to any stock options or related
rights (including registration rights) that he has previously been granted, or
(ii) Xxxxx Xxxxxx or Xxxxxx Xxxxxx, other than in their respective capacities as
members of the Corporation's Board of Directors, or any of their respective
Affiliates.
8. Indemnification. To the fullest extent permitted or
required by the laws of the state of incorporation of the Corporation, as may
apply form time to time, the Corporation shall indemnify and hold harmless
(including advance payment of expenses) X.X. Xxxx, in accordance with the terms
of such laws, if X.X. Xxxx is made a party, or threatened to be made a party, to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that X.X. Xxxx
is or was an officer or director for the Corporation or any subsidiary or
affiliate of the Corporation, against expenses (including reasonable attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any such action, suit or proceeding, which
indemnification shall include the protection of the applicable indemnification
provisions of the Amended and Restated Certificate of Incorporation and the
Amended and Restated By-laws of the Corporation from time to time in effect. The
Corporation hereby agrees that such obligations include indemnification of X.X.
Xxxx from any claims asserted against or incurred by him in connection with any
direct or indirect stock ownership in the Corporation. In addition to the
foregoing, the Corporation shall indemnify and hold harmless X.X. Xxxx from and
against any loss, cost, damage, claim or expense (including attorneys' fees and
litigation expenses) incurred by or asserted against him as the result, directly
or indirectly, of the Corporation's breach or default of any of its
representations, warranties or covenants under this Agreement.
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9. Return of Personal Possessions. The Corporation shall
permit X.X. Xxxx (or his representatives) to remove any and all of his personal
possessions, mementos, art work, furniture, furnishings and other property that
are located in the Corporation's offices in Youngstown, Ohio. The Corporation
acknowledges and agrees that all furnishings, fixtures and equipment located in
X.X. Xxxx'x Washington, D.C. office are the exclusive property of X.X. Xxxx.
10. No Duty to Mitigate, Etc. X.X. Xxxx'x rights under
paragraphs 3a, b, c, d and e and paragraph 4 above are absolute, and X.X. Xxxx
shall have no duty to seek substitute employment or otherwise to mitigate any
loss and all amounts and benefits payable under such paragraphs shall be paid to
X.X. Xxxx without offset or reduction (regardless of any claims that the
Corporation may possess) and even if X.X. Xxxx obtains substitute employment.
The Corporation shall not garnish, offset or otherwise withhold for the benefit
of itself or any third party (other than withholding imposed by any governmental
authority) any amounts payable to X.X. Xxxx under this Agreement unless
compelled to do so by judicial order; it being specifically agreed that the
Corporation shall not offset or withhold any payment under paragraphs 5a or 8
hereof, even if the Corporation believes it has defenses or claims in connection
therewith.
11. Miscellaneous.
a. The provisions of this Agreement are severable and if any
one or more provisions may be determined by a court of competent jurisdiction to
be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions and any partially unenforceable provisions to the extent enforceable
in any jurisdiction nevertheless shall be binding and enforceable.
b. During the Term, the Corporation shall maintain customary
directors' and officers' liability insurance with X.X. Xxxx as a beneficiary
thereunder, for any acts, events or omissions occurring or failing to occur on
or before the Effective Date.
c. This Agreement embodies the entire agreement of the parties
with respect to X.X. Xxxx'x termination of employment and, except as provided
herein, supersedes any other prior oral or written agreements, arrangements or
understandings between X.X. Xxxx and the Corporation. This Agreement may not be
changed or terminated orally but only by an agreement in writing signed by the
parties hereto.
d. All notices and other communications required or permitted
under this Agreement shall be in writing, and shall be deemed properly given if
delivered personally, mailed by
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registered or certified mail in the United States mail, postage prepaid, return
receipt requested, sent by facsimile, or sent by overnight Express delivery
service, as follows:
If to the Corporation:
Phar-Mor, Inc.
00 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Attn: General Counsel
If to X.X. Xxxx:
Xxxxxx X. Xxxx
0000 Xxxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
With a copy to:
Xxxxxx, Flyer & Xxxxx, a professional corporation 0000 X
Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxxxxxxx, Esquire
Notice given by hand, Express Mail, Federal Express or other such express
delivery service shall be effective upon actual receipt. Notice given by
facsimile transmission shall be effective upon actual receipt if received during
the recipient's normal business hours, or at the beginning of the recipient's
next business day after receipt if not received during the recipient's normal
business hours. All notices by facsimile transmission shall be confirmed
promptly after transmission in writing by certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by giving
notice as provided above of such change of address.
e. The parties acknowledge and agree that they are each familiar with
and desire their relationship to be governed by the laws of the State of
Delaware. Accordingly, this Agreement shall be construed under and governed by
the laws of the State of Delaware and the parties hereto irrevocably consent
(and waiver any objection) to the jurisdiction and venue of the State of
Delaware courts and/or the United States District for the District of Delaware
for any action arising under this Agreement.
f. This Agreement shall inure to the benefit and bind the successors
and assigns of the parties. In particular, the provisions of Section 3.00 of the
Employment Agreement applicable to X.X. Xxxx shall inure to the benefit and bind
any assignee
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(including donee and legatee) of the policy or policies from X.X.
Xxxx.
g. Captions to the paragraphs and subparagraphs of this Agreement are
solely for the convenience of the parties, are not a part of this Agreement, and
shall not be used for the interpretation of any of the provisions of this
Agreement.
h. The Corporation shall reimburse X.X. Xxxx for any legal and
accounting fees and expenses incurred by him in connection with the preparation,
execution and delivery of this Agreement, such fees and expenses not to exceed
$50,000.
i. In the event a controversy or claim arises under or related to this
Agreement and the parties to the dispute do not settle their dispute, any
unresolved claim or controversy shall, at the election of either party, be
submitted to binding arbitration before a single neutral arbitrator, said
arbitrator to be an individual with at least ten (10) years experience as a
senior executive of a Fortune 500 company (a "Qualified Arbitrator"). The
Qualified Arbitrator shall be selected through the following procedure: within
ten (10) days following a party's notice of its election to arbitrate, each
party shall submit to the other a list of at least five (5) qualified
individuals and the parties shall proceed in good faith to select a Qualified
Arbitrator from such lists. If the parties are unable to agree upon a Qualified
Arbitrator within thirty (30) days of submission of such lists, then they shall
seek appointment of a Qualified Arbitrator by the American Arbitration
Association. The arbitration shall be conducted within the greater Washington,
D.C. metropolitan area in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association and commenced within
ninety (90) days after selection of the Qualified Arbitrator, and judgment on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof; it being the intent of the parties hereto that, if
arbitration is pursued hereunder, any award made pursuant thereto shall be
binding upon and enforceable against the parties hereto. The parties hereto
specifically and expressly desire that any such controversy or claim be resolved
in the most expeditious manner possible, and, accordingly, irrevocably instruct
any such arbitrator to issue a decision and award within thirty (30) days after
the arbitration hearing is completed and written submissions, if any are
required or permitted, have been filed with the Qualified Arbitrator, or as soon
as practicable thereafter.
j. Time is of the essence for all purposes of
this Agreement.
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IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the date first above written.
PHAR-MOR, INC., a Pennsylvania
corporation
By:
Xxxxxx X. Xxxx
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EXHIBIT A
Form W-2
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Schedule 1
Long Term Performance Payment
The Long-Term Performance Payment (if any) shall be
(x) three percent (3%) of any excess of (i) the aggregate
market value of the Corporation's publicly-traded common stock
based on the average closing price for the thirty (30)-day
period ending on the last day of the subject period (less the
sum of (a) the proceeds from the exercise during such period
of any options or warrants plus (b) any cash or property
consideration actually received by the Corporation during such
period form the issuance of any shares of its common stock)
over (ii) the aggregate market value of the Corporation's
publicly-traded common stock based on the average closing
price for the thirty (30)-day period ending on the last day of
the immediately prior subject period (provided that for the
first day of the period ending on June 30, 1998 such average
closing price shall be deemed to be $8.00 per share), less (y)
one-half of the Annual Bonus paid or payable to X.X. Xxxx, if
any, for each of the three fiscal years comprising such period
(but not in any event less than zero).
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Schedule 2
Life Insurance
Company Policy Number Face Amount Premium
------- ------------- ----------- -------
Pacific Mutual 1A23092310 $3,000,000 $38,110.00
Disability Insurance
Policy Monthly Annual Owner and
Company Number Benefit Premium Loss Payee
Xxxx Xxxxxx 01028146490 $10,000 $ 5,664.00 X.X. Xxxx
Reliance RN HLD 0445 $35,000 $19,993.00 Phar-Mor
Reliance XX XXX 0000x Xxxx Xxx - 0 - Xxxx-Xxx
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Schedule 3
Xxxx Xxxxxx
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