1
EXHIBIT 10.3
SEVERANCE AND CHANGE IN CONTROL AGREEMENT
AGREEMENT effective as of November 17, 1997 between GALOOB TOYS,
INC. (the "Corporation") and XXXX X. XXXXXXX (the "Executive").
WHEREAS, the Executive is currently employed by the Corporation in
an executive or key management position capacity and is currently
serving as President and Chief Executive Officer, as a member of the
Board of Directors and as a member of the Executive Committee of the
Board of Directors; and
WHEREAS, the Executive is willing to enter into this Agreement
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the Corporation and Executives agree as
follows:
1. Term of Agreement. The term of the Agreement shall be
deemed to have commenced as of November 17, 1997 and shall continue
indefinitely unless terminated by either the Executive or the
Corporation subject to the conditions set forth in Section 3 hereto.
2. Position. During the term hereof, the Executive shall
continue to serve as an officer or key management employee of the
Corporation with the office or position, duties and responsibilities as
follows: President and Chief Executive Officer of the Corporation
responsible for managing, planning and directing the performance,
operation and all other aspects of the Corporation; member of the Board
of Directors; and member of the Executive Committee or any other
committee, regardless of name, having authority similar to or greater
than that currently vested in the Executive Committee.
3. Termination of Employment. The termination of the
employment of the Executive during the period of this Agreement may
occur, under this Agreement, in one of the following ways:
a. By the Corporation. The Corporation may terminate
the employment of the Executive with "cause." Termination shall be
defined to be for "cause" only if:
(1) The Executive knowingly and willfully breaches
or habitually neglects material duties and responsibilities within
the course and scope of his authority as Chief Executive Officer and
President of the Corporation; provided, however, the Board of
Directors shall have given the Executive written notice specifying the
conduct alleged to have constituted such cause and the Executive has
failed to cure such conduct, if curable, within thirty (30) days
following receipt of such notice.
(2) The Executive knowingly and willfully commits an
act of dishonesty, fraud, or misrepresentation which is monetarily
materially adverse to the Corporation.
b. By the Executive. The Executive may terminate his
employment at any time during the period of this Agreement:
(1) For any reason, including retirement; or
(2) For "good reason." Termination shall be deemed
for "good reason" if:
(a) the Corporation makes, or the
stockholders make, a material change in the Executive's
duties, responsibilities or authority, without his express
written consent, or any change which would cause the
Executive's position with the Corporation to become of less
dignity, responsibility, importance or scope from the
position and attributes therefor described in Section
2;
(b) the Corporation reduces the Executive's
base annual salary or annual cash incentive compensation bonus formula; or
(c) any of the following events shall occur
(each such event shall be referred to hereinafter as a
"Change in Control" of the Corporation and shall be
deemed to occur as of the first date on which any of the following
events occur):
(i) A Person shall, in a transaction to
which the Corporation is not a party, become the direct or
indirect Beneficial Owner of securities of the Corporation
representing twenty five percent (25%) or more of the
combined voting power of the issued and outstanding common
stock voting securities of the Corporation ("Significant
Owner"). For purposes of this Agreement, the terms "Person"
and "Beneficial Owner" shall be given the definitions
contained in Rule 13d-3 under the Securities Exchange Act of
1934, as amended from time to time.
(ii) (A) Directors who constituted the
Board of Directors on January 1, 1997, and any other
individual(s) who becomes a director subsequent to the date
of this Agreement whose election as a director was initially
approved by at least a majority of directors who comprised
the Board of Directors as of the date of such election or
nomination ("incumbent Directors"), comprise two-thirds
(2/3) or less of the Board of Directors; or (B) the
Corporation or the Board of Directors elects or appoints
anyone other than the Executive as Chairman of the Board; or
(C) notwithstanding anything else in this Agreement,
including approval by the majority of Incumbent Directors,
if the Corporation is a party to a transaction resulting in
a Person becoming the direct or indirect Beneficial Owner of
the securities of the Corporation representing twenty-five
percent (25%) or more of the combined voting power of the
issued and outstanding common stock voting securities of the
Corporation, and, in conjunction with the transaction or in
a period twelve (12) months from the date of that
transaction, one-third (1/3) or more of the Board of
Directors is composed of directors who were not Incumbent
Directors prior to such transaction, or during the period
commencing twenty-four (24) months from the date of such
transaction, one-half (1/2) or more of the Board of
Directors is composed of directors who were not Incumbent
Directors prior to such transaction.
(iii) The Corporation's common stock, par
value $.01 per share, shall cease to be publicly traded.
(iv) A sale of all or substantially all
of the assets of the Corporation.
(v) The Board of Directors shall approve
any merger, consolidation, or like business
combination or reorganization of the Corporation, the
consummation of which would result in the occurrence of any event
described in clause (ii) or (iii) above, and such
transaction shall have been consummated.
c. By Death or Disability. This Agreement shall
terminate upon the death of the Executive. In addition, if the
Executive shall be prevented during the term of this Agreement from
properly performing services hereunder by reason of a disability, this
Agreement may be terminated as hereinafter provided. "Disability" shall
mean that, as a result of the Executive's incapacity due to physical or
mental illness or injury, the Executive has been absent from the full-
time performance of his duties with the Corporation for six (6)
consecutive months and within thirty (30) days after written notice of
termination due to a Disability is given to the Executive by the
Corporation, he has not returned to the full-time performance of his
duties for a period of at least 14 consecutive days, whereupon this
Agreement and Executive's employment will be terminated. Any question
as to the existence of Disability shall be determined by a qualified
independent physician selected by the Executive (or, if he is unable to
make such selection, such selection shall be made by any adult member of
the Executive's family) and approved by the Corporation. The written
determination of such physician shall be final and conclusive for
purposes of this Agreement.
4. Consequences of Termination. The termination of the
employment of the Executive will cause the following results:
a. If the termination is by the Corporation for cause or
is by the Executive for any reason other than for good reason, the
Corporation will pay the Executive within five (5) days after the date
of termination any unpaid compensation for services performed prior to
the date of termination and the amount of any accrued but unused FTO or
vacation time to which the Executive may be entitled to under the
Corporation's vacation plan and any amounts to be paid to the Executive
pursuant to any deferred compensation plan. Except as provided in the
preceding sentence, and except for other payments routinely owed to the
Executive by the Corporation for such items as travel and expense
reimbursement, the Corporation shall have no further obligations to the
Executive under this Agreement or otherwise; or
b. If the termination is by the Corporation for other
than cause prior to a Change in Control, or by the Executive for good
reason prior to a Change in Control, the Corporation shall pay the
Executive within five (5) days after the date of termination, a lump sum
payment equal to three times the Executive's annualized current base
compensation and:
(1) pay three times an amount equal to the largest
dollar bonus paid (including, for this purpose, any bonus amount
that was deferred by Executive) in the last five years, including
the year in which the Executive's termination of employment
occurs. The term "bonus" herein shall include regular annual
bonus payments, any annual super performance bonus payments, and
any other designated annual (as opposed to long term) bonus
payments. The amount determined pursuant to the first sentence of
this paragraph 4.b.(1) above shall be hereinafter referred to as
the "Owed Bonus"; and
(2) pay a lump sum amount equal to three times the
annual car allowance in effect for the Executive at the time of
termination and a lump sum amount equal to three times the annual
insurance, maintenance, and gasoline costs incurred for the
Executive's vehicle during the Executive's last full year of
employment with the Corporation; and
(3) the corporation shall continue all medical,
health and welfare and insurance benefits that were in effect and
in which the Executive participated as of the date of termination
for a period of thirty-six (36) months from the date of
termination; the provisions and conditions covering the foregoing
benefits, including the amount of any contributions to be made by
the Executive on a monthly or other periodic basis, will be
governed by the various benefit plans as they are in effect from
time to time.
c. If the termination is by the Corporation for other
than cause within the twenty-four (24) months following a Change in
Control, or by the Executive for good reason within twenty-four (24)
months following a Change in Control, the Corporation shall pay to the
Executive within five (5) days after the date of termination, a lump sum
payment equal to three times the Executive's annualized current base
compensation and three times the Owed Bonus; and
(1) pay a lump sum amount equal to $948,400
("Special Payment") plus the Corporation shall make a payment to
the Executive ("Make-Whole Payment") in such an amount as to pay
any income taxes and employment taxes on the Special Payment; any
income taxes and employment taxes on the Make-Whole Payment; and
the value of the lost tax benefit caused by the loss of any tax
deduction resulting from the receipt of the Special Payment and/or
the Make-Whole Payment;
(2) pay a lump sum amount equal to three times the
annual car allowance in effect for the Executive at the time of
termination and a lump sum amount equal to three times the annual
insurance, maintenance, and gasoline costs incurred for the
Executive's vehicle during the Executive's last full year of
employment with the Corporation;
(3) the Corporation shall continue all medical,
health and welfare and insurance benefits that were in effect and
in which the Executive participated as of the date of termination
for a period of thirty-six (36) months from the date of
termination; the provisions and conditions covering the foregoing
benefits, including the amount of any contributions to be made by
the Executive on a monthly or other periodic basis, will be
governed by the various benefit plans as they are in effect from
time to time; and
(4) if the Amended and Restated Promissory Note -
Balloon Payment, dated November 17, 1997, between the Corporation,
as the Lender, and the Executive and his spouse, as the Borrower
(a copy of which is attached hereto and made a part hereof as
Exhibit A) (the "Note") is forgiven and released in accordance
with the provisions of paragraph 3(c)(iii) of the Note, then as
between the Corporation and the Executive it will be deemed that
the forgiveness and release of the Note would subject the
Executive and the Borrower to taxes on the total amount that is
forgiven and released ("Taxable Amount") and, therefore, the
Corporation shall make a payment to the Executive within five (5)
days after the effective date of such forgiveness and release
("Other Make-Whole Payment") in such an amount as to pay any
income taxes and employment taxes on the Taxable Amount; any
income taxes and employment taxes on the Other Make-Whole Payment;
and the value of the lost tax benefit caused by the loss of any
tax deduction resulting from the receipt of the Taxable Amount
and/or the Other Make-Whole Payment.
(5) Appendix 1 to this Agreement, attached hereto
and made a part hereof, presents the computation of the Make-Whole
Payment and the Other Make-Whole Payment pursuant to Sections
4c(1) and (4) above, respectively. Appendix 1 is intended to set
forth the amount of the Make-Whole Payment and the Other Make-
Whole Payment, as the case may be, under current law, and it is
intended that any pertinent changes in the law that impact the
methodology used to compute these Payments would require the
Corporation and the Executive to agree on the appropriate
modification(s) to Appendix 1.
d. Nothing in this Agreement shall prevent the Executive
from receiving any benefits to which the Executive may be entitled under
any plan or program of the Corporation, except any severance pay
benefits for which the Executive may otherwise be eligible under any
plan, program or policy of the Corporation other than this Agreement.
e. (1) Notwithstanding anything to the contrary
contained herein, in the event it shall be determined that any payment
or distribution by the Corporation to or for the benefit of the
Executive including the value of the Taxable Amount in Section 4(c)(4)
above, (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement, or by operation of other agreements or
undertakings (including option agreements)), but determined without
regard to any additional payments required under this Section 4.e. (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986 as amended (the "Code"), or any
comparable Federal, state or local excise tax (such excise tax, together
with any interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment"). The Gross-Up Payment
shall be in such amount as to pay the Excise Tax, any excise tax imposed
by Code Section 4999 on the Gross-Up Payment, any income taxes and
employment taxes (including, without limitation, penalties and interest)
on the Gross-Up Payment, and the value of the lost tax benefit caused by
the loss of any tax deduction resulting from the receipt of the Gross-Up
Payment. An example under current law under which Executive could lose
the benefit of tax deductions to which the Executive might otherwise be
entitled because of the receipt of a Gross-Up Payment is the overall
limitation on itemized deductions under Code Section 68. This example
of the loss of tax deduction is intended to be illustrative and is not
intended to be exclusive. Appendix 2 to this Agreement attached hereto
and made a part hereof, presents an illustrative example of the
operation of the Gross-Up Payment. Appendix 2 is only intended to
present an illustration of the methodology to use to compute the Gross-
Up Payment under current law and it is intended that changes in the law
may impact the methodology used to compute the Gross-Up Payment.
(2) All determinations required to be made under
this Section 4.e., including, without limitation, whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determinations, shall
be made by Price Waterhouse or any other nationally recognized
accounting firm which is the Corporation's outside auditor at the time
of such determination, which firm must be reasonably acceptable to the
Executive (the "Accounting Firm"). The Corporation shall cause the
Accounting Firm to provide detailed supporting calculations to the
Corporation and the Executive within fifteen (15) business days after a
notice is given by the Executive to the Corporation that there has been
a Payment, or such earlier time as is requested by the Corporation.
Within two (2) business days after said notice is given to the
Corporation, the Corporation shall instruct the Accounting Firm to
timely provide the data required by this Section 4.e. to the Executive.
All fees and expenses of the Accounting Firm shall be borne solely by
the Corporation. Any Gross-Up Payment, as determined pursuant to this
Section 4.e., shall be paid by the Corporation to the Internal Revenue
Service ("IRS") and/or other appropriate taxing authority on the
Executive's behalf within five (5) days after receipt of the Accounting
Firm's determination. If the Accounting Firm determines that there is
substantial authority (within the meaning of Section 6662 of the Code)
that no Excise Tax is payable by the Executive, the Accounting Firm
shall furnish the Executive with a written opinion that failure to
disclose or report the Excise Tax on the Executive's Federal income tax
return will not constitute a substantial understatement of tax or be
reasonably likely to result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Corporation and the Executive in the absence of material
mathematical or legal error. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments will not have been made by the Corporation that
should have been made ("Underpayment") or that Gross-Up Payments have
been made that should not have been made ("Overpayment"), in each case,
consistent with the calculations required to be made hereunder. In the
event that the Corporation exhausts its remedies pursuant to Section
4.e.(3) below and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of
Underpayment, if any, that has occurred along with any required interest
and/or penalties thereon, and any such Underpayment along with any
required interest and/or penalties thereon, shall be promptly paid by
the Corporation to the IRS or other appropriate taxing authority on the
Executive's behalf or, if such Underpayment has been previously paid by
the Executive, the Corporation shall pay such Underpayment to the
Executive. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive, effective as of the date the
Overpayment was made, with interest at the applicable Federal rate
provided for in Section 7872(r)(2) of the Code, due and payable on the
later to occur of (i) ninety (90) days after written demand to the
Executive by the Corporation; (ii) the date such Overpayment has been
refunded by the IRS to the Executive or (iii) the date such Overpayment
has been deducted by the Executive from Federal and State income taxes
and such deduction has reduced the Executive's tax payments by a like
amount; provided, however, that the Executive shall have no duty or
obligation whatsoever to repay said loan unless the Executive's receipt
of the Overpayment, or any portion thereof, is includible in the
Executive's income and the Executive's repayment of same is deductible
by the Executive for Federal and state income tax purposes.
(3) The Executive shall notify the Corporation in
writing of any claim by the IRS or state or local taxing authority that,
if successful, would result in any Excise Tax or an Underpayment
("Claim"). Such notice shall be given as soon as practicable but no
more than sixty (60) business days after the Executive is informed in
writing of the Claim and shall apprise the Corporation of the nature of
the Claim, the administrative or judicial appeal period, and the date on
which any payment of the Claim must be paid. The Executive shall not
pay any portion of the Claim prior to the expiration of the thirty (30)
day period following the date on which the Executive gives such notice
to the Corporation (or such shorter period ending on the date that any
amount under the Claim is due). If the Corporation notifies the
Executive in writing prior to the expiration of such thirty (30) day
period that it desires to contest the Claim, the Executive shall:
(a) give the Corporation any information
reasonably requested by the Corporation relating to the Claim;
(b) take such action in connection with
contesting the Claim as the Corporation shall reasonably request
in writing from time to time, including without limitation,
accepting legal representation concerning the Claim by an attorney
selected by the Corporation who is reasonably acceptable to the
Executive; and
(c) cooperate with the Corporation in good
faith in order to effectively contest the Claim; provided,
however, that the Corporation shall bear and pay directly all
costs and expenses (including, without limitation, additional
interest and penalties and reasonable attorneys' fees) incurred in
such contests and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including, without limitation, interest and penalties thereon)
imposed as a result of such representation. Without limitation
upon the foregoing provisions of this Section 4.e., except as
provided below, the Corporation shall control all proceedings
concerning such contest and, at its sole option, may pursue or
forego any and all administrative appeal, proceedings, hearings
and conferences with the taxing authority pertaining to the Claim.
At the written request of the Corporation and upon payment to the
Executive of an amount at least equal to the Claim plus any
additional amount necessary to obtain the jurisdiction of the
appropriate tribunal and/or court ("Additional Sum") the Executive
shall pay same and xxx for a refund. The Executive agrees to
prosecute any contest of a Claim to a determination before any
administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Corporation shall determine;
provided, however, that if the Corporation requests the Executive
to pay the Claim and xxx for refund, the Corporation shall
advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive
harmless on an after-tax basis, from any Excise Tax or income tax
(including, without limitation, interest, penalties thereon, or
lost deductions) imposed on such advance or for any imputed income
on such advance. Any extension of the statute of limitation
relating to assessment of any Excise Tax for the taxable year of
the Executive which is the subject of the Claim is to be limited
solely to the Claim. Furthermore, the Corporation's control of
the contest shall be limited to issues for which a Gross-Up
Payment would be payable hereunder. The Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the IRS or any other taxing authority.
(4) If, after the receipt by the Executive of any
amount advanced by the Corporation pursuant to Section 4.e.(3)
above, the Executive receives any refund of a Claim and/or any
Additional Sum, the Executive shall promptly pay to the
Corporation the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Corporation pursuant to Section 4.e.(3) above, a final
determination or a non-final determination is made by the taxing
authority that the Executive shall not be entitled to any refund
of the Claim (and, in the case of a non-final determination, the
Corporation does not notify the Executive in writing of its intent
to contest such denial of refund of a Claim prior to the
expiration of thirty (30) days after such determination), then the
portion of such advance attributable to a Claim shall be forgiven
and shall not be required to be repaid. The amount of such
advance attributable to a Claim shall offset, to the extent
thereof, the amount of the Underpayment required to be paid by the
Corporation to the Executive. A "final determination" shall occur
when a court of appellate jurisdiction shall have finally
adjudicated a claim or when the period to contest or otherwise
appeal any decision by an administrative tribunal or court of
initial jurisdiction has been waived or the time for contention on
appealing same has expired.
5. Income Tax Withholding. The Corporation may withhold from
any benefits payable under this Agreement any Federal, state, city or
other taxes as may be required pursuant to any law, regulation or
ruling.
6. Confidentiality. Executive covenants and agrees to regard
and preserve as confidential all proprietary information and trade
secrets that have been or may be obtained by the Executive in the course
of his employment with the Corporation.
7. Stock Options. In the event of a Change in Control, unless
the employment of the Executive is terminated for Cause, (i) all then
outstanding stock options granted to the Executive under the Amended and
Restated 1984 Employee Stock Option Plan and the 1994 Senior Management
Stock Option Plan shall become immediately exercisable without regard to
any installment or vesting provisions that may have been made part of
the terms and conditions of such options. If the Executive terminates
his employment with the Corporation for good reason within 24 months
following a Change in Control, or if the Executive is terminated by the
Corporation within 24 months following a Change in Control other than
for Cause, any and all then outstanding stock options and stock
appreciation rights granted to such employee under the 1996 Share
Incentive Plan shall become immediately exercisable.
8. General
(a) Subject to the second sentence hereof, the Corporation
shall pay to the Executive reasonable attorneys' fees that may be
incurred by the Executive in enforcing the terms of this Agreement. If
litigation or an arbitration proceeding ensues, and the Executive
prevails in such litigation or arbitration, the Corporation shall
promptly reimburse the Executive for his attorneys' fees and
disbursements, costs and expenses ("Costs") incurred in such litigation
or arbitration proceeding, plus interest on such Costs from the date
they are incurred by the Executive, and pay prejudgment interest on any
money judgment obtained by the Executive, such interest on such Costs
and such prejudgment interest to be calculated at the base rate of
interest charged from time to time by Citibank, N.A. from the date that
payment should have been made under this Agreement.
(b) The Corporation's obligation to pay the Executive the
compensation and to make the arrangements provided herein shall be
absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Corporation may have
against the Executive or anyone else. All amounts payable by the
Corporation hereunder shall be paid without notice or demand. The
Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment and if
Executive obtains such other employment, any compensation earned by
Executive pursuant thereto shall not be applied to mitigate any payment
made to Executive pursuant to this Agreement except as expressly
provided herein.
(c) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Corporation, by written agreement to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that
the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, the term "Corporation"
shall mean the Corporation as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement required by this Section 8(c), or which otherwise becomes
bound by all terms and provisions of this Agreement by operation of law.
(d) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be
payable to the Executive hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's devisee, legatee or
other designee or, if there be no such designee, to the Executive's
estate.
(e) For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Xxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
If to the Corporation:
Galoob Toys, Inc.
000 Xxxxxx Xxxx.
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
(f) This Agreement shall constitute the entire agreement
between the Executive and the Corporation concerning the subject matter
hereof, and performance of its obligations hereunder by the Corporation
shall constitute full settlement and release of any claim or cause of
action, of whatsoever nature, which the Executive might otherwise assert
or claim against the Corporation or any of its directors, stockholders,
officers or employees on account of any termination. This Agreement
supersedes the severance agreement, dated October 27, 1994, between the
Corporation and the Executive, and such agreement is hereby terminated
and of no further force or effect. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, signed by the Executive and an
authorized officer of the Corporation. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of any similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
No assurances or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party
which are not set forth expressly in this Agreement. However, this
Agreement is in addition to and not in lieu of any other plan providing
for payments to or benefits for the Executive or any agreement now
existing or which hereafter may be entered into between the Corporation
and the Executive. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State
of Delaware without giving effect to the provisions, principles, or
policies thereof relating to choice or conflict of laws.
(g) The invalidity or unenforceability of any provision of
this Agreement in any circumstance shall not affect the validity or
enforceability of such provision in any other circumstance or the
validity or enforceability of any other provision of this Agreement, and
except to the extent such provision is invalid or unenforceable, this
Agreement shall remain in full force and effect. Any provision in this
Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of
such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof in such jurisdiction, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
(h) Except as otherwise explicitly provided herein, any
dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with
the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to
seek specific performance in a court of law, of his right to be paid as
provided in this Agreement in the event of any dispute.
(i) The masculine or neuter gender shall include the
feminine gender. This Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
GALOOB TOYS, INC.
By:
Name: Xxxx X. Xxxxxxx
Title:
mgsever
CALCULATION OF GROSS-UP FACTOR APPENDIX 2
AND PROOF OF GROSS-UP PAYMENT
ASSUMPTIONS:
FEDERAL INCOME TAX RATE 39.600%
ADJUSTMENT TO FEDERAL RATE FOR
ITEMIZED DEDUCTION PHASE OUT 1.188%
GOLDEN PARACHUTE EXCISE TAX RATE 20.000%
MEDICARE PORTION OF FICA TAX RATE 1.450%
STATE INCOME TAX RATE 9.300%
EXCISE TAX LIABILITY BEFORE GROSS UP $100,000
CALCULATION OF GROSS-UP FACTOR:
FEDERAL INCOME TAX RATE 39.600%
ADJUSTMENT FOR ITEMIZED DEDUCTION
PHASE OUT 1.188%
GOLDEN PARACHUTE EXCISE TAX RATE 20.000%
MEDICARE PORTION OF FICA TAX RATE 1.450%
STATE INCOME TAX RATE NET OF TAX
BENEFIT (9.3% X [1 - .396]) 5.617%
SUM OF APPLICABLE TAX RATE 67.855%
GROSS-UP FACTOR (1 / [1 - .67855]) 3.11092
PROOF:
EXCISE TAX ON EXCESS PARACHUTE PAYMENTS (SEE ABOVE) $100,000
GROSS-UP FACTOR 3.11092
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GROSS-UP PAYMENT (EXCISE TAX x GROSS-UP FACTOR) $311,092
COMPONENTS OF GROSS UP:
FEDERAL INCOME TAX ON GROSS-UP PAYMENT (40.788%)
(40.788% OF GROSS-UP PAYMENT) $126,888
GOLDEN PARACHUTE EXCISE TAX ON EXCESS
PARACHUTE PAYMENT (20% [SEE ABOVE]) $100,000
GOLDEN PARACHUTE EXCISE TAX ON GROSS-
UP PAYMENT (20% OF GROSS-UP PAYMENT) 62,218
FICA MEDICARE TAX ON GROSS-UP PAYMENT
(1.45% OF GROSS-UP PAYMENT) 4,511
STATE INCOME TAX (NET) ON GROSS-UP
PAYMENT (5.617% OF GROSS-UP PAYMENT 17,475
TOTAL TAXES GROSSED UP $311,092
