EXHIBIT 10.23
EMPLOYMENT AGREEMENT
This agreement made as of the 2nd day of January, 2002
BETWEEN:
ALDERWOODS GROUP SERVICES INC.
(the "Company")
-And-
XXXXXXX X. XXXXX
(the "Executive")
WHEREAS:
The Company is a wholly-owned subsidiary of Alderwoods Group, Inc.
("AGI"), a Delaware corporation that is the holding entity for a corporate
group engaged in the operation of funeral homes, insurance and cemeteries
in Canada, the United States and England; and
The Company and the Executive wish to enter into a written Employment
Agreement which will provide the Executive with an incentive to continue
in his position as Senior Vice President, Chief Financial 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 AGI and confirmed by the U.S. 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 AGI;
provided, however, that the following acquisitions will not
constitute a Change in Control: (1) any issuance of Voting Stock of
AGI directly from AGI that is approved by the Incumbent Board (as
defined below), (2) any acquisition by AGI of Voting Stock of AGI,
(3) any acquisition of Voting Stock of AGI by any employee benefit
plan (or related trust) sponsored or maintained by AGI or any
subsidiary of AGI, or (4) any acquisition of Voting Stock of AGI 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 AGI, or any 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 AGI 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, constitute the Board of
Directors of AGI (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 AGI's stockholders,
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 AGI 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 stockholders of AGI of a complete liquidation or
dissolution of AGI, except pursuant to a Business Combination that
would not constitute a Change in Control.
2. "CONSTRUCTIVE DISCHARGE" means the termination of the Executive's
employment by the Executive following the occurrence 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 of the Executive's place of employment by
the Company by more than 50 miles from Xxxxxxx, Xxxxxxx;
b) any material reduction by the Company in the Executive's job duties
or responsibilities;
c) any material reduction by the Company in the Executive's level of
compensation or benefits;
d) any adverse change by the Company or AGI to the Executive's title or
function;
e) harassment by a representative or affiliate of the Company; or
f) 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.
3. "EFFECTIVE DATE" has the meaning set forth in the "Fourth Amended Joint
Plan of Reorganization of Xxxxxx Group International, Inc., Its Parent
Corporation and Certain of Their Debtor Subsidiaries."
4. "JUST CAUSE" means willful misconduct or willful neglect of duty by the
Executive, including, but not limited to, intentional wrongful disclosure
of confidential or proprietary information of the Company or AGI or any of
its subsidiaries; intentional wrongful engagement in any competitive
activity prohibited by paragraph 20; and the intentional material breach
of any provision of this Agreement.
5. "SERVICES" has the meaning set forth in the Management Services
Agreements, dated as of January 2, 2002, by and between the Company and
AGI and the Company and certain subsidiaries of AGI.
6. "TERMINATION WITHOUT JUST CAUSE" includes, but is not limited to, any
unilateral change in the material terms and conditions of the Executive's
employment.
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7. "VOTING STOCK" means securities entitled to vote generally in the election
of directors.
ENTIRE AGREEMENT
8.
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. There are no
representations, warranties, forms, conditions, undertakings, 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 Executive acknowledges and agrees that, as of the Effective
Date, the Key Employee Retention Program will terminate and be of no
further force or effect with respect to the Executive.
EMPLOYMENT
9. The Company agrees to employ the Executive, and the Executive agrees to
be employed by the Company, in the position of Senior Vice President,
Chief Financial Officer for the term of this Agreement. The Executive
also agrees that, as part of the Executive's duties, the Executive
shall occupy and perform the office of Senior Vice President, Chief
Financial Officer of AGI, on behalf of the Company, for the term of
this Agreement. As used in this Agreement, the phrase "term of this
Agreement" means the period beginning on the Effective Date and ending
on the earlier of January 2, 2004, or the effective date of the
termination of Executive's employment. Notwithstanding anything to the
contrary in this Agreement, paragraph 16(b) shall survive and remain in
effect following the term of this Agreement.
10. 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. The Executive acknowledges and agrees that
the duties required of his position include, without limitation, the
provision of Services on behalf of, and for the account of, the Company.
COMPENSATION
11.
a) In consideration for the Executive's continued performance of his
duties as Senior Vice President, Chief Financial Officer, the
Executive will receive a base salary of $235,000 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.
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SHORT TERM INCENTIVE PLAN - ANNUAL BONUS
12. The Executive will be entitled to participate in a short term incentive
plan as adopted by the Company from time to time in a manner commensurate
with his position and level of responsibility with the Company. The bonus
payable under such plan will be paid in full within 90 days after the end
of each year.
13. 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 (1) without Just
Cause or (2) by reason of Constructive Discharge in compliance with
paragraph 17. If the Executive's employment is terminated without
Just Cause or by reason of Constructive Discharge 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 and will be
subject to deductions required by applicable law. If the bonus
amount has not been determined within seven days of the termination
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, the
bonus which the Executive will be entitled to receive under
paragraph 16 for that year will be equal to the Executive's pro rata
portion of the bonus for the year of termination (for the number of
days elapsed in the current year), based on the achievement of the
applicable performance criteria through the date of termination.
STOCK OPTION PLAN
14. The Executive is eligible for participation in AGI's equity incentive plan
or plans. Stock options will be granted to the Executive as determined by
the Board of Directors of AGI.
BENEFITS
15. The Executive will be eligible 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 $500.00 per month plus operating expenses with no
allowance for auto insurance coverage.
c) CLUB MEMBERSHIP. The Executive will be entitled to the amount of
$1,000.00 per year for club memberships as directed by the
Executive.
TERMINATION OF EMPLOYMENT
16. 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;
b) by the Company, not following a Change in Control as set forth in
paragraph 17 below, 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:
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i) 12 months' base salary; provided, however, that if the
Executive's employment is terminated prior to the first
anniversary of the Effective Date, he shall be entitled to a
lump sum payment in an amount equal to 24 months' base salary;
ii) The amount of any unpaid bonus earned by the Executive up to
and including the date of termination calculated in accordance
with paragraph 13(b); and
iii) 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) - (iii) will be subject
to deductions required by applicable law;
c) by the Company for any reason other than Just Cause or by reason of
Constructive Discharge, following a Change in Control, both in
compliance with paragraph 17 below; or
d) by the Executive, for any reason, upon thirty (30) days advance
written notice to the Company in which case the Company will have no
further obligation to the Executive under this Agreement or
otherwise except to pay the Executive the unpaid portion, if any, of
the Executive's base salary payable for the period through the date
of termination of the Executive's employment.
CHANGE IN CONTROL
17. If a Change in Control occurs and, within two years of the effective date
of the Change in Control, the Executive's employment is terminated by the
Company without Just Cause or by reason of Constructive Discharge, the
Company shall, within seven days of the date of 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 (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) Two times the amount of incentive pay (in an amount equal to
not less than the highest aggregate incentive pay earned by
the Executive in any of the three fiscal years immediately
preceding the year in which the Change in Control occurred);
iv) The amount of any unpaid bonus earned by the Executive for a
completed year, calculated in accordance with paragraph 13;
and
v) The amount of any unpaid salary or vacation earned by the
Executive up to and including the date of termination.
Payments identified in paragraphs (i) - (v) will be subject to deductions
required by applicable law. Any termination of employment of the Executive by
the Company or the removal of the Executive from the office or position in the
Company or AGI that occurs (A) not more than 365 days prior to the date on which
a Change in Control occurs and (B) following the commencement of any discussion
with a third party that ultimately results in a Change in Control will be deemed
to be a termination or removal of the Executive after a Change in Control for
purposes of this Agreement.
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CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
18. In the event that it is determined (as hereinafter provided) that any
payment (other than the Gross-Up Payments provided for in this
paragraph 18 and Annex A) or distribution by the Company, AGI 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," within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any
similar tax imposed by U.S. state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then the 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.
19. The obligations set forth in paragraph 18 will be subject to the
procedural provisions described in Annex A.
CONFIDENTIAL INFORMATION; COMPETITIVE ACTIVITY
20. 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 20) or generally known to persons
engaged in businesses similar or related to those of the Company.
Confidential or proprietary information will include, without
limitation, the Company's financial matters, customers, employees,
industry contracts, strategic business plans, product development (or
other proprietary product data), marketing plans, and all other secrets
and all other information of a confidential or proprietary nature. The
foregoing obligations imposed by this paragraph 20 will not apply (i)
during the Term, in the course of the business of and for the benefit
of the Company, (ii) if such confidential or proprietary information
has become, through no fault of the 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).
21. 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
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(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.
22. The Executive and the Company agree that the covenants contained in
paragraphs 20 and 21 are reasonable under the circumstances, and
further agree that if, in the opinion of any court of competent
jurisdiction, any such covenant is not reasonable in any respect, such
court will have the right, power and authority to excise or modify any
provision or provisions of such covenants as to the court will appear
not reasonable and to enforce the remainder of the covenants as so
amended. The Executive acknowledges and agrees that the remedy at law
available to the Company for breach of any of his obligations under
this paragraph 22 would be inadequate and that damages flowing from
such a breach may not readily be susceptible to being measured in
monetary terms. Accordingly, the 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.
23. For purposes of paragraphs 20, 21 and 22, the term "Company" will also
include AGI and any subsidiary of AGI.
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 16, 17 or 18 are reasonable estimates of the damages which
would be suffered by the Executive. Any amount paid under paragraphs
16, 17 or 18 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 16, 17 or 18 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
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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 16(b), 18,
19, 20, 21, 22, 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
without giving effect to the principles of conflict of laws thereof. Each
party to this Agreement hereby consents and submits himself or itself to
the jurisdiction of the courts of the Province of Ontario for the purposes
of any legal action or proceeding arising out of this Agreement.
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 AGI pursuant to a
Plan of Reorganization approved by a 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
xepenses 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
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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 by personal delivery, by registered mail or
by electronic means of communication addressed to the recipient as
follows:
TO THE EXECUTIVE:
Xxxxxxx X. Xxxxx
11th Floor, Atria III
0000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
TO THE COMPANY:
Alderwoods Group Services Inc.
11th Floor, Atria III
0000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Senior Vice-President, Legal & Asset Management
WITH A COPY TO:
Alderwoods 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. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person, other than (1) the parties to this
Agreement, (2) any permitted assignees of the Company and the Executive,
and (3) AGI, as contemplated by paragraphs 8(b), 9, 10, 14, 20, 21, 22 and
23, any rights or remedies under or by reason of this Agreement and AGI
shall be a third party beneficiary of this Agreement.
...CONTINUED
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IN WITNESS WHEREOF the Executive has executed and the Company has caused its
duly authorized representative to execute this Agreement as of the date set
forth on the first page of this Agreement.
ALDERWOODS GROUP SERVICES INC.
By: /s/ XXXX X. XXXXXXX
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President and Chief Executive Officer
WITNESS:
/s/ AZALEA ANGELES /s/ XXXXXXX X. XXXXX
----------------------------- --------------------------------------------
Xxxxxxx X. Xxxxx
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ANNEX A
EXCISE TAX GROSS-UP PROCEDURAL PROVISIONS
1. Subject to the provisions of paragraph 5 of this Annex, all determinations
required to be made under paragraph 18 of this Agreement and this Annex A,
including whether an Excise Tax is payable by the 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.
A-1
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 18 of this Agreement and
this Annex A.
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