1
Company pursuant to this Agreement. Further, the amount of any
payment or benefit provided for in this Agreement shall not be
reduced by any compensation earned by the Employee as the
result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by
the Employee to the Company or otherwise, except with respect
to Section 4(c) benefits to the extent the Employee receives
substantially equivalent benefits from a successor employer.
5. ADDITIONAL TAX PAYMENTS.
(a) EXCISE TAX GROSS-UP.
If any payment or benefit to which the Employee becomes
entitled in connection with the Transaction pursuant to this
Agreement, the Merger Agreement or otherwise (the "Total
Payments") will be subject to the tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor tax that may hereafter be imposed) (the
"Excise Tax"), the Company shall pay to the Employee at the
time specified below, an additional amount (the "Gross-up
Payment") such that the net amount retained by the Employee,
after deduction of any Excise Tax on the Total Payments and
any taxes on the Total Payments other than the Excise Tax and
any federal, state and local income and employment tax and
Excise Tax upon the payment provided for by this subsection,
shall be equal to the Total Payments. For purposes of
determining whether any of such payments or benefits will be
subject to the Excise Tax, and the amount of such Excise Tax,
the Company and the Employee shall rely upon the assumption
and determinations of Xxxxxx Xxxxxxxx LLP or such other
certified accounting firm as may be mutually agreed upon by
the Employee and the Company (the "Accounting Firm"). All fees
and expenses of the Accounting Firm shall be borne solely by
the Company. Any determinations by the Accounting Firm shall
be binding upon the Company and the Employee, and they agree
to take a position consistent with such determination (i) on
any return, report, information return or other document
(including, without limitation, any related or supporting
information) with respect to taxes of the Company or the
Employee, (ii) in any proceeding, formal or informal, before
any taxing authority, and (iii) otherwise. In the event that
the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-Up
Payment is determined, the Employee shall repay to the Company
at the time that the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal
and state and local income and employment tax imposed on the
Gross-Up Payment being repaid by him if such repayment results
in reduction in Excise Tax and/or a federal and state and
local income and employment tax deduction) plus interest on
the amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder
at the time the Gross-Up Payment is determined (including
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by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest payable with respect to such
excess at the rate provided in section 1274(b)(2)(B) of the
Code) at the time that the amount of such excess is finally
determined. The Gross-Up Payment shall be paid within five (5)
business days after the amount thereof is determined, but in
no event later than thirty (30) days prior to the date on
which payment of the Excise Tax in respect of which such
Gross-Up Payment is determined is due. If the amounts of any
payments under this Agreement cannot be finally determined on
or before the payment date otherwise scheduled for payment,
the Company shall pay to the Employee on such date an
estimate, as determined in good faith by the Company, of the
minimum amount of such payment and shall pay the remainder of
such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Employee payable on the fifth day after demand
by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code).
Notwithstanding the foregoing, and subject to the Company's
and Parent's obligations under Section 5(b), the Company shall
not be required to pay a Gross-Up Payment with respect to an
amount of the Excise Tax equal to the excess of (i) over (ii),
where (i) equals the Excise Tax that actually becomes due with
respect to the Total Payments and (ii) equals that amount of
Excise Tax that would have become due with respect to the
Total Payments assuming that, with respect to the Company
stock options granted to the Employee on October 9, 1998 (the
"October Grant"), (x) the cash payout of the October Grant
pursuant to Section 2.9 of the Merger Agreement was subject to
Q&A 24(c) of the proposed Treasury Regulations promulgated
under section 280G of the Code (the "Regulations") and (y) for
purposes of Q&A 24(c)(2) under the Regulations, the percentage
used to calculate the amount reflecting the lapse of the
obligation to continue to perform services was one percent
(1%) (such excess amount shall hereinafter be referred to as
the "Option Excise Tax").
(b) COMPANY'S TAX POSITION.
The Company shall, and the Parent shall cause the Company to,
take the position (i) on any return, report, information
return or other document (including, without limitation, any
related or supporting information) with respect to taxes of
the Company or the Employee, (ii) in any proceeding, formal or
informal, before any taxing authority, and (iii) otherwise,
that the Option Excise Tax is not due, and the Company shall
not, nor shall the Parent cause the Company to, withhold any
amounts in respect thereof without the prior written consent
of the Employee. The Company shall, at its own expense,
contest in good faith any assessment or proposed assessment by
the Internal Revenue Service (the "IRS") against the Com-
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3
pany in respect of the Excise Tax with respect to the Option
Excise Tax. The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Employee or the
Company of the Option Excise Tax. Such notification shall be
given as soon as practicable but no later than ten (10)
business days after the Employee is informed in writing of
such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be
paid. The Employee shall also give the Company any information
reasonably requested by the Company relating to such claim;
take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company' cooperate with the Company
in good faith in order effectively to contest such claim; and
permit the Company to participate in any proceedings relating
to such claim. Such contest shall include pursuing any and all
administrative and judicial remedies available to the Company.
In the event that there is a Final Determination (as defined
below) pursuant to which the IRS makes an assessment against
the Company in respect of the Option Excise Tax, the Company
shall remit such amount to the IRS and the Company shall be
entitled to reimbursement of such amount. The Company shall
effect such reimbursement only by means of withholding from
the final tranche of the Stock Grant a number of shares having
a value equal to the amount of the Option Excise Tax (rounding
down to the next whole share); provided, however, that the
Company shall be entitled to withhold from any cash payments
to the Employee following the payment of such tranche of the
Stock Grant an amount equal to the remainder of such Option
Excise Tax.
For purposes of this Agreement, "Final Determination" shall
mean:
(x) a decision, judgment, decree, or other order by any court
of competent jurisdiction, which decision, judgment,
decree, or other order has become final and not subject to
further appeal; or
(y) a closing agreement entered into under section 7121 of the
Code or any other binding settlement agreement entered
into with the IRS, in either case with the consent of the
Employee, which consent shall not be unreasonably
withheld.
6. LEGAL FEES.
The Company shall pay to the Employee all legal fees and expenses
incurred by the Employee in disputing in good faith any issue hereunder
relating to the termination of the Employee's employment, in seeking in
good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to
any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery
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of the Employee's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
7. PROTECTIVE COVENANTS.
(a) COMPENSATION, BENEFITS SUSPENDED IF SECTION 7 (b) BREACHED.
Except as more specifically provided with respect to the Stock
Grant in Section 3(c), the Employee agrees that if, during the
Employment Term, he breaches his obligations under Section
7(b), any payments and benefits to which the Employee would
otherwise have been entitled shall be suspended for one (1)
year, or, if less, the remaining balance of the period with
respect to which the Employee would otherwise be so entitled
to such payments and benefits, which payments and benefits
shall be deemed immediately forfeited. Nothing herein shall
prohibit the Employee from being a stockholder in a mutual
fund or a diversified investment company or a passive owner of
not more than two percent of the outstanding stock of any
class of a corporation any equity securities of which are
publicly traded, so long as the Employee has no active
participation in the business of such corporation.
(b) NON-DISCLOSURE; NON-COMPETE; NON-SOLICITATION.
The Employee shall not, at any time during the Employment Term
or thereafter, make use of or disclose, directly or
indirectly, any trade secret, customer lists or other
confidential or secret information of the Company not
available to the public generally or to the competitors of the
Company ("Confidential Information") except to the extent that
such Confidential Information becomes a matter of public
record or is otherwise available to the general public, other
than as a result of any act or omission of the Employee, or is
required to be disclosed by any law, regulation or order of
any court or regulatory commission, department or agency.
Promptly following the Date of Termination, the Employee shall
surrender to the Company all records, memoranda, notes, plans,
reports, computer tapes and software and other documents and
data relating to any Confidential Information or the business
of the Company that he may then possess or have under his
control (together with all copies thereof); provided, however,
that the Employee may retain copies of such documents as are
necessary for the preparation of his federal or state income
tax returns. In consideration for the payments under this
Agreement and any payments received by the Employee pursuant
to the Transaction for his equity interests in the Company,
during the scheduled Employment Term (notwithstanding any
earlier termination of the Employment Term), the Employee will
not in any manner directly or indirectly, through any person,
firm or corporation, alone or as a member of a partnership or
as an officer, director, stockholder, investor or employee of
or consultant to any other corporation or enterprise or
otherwise engage or assist any other person, firm, corporation
or enterprise in engaging in any business then being conducted
by the Company (but not later than as of the Date of
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5
Termination) in any geographic area in which the Company is
then conducting such business. In consideration for the
payments under this Agreement and any payments received by the
Employee pursuant to the Transaction for his equity interests
in the Company, the Employee will not during the scheduled
Employment Term (notwithstanding any earlier termination of
the Employment Term) in any manner, directly or indirectly
induce or attempt to induce any employee of the Company to
terminate or abandon his or her employment for any purpose
whatsoever.
(c) FALSE, DEFAMATORY, OR DISPARAGING STATEMENTS.
The Employee agrees that after his Date of Termination, he
shall not make any false, defamatory or disparaging statements
about the Company, or the officers or directors of the
Company. Promptly after the Employee's Date of Termination,
the Company agrees that it shall instruct the officers and the
directors of the Company not to make any false, defamatory or
disparaging statements about the Employee after such Date of
Termination.
(d) INJUNCTIONS TO PREVENT BREACHES OF PROTECTIVE COVENANTS.
The parties hereto agree that the Company would be damaged
irreparably in the event any provision of paragraphs (b) or
(c), next above, were not performed by the Employee in
accordance with their respective terms or were otherwise
breached and that money damages would be an inadequate remedy
for any such nonperformance or breach. Therefore, the Company
or its successors or assigns shall be entitled, in addition to
any other rights and remedies existing in their favor, to an
injunction or injunctions to prevent any breach or threatened
breach of any such provisions and to enforce such provisions
specifically (without posting a bond or other security). The
parties hereto agree that the Employee would be damaged
irreparably in the event any provision of paragraph (c), next
above, were not performed by the Company in accordance with
its terms or were otherwise breached and that money damages
would be an inadequate remedy for any such nonperformance or
breach. Therefore, the Employee shall be entitled, in addition
to any other rights and remedies existing in his favor, to an
injunction or injunctions to prevent any breach or threatened
breach of any such provisions and to enforce such provision
specifically (without posting a bond or other security).
8. SUCCESSORS.
(a) THE EMPLOYEE.
This Agreement is personal to the Employee and, without the
prior express written consent of the Company, shall not be
assignable by the Employee, except that the Employee's rights
to receive any compensation or benefits under this Agreement
may be transferred or disposed of pursuant to testamentary
disposition, intestate succession or pursuant to a domestic
relations order of a court of competent juris-
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6
diction. This Agreement shall inure to the benefit of and be
enforceable by the Employee's heirs, beneficiaries and/or
legal representatives.
(b) THE COMPANY.
This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns. The Company
shall require any successor to all or substantially all of the
business and/or assets of the Company, whether direct or
indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance
satisfactory to the Employee, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such
succession had taken place.
9. MISCELLANEOUS.
(a) APPLICABLE LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, applied
without reference to principles of conflict of laws.
(b) AMENDMENTS.
This Agreement may not be amended or modified otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES.
All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party
or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company: UNITED STATES FILTER CORPORATION
00-000 Xxxx Xxxxxx
Xxxx Xxxxxx, XX 00000
If to the Employee: XXXXXX X. XXXXXX
00-000 Xxxxxx'x Xxxxx Xxxx
Xxxx Xxxxxx, XX 00000
With a copy to: XXXXXXX XXXXXXX, ESQ.
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
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or to such other address as either party shall have furnished
to the other in writing in accordance herewith. Notices and
communications shall be effective when actually received by the
addressee.
(d) WITHHOLDING.
The Company may withhold from any amounts payable under this
Agreement such federal, state or local income taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(e) SEVERABILITY.
If any provision of this Agreement as applied to any part or to
any circumstances will be adjudged by a court to be invalid or
unenforceable, the same will in no way affect any other
provision of this Agreement, the application of such provision
in any other circumstances, or the validity or enforceability
of this Agreement. The parties hereto intend this Agreement to
be enforced as written. If any provision or any part thereof is
held to be invalid or unenforceable because of the duration
thereof, the level of restrictions or the geographic scope
thereof, all parties agree that the court or arbitrator making
such determination will have the power to reduce the duration,
restrictions or geographic scope of such provision, and/or to
delete specific words or phrases in an its modified form such
provision will then be enforceable.
(f) CAPTIONS.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(g) BENEFICIARIES/REFERENCES.
The Employee shall be enabled to select (and change) a
beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following the Employee's death, and
may change such election, in either case by giving the Company
written notice thereof. In the event of the Employee's death or
a judicial determination of his incompetence, reference in this
Agreement to the Employee shall be deemed, where appropriate,
to refer to the Employee's beneficiary(ies), estate or legal
representative(s).
(h) ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the
parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with
respect to the subject matter hereof, including without
limitation the Prior Agreement and the Company's Executive
Severance Pay Plan. However, nothing
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in this Agreement shall adversely affect the Employee's rights
to benefits vested and accrued prior to the Effective Date,
other than benefits which vest or accrue upon a "Change of
Control" as defined in the Prior Agreement and the Company's
Executive Severance Pay Plan, as the case may be, which are
not satisfied under Section 3(h). The Employee expressly
agrees and acknowledges that the payments for his Company
stock options set forth in Section 2.9 of the Merger Agreement
are the sole payments in connection with or with respect to
his Company stock options to which he is or will be entitled,
and that the Prior Agreement has not been amended subsequent
to September 30, 1998.
(i) ARBITRATION.
(i) Any dispute, controversy or claim arising out of or
relating to this Agreement, a breach thereof or the
coverage or enforceability of this Section 9(i) shall
be settled by arbitration in Los Angeles, California
(or such other location as the Company and the
Employee may mutually agree), conducted in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association, as such rules are in effect
in Los Angeles on the date of delivery of demand for
arbitration. The arbitration of any such issue,
including the determination of the amount of damages,
shall be to the exclusion of any court of law. This
provision shall not limit, nor be limited by, any
additional right to seek injunctive relief under
Section 7(d).
(ii) There shall be three arbitrators, one to be chosen by
each party at will within ten (10) days from the date
of delivery of demand for arbitration and the third
arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a
third arbitrator within ten (10) days after the last
of the two arbitrators is chosen by the parties, the
third arbitrator will be designated, on application
by either party, by the American Arbitration
Association. The decision of a majority of the
arbitrators shall be final and binding on both
parties and their respective heirs, executors,
administrators, personal representatives, successors
and assigns. Judgment upon any award of the
arbitrators may be entered in any court having
jurisdiction, or application may be made to any such
court for the judicial acceptance of the award and
for an order of enforcement.
(iii) The Company shall pay the fees and expenses incurred
in connection with any arbitration arising out of
this Agreement, unless a majority of the arbitrators
concludes that such arbitration procedure was not
instituted in good faith by the Employee.
(j) REPRESENTATION.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that
the performance of its obligations under this
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9
Agreement will not violate any agreement between the Company
and any other person, firm or organization or any applicable
laws or regulations.
(k) SURVIVORSHIP.
The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement or the
Employee's employment hereunder to the extent necessary to the
intended preservation of such rights and obligations.
10. TERMINATION OF AGREEMENT.
This Agreement shall be void and of no further force or effect upon the
termination of the Merger Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of March 22, 1999.
PARENT:
VIVENDI
By: __________________________________
Its:___________________________________
(title)
COMPANY:
UNITED STATES FILTER CORPORATION,
a Delaware corporation
By: __________________________________
Its:___________________________________
(title)
EMPLOYEE:
By: __________________________________
19
