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Exhibit 10.39
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
March 12, 1999, is made and entered into by and between CMAC Investment
Corporation, a Delaware corporation (the "Company"), and Xxx X. Xxxxxx (the
"Executive").
RECITALS:
WHEREAS, Xxxxxx Corporation, a Delaware corporation
("Xxxxxx"), will merge with and into the Company (the "Merger") pursuant to an
Agreement and Plan of Merger, dated as of November 22, 1998 (the "Merger
Agreement");
WHEREAS, the Executive is entitled to receive certain benefits
pursuant to a Severance Agreement, dated as of September 17, 1997, by and
between the Executive and Xxxxxx (the "Xxxxxxxxx Agreement"), under certain
circumstances as a result of the Merger;
WHEREAS, the Company desires to retain the Executive to render
managerial services to the Company and its Subsidiaries (as defined below) and
the Executive desires to render such services;
WHEREAS, upon the consummation of the Merger, the Executive
and the Company desire to terminate the Severance Agreement; and
WHEREAS, the Company and the Executive desire to set forth
herein the terms and conditions on which the Company will employ the Executive,
and the Executive will accept employment with the Company.
NOW, THEREFORE, in consideration of the mutual premises,
agreements and covenants set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending legally to be bound, hereby agree as follows:
1. Certain Defined Terms. In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means $375,000 or such higher annual base
salary as in effect for the Executive on or prior to the Termination
Date.
(b) "Board" means the Board of Directors of the Company.
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(c) "Cause" means that, prior to any termination pursuant to
Section 8(b), the Executive shall have committed:
(i) an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary;
(ii) intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been materially harmful to the
Company. For purposes of this Agreement, no act or failure to
act on the part of the Executive shall be deemed "intentional"
if it was due primarily to an error in judgment or negligence,
but shall be deemed "intentional" only if done or omitted to
be done by the Executive not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for
"Cause" hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three quarters of the
Board then in office at a meeting of the Board called and held
for such purpose, after reasonable notice to the Executive and
an opportunity for the Executive, together with his counsel
(if the Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the
good faith opinion of the Board, the Executive had committed
an act constituting "Cause" as herein defined and specifying
the particulars thereof in detail. Nothing herein will limit
the right of the Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(d) "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the
Company, in the management of any other mortgage guaranty insurance
company or any majority or sole owner of any mortgage guaranty
insurance company, including becoming an employee, owner (except for
passive investments of not more than one percent of the outstanding
shares of, or any other equity interest in, any company or entity
listed or traded on a national securities exchange or in an
over-the-counter security market), officer, agent, consultant or
director of any such company or owner thereof.
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(e) "Employee Benefits" mean the perquisites, benefits and
service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which the Executive is entitled to participate,
including, without limitation, any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital
or other insurance (whether funded by actual insurance or self-insured
by the Company), disability, salary continuation, expense reimbursement
and other employee benefit policies, plans, programs or arrangements.
(f) "Incentive Pay" means an annual amount equal to not less
than the highest aggregate annual bonus, incentive or other payments of
cash compensation, in addition to Base Pay, made or to be made in
regard to services rendered in any calendar year pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar
agreement, policy, plan, program or arrangement (whether or not funded)
of the Company.
(g) "Subsidiary" means an entity in which the Company directly
or indirectly beneficially owns 50% or more of the outstanding Voting
Stock.
(h) "Termination Date" means the date on which the Executive's
employment is terminated, the effective date of which shall be the date
of termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 8(b).
(i) "Voting Stock" means securities entitled to vote generally
in the election of directors.
2. Employment. Effective upon the consummation of the Merger,
the Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company, upon the terms and subject to the conditions set
forth in this Agreement.
3. Position and Duties. The Executive shall be employed as the
President and Chief Operating Officer of the Company. The Executive shall devote
substantially all of his business time and attention to the performance of his
duties hereunder, it being understood that he may, in his discretion and subject
to not interfering with his duties hereunder, devote time to other activities.
Subject to the authority of the Board and the Chief Executive Officer, the
Executive shall be responsible for the day-to-day nationwide general operation,
management and administration of all business of the Company and its
Subsidiaries, including, without limitation, as set forth in the By-laws of the
Company. The Executive shall report to the Chief Executive Officer of the
Company. The Executive has been elected as a member of the Board, effective as
of the date hereof. The Company shall cause the Executive to be included in any
slate of
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directors to be nominated for election to the Board (as a nominee of Xxxxxx
while Xxxxxx separately nominates directors pursuant to the terms of the Merger
Agreement) as of the date hereof and for successive terms while he is employed
by the Company.
4. Term of Employment. The term of the Executive's employment
hereunder shall commence as of the effective date of the Merger (the
"Commencement Date") and shall continue thereafter for a period of two (2) years
following the Commencement Date unless earlier terminated in accordance with the
provisions hereof.
5. Compensation. As compensation for all services rendered by
the Executive under this Agreement, the Company shall pay the Executive
compensation as follows:
(a) Annual Compensation. For all services rendered by the
Executive during his employment under this Agreement, beginning on the
Commencement Date, the Company shall pay the Executive an annual base
salary in an amount not less than $375,000 per annum, payable in
substantially equal bi-weekly installments. The Executive's annual
salary shall be subject to review before January 1 of each year by the
Board for possible merit increase. Any merit increase would be
effective on or about January 1st of the following year.
(b) Target Bonus. The Company shall provide the Executive with
a target bonus in an amount equal to (i) $475,000 for the period
beginning on the Commencement Date and ending on December 31, 1999,
(ii) $475,000 for the calendar year 2000, and (iii) a pro rated portion
of $475,000 for the period beginning on January 1, 2001 and ending on
the last day of the term of this Agreement, subject to adjustment in
each case in accordance with the penultimate sentence of this clause
(b) (the "Target"), to be earned based on the Company's annual
performance determined in accordance with specified targets established
by the Board of Directors in the normal running of the Company's
business..
Notwithstanding anything to the contrary contained herein, the
Company shall pay the Executive a minimum of 50% of the Target in respect of the
period commencing on the Commencement Date and ending on December 31, 1999 and
in respect of the period commencing on January 1, 2000 and ending on December
31, 2000. The Company shall calculate and pay the bonus in January or February
of the calendar year following the year in which the bonus was earned. The
Executive shall be eligible for the full target bonus for 1999 without regard to
the fact that his employment with the Company will not begin before the
Commencement Date. If the Executive's employment terminates at or before the end
of the term of this Agreement for any reason other than for Cause, the Executive
will receive a pro rated bonus for the year in which his termination occurs as
follows:
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(i) If the Company terminates the Executive's
employment other than for Cause, or if the Executive
terminates pursuant to Section 8(b), the Executive shall
receive a prorated portion of 50% of the Target for the
applicable period in which his termination occurs if the
Company is not meeting the performance objectives for the
bonus at the date of the termination of the Executive's
employment.
(ii) If the Company terminates the Executive's
employment other than for Cause, or if the Executive
terminates pursuant to Section 8(b) the Executive shall
receive a prorated portion of the Target then in effect (as if
fully earned) for the applicable period in which his
termination occurs if the Company is meeting the performance
objectives for the bonus at the date of the termination of the
Executive's employment.
(iii) If the Executive terminates his employment for
any reason other than for Cause or pursuant to Section 8(b),
the Executive shall receive a prorated portion of 50% of the
Target for the applicable period in which his termination
occurs.
(iv) The foregoing prorations shall be based on the
number of days within the applicable period that the Executive
was employed by the Company. The pro rated bonus will be paid
within thirty (30) days after the Executive's employment
terminates.
The Executive's target bonus shall be subject to review before January 1 of each
year by the Board for possible merit increase. Any merit increase would be
effective on or about January 1st of the following year.
(c) Other Benefits. The Executive shall be entitled to
participate in those benefits available to the senior executive
officers of the Company. The Executive shall be entitled to the
vacation policy that applies to the senior executive officers of the
Company. The Company shall give the Executive a car allowance, a
country club membership and parking, in each case, on a basis
equivalent to the senior executive officers of the Company.
6. Relocation.
(a) In Connection with the Merger. During the term of this
Agreement, the Company shall, within thirty (30) calendar days of the
Executive's request, cause a relocation company selected and paid for
by the Company to purchase the Executive's house and property located
at 00 Xxxxxxxxx, Xxxx Xxxxx, Xxxxxxxx 00000 (the "Executive's Home")
for an amount in cash equal to their then fair market value to
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be mutually determined by the relocation company and the Executive and
shall pay the Executive $75,000 to cover miscellaneous expenses in
connection with such sale. In connection with the Executive's
relocation to the Philadelphia, Pennsylvania area, the Company shall
pay in cash, within five (5) calendar days after the Executive's
request and the Company's receipt of documentation of expenses, all (i)
expenses of moving household goods and vehicles, (ii) costs for
temporary storage of household goods and vehicles for up to twelve (12)
months, (iii) reimbursement for reasonable temporary living expenses up
to $60,000, (iv) duplicate interest expenses, if any, with respect to
the Executive's Home and his new home in the Philadelphia area for up
to six (6) months, (v) expenses related to house hunting trips, and
(vi) fees and commissions relating to the Executive's purchase of a new
home and the sale of the Executive's Home. The Company shall, within
five (5) calendar days after the Executive's request and the Company's
receipt of documentation of expenses, pay the Executive a tax gross-up
payment for the relocation benefits described in this Section 6(a) in
an amount necessary to make the after-tax benefit received by the
Executive (taking into account the effect of both income taxes and any
Excise Tax (as defined under Section 10(a) of this Agreement)) in
respect of these relocation benefits equal to the pre-tax benefit of
the payments to the Executive under this Section 6(a).
(b) Upon Termination. If the Executive's employment terminates
other than for Cause during the term of this Agreement, and the
Executive moves out of the Philadelphia, Pennsylvania area, the Company
shall cause a relocation company selected and paid for by the Company
to purchase the Executive's house and property in the Philadelphia,
Pennsylvania area for an amount in cash equal to their then fair market
value to be mutually determined by the relocation company and the
Executive and shall pay the Executive $75,000 to cover miscellaneous
expenses in connection with such sale within thirty (30) calendar days
of the Executive's request, which request may occur at any time within
six (6) months of the termination of the Executive's employment. To the
extent more favorable to the Executive than as set forth herein,
"Cause" shall have the meaning assigned to such term in any severance
arrangement entered into between the Company and the Chief Executive
Officer of the Company.
(c) The parties acknowledge that the relocation company may
require withholding of amounts required to correct problems noted in
the inspection of the Executive's Home.
7. Insurance. The Company shall provide to the Executive life
insurance and disability insurance to the same extent as provided to the Chief
Executive Officer of the Company and shall reimburse the Executive for the
premiums paid by Executive in respect thereof to the same extent as provided to
the Chief Executive Officer.
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8. Termination.
(a) The Executive's employment may be terminated by the
Company during the term of this Agreement and the Executive shall be
entitled to benefits provided by Section 9 unless such termination is
the result of the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive
disability benefits pursuant to, the long-term disability plan
of the Company then in effect for, or applicable to, the
Executive; or
(iii) Cause.
If, during the term of this Agreement, the Executive's
employment is terminated by the Company or any Subsidiary other than
pursuant to Section 8(a)(i), 8(a)(ii) or 8(a)(iii), the Executive shall
be entitled to the benefits provided by Section 9 hereof.
(b) The Executive may terminate employment with the Company
and any Subsidiary during the term of this Agreement with the right to
the benefits as provided in Section 9 upon the occurrence of one or
more of the following events (regardless of whether any other reason,
other than Cause as hereinabove provided, for such termination exists
or has occurred, including without limitation other employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the
Company and/or a Subsidiary, as the case may be, which the
Executive holds upon the effective date of the Merger pursuant
to this Agreement, or the removal of the Executive as a
Director of the Company (or any successor thereto);
(ii) (A) A significant adverse change in the nature
or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with the
Company and/or any Subsidiary which the Executive holds upon
the effective date of the Merger pursuant to this Agreement,
(B) a reduction in the aggregate of the Executive's Base Pay
and Incentive Pay received from the Company and any
Subsidiary, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the
scope or value thereof (except that the level of any such
Employee Benefits may be reduced in the event of a
corresponding reduction generally applicable to all recipients
of or participants in such Employee Benefits), any of which is
not remedied by the Company within
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ten (10) calendar days after receipt by the Company of written
notice from the Executive of such change, reduction or
termination, as the case may be;
(iii) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer of
all or substantially all of its business and/or assets, unless
the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which
all or substantially all of its business and/or assets have
been transferred (directly or by operation of law) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 20(a); or
(iv) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the
Company or any successor thereto (including without limitation
any failure of the Company or a successor to pay the Executive
the compensation required by Section 5(a) or (b) of this
Agreement).
(c) A termination by the Company pursuant to Section 8(a) or
by the Executive pursuant to Section 8(b) shall not affect any rights
that the Executive may have pursuant to any agreement, policy, plan,
program or arrangement of the Company providing Employee Benefits,
which rights shall be governed by the terms thereof.
9. Severance Compensation.
(a) If the Company terminates the Executive's employment
during the term of this Agreement other than pursuant to Section 8(a),
or if the Executive terminates his employment pursuant to Section 8(b),
the Company shall pay to the Executive the following amounts within
thirty (30) business days after the Termination Date and continue to
provide to the Executive the following benefits:
(i) A lump sum payment in an amount equal to three
(3) times the Base Pay;
(ii) For a period of two years following the
Termination Date (the "Continuation Period"), the Company
shall arrange to provide the Executive with Employee Benefits
that are welfare benefits (but not stock option, stock
purchase, stock appreciation or similar compensatory benefits)
substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the
Termination Date (or, if greater, immediately prior to the
reduction, termination, or denial described in Section
8(b)(ii)), except that the level of any such Employee Benefits
to be provided to the Executive may be reduced in the event of
a corresponding reduction generally applicable to all
recipients of or participants in such Employee Benefits. If
and to the extent that
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any benefit described in the immediately preceding sentence is
not or cannot be paid or provided under any policy, plan
program or arrangement of the Company or any Subsidiary, as
the case may be, then the Company shall itself pay or provide
for the payment to the Executive, his dependents and
beneficiaries, of such Employee Benefits. Without otherwise
limiting the purposes or effect of Section 10, Employee
Benefits otherwise receivable by the Executive pursuant to the
first sentence of this Section 9(a)(ii) shall be reduced to
the extent comparable welfare benefits are actually received
by the Executive from another employer during the Continuation
Period following the Executive's Termination Date, and any
such benefits actually received by the Executive shall be
reported by the Executive to the Company.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit
required to be made or provided hereunder on a timely basis, the
Company shall pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Northeast Edition of The Wall Street Journal. Such interest shall be
payable as it accrues on demand. Any change in such prime rate shall be
effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the
contrary, the parties' respective rights and obligations under this
Section 6, Section 9 and Sections 10 through 25 shall survive any
termination or expiration of this Agreement or the termination of the
Executive's employment for any reason whatsoever.
10. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, but subject to Section 10(h), in the event that
Section 9 of this Agreement shall become operative and it shall be
determined (as hereafter provided) that any payment or distribution by
the Company or any of its affiliates to or for the benefit of the
Executive paid or payable or distributed or distributable pursuant to
the terms of this Agreement (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 successor provision thereto) by
reason of being considered "contingent on a change in ownership or
control" of the Company, within the meaning of Section 280G of the Code
(or any successor provision thereto) or to any similar tax imposed by
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 shall be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment"). The Gross-Up Payment
shall be in an amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such
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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.
(b) Subject to the provisions of Section 10(f), all
determinations required to be made under this Section 10, 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, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within thirty (30) calendar days after the
Termination Date, if applicable, and any such other time or times as
may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the
Company shall pay the required Gross-Up Payment to the Executive within
fifteen business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the Executive has
substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the
uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which shall 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 Section 10(f) and the
Executive thereafter is required to make a payment of any Excise Tax,
the Executive shall direct the Accounting 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 shall be
promptly paid by the Company to, or for the benefit of, the Executive
within fifteen business days after receipt of such determination and
calculations.
(c) The Company and the Executive shall each provide the
Accounting 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 Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by
Section 10(b). Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and
the Executive.
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(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent
basis with the determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall make proper
payment of the amount of any Excise Payment, 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 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 Accounting
Firm determines that the amount of the Gross-Up Payment should be
reduced, the Executive shall within fifteen business days pay to the
Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Section 10(b) shall be borne by the Company. If such
fees and expenses are initially paid by the Executive, the Company
shall reimburse the Executive the full amount of such fees and expenses
within fifteen business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority
that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than ten (10) business days after the
Executive actually receives notice of such claim and the Executive
shall 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 shall not pay such claim
prior to the earlier of (i) the expiration of the 30-calendar-day
period following the date on which he gives such notice to the Company
and (ii) 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 shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
(ii) 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
competent in respect of the subject matter and reasonably
selected by the Company;
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(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and shall
indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income 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
Section 10(f), the Company shall control all proceedings taken
in connection with the contest of any claim contemplated by
this Section 10(f) 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 shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and xxx
for a refund, the Company 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 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 shall be limited
to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall 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.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 10(f), the Executive
receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
10(f) 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 Section 10(f), a determination is made that
the Executive shall not be entitled to any
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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 thirty (30) calendar days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of any such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid by the Company to the Executive pursuant to this Section 10.
(h) Notwithstanding any provision of this Agreement to the
contrary, if (i) but for this sentence, the Company would be obligated
to make a Gross-Up Payment to the Executive, (ii) the aggregate
"present value" of the "parachute payments" to be paid or provided to
the Executive under this Agreement or otherwise does not exceed 1.15
multiplied by three times the Executive's "base amount" and (iii) but
for this sentence, an amount equal to the excess of (A) the net
after-tax proceeds (taking into account both income taxes and any
Excise Tax) received by the Executive in respect of the parachute
payments (and taking into account payment of the Gross-Up Payment),
over (B) the maximum net after-tax benefit to the Executive of
parachute payments the present value of which is not equal to or
greater than three times the Executive's base amount, is not greater
than $50,000, then the payments and benefits to be paid or provided
under this Agreement shall be reduced to the minimum extent necessary
(but in no event to less than zero) so that no portion of any payment
or benefit to the Executive, as so reduced, constitutes an "excess
parachute payment." For purposes of this Section 10(h), the terms
"excess parachute payment," "present value," "parachute payment," and
"base amount" shall have the meanings assigned to them by Section 280G
of the Code. The determination of whether any reduction in such
payments or benefits to be provided under this Agreement is required
pursuant to the preceding sentence shall be made at the expense of the
Company, if requested by the Executive or the Company, by the
Accounting Firm. The fact that the Executive's right to payments or
benefits may be reduced by reason of the limitations contained in this
Section 10(h) shall not of itself limit or otherwise affect any other
rights of the Executive other than pursuant to this Agreement. In the
event that any payment or benefit intended to be provided under this
Agreement or otherwise is required to be reduced pursuant to this
Section 10(h), the Executive shall be entitled to designate the
payments and/or benefits to be so reduced in order to give effect to
this Section 10(h). The Company shall provide the Executive with all
information reasonably requested by the Executive to permit the
Executive to make such designation. In the event that the Executive
fails to make such designation within ten (10) business days of the
Termination Date, the Company may effect such reduction in any manner
it deems appropriate.
11. No Mitigation Obligation. The Company hereby acknowledges
that it will be difficult and may be impossible for the Executive to find
reasonably comparable employment following the Termination Date. Accordingly,
the payment of the severance compensation by the Company to the Executive in
accordance with the terms of this Agreement is hereby
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acknowledged by the Company to be reasonable, and the Executive shall not be
required to mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall any profits, income, earnings
or other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of the Executive hereunder or
otherwise, except as expressly provided in the last sentence of Section
9(a)(ii).
12. Legal Fees and Expenses. The Company shall pay all of the
reasonable legal fees and expenses incurred by the Executive in connection with
the negotiation and preparation of this Agreement and the Agreement dated as of
the date hereof by and between the Executive and the Company. It is the intent
of the Company that the Executive not be required to incur legal fees and the
related expenses associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its obligations
under this agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny, or
to recover from, the Executive the benefits provided or intended to be provided
to the Executive hereunder, the Company irrevocably authorizes the Executive
from time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation, the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company shall pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
13. Competitive Activity. During a period ending one (1) year
following the Executive's Termination Date, if the Executive shall have received
or shall be receiving benefits under Section 9 and, if applicable, Section 10,
the Executive shall not, without the prior written consent of the Company, which
consent shall not be unreasonably withheld, engage in any Competitive Activity.
14. Employment Rights. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the Company or any
Subsidiary after the term of this Agreement.
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15. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
the Company is required to withhold pursuant to any law or government regulation
or ruling.
16. Other Expenses. The Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including, without limitation, all reasonable
travel and living expenses incurred while away from home on business or at the
request of the Company in accordance with the applicable Company policy.
17. 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 Agreement will not violate any
agreement between it and any other person, firm or organization. The Executive
represents that the performance of his obligations under this Agreement will not
violate any agreement between him and any other person, firm or organization
that would be violated by the performance of his obligations under this
Agreement.
18. Termination of Severance Agreement. The parties hereto
agree that, as of the effective date of the Merger, the Severance Agreement
shall be terminated and of no further force or effect.
19. Treatment of Equity. The parties acknowledge that pursuant
to the Xxxxxx Corporation Equity Award Agreements dated as of May 20, 1996,
January 17, 1997, May 1, 1997, November 14, 1997, as amended, and the Xxxxxx
Corporation Stock Option Agreement dated as of May 20, 1998, the Executive's
options to purchase common stock of Xxxxxx and the Executive's restricted stock
of Xxxxxx are fully vested as a result of the Merger.
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20. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree 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. This Agreement shall be
binding upon and inure to the benefit of the Company and any successor
to the Company, including, without limitation, any persons acquiring
directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be
deemed the "Company" for the purposes of this Agreement), but shall not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and
legatees. This Agreement shall have no force or effect in the event the
Merger is not consummated by June 30, 1999.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 19(a) and 19(b).
Without limiting the generality or effect of the foregoing, the
Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by
Executive's will or by the laws of descent and distribution and, in the
event of any attempted assignment or transfer contrary to this Section
19(c), the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
21. Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five (5) business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three (3) business
days after having been sent by a nationally recognized overnight courier service
such as Federal Express, UPS, or Purolator, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive office and
to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
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22. Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Pennsylvania,
without giving effect to the principles of conflict of laws of such State.
23. Validity. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances shall not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
24. Miscellaneous. No provision 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 the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
25. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first written above.
CMAC INVESTMENT CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
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/s/ Xxx X. Xxxxxx
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Xxx X. Xxxxxx
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