EMPLOYMENT AGREEMENT
Exhibit 10.1
This
Employment Agreement (the "Agreement"), is effective as of April
16, 2019 (the “Effective Date”), between Aytu
BioScience, Inc., a Delaware corporation headquartered at 000
Xxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 XXX, hereinafter
referred to as the "Company"), and Xxxxxx X. Xxxxxxx
(“Employee").
RECITALS
WHEREAS, the Company is a duly organized
Delaware corporation, with its principal place of business within
the State of Colorado, and is in the business of developing and
marketing pharmaceutical products; and
WHEREAS, the Company desires assurance
of the continued association and services of the Employee in order
to continue to retain the Employee’s experience, skills,
abilities, background and knowledge, and is willing to continue to
engage the Employee’s services on the terms and conditions
set forth in this Agreement; and
WHEREAS, Employee desires to be in the
continued employ of the Company, and is willing to accept such
continued employment on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, the parties hereto agree to the terms and
conditions of this Agreement as follows:
1. Employment for Term. The Company hereby agrees to employ
Employee and Employee hereby accepts such employment with the
Company for the period of 24 months beginning on the Effective
Date. The term of this Agreement (the "Term") shall continue until
the termination of Employee's employment in accordance with the
provisions of this Agreement. The termination of Employee's
employment under this Agreement shall end the Term but shall not
terminate Employee's or the Company's other obligations that are
intended to survive the termination of this Agreement (including
without limitation, the payments under Section 7 and 8 and
Employee’s obligations under Section 9).
2. Position and Duties. During the Term, Employee shall
serve as Chairman of the Board (Chairman) and Chief Executive
Officer (CEO) of the Company, and perform such duties as are
consistent with this position. The Employee shall report to the
Board of Directors of the Company. During the Term, Employee shall
also hold such additional positions and titles as the Board of
Directors of the Company (the "Board") may determine from time to
time. During the Term, Employee shall devote as much time as is
necessary to satisfactorily perform his duties as CEO of the
Company. Employee may engage in any civic and not-for-profit
activities so long as such activities do not materially interfere
with the performance of his duties hereunder or present a conflict
of interest with the Company During the Term of this Agreement,
Employee agrees not to acquire, assume or participate in, directly
or indirectly, any position, investment or interest known by the
Employee to be adverse or antagonistic to the Company, its business
or prospects, its financial position, or otherwise or in any
company, person or entity that is, directly or indirectly, in
competition with the business of the Company or any of its
affiliates. This provision shall encompass any advisory boards of
which Employee is or becomes a member of during the term hereof.
Employee shall provide written disclosure to the Compensation
Committee of the Company’s Board of Directors as to all
advisory boards on which Employee sits, and will provide the
Company with written notice within 10 business days of Employee
agreeing to sit on any additional advisory boards. On termination
of Employee’s employment, regardless of the reason for such
termination, Employee shall immediately (and with contemporaneous
effect) resign any directorships, offices or other positions that
Employee may hold in the Company or any affiliate, unless otherwise
agreed in writing by the parties.
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3. Compensation.
(a) Base Salary. The Company shall pay
Employee a base salary of $330,000 per annum, payable at least
monthly on the Company's regular pay cycle for professional
employees (the “Base Salary”). Except as specifically
otherwise provided herein, the Base Salary may be increased only by
recommendation of the Compensation Committee of the Board and
ratified by the Compensation Committee or a majority of the
independent members of the Board.
(b) Annual Review. The Base Salary shall
be reviewed at the end of each fiscal year (the first such review
to occur at the end of fiscal year 2020).
(c) Equity Compensation. In connection
with the execution of this Agreement, the Company hereby agrees to
grant on or promptly after August 1, 2019 equity compensation to
Employee in the form of options to purchase shares of Company
Common Stock. These options shall vest in accordance with the terms
and schedule set forth in Exhibit A hereto. Such vesting schedule
will be accelerated, to the extent provided in Section 8 of this
agreement. Equity grants will be made annually during the Term of
this Agreement in the amount approved by the Compensation Committee
and commensurate with the performance level of the
Employee.
(d) Other and Additional Compensation.
Subsections (a) and (c) above establish Employee’s
compensation during the Term which shall not preclude the Board
from awarding Employee a higher salary or any bonuses or stock
options, restricted stock or other forms of additional equity
awards in the discretion of the Board during the Term at any time.
The Employee shall be eligible for an annual discretionary bonus
(hereinafter referred to as the “Bonus”) with a target
amount of one hundred and twenty five percent (125%) of the
Base Salary, subject to
standard deductions and withholdings, based on the Compensation
Committee’s determination, in good faith, and based upon the
Employee’s individual achievement and company performance
objectives as set by the Board or the Compensation Committee, of
whether the Employee has met such performance milestones as are
established for the Employee by the Board or the Compensation
Committee, in good faith, in consultation with the Employee
(hereinafter referred to as the “Performance
Milestones”). The Performance Milestones will be based on
certain factors including, but not limited to, the Employee’s
performance and the Company’s financial and operational
performance. The Employee’s Bonus target will be reviewed
annually and may be adjusted by the Board or the Compensation
Committee in its discretion, provided however, that the Bonus
target may only be reduced upon Employee’s written consent.
The Employee must be employed on the date the Bonus is awarded to
be eligible for the Bonus, subject to the termination provisions
hereof. Bonuses shall be paid during the calendar quarter following
the calendar quarter for which such Bonus was earned when
Performance Milestones are met during a calendar quarter. Fourth
quarter Bonuses and Bonuses calculated on the basis of partial
Performance Milestone satisfaction shall be paid within 75 days of
fiscal year-end.
4. Employee Benefits. During the Term, Employee shall be
entitled to participate at the same level as other senior executive
officers of the Company in any group insurance, hospitalization,
medical, health and accident, disability, fringe benefit and
tax-qualified retirement plans or programs of the Company now
existing or hereafter established to the extent that he is eligible
under the general provisions thereof. For the term of this
Agreement, Employee shall be entitled to paid time off at the rate
of (5) weeks per annum. In accordance with Company policy, unused
paid time off may not be carried over from year to
year.
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5. Expenses. The Company shall reimburse Employee for
actual, reasonable out-of-pocket expenses incurred by him in the
performance of his services for the Company upon the receipt of
appropriate documentation of such expenses which shall be submitted
in such form, and with such supporting documentation, as called for
or required by Company policy.
6. Termination.
(a) General. The Term shall end
immediately upon Employee's death. Employee’s employment may
also be terminated by the Company with or without Cause or as a
result of Employee’s Disability, as defined in Section 7 or
by Employee with or without Good Reason (as such terms are defined
below).
(b) Notice of Termination. Either party
shall give written notice of termination to the other
party.
(c) Notification of New Employer. In the
event that Employee leaves the employ of the Company, Employee
grants consent to notification by the Company to Employee’s
new employer about his rights and obligations under this Agreement
and the PIA (hereinafter defined).
7. Severance Benefits.
(a) Cause Defined. "Cause" means (i)
willful malfeasance or willful misconduct by Employee in connection
with his employment; (ii) Employee's gross negligence in performing
any of his duties under this Agreement; (iii) Employee's conviction
of, or entry of a plea of guilty to, or entry of a plea of
nolo contendere with
respect to, any crime other than a traffic violation or infraction
which is a misdemeanor; (iv) Employee’s willful and
deliberate violation of a Company policy, (v) Employee's unintended
but material breach of any written policy applicable to all
employees adopted by the Company which is not cured to the
reasonable satisfaction of the Board of Directors within thirty
(30) business days after notice thereof; (vi) the Employee’s
unauthorized use or disclosure of any proprietary information or
trade secrets of the Company or any other party as to which the
Employee owes an obligation of nondisclosure as a result of the
Employee’s relationship with the Company, (vii) the
Employee’s willful and deliberate breach of his obligations
under this Agreement, or (viii) any other material breach by
Employee of any of his obligations in this Agreement which is not
cured to the reasonable satisfaction of the Board of Directors
within thirty (30) business days after notice thereof.
(b) Disability Defined. "Disability"
shall mean (i) Employee's incapacity due to a physical or mental
condition and, if reasonable accommodation is required by law,
after any reasonable accommodation, that results in Employee being
substantially unable to perform his duties hereunder for six
consecutive months (or for six months out of any nine month period)
or (ii) a qualified independent physician mutually acceptable to
the Company and Employee determines that Employee is incapacitated
due to a physical or mental condition and, if reasonable
accommodation is required by law, after any reasonable
accommodation so as to be unable to regularly perform the duties of
his position and such condition is expected to be of a permanent or
near-permanent duration. Until such time as Employee is terminated
for Disability under this paragraph (b), Employee shall continue to
receive his Base Salary hereunder, provided that if the Company
provides Employee with disability insurance coverage, payments of
Employee's Base Salary shall be reduced by the amount of any
disability insurance payments received by Employee due to such
coverage. The Company shall give Employee written notice of
termination due to Disability which shall take effect sixty (60)
days after the date it is sent to Employee unless Employee shall
have returned to the performance of his duties hereunder during
such sixty (60) day period (whereupon such notice shall become
void). In the event that the Company terminates Employee’s
employment as a result of his Disability, Employee shall be
entitled to the same benefits as if his employment had been
terminated by the Company without Cause.
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(c) Good Reason Defined. For
purposes of this Agreement, “Good Reason” shall mean,
without Employee’s written consent: (i) there is a material
reduction of the level of Employee’s compensation (excluding
any bonuses) (except where there is a general reduction applicable
to the management team generally, provided, however, that in no
case may the Base Salary be reduced below the amount stated in
Section 3(a)), (ii) there is a material reduction in
Employee’s overall responsibilities or authority, or scope of
duties (it being understood that the occurrence of a Change in
Control shall not, by itself, necessarily constitute a reduction in
Employee’s responsibilities or authority); or (iii) there is
a material change in the principal geographic location at which
Employee must perform his services (it being understood that the
relocation of Employee to a facility or a location within forty
(40) miles of the State Capitol Building in Denver, Colorado shall
not be deemed material for purposes of this Agreement). No event
shall be deemed to be “Good Reason” if the Company has
cured the event (if susceptible to cure) within 30 days of receipt
of written notice from Employee specifying the event or events
which, absent cure, would constitute “Good
Cause.”
(d) Accrued Compensation Defined.
Accrued Compensation shall mean an amount which shall include all
amounts earned or accrued by Employee through the date of
termination of this Agreement but not paid as of such date,
including (i) Base Salary, (ii) reimbursement for business expenses
incurred by the Employee on behalf of the Company, pursuant to the
Company’s expense reimbursement policy in effect at such
time, (iii) any expense allowance pursuant to Company policy, (iv)
accrued but unused vacation pay per Company policy, and (v) bonuses
and incentive compensation earned and awarded prior to the date of
termination. Accrued Compensation shall be paid on the first
regular pay date after the date of termination (or earlier, if
required by applicable law).
(e)
Termination.
(i) Cause; Without Good Reason; Death;
Disability. If the Company ends the Term for Cause, if
Employee resigns as an employee of the Company for reasons other
than an event of Good Reason, the Employee dies or Disability
occurs , then the Company shall pay to Employee the Accrued
Compensation but shall have no obligation to pay Employee any
amount, whether for salary, benefits, bonuses, or other
compensation or expense reimbursements of any kind, accruing after
the end of the Term, and such rights shall, except as otherwise
required by law or pursuant to the applicable award agreement or
plan, be forfeited immediately upon the end of the Term. For the
sake of clarity, any stock options, restricted stock or other
equity compensation shall, to the extent vested on the date of
resignation without Good Reason, the date the Company ends the Term
for Cause, or the date of Employee’s death, remain
outstanding and exercisable to the extent provided in the
applicable award agreement or plan, by the Employee or his personal
representative or executor.
(ii) Without Cause; Good Reason. In the
event that the Company terminates Employee’s employment
hereunder without Cause, or the Employee terminates his employment
with Good Reason, he shall be entitled to the Accrued Compensation
and, subject to Xxxxxxx 00 xxx 00 xxxxx,
(X) A lump sum payment equal to two
times his Base Salary in effect at the date of termination, less
applicable withholding
(B)
Continued participation (via state or federal insurance
continuation laws such as COBRA, to the extent available) in the
health and welfare plans (or comparable plans, if continued
participation in the Company’s plans is not available)
provided by the Company to Employee at the time of termination for
a period of two years from the date of termination or, if earlier,
until he is eligible for comparable coverage with a subsequent
employer. The Company agrees to reimburse the payments Employee
makes for such coverage, whether via continuation or separate
comparable policy. Premium reimbursements shall be made by the
Company to Employee consistent with the Company’s normal
expense reimbursement policy, provided that Employee submits
documentation to the Company substantiating his payments for
insurance coverage. Employee shall give the Company prompt notice
of his eligibility for comparable coverage.
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(C) All
vested stock options shall remain exercisable from the date of
termination until the expiration date of the applicable
award. So
long as the Section 8 below does not apply, then all
options which are unvested at the date of termination Without Cause
or for Good Reason shall be accelerated as of the date of
termination such that the number
of option shares equal to 1/24th the number of
option shares multiplied by the number of full months of
Employee’s employment hereunder shall be deemed vested and
immediately exercisable by the Employee. Any unvested options over
and above the foregoing shall be cancelled and of no further force
or effect, and shall not be exercisable by the
Employee.
(D) Any
severance payments and/or other separation benefits contemplated by
this Agreement are conditional on Employee: (i) continuing to
comply with the terms of this Agreement and the PIA (as defined
herein); (ii) delivering prior to or contemporaneously with any
such severance payments, and not revoking, (x) a customary general
release of claims relating to Employee’s employment and/or
this Agreement against the Company or its successor, its
subsidiaries and their respective directors, officers and
stockholders and (y) a customary affirmation of Employee’s
continuing obligations hereunder and under the PIA.
Unless
otherwise required by law, no severance payments and/or benefits
under this Agreement will be paid and/or provided until after the
expiration of any relevant revocation period. Subject to the
effectiveness of the release, the severance payments shall be paid
on the first payroll date that begins 30 days after
Employee’s termination of employment.
8. Change in Control Payments. The provisions of this
paragraph 8 set forth the terms of an agreement reached between
Employee and the Company regarding Employee's rights and
obligations upon the occurrence of a "Change in Control" (as
hereinafter defined) of the Company during the Term. These
provisions are intended to assure and encourage in advance
Employee's continued attention and dedication to his assigned
duties and his objectivity during the pendency and after the
occurrence of any such Change in Control. The following provisions
shall apply in the event of a Change in Control, in addition to any
payment or benefit that may be required pursuant to Section
7.
(a) Equity. Upon the occurrence of a
Change in Control, all stock options, restricted stock and other
stock-based grants to Employee by the Company or that may be
granted in the future shall, irrespective of any provisions of his
award agreements, immediately and irrevocably vest and become
exercisable and any restrictions thereon shall lapse. All stock
options shall remain exercisable from the date of the Change in
Control until the expiration of the term of such stock
options.
(b) Definitions. For purposes of this
paragraph 8, the following terms shall have the following
meanings:
"Change
in Control" shall mean any of the following:
(1) the
acquisition by any individual, entity, or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the
"Acquiring Person"), other than the Company, or any of its
Subsidiaries, of beneficial ownership (within the meaning of Rule
13d-3- promulgated under the Exchange Act) of 50% or more of the
combined voting power or economic interests of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (excluding any issuance of securities by the
Company in a transaction or series of
transactions made principally for bona fide equity financing
purposes; or
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(2) the
acquisition of the Company by another entity by means of any
transaction or series of related transactions to which the Company
is party (including, without limitation, any stock acquisition,
reorganization, merger or consolidation but excluding any issuance
of securities by the Company in a transaction or series of transactions made
principally for bona fide equity financing purposes) other
than a transaction or series of related transactions in which the
holders of the voting securities of the Company outstanding
immediately prior to such transaction or series of related
transactions retain, immediately after such transaction or series
of related transactions, as a result of shares in the Company held
by such holders prior to such transaction or series of related
transactions, at least a majority of the total voting power
represented by the outstanding voting securities of the Company or
such other surviving or resulting entity (or if the Company or such
other surviving or resulting entity is a wholly-owned subsidiary
immediately following such acquisition, its parent);
or
(3) the sale or
other disposition of all or substantially all of the assets of the
Company in one transaction or series of related
transactions.
9. Proprietary Information and Inventions Agreement. As a
condition of Employee’s employment with the Company, Employee
agrees to sign the Company’s standard form of Proprietary
Information and Inventions Agreement
(“PIA”).
10. Successors and Assigns.
(a) Employee. This Agreement is a
personal contract, and the rights and interests that the Agreement
accords to Employee may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him. All rights and
benefits of Employee shall be for the sole personal benefit of
Employee, and no other person shall acquire any right, title or
interest under this Agreement by reason of any sale, assignment,
transfer, claim or judgment or bankruptcy proceedings against
Employee. Except as so provided, this Agreement shall inure to the
benefit of and be binding upon Employee and his personal
representatives, distributees and legatees.
(b) The Company. This Agreement shall be
binding upon the Company and inure to the benefit of the Company
and of its successors and assigns, including (but not limited to)
any Company that may acquire all or substantially all of the
Company's assets or business or into or with which the Company may
be consolidated or merged. Any such successor of the Company will
be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose,
“successor” means any person, firm, corporation or
other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the
Company.
11. Entire Agreement. This Agreement (together with the
equity award agreements referred to herein) represents the entire
agreement between the parties concerning Employee's employment with
the Company and supersedes all prior negotiations, discussions,
understanding and agreements, whether written or oral, between
Employee and the Company relating to the subject matter of this
Agreement.
12. Amendment or Modification, Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver
is agreed to in writing signed by Employee and by a duly authorized
officer of the Company. No waiver by any party to this Agreement or
any breach by another party of any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of a similar or dissimilar condition or provision at the
same time, any prior time or any subsequent time.
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13. Notices. Any notice to be given under this Agreement
shall be in writing and delivered personally or sent by overnight
courier or registered or certified mail, postage prepaid, return
receipt requested, addressed to the party concerned at the address
indicated below, or to such other address of which such party
subsequently may give notice in writing:
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If to
Employee:
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0000
Xxxx 0xx
Xxxxxx Xxxxxxx
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Xxxxxx,
XX 00000
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To the
address specified in the payroll records of the
Company.
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If to
the Company:
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000
Xxxxxxxxx Xxxxxxx
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Xxxxx
000
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Xxxxxxxxx,
Xxxxxxxx 00000
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Any
notice delivered personally or by overnight courier shall be deemed
given on the date delivered and any notice sent by registered or
certified mail, postage prepaid, return receipt requested, shall be
deemed given on the date mailed.
14. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances
shall be determined by any court of competent jurisdiction or
arbitrator acting pursuant to Section 19 below to be invalid and
unenforceable to any extent, the remainder of this Agreement or the
application of such provision to such person or circumstances other
than those to which it is so determined to be invalid and
unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest
extent permitted by law. If for any reason any provision of this
Agreement containing restrictions is held to cover an area or to be
for a length of time that is unreasonable or in any other way is
construed to be too broad or to any extent invalid, such provision
shall not be determined to be entirely null, void and of no effect;
instead, it is the intention and desire of both the Company and
Employee that, to the extent that the provision is or would be
valid or enforceable under applicable law, any court of competent
jurisdiction or arbitrator acting pursuant to Section 19 below
shall construe and interpret or reform this Agreement to provide
for a restriction having the maximum enforceable area, time period
and such other constraints or conditions (although not greater than
those contained currently contained in this Agreement) as shall be
valid and enforceable under the applicable law.
15. Survivorship. The respective rights and obligations of
the parties hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of
such rights and obligations.
16. Headings. All descriptive headings of sections and
paragraphs in this Agreement are intended solely for convenience of
reference, and no provision of this Agreement is to be construed by
reference to the heading of any section or paragraph.
17. Withholding Taxes. All salary, benefits, reimbursements
and any other payments to Employee under this Agreement shall be
subject to all applicable payroll and withholding taxes and
deductions required by any law, rule or regulation of and federal,
state or local authority.
18. 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 constitute one and same instrument. The
parties agree that facsimile signatures shall have the same force
and effect as original signatures.
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19. Applicable Law; Arbitration. The validity,
interpretation and enforcement of this Agreement and any amendments
or modifications hereto shall be governed by the laws of the State
of Colorado, as applied to a contract executed within and to be
performed in such State. The parties agree that any disputes shall
be definitively resolved by binding arbitration before the American
Arbitration Association in Denver, Colorado in accordance with its
rules of arbitration procedure then in effect. The parties consent
to the jurisdiction to the federal courts of the District of
Colorado or, if there shall be no jurisdiction, to the state courts
located in Arapahoe County, Colorado, to enforce any arbitration
award rendered with respect thereto. Each party shall choose one
arbitrator and the two arbitrators shall choose a third arbitrator.
All costs and fees related to such arbitration (and judicial
enforcement proceedings, if any) shall be borne by the Company
unless Employee’s claim is deemed to be frivolous by the
arbitrator(s) or judge.
20. Legal Fees. The Company shall pay the reasonable
expenses of Employee’s counsel in negotiating this
Agreement.
21. Section 409A.
(a)
Anything in this Agreement to the contrary notwithstanding, if at
the time of Employee’s separation from service within the
meaning of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), the Company determines that
Employee is a “specified employee” within the meaning
of Section 409A(a)(2)(B)(i) of the Code, then to the extent any
payment or benefit that Employee becomes entitled to under this
Agreement on account of Employee’s separation from service
would be considered deferred compensation otherwise subject to the
20 percent additional tax imposed pursuant to Section 409A(a) of
the Code as a result of the application of Section 409A(a)(2)(B)(i)
of the Code, such payment shall not be payable and such benefit
shall not be provided until the date that is the earlier of (A) six
months and one day after Employee’s separation from service,
or (B) Employee’s death. If any such delayed cash payment is
otherwise payable on an installment basis, the first payment shall
include a catch-up payment covering amounts that would otherwise
have been paid during the six-month period but for the application
of this provision, and the balance of the installments shall be
payable in accordance with their original schedule.
(b) All
in-kind benefits provided and expenses eligible for reimbursement
under this Agreement shall be provided by the Company or incurred
by Employee during the time periods set forth in this Agreement.
All reimbursements shall be paid as soon as administratively
practicable, but in no event shall any reimbursement be paid after
the last day of the taxable year following the taxable year in
which the expense was incurred. The amount of in-kind benefits
provided or reimbursable expenses incurred in one taxable year
shall not affect the in-kind benefits to be provided or the
expenses eligible for reimbursement in any other taxable year
(except for any lifetime or other aggregate limitation applicable
to medical expenses). Such right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another
benefit.
(c) To
the extent that any payment or benefit described in this Agreement
constitutes “non-qualified deferred compensation” under
Section 409A of the Code, and to the extent that such payment or
benefit is payable upon Employee’s termination of employment,
then such payments or benefits shall be payable only upon
Employee’s “separation from service.” The
determination of whether and when a separation from service has
occurred shall be made in accordance with the presumptions set
forth in Treasury Regulation Section 1.409A 1(h).
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(d) The
parties intend that this Agreement will be administered in
accordance with Section 409A of the Code. To the extent that any
provision of this Agreement is ambiguous as to its compliance with
Section 409A of the Code, the provision shall be read in such a
manner so that all payments hereunder comply with Section 409A of
the Code. Each payment pursuant to this Agreement is intended to
constitute a separate payment for purposes of Treasury Regulation
Section 1.409A 2(b)(2). The parties agree that this Agreement may
be amended, as reasonably requested by either party, and as may be
necessary to fully comply with Section 409A of the Code and all
related rules and regulations in order to preserve the payments and
benefits provided hereunder without additional cost to either
party.
22. Application of Internal Revenue Code Section 280G.
If any payment or benefit Employee would receive pursuant to a
Change in Control from the Company or otherwise
(“Payment”)
would (i) constitute a “parachute payment” within
the meaning of Section 280G of the Code, and (ii) but for
this sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then such Payment
shall be equal to the Reduced Amount. The “Reduced
Amount” shall be either (x) the largest portion of the
Payment that would result in no portion of the Payment being
subject to the Excise Tax or (y) the largest portion, up to
and including the total, of the Payment, whichever amount, after
taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at
the highest applicable marginal rate), results in Employee’s
receipt, on an after-tax basis, of the greater economic benefit
notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax. If a reduction in payments or benefits
constituting “parachute payments” is necessary so that
the Payment equals the Reduced Amount, reduction shall occur in the
manner that results in the greatest economic benefit for Employee.
If more than one method of reduction will result in the same
economic benefit, the items so reduced will be reduced pro
rata.
In the
event it is subsequently determined by the Internal Revenue Service
that some portion of the Reduced Amount as determined pursuant to
clause (x) in the preceding paragraph is subject to the Excise
Tax, Employee agrees to promptly return to the Company a sufficient
amount of the Payment so that no portion of the Reduced Amount is
subject to the Excise Tax. For the avoidance of doubt, if the
Reduced Amount is determined pursuant to clause (y) in the
preceding paragraph, Employee will have no obligation to return any
portion of the Payment pursuant to the preceding
sentence.
Unless
Employee and the Company agree on an alternative accounting firm,
the accounting firm engaged by the Company for general tax
compliance purposes as of the day prior to the effective date of
the Change in Control shall perform the foregoing calculations. If
the accounting firm so engaged by the Company is serving as
accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally
recognized accounting firm to make the determinations required
hereunder. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made
hereunder.
The
Company shall use commercially reasonable efforts to cause the
accounting firm engaged to make the determinations hereunder to
provide its calculations, together with detailed supporting
documentation, to the Employee and the Company within fifteen
(15) calendar days after the date on which Employee’s
right to a Payment is triggered (if requested at that time by the
Employee or the Company) or such other time as requested by
Employee or the Company.
23.
Indemnification. As a condition to the
effectiveness of this Agreement, the Company and Employee shall
enter into a mutually acceptable indemnification
agreement.
9
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
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EMPLOYEE
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|
|
|
|
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By: /s/
Xxxx X. Xxxxxxxx
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/s/
Xxxxxx X. Xxxxxxx
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Name:
XXXX X. XXXXXXXX
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Name:
XXXXXX X. XXXXXXX
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Chairman
of the Compensation Committee
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Chairman
and Chief Executive Officer
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Board
of Directors
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10
EXHIBIT A
Terms of Compensation
Management equity grant:
●
A quantity of
restricted stock of the company as agreed upon by Employee and the
Company, but in no event will the quantity be less than the highest
amount of restricted stock issued to any other employee during the
term.
11
