EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of January 1, 2003 by and between XXXX
MARKETS, INC., a Pennsylvania corporation (the "Company"), and Xxxxxxx X. Xxxxx
(the "Executive"),
WITNESSETH THAT:
WHEREAS, the Executive is currently serving as Chief Financial Officer
/ Treasurer of the Company, and the Company desires to retain the Executive
to continue to serve in such capacity or capacities as the Board of Directors
of the Company (the "Board") or the Chairman of the Board (the "Chairman") may
from time to time determine, and the Executive is willing to continue to serve
in such capacity or capacities, on the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto, each intending to be legally bound hereby, agree as
follows:
1. Employment. The Company agrees to continue to employ the Executive,
and the Executive agrees to continue to be employed by the Company, for the
Term provided in Paragraph 3(a) below and upon the other terms and conditions
hereinafter provided. The Executive hereby represents and warrants that he has
the legal capacity to execute and perform this Agreement, that it is a valid
and binding agreement, enforceable against him according to its terms, and that
its execution and performance by him do not violate the terms of any existing
agreement or understanding to which the Executive is a party.
2. Position and Responsibilities. During the Term, the Executive agrees
to serve as the Chief Financial Officer/ Treasurer of the Company or in such
other executive capacity or capacities for the Company and/or any of its
subsidiaries or affiliated companies as the Board or the Chairman may from
time to time determine. The Executive also agrees to serve, if elected and
without additional compensation, as a member of the Board and/or as an officer
and director of any other parent, subsidiary or affiliate of the Company.
3. Term and Duties.
(a) Term of Agreement. The term of the Executive's employment under this
Agreement shall commence on January 1, 2003 and shall continue thereafter
through December 31, 2007 (the "Term").
(b) Duties. During the Term, and except for illness or incapacity and
reasonable vacation periods of not less than five weeks in any calendar
year (or such greater periods as shall be consistent with the Company's
policies for other key the Executives), the Executive shall devote all of
his business time, attention, skill and efforts exclusively to the
business and affairs of the Company and its subsidiaries and affiliates,
shall not be engaged in any other business activity, and shall perform
and discharge well and faithfully the duties which may be assigned to him
from time to time by the Board or the Chairman; provided, however, that
nothing in this Agreement shall preclude the Executive from devoting time
during reasonable periods required for:
(i) serving, in accordance with the Company's policies and with the
prior approval of the Board or the Chairman, which prior approval
will not be unreasonably withheld, as a director of any company or
organization involving no actual or potential conflict of interest
with the Company or any of its subsidiaries or affiliates;
(ii) delivering lectures and fulfilling speaking engagements;
(iii) engaging in charitable and community activities; and
(iv) investing his personal assets in businesses in which his
participation is solely that of an investor in such form or manner
as will not violate Section 7 below or require any services on the
part of the Executive in the operation or the affairs of such
business, provided, however, that such activities do not materially
affect or interfere with the performance of the Executive's duties
and obligations to the Company.
4. Compensation. For all services rendered by the Executive in any
capacity required hereunder during the Term, including, without limitation,
services as an the Executive, officer, director, or member of any committee of
the Company or any subsidiary, affiliate or division thereof, the Executive
shall be compensated as set forth below:
(a) Base Salary. The Executive shall be paid a fixed salary ("Base
Salary") of $285,000 per annum as of the effective date of this Agreement.
The Base Salary amount is subject to periodic review and adjustment by
the Board or its Executive Compensation Committee but shall not be less
than $285,000 per annum during the Term of this Agreement. Base Salary
shall be payable in accordance with the customary payroll practices of
the Company, but in no event less frequently than monthly.
(b) Bonus. The Executive shall be eligible to participate in such
annual or long-term bonus or incentive plans as the Company shall from
time to time maintain for its senior the Executives. The basis for the
Executive's participation shall be the same as for other similarly
situated the Executives, and it is understood that awards under any such
plan may be discretionary.
(c) Equity-Based Compensation. The Executive shall be eligible to
participate in, and to be granted stock options, stock appreciation
rights or other equity-based awards under, the Company's 1995 Stock Option
Plan or such other stock option, stock ownership, stock incentive or
other equity-based compensation plans as the Company shall from time to
time maintain for its senior the Executives. The basis for the
Executive's participation shall be the same as for other similarly
situated the Executives, and it is understood that awards under any such
plan may be discretionary.
(d) SERP Contribution. During the Term, the Company's annual
contributions to the Executive's accounts under the Company's Supplemental
Executive Retirement Plan (together with any successor plan, the "SERP")
shall be determined annually by the Compensation Committee of the
Board of Directors
(e) Additional Benefits. Except as modified by this Agreement, the
Executive shall be entitled to participate in all compensation or
employee benefit plans or programs, and to receive all benefits,
perquisites and emoluments, for which any member of senior management at
the Company is eligible under any plan or program now or hereafter
established and maintained by the Company for senior officers, to the
extent permissible under the general terms and provisions of such plans
or programs and in accordance with the provisions thereof, including
group hospitalization, health, dental care, senior executive life or
other life insurance, travel or accident insurance, disability plans,
tax-qualified or non-qualified pension, savings, thrift and profit-
sharing plans, deferred compensation plans, sick-leave plans, auto
allowance or auto lease plans, and executive contingent compensation
plans, including, without limitation, capital accumulation programs and
stock purchase plans. Notwithstanding the foregoing, the Executive
acknowledges and agrees that the severance payments provided in certain
circumstances under this Agreement are in lieu of any rights which the
Executive might otherwise have under any and all other displacement,
separation or severance plans or programs of the Company, and the
Executive hereby waives all rights to participate in any of such plans
or programs in the event of the termination of his employment during the
Term.
5. Business Expenses. The Company shall pay or reimburse the Executive
for all reasonable travel and other expenses incurred by the Executive (and
his spouse where there is a legitimate business reason for his spouse to
accompany him) in connection with the performance of his duties and
obligations under this Agreement, subject to the Executive's presentation of
appropriate vouchers in accordance with such policies and procedures as the
Company from time to time establish for senior officers.
6. Effect of Termination of Employment; Effect of Disability.
(a) Without Cause Termination or Termination by the Executive for Good
Reason. Subject to the provisions of Section 7 below, in the event the
Executive's employment hereunder terminates due to either a Without Cause
Termination (as defined in Section 6(f)(iii)) or a termination by the
Executive for Good Reason (as defined in Section 6(f)(ii)):
(i) earned but unpaid Base Salary as of the Date of Termination
(as defined in Section 14(b)) and any earned but unpaid bonuses for
prior years (collectively, the "Accrued Obligations"), shall be
payable in full, and the Company shall, as liquidated damages or
severance pay, or both:
(A) continue to pay the Executive's Base Salary, as in effect
at the Date of Termination, from the Date of Termination until
the end of the Term, and
(B) pay to the Executive for the year of termination and for
each subsequent calendar year or portion thereof during the
remainder of the Term, an amount (prorated in the case of any
partial year) equal to the highest annual incentive bonus
received by the Executive for any year in the three years
preceding the Date of Termination, such payments to be made at
the normal times for payment of bonuses under the Company's
annual bonus plan as in effect at the Date of Termination (the
"Bonus Plan").
With respect to the payments provided for in this Section 6(a)(i), the
Executive shall be entitled, to the extent permitted by law as determined
by the Company in good faith, to participate in any compensation deferral
plans or arrangements then provided by the Company to senior the
Executives on the same basis as if he had remained an employee through
the end of the Term.
(ii) Until the end of the Term, the Company shall pay to the
Executive, in lieu of Company contributions to the SERP and at the
time such contributions would otherwise have been made to the SERP,
the amount no less than what was made to the SERP the year prior to
Termination.
(iii) The Company shall continue to provide the Executive and the
Executive's spouse through December 31, 2001 with medical, dental,
accident, disability and life insurance benefits upon substantially
the same terms and conditions (including contributions required by
the Executive for such benefits) as those of the applicable employee
benefit plans in effect from time to time as applied to employees;
provided, however, that if the Executive or his spouse cannot
continue to participate under the terms of the Company plans
providing such benefits, the Company shall otherwise provide such
benefits on (as nearly as reasonably practicable) the same after-tax
basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event the Executive becomes re-
employed with another employer and becomes eligible to receive
welfare benefits from such employer, the welfare benefits described
herein shall be secondary to such benefits during the period of the
Executive's eligibility, but only to the extent that the Company
reimburses the Executive for any increased cost and provides any
additional benefits necessary to give the Executive the benefits
provided hereunder.
(iv) The Executive shall be entitled to vested benefits under all
other compensation or benefit plans in which the Executive
participated as of the date of termination, as determined under the
terms of the applicable plan or agreement.
(b) Disability. In the event of the Executive's Disability, the Company
may, by giving a Notice of Disability as provided in Section 14(c),
remove the Executive from active employment and in that event shall
provide the Executive with the same payments and benefits as those
provided in Section 6(a), except that:
(i) Base Salary payments under Section 6(a)(i)(A) shall be at the
rate 50% of the Executive's Base Salary as in effect at the Date of
Disability;
(ii) in lieu of the bonus payments provided in Section 6(a)(i)(B),
the Executive shall receive, at the same time as bonus payments for
the year of Disability would otherwise be made under the Bonus Plan,
a prorated bonus for the year of Disability only equal to the amount
determined by the Company in good faith (which determination shall be
final and conclusive) to be the amount of the bonus award the
Executive would have received if he had been employed throughout the
bonus year, prorated on a daily basis as of the Date of Disability;
and
(iii) except for Accrued Obligations, Base Salary payments shall be
offset by any amounts otherwise payable to the Executive under the
Company's disability program generally available to other employees.
(c) Death. In the event the Executive's employment hereunder terminates
due to death:
(i) Accrued Obligations as of the date of death shall be payable in
full;
(ii) from the date of the Executive's death until the end of the
Term, the Company shall, at the same times Base Salary would
otherwise be payable hereunder, make payments at the rate of 50% of
the Executive's Base Salary in effect at the date of death to (A)
the Executive's spouse at the date of his death, should she survive
him and (B) following the death of the Executive's spouse or should
she not survive him, to the Executive's estate;
(iii) the Company shall pay to the Executive's estate, at the same
time as bonus payments for the year of death would otherwise be made
under the Bonus Plan, a prorated bonus for the year of death only
equal to the amount determined by the Company in good faith (which
determination shall be final and conclusive) to be the amount of the
bonus award the Executive would have received if he had been
employed throughout the bonus year, prorated on a daily basis as of
the date of death; and
(iv) in the event the Executive is survived by his spouse, the
Company shall continue to provide the Executive's spouse through
December 31, 2011 with medical and dental insurance benefits in
accordance with Section 6(a)(iii) above;
(d) Other Termination of Employment. In the event the Executive's
employment hereunder terminates due to a Termination for Cause or the
Executive terminates employment with the Company other than for Good
Reason, Disability, Retirement or death, Accrued Obligations and vested
benefits as of the Date of Termination shall be payable in full. No
other payments shall be made, or benefits provided, by the Company except
for benefits which have already become vested under the terms of employee
benefit programs maintained by the Company or its affiliates for its
employees generally as provided in Section 10.
(e) Definitions. For purposes of this Agreement, the following terms,
when capitalized, shall have the following meanings unless the context
otherwise requires:
(i) "Termination for Cause" means, to the maximum extent permitted
by applicable law, a termination of the Executive's employment by
the Company by a vote of the majority of the Board members then in
office, because the Executive (a) has been convicted of, or has
entered a plea of nolo contendere to, a criminal offense involving
moral turpitude, or (b) has willfully continued to fail to
substantially perform his duties with the Company (other than any
such failure resulting from the Executive's incapacity due to
physical or mental illness or any such failure subsequent to the
Executive being delivered a Notice of Termination without Cause by
the Company or delivering a Notice of Termination for Good Reason to
the Company) after a written demand for substantial performance is
delivered to the Executive by the Board which specifically
identifies the manner in which the Board believes that the Executive
has not substantially performed his duties or (c) has committed an
improper action resulting in personal enrichment at the expense of
the Company or (d) has engaged in illegal or gross misconduct that
is materially and demonstrably injurious to the Company, or (e) has
violated the representations made in Section 1 above, or the
provisions of Section 7 below; provided, however, that the Board has
given the Executive advance notice of such Termination for Cause
including the reasons therefor, together with a reasonable
opportunity for the Executive to appear with counsel before the
Board and to reply to such notice.
(ii) a "termination by the Executive for 'Good Reason'" shall mean a
termination of his employment by the Executive:
(A) by a Notice of Termination given during the period
beginning 30 days and ending 180 days following the occurrence
of a Change of Control, regardless of the reason or lack of
reason for such termination; or
(B) by a Notice of Termination given otherwise during the
period beginning on the date of a Change of Control and ending
on the second anniversary of the date of the Change of Control
due to:
(1) any change in the duties or responsibilities (including
reporting responsibilities) of the Executive that is
inconsistent in any material and adverse respect with the
Executive's position(s), duties, responsibilities or
status with the Company immediately prior to such Change
of Control (including any material and adverse diminution
of such duties or responsibilities);
(2) a material and adverse change in the Executive's
titles or offices (including, if applicable, membership on
the Board) with the Company as in effect immediately prior
to such Change of Control;
(3) a material and adverse change in the aggregate value
of the Executive's compensation and benefits as in effect
during the 12 months immediately prior to such Change of
Control;
(4) any requirement of the Company that the Executive be
based anywhere more than 60 miles from the office where
the Executive is located at the time of the Change of
Control; or
(5) the failure of the Company to obtain the assumption
of this Agreement from any Surviving Corporation as
contemplated in Section 6(f)(iv)(B)(4).
(C) at any time due to:
(1) any reduction without the consent of the Executive in
the Executive's salary below the amount then provided for
under Paragraph 4(a) hereof; or
(2) a failure of the Company or its successor to fulfill
its obligations under this Agreement in any material
respect. An isolated, insubstantial and inadvertent
action taken in good faith and which is remedied by the
Company within 10 days after receipt of notice thereof
given by the Executive shall not constitute Good Reason.
The Executive's right to terminate employment for Good
Reason shall not be affected by the Executive's
incapacities due to mental or physical illness and the
Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
event or condition constituting Good Reason; provided,
however, that the Executive must provide notice of
termination of employment within 180 days following the
Executive's knowledge of an event constituting Good
Reason or such event shall not constitute Good Reason
under this Agreement.
(iii) "Without Cause Termination" means a termination of the
Executive's employment by the Company other than due to Disability
or expiration of the Term and other than a Termination for Cause.
(iv) "Change of Control" means the occurrence of any of the
following events:
(A) individuals who on the effective date of this Agreement
constitute the Board (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the effective
date, whose election or nomination for election was approved by
a vote of at least two-thirds of the Incumbent Directors then
on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as
a nominee for director, without written objection by such
Incumbent Directors to such nomination) shall be deemed to be
an Incumbent Director; provided, however, that no individual
elected or nominated as a director of the Company initially as
a result of an actual or threatened election contest with
respect to directors or any other actual or threatened
solicitation of proxies by or on behalf of any person other
than the Board shall be deemed to be an Incumbent Director; or
(B) Any merger, consolidation, division, share exchange, sale
or other transfer of assets, liquidation or other transaction
or series of related transactions outside the ordinary course
of business involving the Company or any of its subsidiaries
(a "Business Combination"), unless immediately following such
Business Combination there shall be a corporation (the
"Surviving Corporation") which meets each of the following
requirements: (1) the Surviving Corporation owns, directly or
indirectly through subsidiaries, consolidated assets of the
Company which immediately prior to the Business Combination had
an aggregate book value equal to more than 75% of the book value
of the Company's consolidated total assets as of the close of
the most recent fiscal quarter ended on or prior to the date of
the first public announcement of the Business Combination; (2)
at least a majority of the voting power in the election of
directors of the Surviving Corporation is held by the
shareholders of the Company having such power in the election
of the Board immediately prior to the Business Combination and,
other than as a result of an election by such shareholders to
receive consideration other than in shares of the Surviving
Corporation, such voting power is held by such shareholders in
substantially the same proportions as immediately prior to the
Business Combination; (3) at least a majority of the members of
the board of directors of the Surviving Corporation were
Incumbent Directors at the time of the Board's approval of the
execution of the initial agreement providing for such Business
Combination; and (4) the Surviving Corporation, if other than
the Company, shall have expressly assumed in writing the
obligations of the Company under this Agreement.
(v) "Disability" for purposes of this Agreement means the Executive
shall be disabled so as to be unable to perform for 180 days in any
365-day period, with or without reasonable accommodation, the
essential functions of his positions under this Agreement, as
determined by a person or entity experienced in this field selected
by the Company and acceptable to the Executive or his representative.
(vi) "Retirement" means a voluntary termination of his employment by
the Executive (1) on or after attainment of age 65, (2) on not less
than 6 months' Notice of Retirement as provided in Section 14 and (4)
under circumstances not constituting a Termination for Cause, Without
Cause Termination, termination for Good Reason, Disability or death.
(vii) The "Date of Termination," "Date of Disability" and "Date of
Retirement" shall have the meanings ascribed to them in Section 14.
To the fullest extent permitted by applicable law, to the extent
this Agreement requires the payment of Base Salary and/or the
provision of coverages and benefits subsequent to the Date of
Termination or Date of Disability, the Executive's Date of
Termination or Date of Disability, as applicable, shall not be
treated as a termination of employment (a "Benefit Plan Termination
Date") from the Company for purposes of determining the Executive's
rights, responsibilities and tax treatment under any and all
employee pension, welfare and fringe benefit plans maintained by the
Company. Rather, the Benefit Plan Termination Date shall be the day
following the last day for which any Base Salary and/or coverages
and benefits are required to be provided by this Agreement.
7. Other Duties of the Executive During and After Term.
(a) Confidential Information. The Executive recognizes and acknowledges
that certain information pertaining to the affairs, business, suppliers,
or customers of the Company or any of its subsidiaries or affiliates (any
or all of such entities hereinafter referred to as the "Business"), as
such information may exist from time to time, is confidential information
and is a unique and valuable asset of the Business, access to and
knowledge of which are essential to the performance of his duties under
this Agreement. The Executive shall not, through the end of the Term or
at any time thereafter, except to the extent reasonably necessary in the
performance of his duties under this Agreement, divulge to any person,
firm, association, corporation or governmental agency, any information
concerning the affairs, business, suppliers, or customers of the Business
(except such information as is required by law to be divulged to a
government agency or pursuant to lawful process or such information which
is or shall become part of the public realm through no fault of the
Executive), or make use of any such information for his own purposes or
for the benefit of any person, firm, association or corporation (except
the Business) and shall use his reasonable best efforts to prevent the
disclosure of any such information by others. All records and documents
relating to the Business, whether made by the Executive or otherwise
coming into his possession are, shall be, and shall remain the property
of the Business. No copies thereof shall be made which are not retained
by the Business, and the Executive agrees, on any termination of his
employment, or on demand of the Company, to deliver the same to the
Company.
(b) Non-Competition. During his employment by the Company, whether
during or after the Term, and for a period of four years following the
termination of his employment for any reason except for a Without Cause
Termination or termination by the Executive for Good Reason, the
Executive shall not, without express prior written approval by order of
the Board, directly or indirectly, engage in, whether as an officer,
director, employee, consultant, agent, partner, joint venturer,
proprietor or otherwise, become interested in (other than as a
shareholder owning not more than 1% of the outstanding shares of any
class of securities registered under Section 12 of the Securities
Exchange Act of 1934) or assist any business which (i) is in
competition with the Company or any of its affiliates in the retail
grocery business or (A) during his employment, in any other business in
which the Company or any of its subsidiaries is then engaged or proposes
to engage or (B) following the termination of his employment, in any
other business which during the 12 months preceding the Executive's Date
of Termination accounted for more than 2% of the Company's consolidated
revenues and (ii) engages in any such business in any county in which the
Company then engages in such business or any county contiguous thereto.
(c) Non-Interference. During his employment with the Company and until
four years after the termination of the Executive's employment, whether
during or after the Term and notwithstanding the cause of termination,
the Executive shall not (i) hire or employ, directly or indirectly
through any enterprise with which he is associated, any employee of the
Company or any of its affiliates or (ii) recruit, solicit or induce (or
in any way assist another person or enterprise in recruiting, soliciting
or inducing) any such employee or any consultant, vendor or supplier of
the Company or any of its affiliates to terminate or reduce such person's
employment, consulting or other relationship with the Company or any of
its affiliates.
(d) Remedies. The Company's obligation to make payments or provide for
or increase any benefits under this Agreement (except to the extent
previously vested) shall cease upon any violation of the provisions of
this Section 7; provided, however, that the Executive shall first have the
right to appear before the Board with counsel and that such cessation of
payments or benefits shall require a vote of a majority of the Board
members then in office. In addition, in the event of a violation by the
Executive of the provisions of this Section 7, the Company shall be
entitled, if it shall so elect, to institute legal proceedings to obtain
damages for any such breach, and/or to enforce the specific performance
by the Executive of this Section 7 and to enjoin the Executive from any
further violation, and may exercise such remedies cumulatively or in
conjunction with such other remedies as may be available to the Company
at law or in equity. The Executive acknowledges, however, that the
remedies at law for any breach by him of the provisions of this Section 7
would be inadequate and agrees that the Company shall be entitled to
injunctive relief against him in the event of any such breach.
(d) Survival; Authorization to Modify Restrictions. The covenants of the
Executive contained in this Section 7 shall survive any termination of the
Executive's employment for the periods stated herein, whether during or
after the Term and, except as otherwise provided in this Section 7,
regardless of the reason for such termination. The Executive represents
that his experience and capabilities are such that the enforcement of the
provisions of this Section 7 will not prevent him from earning his
livelihood, and acknowledges that it would cause the Company serious and
irreparable injury and cost if the Executive were to use his ability and
knowledge in competition with the Company or to otherwise breach the
obligations contained in this Section 7. Accordingly, it is the
intention of the parties that the provisions of this Section 7 shall be
enforceable to the fullest extent permissible under applicable law, but
that the unenforceability (or modification to conform to such law) of any
provision or provisions hereof shall not render unenforceable, or impair,
the remainder thereof. If any provision or provisions hereof shall be
deemed invalid or unenforceable, either in whole or in part, this
Agreement shall be deemed amended to delete or modify, as necessary, the
offending provision or provisions and to alter the bounds thereof to the
extent required in order to render it valid and enforceable.
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment, award, benefit or
distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any
entity which effectuates a Change of Control (or any of its affiliated
entities) to or for the benefit of the Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to
any additional payments required under this Section 8) (the "Payments")
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest
or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Company shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all
taxes (including any Excise Tax) imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the sum of
(x) the Excise Tax imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-Up Payment in
the Executive's adjusted gross income and the highest applicable marginal
rate of federal income taxation for the calendar year in which the Gross-
Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to (i) pay federal income
taxes at the highest marginal rates of federal income taxation for the
calendar year in which the Gross-Up Payment is to be made, (ii) pay
applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes and (iii) have
otherwise allowable deductions for federal income tax purposes at least
equal to the Gross-Up Payment. Notwithstanding the foregoing provisions
of this Section 8(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the Payments would not be
subject to the Excise Tax if the Payments were reduced by an amount that
is less than 5% of the portion of the Payments that would be treated as
"parachute payments" under Section 280G of the Code, then the amounts
payable to the Executive under this Agreement shall be reduced (but not
below zero) to the maximum amount that could be paid to the Executive
without giving rise to the Excise Tax (the "Safe Harbor Cap"), and no
Gross-Up Payment shall be made to the Executive. The reduction of the
amounts payable hereunder, if applicable, shall be made by reducing first
the payments under Section 6(a)(ii), unless an alternative method of
reduction is elected by the Executive. For purposes of reducing the
Payments to the Safe Harbor Cap, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction of
the amounts payable hereunder would not result in a reduction of the
Payments to the Safe Harbor Cap, no amounts payable under this Agreement
shall be reduced pursuant to this provision.
(b) Subject to the provisions of Section 8(a), all determinations
required to be made under this Section 8, including whether and when a
Gross-Up Payment is required, the amount of such Gross-Up Payment, the
reduction of the Payments to the Safe Harbor Cap and the assumptions to
be utilized in arriving at such determinations, shall be made by the
public accounting firm that is retained by the Company as of the date
immediately prior to the Change of Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice from the
Company or the Executive that there has been a Payment, or such earlier
time as is requested by the Company (collectively, the "Determination").
In the event that the Accounting Firm is serving as accountant or auditor
for the individual, entity or group effecting the Change of Control, the
Executive may appoint another nationally recognized public accounting
firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the
Company, and the Company shall enter into any agreement requested by the
Accounting Firm in connection with the performance of the services
hereunder. The Gross-Up Payment under this Section 8 with respect to
any Payments shall be made no later than 30 days following such Payment.
If the Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any,
on the Executive's applicable federal income tax return will not result
in the imposition of a negligence or similar penalty. In the event the
Accounting Firm determines that the Payments shall be reduced to the Safe
Harbor Cap, it shall furnish the Executive with a written opinion to such
effect. The Determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination,
it is possible that Gross-Up Payments which will not have been made by
the Company should have been made ("Underpayment") or Gross-Up Payments
are made by the Company which should not have been made ("Overpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Executive thereafter is required to make payment of any
Excise Tax or additional Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or
for the benefit of the Executive. In the event the amount of the Gross-
Up Payment exceeds the amount necessary to reimburse the Executive for
his Excise Tax, the Accounting Firm shall determine the amount of the
Overpayment that has been made, and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by the Executive (to the extent he has received a refund if
the applicable Excise Tax has been paid to the Internal Revenue Service)
to or for the benefit of the Company. The Executive shall cooperate, to
the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise
Tax.
9. Resolution of Disputes. Except as otherwise provided in Section 7(d)
hereof, any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Sunbury,
Pennsylvania, by three arbitrators in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. In the event
of any arbitration, litigation or other proceeding between the Company
and the Executive with respect to the subject matter of this Agreement
and the enforcement of rights hereunder, the Company shall reimburse the
Executive for his reasonable costs and expenses relating to such
arbitration, litigation or other proceeding, including attorneys' fees
and expenses, to the extent that such arbitration, litigation or other
proceeding results in any: (i) settlement requiring the Company to make
a payment, continue to make payments or provide any other benefit to the
Executive; or (ii) judgment, order or award against the Company in favor
of the Executive or his spouse, legal representative or heirs, unless
such judgment, order or award is subsequently reversed on appeal or in a
collateral proceeding. At the request of the Executive, costs and
expenses (including attorneys' fees) incurred in connection with any
arbitration, litigation or other proceeding referred to in this Section
shall be paid by the Company in advance of the final disposition of the
arbitration, litigation or other proceeding upon receipt of an
undertaking by or on behalf of the Executive to repay the amounts
advanced if it is ultimately determined that he is not entitled to
reimbursement of such costs and expenses by the Company as set forth in
this Section.
10. Full Settlement; No Mitigation; Non-Exclusivity of Benefits. The
Company's obligation to make any payment provided for in this Agreement
and otherwise to perform its obligations hereunder shall be in lieu and
in full settlement of all other severance payments to the Executive under
any other severance plan, arrangement or agreement of the Company and its
affiliates, and in full settlement of any and all claims or rights of the
Executive for severance, separation and/or salary continuation payments
resulting from the termination of his employment. In no event shall the
Executive be obligated to seek other employment or to take other action
by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement, and except as specifically provided
herein, such amounts shall not be reduced whether or not the Executive
obtains other employment. Except as provided above in this Section 10,
nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliates for which the
Executive may qualify, nor, except as otherwise specifically provided in
this Agreement, shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliates, including without limitation any stock
option agreement. Amounts or benefits which are vested benefits or which
the Executive is otherwise entitled to receive under any such plan,
program, policy, practice, contract or agreement prior to, at or
subsequent to any Date of Termination, Date of Disability or Date of
Retirement shall be paid or provided in accordance with the terms of such
plan, program, policy, practice, contract or agreement except as
explicitly modified by this Agreement.
11. Employment and Payments by Affiliates. Except as herein otherwise
specifically provided, references in this Agreement to employment by the
Company shall include employment by affiliates of the Company, and the
obligation of the Company to make any payment or provide any benefit to
the Executive hereunder shall be deemed satisfied to the extent that such
payment is made or such benefit is provided by any affiliate of the
Company.
12. Withholding Taxes. The Company may directly or indirectly withhold
from any payments made under this Agreement all Federal, state, city or
other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
13. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement
shall preclude the Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another
corporation or entity which assumes this Agreement and all obligations
and undertakings of the Company hereunder. Upon such a consolidation,
merger or transfer of assets and assumption, the term, "Company" as used
herein shall mean such other corporation or entity, and this Agreement
shall continue in full force and effect.
14. Notices.
(a) General. All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be
deemed to have been duly given when delivered or 5 days after being
deposited in the United States mail, certified and return receipt
requested, postage prepaid, addressed as follows:
(i) To the Company:
Xxxx Markets, Inc.
0000 X. Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
(ii) To the Executive:
Xxxxxxx X. Xxxxx
X.X. 0
Xxxxxxxxx, XX 00000
or to such other address as the addressee party shall
have previously specified in writing to the other.
(b) Notice of Termination. Except in the case of death of the
Executive, any termination of the Executive's employment hereunder,
whether by the Executive or the Company, shall be effected only by a
written notice given to the other party in accordance with this Section
14 (a "Notice of Termination"). Any Notice of Termination shall (i)
indicate the specific termination provision in Section 6 relied upon,
(ii) in the case of a termination by the Company for Cause or by the
Executive for Good Reason, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination and (iii)
specify the effective date of such termination of employment (the "Date
of Termination"), which shall not be less than 15 days nor more than 60
days after such notice is given. The failure of the Executive or the
Company to set forth in any Notice of Termination any fact or
circumstance which contributes to a showing of Cause or Good Reason shall
not waive any right of the Executive or the Company hereunder or preclude
the Executive or the Company from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(c) Notice of Disability. Any finding of Disability by the Company
shall be effected only by a written notice given to the Executive in
accordance with this Section 14 (a "Notice of Disability"). Any Notice
of Disability shall (i) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such finding of Disability
and (ii) specify an effective date (the "Date of Disability"), which
shall not be less than 10 days after such notice is given. The failure
of the Company to set forth in any Notice of Disability any fact or
circumstance which contributes to a showing of Disability shall not
waive any right of the Company hereunder or preclude the Company from
asserting such fact or circumstance in enforcing the Company's rights
hereunder.
(d) Notice of Retirement. Retirement shall be effected only by a
written notice given by the Executive in accordance with this Section 14
(a "Notice of Retirement"). Any Notice of Retirement shall (i) indicate
that it is a Notice of Retirement and (ii) specify an effective date
(the "Date of Retirement) which shall not be less than six months after
such notice is given.
15. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge,
or hypothecation or to execution, attachment, levy or similar process or
assignment by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be null, void and of no
effect; provided, however, that nothing in this Section 15 shall preclude
the assumption of such rights by executors, administrators, or other
legal representatives of the Executive or his estate or their assigning
any rights hereunder to the person or persons entitled thereto.
16. Source of Payments. Subject to Section 11 hereof, all payments
provided for under this Agreement shall be paid in cash from the general
funds of the Company. The Company shall not be required to establish a
special or separate fund or other segregation of assets to assure such
payments, and, if the Company shall make any investments to aid it in
meeting its obligations hereunder, the Executive shall have no right,
title or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating
to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship, between the Company and
the Executive or any other person. To the extent that any person
acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor.
17. Binding Agreement. This Agreement shall be binding upon, and shall
inure to the benefit of, the Executive and the Company and, as permitted
by this Agreement, their respective successors, assigns, heirs,
beneficiaries and representatives.
18. Governing Law. The validity, interpretation, performance and
enforcement of this Agreement shall be governed exclusively by the laws
of the Commonwealth of Pennsylvania, without regard to principles of
conflicts of laws thereof.
19. Counterparts; Headings. This Agreement may be executed in
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument. The underlined Section headings contained in this Agreement
are for convenience of reference only and shall not affect the
interpretation or construction of any provision hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its officer thereunto duly authorized, and the Executive has signed
this Agreement, all as of the date first above written.
XXXX MARKETS, INC.
By: /S/Xxxxxx X. Xxxx
---------------------------
Name: Xxxxxx X. Xxxx
Title: President/ CEO
/S/Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx
