AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
Exhibit 10.3(32)
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 is made and entered into as of December 31, 2008 (the “Amendment”), to
the EMPLOYMENT AGREEMENT made and entered into as of September 10, 2007 (the “Agreement”), by and
between MGM MIRAGE (“Employer”), and Xxxxxx Xxxxxxx (“Employee”).
W I T N E S S E T H:
WHEREAS, the Employer and the Employee desire to amend the Agreement as required pursuant to
the final Treasury regulations under section 409A of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this Amendment and in
the Agreement, the Employer and the Employee agree that the Agreement is hereby amended as
follows, effective January 1, 2009:
1. Equity Treatment Upon a Change of Control. Section 10.5 is amended and restated to read as
follows:
10.5 Change of Control. In the event there is a Change of Control of the
Company (which term is defined in Section 22), then:
10.5.1 All of your unvested options, stock appreciation rights or Other
Rights (including restricted stock units), if any, shall become fully vested.
10.5.2 If the Change of Control results from an exchange of outstanding
common stock as a result of which the common stock of MGM MIRAGE is no
longer publicly held, then all of your options to purchase common stock of MGM
MIRAGE, stock appreciation rights, and Other Rights (including restricted stock
units) will vest or be exercisable, as applicable, for the consideration (cash, stock
or otherwise) which the holders of MGM MIRAGE common stock received in
such exchange. For example, if immediately prior to the effective date of the
transaction, you had vested and exercisable options to acquire 5,000 shares of
MGM MIRAGE’s common stock and the exchange of stock is one share of
common stock of MGM MIRAGE for two shares of common stock of the
acquiring entity, then your options will be converted into options to acquire, upon
payment of the exercise price, 10,000 shares of the acquiring entity’s common stock. If, in addition, you had unvested stock options, each option would become
immediately vested and on exercise and payment of the exercise price, entitle you
to receive two shares of the acquiring company’s common stock.
10.5.3
If the Change of Control results from a sale of MGM MIRAGE’s
outstanding common stock for cash with the result that MGM
MIRAGE’s
common stock is no longer publicly held, then upon the Change of Control, all of
your options to purchase common stock of MGM MIRAGE, stock appreciation rights, and
restricted stock units will become vested and cashed out for an amount of cash equal
to the difference between the purchase price and the exercise price (if applicable),
less any applicable withholding taxes. The cash-out payment will be made on or
within 30 days after the Change of Control. For example, if immediately prior to the
Change of Control, you have options to acquire 2,000 shares of MGM
MIRAGE’s common
stock at an exercise price of $35, and the purchase price for MGM
MIRAGE’s common
stock was $40, then upon the Change of Control you would be entitled to receive
$10,000 in full satisfaction of such options (2,000 shares times $5 per share). If,
in addition, you had unvested stock options, those options would become vested and
immediately exercisable upon the Change of Control and you would be entitled to
receive $5, net of applicable taxes, for each option in full satisfaction of that
option. The foregoing applies to all options, stock appreciation rights, and
restricted stock units granted to you, notwithstanding the provisions of Section
10.7, to the extent required to comply with Section 409A (as defined below).
2. Definition of “Change of Control.” The definition of “Change of Control” in Section
22 is hereby amended by adding the following as the last paragraph thereof:
Notwithstanding the foregoing, any accelerated vesting of any restricted stock
units granted to you that are “deferred compensation” (as defined under Treasury
Regulation Section 1.409A-l(b)(l), after giving effect to the exemptions in Treasury
Regulation Sections 1.409A-l(b)(3) through (b)(12)), may occur only upon or as a
result of a “Change of Control,” as described above, that is also a “change in
control event” as described in Section 409A (as defined in Section 24).
Under Section 409A, a “change in control event” means: a (i) Change in
Ownership of the Company, (ii) Change in Effective Control of the Company, or (iii)
Change in the Ownership of Assets of the Company, as described herein and construed
in accordance Section 409A.
(i) A Change in Ownership of the Company shall occur on the date that any one
Person acquires, or Persons Acting as a Group acquire, ownership of the capital
stock of the Company that, together with the stock held by such Person or Group,
constitutes more man 50% of the total fair market value or total voting power of the
capital stock of the Company. However, if any one Person is, or Persons Acting as a
Group are, considered to own more than 50% of the total fair market value or total
voting power of the capital stock of the Company, the acquisition of additional
stock by the same Person or Persons Acting as a Group is not considered to cause a
Change in Ownership of the Company or to cause a Change in Effective Control of the
Company (as described below). An increase in the percentage of capital stock owned
by any one Person, or Persons Acting as a Group, as a result of a transaction in
which the Company acquires its stock in exchange for property will be treated as an
acquisition of stock.
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(ii) A Change in Effective Control of the Company shall occur on the date either (A) a
majority of members of the Company’s Board is replaced during any 12-month period by directors
whose appointment or election is not endorsed by a majority of the members of the Company’s Board
before the date of the appointment or election, or (B) any one Person, or Persons Acting as a
Group, acquires (or has acquired during the 12-month period ending on the date of the most recent
acquisition by such Person or Persons) ownership of stock of the Company possessing 30% or more of
the total voting power of the stock of the Company.
(iii) A Change in the Ownership of Assets of the Company shall occur on the date that any one
Person acquires, or Persons Acting as a Group acquire (or has or have acquired during the 12-month
period ending on the date of the most recent acquisition by such Person or Persons), assets from
the Company that have a total gross fair market value equal to or more than 40% of the total gross
fair market value of all of the assets of the Company immediately before such acquisition or
acquisitions. For this purpose, gross fair market value means the value of the assets of the
Company, or the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets.
The following rules of construction apply in interpreting the definition of “change in control
event”:
(A) A Person means any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended, other than employee benefit plans sponsored or maintained by the
Company and by entities controlled by the Company or an underwriter of the
capital stock of the Company in a registered public offering.
(B) Persons will be considered to be Persons Acting as a Group
(or Group) if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction
with the corporation. If a Person owns stock in both corporations that enter into a
merger, consolidation, purchase or acquisition of stock, or similar transaction,
such shareholder is considered to be acting as a Group with other shareholders
only with respect to the ownership in that corporation before the transaction
giving rise to the change and not with respect to the ownership interest in the
other corporation. Persons will not be considered to be acting as a Group solely
because they purchase assets of the same corporation at the same time or purchase
or own stock of the same corporation at the same time, or as a result of the same
public offering.
(C) For purposes of this definition of “change in control event,”
fair market value shall be determined by Board.
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(D) A “change in control event” shall not include a transfer to a
related person as described in Section 409A.
(E) For purposes of this definition of “change in control event,”
section 318(a) of the Internal Revenue Code of 1986, as amended (the “Code”)
applies to determine stock ownership. Stock underlying a vested option is
considered owned by the individual who holds the vested option (and the stock
underlying an unvested option is not considered owned by the individual who
holds the unvested option). For purposes of the preceding sentence, however, if a
vested option is exercisable for stock that is not substantially vested (as defined
by Treasury Regulation §1.83-3(b) and (j)), the stock underlying the option is not
treated as owned by the individual who holds the option.
3. Section 409A. A new Section 24 is added as follows:
24. Section 409A.
(a) This Agreement is intended to comply with, or otherwise
be exempt from, Section 409A of the Code and any regulations and Treasury
guidance promulgated thereunder (“Section 409A”). If we determine in good
faith that any provision of this Agreement would cause you to incur an additional
tax, penalty, or interest under Section 409A, the Compensation Committee and
you shall use reasonable efforts to reform such provision, if possible, in a
mutually agreeable fashion to maintain to the maximum extent practicable the
original intent of the applicable provision without violating the provisions of
Section 409A or causing the imposition of such additional tax, penalty, or interest
under Section 409A. The preceding provisions, however, shall not be construed
as a guarantee by us of any particular tax effect to you under this Agreement.
(b)
“Termination of employment,” or words of similar import,
as used in this Agreement means, for purposes of any payments under this
Agreement that are payments of deferred compensation subject to Section 409A,
your “separation from service” as defined in Section 409A.
(c) For purposes of Section 409A, the right to a series of
installment payments under this Agreement shall be treated as a right to a series of
separate payments.
(d) With respect to any reimbursement of your expenses, or
any provision of in-kind benefits to you, as specified under this Agreement, such
reimbursement of expenses or provision of in-kind benefits shall be subject to the
following conditions: (1) the expenses eligible for reimbursement or the amount
of in-kind benefits provided in one taxable year shall not affect the expenses
eligible for reimbursement or the amount of in-kind benefits provided in any other
taxable year, except for any medical reimbursement arrangement providing for
the reimbursement of expenses referred to in Section 105(b) of the Code; (2) the
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reimbursement of an eligible expense shall be made in accordance with our reimbursement policy but
no later than the end of the year after the year in which such expense was incurred; and (3) the
right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for
another benefit.
(e) Any payment of “deferred compensation” (as defined under
Treasury Regulation Section 1.409A-l(b)(l), after giving effect to the exemptions
in Treasury Regulation Sections 1.409A-l(b)(3) through (b)(12)) that arises under
this Agreement, on account of your separation from service while you are a
“specified employee” (as defined under Section 409A), and is scheduled to be
paid or provided within six months after such separation from service (the
aggregate of such scheduled payments, the “Delayed Payment”) shall, in lieu
thereof, be paid or provided, as adjusted for interest, within 15 days after the end
of the six-month period beginning on the date of such separation from service or,
if earlier, within 15 days after the appointment of the personal representative or
executor of your estate following your death. For purposes of the foregoing,
interest shall accrue at the prime rate of interest published in the northeast edition
of The Wall Street Journal on the date of your separation from service.
(f) In the event that the provisions of Section 24(e) shall apply
to any payment obligation under this Agreement, we will, within five
(5) business
days after your separation from service, make an irrevocable contribution of an
amount equal to the Delayed Payment to a grantor trust established consistent
with the terms of Revenue Procedure 92-64, 33 I.R.B. 11 (Aug. 17, 1992) with a
financial institution approved by you, which approval will not be withheld
unreasonably, serving as the third-party trustee thereof, under the terms of which
the assets of the trust may be used, in the absence of our insolvency, solely for
purposes of fulfilling our obligation to pay the Delayed Payment to you in
compliance with Section 409A(a)(2)(B)(i) of the Code. In addition, in the event
that you must incur legal fees or costs to enforce payment of any amounts subject
to the six-month delay of payment under this Agreement, we will pay all
reasonable attorney’s fees associated with such action.
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IN WITNESS WHEREOF, the Employer and Employee have entered into this Amendment in Las Vegas,
Nevada, effective as of January 1, 2009.
| MGM MIRAGE |
||||
| Date: | By: | /s/ Xxxxxxx X. Xxxxxxx | ||
| Name: | Xxxxxxx X. Xxxxxxx | |||
| Title: | SVP Treasurer | |||
| EMPLOYEE |
||||
| Date: 12-18-08 | By: | /s/ Xxxxxx X. Xxxxxxx | ||
| Xxxxxx Xxxxxxx | ||||
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