EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Employment Agreement") is made as of
the 1st day of October, 1997 by and between PHAR-MOR, INC., a Pennsylvania
corporation (the "Corporation"), and XXXXXX X. XXXXXX ("X.X. Xxxxxx").
WHEREAS, the Corporation desires to employ X.X. Xxxxxx, and X.X. Xxxxxx
desires to be employed by the Corporation, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Position, Term and Duties.
1.1 The Corporation hereby employs X.X. Xxxxxx, and X.X. Xxxxxx hereby
accepts employment, as the Co-Chairman of the Board and Co-Chief Executive
Officer of the Corporation for a term that shall commence as of the date hereof
and shall continue such that this Employment Agreement shall at all times have a
rolling term of three (3) years (the "Term").
1.2 X.X. Xxxxxx will render such services to the Corporation as are
customarily rendered by the Co-Chairman of the Board and Co-Chief Executive
Officer of the Corporation, and X.X. Xxxxxx shall be deemed to satisfy such
obligations so long as he continues to hold such titles (it being understood
that a termination of X.X. Xxxxxx from either position "Without Cause" will be a
default by the Corporation under this Employment Agreement). In furtherance and
not in limitation of the foregoing, X.X. Xxxxxx, together with Abbey X. Xxxxxx
("X.X. Xxxxxx") pursuant to his Employment Agreement with the Corporation of
even date herewith (the "Xxxxxx Employment Agreement"), shall have the authority
and power for the supervision, hiring and termination of the Corporation's
senior management. X.X. Xxxxxx may render such services from such offices and
locations as he deems appropriate and desirable, and in no event shall X.X.
Xxxxxx be required to relocate. Nothing in this Employment Agreement shall
prohibit X.X. Xxxxxx from engaging, directly or indirectly, in any such
activities with other companies, ventures or investments in any capacity
whatsoever; provided, however, that X.X. Xxxxxx shall not accept an offer to be
retained as an employee, director, consultant or agent by, or purchase more than
a ten percent (10%) ownership interest in any entity that derives more than
fifty percent (50%) of its gross revenues from the retail sale, at a discount,
of pharmaceuticals (other than an entity in which X.X. Xxxxxx or his immediate
family currently owns or controls, directly or indirectly, an ownership interest
of at least one percent (1%)) without obtaining the prior written consent of the
Corporation's Board of Directors.
1.3 To the fullest extent permitted or required by the laws of the
state of incorporation of the Corporation, as may apply from time to time, the
Corporation shall indemnify and hold harmless (including advance payment of
expenses) X.X. Xxxxxx, in accordance with the terms of such laws, if X.X. Xxxxxx
is made a party, or threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that X.X. Xxxxxx is or was an officer or
director of the Corporation or any subsidiary or affiliate of the Corporation,
against expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any such action, suit or proceeding, which indemnification shall include
the protection of the applicable indemnification provisions of the Amended and
Restated Certificate of Incorporation and the Amended and Restated By-laws of
the Corporation from time to time in effect. In the event, however, that the
Amended and Restated Certificate of Incorporation and the Amended and Restated
Bylaws in effect from time to time provide less protection to X.X. Xxxxxx than
this Section 1.3, then this Section 1.3 shall govern for all purposes hereof.
This Section 1.3 shall survive the termination of this Employment Agreement for
any reason whatsoever.
1.4 If:
1.4.1 (i) except as the result of a termination "With Cause" (as
defined in Section 5.1.1), the Corporation changes or diminishes X.X. Xxxxxx'x
titles, duties or responsibilities as set forth in Sections 1.1 and 1.2 above
without his consent or (ii) the Corporation removes X.X. Xxxxxx as Co-Chairman
of the Board or Co-Chief Executive Officer; or
1.4.2 the Corporation requires X.X. Xxxxxx to relocate; or
1.4.3 the Corporation imposes requirements on X.X. Xxxxxx, or
gives instructions or directions to X.X. Xxxxxx, which are (i) contrary to or in
violation of any law, rule, ordinance or regulation and (ii) not withdrawn by
the Corporation after request by X.X. Xxxxxx; or
1.4.4 there occurs a breach (including, but not limited to, a
failure to make any payment or provide any benefit referred to in this
Employment Agreement) by the Corporation of any of its obligations under this
Employment Agreement, which breach has not been cured within sixty (60) days of
such failure and, if such breach has not been cured, the Corporation shall, in
addition to the other rights of X.X. Xxxxxx hereunder, be required to reimburse
X.X. Xxxxxx for all costs and expenses (including reasonable attorneys' fees)
incurred by him with respect to such breach; or
1.4.5 there occurs a "change in control" (as hereinafter defined)
of the Corporation; or
1.4.6 any of the events described in Section 1.4.1, 1.4.2, 1.4.3,
or 1.4.4 of the Xxxxxx Employment Agreement occurs, and X.X. Xxxxxx exercises
the right described in such Section 1.4 of the Xxxxxx Employment Agreement to
terminate his employment with the Corporation, then, in any such event, X.X.
Xxxxxx shall have the sole right, exercisable within ninety (90) days after the
occurrence of such event, to terminate his employment with the Corporation;
provided, however, that such termination by reason of any of such event(s) shall
not be considered a voluntary resignation or termination of such employment or
of this Employment Agreement by X.X. Xxxxxx, but rather shall be conclusively
considered a discharge of X.X. Xxxxxx by the Corporation "Without Cause". If
X.X. Xxxxxx does not terminate his employment with the Corporation in writing
within such ninety (90)-day period, X.X. Xxxxxx'x continued voluntary employment
with the Corporation from and after the expiration of such ninety (90)-day
period will be deemed to be a waiver of X.X. Xxxxxx'x right to terminate his
employment with the Corporation "Without Cause," with respect to, and only with
respect to, the occurrence of the specific event which gave rise to his
termination right and shall not bar such right of X.X. Xxxxxx if such specific
event occurs at any time in the future.
1.5 In furtherance and not in limitation of any of the foregoing, for
purposes of this Employment Agreement, it shall be considered a termination by
the Corporation "Without Cause" if the Corporation terminates X.X. Xxxxxx as
Co-Chairman of the Board or Co-Chief Executive Officer or both for any reason or
without any reason whatsoever other than "With Cause" (as defined in Section
5.1.1 below).
1.6 The term "change in control" means the first to occur of the
following events:
1.6.1 any Person (as such term is defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or group of
commonly controlled Persons (whether through common ownership, by agreement or
otherwise, but other than a Person or group of Persons owned or controlled
directly or indirectly by X.X. Xxxxxx ) becomes the "beneficial owner" (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of forty
percent (40%) or more of the voting capital stock of the Corporation; or
1.6.2 the Corporation's stockholders approve (a) an agreement to
merge, consolidate or otherwise combine with, or otherwise enter into a
transaction with, another Person (other than a Person or group of Persons owned
or controlled directly or indirectly by X.X. Xxxxxx), which will result (whether
separately or in connection with a series of related transactions) in a change
in ownership of forty percent (40%) or more of the current voting control of, or
beneficial rights to, the voting capital stock of the Corporation, or (b) an
agreement to sell or otherwise dispose of all or substantially all of the
Corporation's assets (including, without limitation, a plan of liquidation or
dissolution) which will result in a change in ownership of forty percent (40%)
or more of either control of the Corporation's assets or its voting capital
stock, or (c) a fundamental alteration in the nature of the Corporation's
business.
2. Compensation and Expenses.
2.1 X.X. Xxxxxx'x "Base Salary" shall be Four Hundred Twenty-Five
Thousand Dollars ($425,000) per annum through the period ending September 30,
1998 which Base Salary shall be increased as of each October 1 thereafter during
the Term by eight percent (8%) of the Base Salary for the previous October 1.
The Base Salary shall be payable in accordance with the Corporation's standard
payroll practices for its senior executive officers.
2.2 The Corporation will pay the following bonuses to X.X. Xxxxxx:
2.2.1 For each fiscal year during the Term commencing with the
1998 fiscal year of the Corporation, based on the Corporation's target bonus
plan, the Corporation's Board of Directors shall authorize an annual bonus
target (the "Annual Bonus") of sixty percent (60%) of X.X. Xxxxxx'x then Base
Salary, with a minimum bonus of twenty-one percent (21%) of such Base Salary if
the "entry level" goal for budgeted operating income is met (subject to pro rata
upward adjustment for performance between the entry level goal and targeted goal
for receipt of bonuses, with X.X. Xxxxxx receiving an Annual Bonus equal to
sixty percent (60%) of his then Base Salary if the target goal is met), to be
paid to him if during the applicable fiscal year the Corporation's performance
meets the target objectives in respect of applicable performance goal(s) under
and subject to the terms of the Corporation's 1997 (or more recent) Corporate
Executive Bonus Plan or any successor incentive compensation plan applicable to
the Corporation's senior officers thereafter (the "Executive Bonus Plan");
provided, however, if the target goal under such Executive Bonus Plan is
exceeded, then such Annual Bonus shall be increased to a level commensurate with
the amount of bonuses payable to those senior officers of the Corporation who
are situated similarly to X.X. Xxxxxx. The Annual Bonus shall be paid within
sixty (60) days after the end of the applicable fiscal year. In addition to and
not in limitation of the foregoing, the Corporation covenants and agrees that
(a) X.X. Xxxxxx shall have the right to participate in any other incentive
compensation plan(s) of the Corporation that may exist from time to time, (b)
regardless of the amount(s), if any, actually set aside by the Corporation under
any incentive compensation plan (including the Executive Bonus Plan), X.X.
Xxxxxx shall nevertheless receive all (and not less than all) of the amount of
Annual Bonus payable to him under the foregoing formula, (c) the Corporation
will adopt reasonable targets for, and adequately fund, the Executive Bonus Plan
and (d) if the Corporation does not adopt the Executive Bonus Plan for any
subsequent year, then the Corporation's Board of Directors and X.X. Xxxxxx
shall, in good faith, agree upon a comparable bonus arrangement (using the most
recent year for which the Executive Bonus Plan was in effect as a standard) for
X.X. Xxxxxx with reasonable targets and funding to provide X.X. Xxxxxx with
benefits comparable to those described above.
2.2.2 Commencing with the three (3)-year period ending September
30, 2000, and for each three (3)-year period thereafter during the Term, the
Corporation will pay (if earned) a performance payment relating to each such
three-(3)-year period (the "Long-Term Performance Payment") to X.X. Xxxxxx in an
amount determined in accordance with the formula set forth in Schedule 2.2.2
attached hereto.
2.3 Promptly upon submission of an itemized list of expenses reasonably
incurred by X.X. Xxxxxx for all business-related expenses, including, but not
limited to, telephone, equipment or supply usage, entertainment, travel,
business and professional associations, miscellaneous items, and other
reasonable charges (including charges for office space and support services at
locations other than the Corporation's headquarters), the Corporation shall
reimburse X.X. Xxxxxx for all such expenses.
2.4 The parties recognize that the Corporation's retail stores,
warehouses, headquarters and other potential business opportunities are spread
over a large geographical area and are in a number of metropolitan areas. In
order to facilitate X.X. Xxxxxx'x performance of his duties, X.X. Xxxxxx will be
provided with the use of a vehicle owned or leased by the Corporation or a
comparable vehicle allowance and will be reimbursed for all reasonable and
customary charges X.X. Xxxxxx incurs in connection with the operation of such
vehicle (such as for fuel, insurance and maintenance) and, in addition, the
Corporation will provide other convenient, time-efficient and cost-effective
transportation for X.X. Xxxxxx'x business travel requirements commensurate with
transportation made available to other chief executive officers, such as the
lease of an aircraft; provided, however, the Corporation shall not, without the
prior written consent of the Board of Directors, purchase an aircraft.
3. Insurance. During the Term, the Corporation shall pay such amounts to X.X.
Xxxxxx as may be required to permit X.X. Xxxxxx, or a trust established by him,
to acquire and maintain a whole life insurance policy or policies in the face
amount of $1,5000,000, or, at X.X. Xxxxxx'x election, a term policy requiring an
equivalent premium, on X.X. Xxxxxx'x life, issued by a nationally-recognized
insurance carrier(s) having the highest or second highest available Best rating;
such payment shall be paid in such amounts so that X.X. Xxxxxx incurs no net
after tax cost in connection therewith.
4. Additional Compensation; Benefits.
4.1 The Corporation has adopted for its employees an incentive and
non-qualified stock option plan (the "Stock Option Plan"). Simultaneously with
the execution of this Employment Agreement, X.X. Xxxxxx shall be granted rights
and options ("Options") pursuant to the Stock Option Plan to purchase up to Two
Hundred Thousand (200,000) shares of the Corporation's common stock (par value
$0.01 per share) ("Option Shares") at a purchase price of Six and 84,375/100,000
Dollars ($6.84375) per share, pursuant to that certain Initial Stock Option
Agreement attached hereto as Exhibit A. The Options shall vest and become first
exercisable as to thirty-three and thirty-four one hundredths percent (33.34%)
on the date hereof and an additional thirty-three and thirty-three one
hundredths percent (33.33%) on each of the first two (2) anniversaries of the
date hereof; provided, however, that such Options shall become fully vested on
the earlier of any termination of X.X. Xxxxxx'x employment "Without Cause", upon
his death or Permanent Disability, or upon a "change in control" (as defined in
Section 1.6 above) and provided further, that any Options that, as of the
effective date of a termination "With Cause" (other than by reason of death or
Permanent Disability), have not become exercisable pursuant to this Section
shall expire. The Options may be exercised at any time or from time to time
during the period following the date the Options are vested; provided, however,
that the Options will only be exercisable for one (1) year following X.X.
Xxxxxx'x death or determination of Permanent Disability and for six (6) months
following either X.X. Xxxxxx'x written voluntary resignation (other than
pursuant to Section 1.4 above) or the Corporation's termination of X.X. Xxxxxx
"With Cause" other than by reason of death or a Permanent Disability (or, if
such termination is contested in a lawsuit filed within such six (6)-month
period, then six (6) months following the entry of a final non-appealable
judgment by a court of competent jurisdiction upholding the Corporation's
termination "With Cause"); and provided further, however, that, following a
termination of X.X. Xxxxxx "Without Cause", the Options will only be exercisable
until the later of (i) fifty-four (54) months from the date hereof or (ii) six
(6) months from the date of such termination (or, if such termination is
contested in a lawsuit filed within such six (6)-month period, then six (6)
months following the entry of a final non-appealable judgment by a court of
competent jurisdiction finding that X.X. Xxxxxx'x termination was "Without
Cause"). The Options are in addition to any other rights and options which, at
the Corporation's sole election and in its sole discretion, may be granted to
X.X. Xxxxxx under any qualified, non-qualified, incentive, bonus and other stock
option plans which may be adopted by the Corporation.
4.1.1 The Corporation covenants and agrees that, unless X.X.
Xxxxxx elects otherwise, the Options shall, to the fullest extent possible under
applicable Federal income tax laws and under the Stock Option Plan, be treated
and reported as incentive stock options as defined under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and any remaining
options shall be treated as nonqualified stock options. The Corporation
covenants and agrees that, upon written request by X.X. Xxxxxx, the Corporation
shall loan to X.X. Xxxxxx an amount or amounts equal to the exercise price
payable for the Option Shares being acquired by X.X. Xxxxxx. The principal
amount of such loan or loans shall become due on the earliest of (a) the fifth
(5th) anniversary of the date of such loan, (b) within five (5) business days
after settlement on X.X. Xxxxxx'x sale, if any, of the Option Shares acquired in
connection therewith and only to the extent of the proceeds therefrom and any
remaining balance on such loan(s) (whether principal or interest) after payment
of the net proceeds from such sale shall be forgiven and X.X. Xxxxxx'x liability
therefor discharged (provided, however, that, if Option Shares are sold or
otherwise disposed of by X.X. Xxxxxx in order to satisfy any tax liability
associated with the exercise of the Options, such loan(s) shall not, at X.X.
Xxxxxx'x election, become due under this Section 4.1.1(b)), (c) within thirty
(30) days following the effective date of X.X. Xxxxxx'x written voluntary
resignation (other than a termination pursuant to Section 1.4 above) or
termination (other than by death or Permanent Disability) by the Corporation
"With Cause" (or, if later, ten (10) days following the entry of a final
non-appealable judgment by a court of competent jurisdiction upholding the
Corporation's termination "With Cause") or (d) upon X.X. Xxxxxx'x actual receipt
of the payment described in Section 5.2(a) below (in which case the Corporation
may withhold from such payment the unpaid balance of the loan(s), but only in
accordance with Section 5.4 below). In addition, interest shall be payable
semi-annually on the outstanding principal balance of any loan provided for in
this Section 4.1.1 at the mid-term applicable Federal rate (as defined under
Section 1274(d) of the Code) in effect on the date of such loan or loans.
4.1.2 With respect to the Options (and the shares of the
Corporation's capital stock to be received upon exercise of the Options), X.X.
Xxxxxx shall have such rights, benefits and protections, pro rata and in pari
passu and on the same terms and conditions, as are equal to the best rights,
benefits and protections as have been provided or may in the future be provided
to any executive of the Corporation or its subsidiaries regarding their
respective options, warrants, stock rights and/or shares of capital stock in the
Corporation (collectively or individually, "Equity"), concerning vesting,
duration of rights and options (including duration following a termination or
resignation), loans by the Corporation in connection with the acquisition of
Equity, terms of payment for the acquisition of Equity, registration rights and
anti-dilution protection granted with respect to the Equity.
4.1.3 In the event of any conflict, inconsistency or ambiguity
between the terms and provisions of this Employment Agreement and the terms and
provisions of the Stock Option Plan and/or the Initial Stock Option Agreement,
the terms and provisions of this Employment Agreement shall govern and control
for all purposes and in all respects in order to provide X.X. Xxxxxx with the
maximum benefit of all of the foregoing.
4.2 The Corporation shall, at its sole cost and expense, pay for all
(and not less than all) of the medical, hospitalization and dental costs and
expenses of X.X. Xxxxxx and his spouse and children (which may, at the
Corporation's sole election, include insurance, supplemental coverage and/or
direct payment/reimbursement), and the Corporation shall reimburse X.X. Xxxxxx
for any net after tax cost incurred by him in connection with any of the
foregoing. In addition, the Corporation shall maintain a disability insurance
policy (the "Disability Income Policy") which shall pay to X.X. Xxxxxx sixty
percent (60%) of his Base Salary during any period of disability up to age 75,
which insurance shall be in lieu of any disability insurance otherwise provided
by the Corporation.
4.3 X.X. Xxxxxx shall participate in all retirement and other benefit
plans of the Corporation available from time to time to employees and/or senior
executives of the Corporation.
4.4 To the fullest extent possible under applicable law, the
Corporation will waive any and all vesting periods, minimum service periods and
waiting periods, if any, that may otherwise apply to X.X. Xxxxxx under any
insurance, benefit or pension plan established for the benefit of the
Corporation's employees.
4.5 X.X. Xxxxxx shall be entitled to such periods of vacation and sick
leave allowance each year as provided under the Corporation's vacation and sick
leave policy for senior executive officers.
5. Termination.
5.1 X.X. Xxxxxx'x employment under this Agreement may be terminated by
the Corporation: (a) immediately "With Cause" (as defined below) at any time by
action of the Corporation's Board of Directors; or (b) immediately "Without
Cause".
5.1.1 For purposes hereof, "With Cause" shall mean: (a) the
conviction (after exhaustion of any and all appeals) of X.X. Xxxxxx for a felony
involving the Corporation; (b) the voluntary written resignation of X.X. Xxxxxx
as a director, officer or employee of the Corporation (excluding a termination
pursuant to Section 1.4 above); (c) the death of X.X. Xxxxxx; (d) the "Permanent
Disability" of X.X. Xxxxxx.
5.1.2 For purposes hereof, "Permanent Disability" shall mean X.X.
Xxxxxx'x inability for more than one hundred eighty (180) consecutive days to
perform substantially all of his services under Section 1.2 above, as determined
by a procedure initiated by the Corporation's Board of Directors in writing
(with sufficient detail as to the Corporation's basis for asserting that X.X.
Xxxxxx has a Permanent Disability) after expiration of such one hundred eighty
(180)-day period, whereby, if X.X. Xxxxxx contests such assertion, the
Corporation and X.X. Xxxxxx shall each select a medical doctor who renders a
written determination and, if such doctors disagree as to their respective
determinations, they shall jointly select a third medical doctor whose
determination shall be binding.
5.2 If X.X. Xxxxxx'x employment is terminated "Without Cause" (which
term "Without Cause" shall mean any termination by the Corporation of X.X.
Xxxxxx other than "With Cause," including any termination pursuant to Section
1.4 above), X.X. Xxxxxx shall be entitled to receive (a) a lump sum cash payment
within one hundred twenty (120) days of termination equal to (i) the present
value (assuming a five percent (5%) discount rate) of the total sum of what
would have been his Base Salary payments under Section 2.1 for the remaining
three (3) years of the Term, plus (ii) the maximum Annual Bonus payable for the
remaining three (3) years of the Term, (b) the Long-Term Performance Payment
otherwise payable in accordance with Section 2.2.2 above and (c) any and all
other compensation, benefits, stock options (granted under this Employment
Agreement or any other plan or arrangement of the Corporation) and health and
disability benefits accruing under this Employment Agreement for the remaining
three (3) years of the Term; however, in lieu of the exercise of any such
options, X.X. Xxxxxx shall be entitled to receive, at his sole election, the
value of such stock options in an amount equal to that determined under the
"Black Shoal's Formula", with payment of the same to be made within one hundred
twenty (120) days of termination.
5.2.1 If there occurs a "change in control" (as defined in Section
1.6 above), and X.X. Xxxxxx elects to treat such change in control as a
termination by the Corporation "Without Cause" pursuant to Section 1.4 above,
then the Long Term Performance Payment payable pursuant to Subsection 5.2(b)
above shall be calculated as of the date of any such sale, other disposition or
transaction and paid as soon as practicable but no later than ninety (90) days
thereafter.
5.3 If X.X. Xxxxxx'x employment is terminated "With Cause" (other than
by reason of death or Permanent Disability), the Corporation shall not have any
other or further obligations to X.X. Xxxxxx under this Agreement (except as
provided in Section 4.1 above and except as to that portion of any unpaid salary
and other compensation and benefits accrued and earned under this Employment
Agreement as of the date of such termination). If X.X. Xxxxxx'x employment is
terminated by reason of death or Permanent Disability, the provisions of this
Employment Agreement relating to Base Salary, Annual Bonus, Long-Term
Performance Payment and any and all other compensation, benefits, stock options
(granted under this Employment Agreement or any other plan or arrangement of the
Corporation) and health and disability benefits accruing under this Employment
Agreement shall continue for the remaining three (3) years of the Term;
provided, however, in the case of a termination by reason of a Permanent
Disability, the Base Salary payable during such remaining three (3) years shall
be reduced by any payments received by X.X. Xxxxxx under the Disability Income
Policy.
5.4 X.X. Xxxxxx'x rights under Sections 5.2 and 5.3 are absolute and
shall survive any termination of this Employment Agreement, and X.X. Xxxxxx
shall have no duty to seek substitute employment or otherwise to mitigate any
loss, and all amounts and benefits payable under such Sections shall be paid to
X.X. Xxxxxx without offset or reduction (regardless of any claims that the
Corporation may possess) and even if X.X. Xxxxxx obtains substitute employment.
The Corporation shall not garnish, offset or otherwise withhold for the benefit
of any third party (other than withholding imposed by any governmental
authority) any amounts payable to X.X. Xxxxxx under this Agreement unless
compelled to do so by judicial order; provided, however, that the Corporation
may withhold from any payment under Section 5.2(a) above an amount equal to the
then outstanding balance (plus accrued interest thereon) under any loan(s) made
to X.X. Xxxxxx pursuant to Section 4.1.1, above, but only if the Corporation has
actually paid to X.X. Xxxxxx any remaining balance of such Section 5.2(a)
payment.
6. Tax Adjustment Payments. If all or any portion of the amounts payable to X.X.
Xxxxxx under this Employment Agreement (together with all other compensation or
payments of cash or property, whether pursuant to this Employment Agreement or
otherwise, including, without limitation, the issuance of Options or Option
Shares or the granting, exercise or termination of options therefor) constitutes
"excess parachute payments" within the meaning of Section 280G of the Code that
are subject to the excise tax imposed by Section 4999 of the Code (or any
similar tax or assessment), the amounts payable hereunder shall be increased to
the extent necessary to place X.X. Xxxxxx in the same after-tax position as he
would have been in had no such tax assessment been imposed on any such payment
paid or payable to X.X. Xxxxxx under this Employment Agreement or any other
payment that X.X. Xxxxxx may receive in connection with his employment with the
Corporation.. The determination of the amount of any such tax or assessment and
the incremental payment required hereby in connection therewith shall be made
jointly by an accounting firm employed by X.X. Xxxxxx and by an accounting firm
employed by the Corporation within thirty (30) calendar days after such payment;
provided, however, if the respective accounting firms employed by X.X. Xxxxxx
and the Corporation cannot agree upon the applicable amount with such thirty
(30)-day calendar period, then both firms shall, within ten (10) days
thereafter, mutually select a nationally recognized accounting firm which shall
make the aforesaid determination within thirty (30) calendar days after its
selection, and such determination shall be binding and conclusive on the
parties. Upon such determination by the accountants or accountant, as the case
may be, the aforesaid incremental payment shall be made within thirty (30)
business days thereafter. The Corporation shall bear all costs and expenses of
the aforesaid accounting firms, and to the extent that any of such costs and
expenses are includable in the taxable income of X.X. Xxxxxx, then such costs
and expenses shall be part of the after-tax computation described above. If,
after the date upon which the payment required by this Section 6 has been made,
it is determined (pursuant to final regulations or published rulings of the
Internal Revenue Service, final judgment of a court of competent jurisdiction,
Internal Revenue Service, state or local audit assessment, or otherwise) that
the amount of excise or other similar taxes or assessments payable by X.X.
Xxxxxx is greater than the amount initially so determined, then the Corporation
shall pay X.X. Xxxxxx an amount equal to the sum of: (i) such additional excise
or other taxes, plus (ii) any interest, fines and penalties resulting from such
underpayment, plus (iii) professional fees incurred with respect to determining
and/or defending the same, plus (iv) an amount necessary to reimburse X.X.
Xxxxxx for any income, excise or other tax assessment or professional fees
payable by X.X. Xxxxxx with respect to the amounts specified in (i), (ii) and
(iii) above, and the reimbursement provided by this clause (iv), in the manner
described above in this Section 6 with respect to the after-tax position of
Estrin. Payment thereof shall be made within ten (10) business days after the
date upon which such subsequent determination is made.
7. Miscellaneous.
7.1 The provisions of this Employment Agreement are severable and if
any one or more provisions may be determined by a court of competent
jurisdiction to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions and any partially unenforceable provision to the extent
enforceable in any jurisdiction nevertheless shall be binding and enforceable.
7.2 During the Term, the Corporation shall maintain customary
directors' and officers' liability insurance if such insurance is available to
the Corporation at reasonable costs.
7.3 This Agreement, together with the Stock Option Plan and the Initial
Stock Option Agreement, embody the entire agreement of the parties with respect
to X.X. Xxxxxx'x employment and supersedes any other prior oral or written
agreements, arrangements or understandings between X.X. Xxxxxx and the
Corporation. This Agreement may not be changed or terminated orally but only by
an agreement in writing signed by the parties hereto.
7.4 All notices and other communications required or permitted under
this Employment Agreement shall be in writing, and shall be deemed properly
given if delivered personally, mailed by registered or certified mail in the
United States mail, postage prepaid, return receipt requested, sent by
facsimile, or sent by overnight Express delivery service, as follows:
If to the Corporation or the Board:
Phar-Mor, Inc.
00 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Chief Financial officer
With a duplicate notice to the same address, attention General Counsel.
If to X.X. Xxxxxx:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxx., Xxxxx 000
Xxxxxxxx, XX 00000
With a copy to:
Xxxxxx, Flyer & Xxxxx
a professional corporation
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxx, Esquire
Notice given by hand or overnight express delivery service shall be effective
upon actual receipt. Notice given by registered or certified mail shall be
effective three (3) business days after the date of mailing. Notice given by
facsimile transmission shall be effective upon actual receipt if received during
the recipient's normal business hours, or at the beginning of the recipient's
next business day after receipt if not received during the recipient's normal
business hours. All notices by facsimile transmission shall be confirmed
promptly after transmission in writing by certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by giving
notice as provided above of such change of address.
7.5 The parties acknowledge and agree that they are each familiar with
and desire their relationship to be governed by the laws of the State of
Delaware. Accordingly, this Employment Agreement shall be construed under and
governed by the laws of the State of Delaware, without reference to its choice
of law provisions or principles, and the parties hereto irrevocably consent (and
waive any objection) to the jurisdiction and venue of the State of Delaware
courts and/or the United States District Court for the District of Delaware for
any action arising under this Employment Agreement.
7.6 The Employment Agreement is personal in nature and shall not be
assignable in whole or in part by either party without the consent of the other.
7.7 This Employment Agreement shall inure to the benefit and bind the
successors and (subject to Section 7.6 above) assigns of the parties. In
particular, the provisions of Section 3 applicable to X.X. Xxxxxx, or any trust
established by X.X. Xxxxxx, shall inure to the benefit and bind any assignee
(including donee and legatee) of the policy or policies from X.X. Xxxxxx.
7.8 Captions to the paragraphs and subparagraphs of this Employment
Agreement are solely for the convenience of the parties, are not a part of this
Employment Agreement, and shall not be used for the interpretation of any of the
provisions of this Employment Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed this
Employment Agreement as of the date first above written.
PHAR-MOR, INC.
By:__________________________________
Name: Xxxxxx Xxxxxxxx
Title: Sr. V.P. CFO
Attest:____________________________
Name: Xxxx X Xxxxxxx
Title: Secretary
--------------------- -------------------------------------
Witness Xxxxxx X. Xxxxxx
SCHEDULE 2.2.2
Commencing with the three (3)-year period ending September 30, 2000,
and for each three (3)-year period thereafter during the Term, the Corporation
will pay to X.X. Xxxxxx an amount relating to each such three (3)-year period in
accordance with the following formula (the "Long-Term Performance Payment"):
The Long-Term Performance Payment (if any) shall be (x) one
and fifty one hundredths percent (1.5%) of any excess of (i)
the aggregate market value of the Corporation's
publicly-traded common stock based on the average closing
price for the thirty (30)-day period ending on the last day of
the subject period (less the sum of (a) the proceeds from the
exercise during such period of any options or warrants plus
(b) any cash or property consideration actually received by
the Corporation during such period from the issuance of any
shares of its common stock) over (ii) the aggregate market
value of the Corporation's publicly-traded common stock based
on the average closing price for the thirty (30)-day period
ending on the last day of the immediately prior subject period
(provided, that, for the three (3)-year period ending on
September 30, 2000 such average closing price shall be deemed
to be $6.84375 per share for the thirty (30)-day period ending
on September 30, 1997), less (y) one-half of the Annual Bonus
paid or payable to X.X. Xxxxxx, if any, for each of the three
years comprising such period (but not in any event less than
zero).
The Long-Term Performance Payment shall be paid to X.X. Xxxxxx as
expeditiously as possible after the close of each such third year, but in any
event not later than ninety (90) days following the close of each such third
year.
