CHANGE IN CONTROL SEVERANCE AGREEMENT BETWEEN FPIC INSURANCE GROUP, INC. AND JOHN R. BYERS
Exhibit
10.2
BETWEEN
FPIC
INSURANCE GROUP, INC.
AND
XXXX
X. XXXXX
THIS
AGREEMENT, effective as of January 1, 2008, between FPIC Insurance Group, Inc.,
a Florida corporation (the “Company"), and Xxxx
X. Xxxxx, an individual (the "Executive")
W
I T N E S S E T H:
WHEREAS,
the Company and the Executive are parties to that certain Severance Agreement
dated as of January 1, 1999, as amended by that certain Amendment to Severance
Agreement dated as of December 14, 2001 (the “Prior Agreement”) and
wish to terminate the Prior Agreement and to enter into this Agreement in
replacement thereof; and
WHEREAS,
the Executive is a valuable employee of the Company and an integral part of its
management and a key participant in the decision making process relative to
planning and policy for the Company; and
WHEREAS,
the Company wishes to encourage the Executive to continue his career and
services with the Company for the period during and after an actual or
threatened Change in Control (as hereinafter defined).
NOW,
THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. Certain
Definitions.
a. "Board" shall mean the
Board of Directors of the Company.
b. "Cause" shall
mean:
(i) the
willful and continued failure of the Executive to perform substantially the
Executive's duties with the Company (other than any such failure resulting from
incapacity due to physical or mental illness, and specifically excluding any
failure by the Executive, after reasonable efforts, to meet performance
expectations) after a written demand for substantial performance is delivered to
the Executive by the Board that specifically identifies the manner in which such
person or the Board believes that the Executive has not substantially performed
the Executive's duties, or
(ii) the
willful engaging by the Executive in illegal conduct, fraud, misappropriation,
or embezzlement that is injurious to the Company.
For
purposes of this provision, no act or failure to act, on the part of the
Executive,
shall be considered "willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the Executive's action
or omission was in the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company.
Cause
shall not exist unless the Board shall have given Executive written notice
specifying the Cause alleged to exist, Executive shall have been granted a
reasonable opportunity to respond to the notice, in writing, and in an
appearance, with counsel, before the Board, and a determination shall thereafter
be made by the Board to terminate the Executive’s employment for Cause at a
meeting of the Board at which a quorum is present and by a vote of at least a
majority of the entire then current membership of the Board.
c. "Change in Control"
shall mean the earlier of the following events:
(i) either
(A) receipt by the Company of a report on Schedule 13D, or an amendment to such
a report, filed with the Securities and Exchange Commission (“SEC”) pursuant to
Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act"),
disclosing that any person (as such term is used in Section 13(d) of the 0000
Xxx) ("Person"), is the
beneficial owner, directly or indirectly, of twenty (20) percent or more of the
outstanding stock of the Company, or (B) actual knowledge by the Company of
facts on the basis of which any Person is required to file such a report on
Schedule 13D, or to file an amendment to such a report, with the SEC (or would
be required to file such a report or amendment upon the lapse of the applicable
period of time specified in Section 13(d) of the 0000 Xxx) disclosing that such
Person is the beneficial owner, directly or indirectly, of twenty (20) percent
or more of the outstanding stock of the Company;
(ii) purchase
by any Person, other than the Company or a wholly owned Subsidiary of the
Company, of shares pursuant to a tender or exchange offer to acquire any stock
of the Company (or securities convertible into stock) for cash, securities or
any other consideration provided that, after consummation of the offer, such
Person is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act
regardless of whether the Company or such Person would otherwise be subject to
the 1934 Act), directly or indirectly, of twenty (20) percent or more of the
outstanding stock of the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to acquire stock regardless
of whether the Company or such Person would otherwise be subject to the 1934
Act);
(iii) either
(A) the filing by any Person acquiring, directly or indirectly, twenty percent
(20%) or more of the outstanding stock of the Company of a
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statement
with the Florida Office of Insurance Regulation pursuant to § 628.461 of the
Florida Statutes or a successor statutory provision,
or (B) actual knowledge by the Company of facts on
the basis of which any Person acquiring, directly or indirectly, twenty percent
(20%) or more of the outstanding stock of the Company or a controlling company
is required to file such a statement pursuant to § 628.461 or a successor
provision;
(iv) approval
by the shareholders of the Company of (A) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation or
pursuant to which shares of stock of the Company would be
converted into cash, securities or other property, other than a consolidation or
merger of the Company in which holders of its stock immediately prior to the
consolidation or merger have substantially the same proportionate ownership of
common stock of the surviving corporation immediately after the consolidation or
merger as immediately before, or (B) any consolidation or merger in which the
Company is the continuing or surviving corporation but in which the common
shareholders of the Company immediately prior to the consolidation or merger do
not hold at least a majority of the outstanding common stock of the continuing
or surviving corporation (except where such holders of common stock hold at
least a majority of the common stock of the corporation that owns all of the
common stock of the Company), or (C) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or substantially
all the assets of the Company, or (D) any merger or consolidation of the Company
where, after the merger or consolidation, one Person owns 100% of the shares of
stock of the Company (except where the holders of the Company's common stock
immediately prior to such merger or consolidation own at least 90% of the
outstanding stock of such Person immediately after such merger or
consolidation); or
(v) a
change in a majority of the members of the Board within a 24-month period unless
the election or nomination for election by the Company's shareholders of each
new director was approved by the vote of at least two-thirds of the directors
then still in office who were in office at the beginning of the 24-month
period.
d. "Code" shall mean the
Internal Revenue Code of 1986, as amended.
e. "Constructive
Discharge" shall mean any (i) material change by the Company of the
Executive's position, functions, or duties to an inferior position, functions,
or duties from that in effect on the date of this Agreement, (ii) assignment or
reassignment by the Company of the Executive without the Executive's consent to
another place of employment more than 50 miles from the Executive's current
place of employment, or (iii) reduction in the Executive's base
salary or percentage target bonus opportunity. The Company and the
Executive, upon mutual written agreement, may waive any of the foregoing
provisions with respect to an event that would otherwise constitute a
Constructive Discharge.
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f. "Coverage Period"
shall mean the period beginning on the Starting Date and ending on the Ending
Date. The "Starting Date" shall
be the date on which a Change in Control occurs; provided, that if a
Termination of Employment occurs prior to a Change in Control and in
contemplation of a potential Change in Control or occurs at the request or
direction
of a third party in connection with a potential Change in Control, the “Starting Date” shall
be the date immediately prior to such termination of employment. The
"Ending Date"
shall be (i) in the case of a transaction described in subparagraph 1(c)(iv) of
this Agreement, the earlier of (A) the date on which a public announcement is
made by the Company that it has abandoned such transaction, or (B)
the date that is 36 full calendar months following the date on which the
transaction is consummated, and (ii) in all other cases, the date that is 36
full calendar months following the date on which a Change in Control
occurs.
g. “Disability” shall
mean the Executive's absence from the Executive's duties with the Company on a
full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive's incapacity due to physical or mental illness.
h. "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended.
i. "Person" shall be
construed as broadly as possible and shall include an individual or natural
person, a partnership (including a limited liability partnership), a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, a business, and any
other entity.
j. "Subsidiary" means,
with respect to any Person, any other Person (i) whose securities having a
majority of the general voting power in electing the board of directors or
equivalent governing body of such Person (excluding securities entitled to vote
only upon the failure to pay dividends thereon or the occurrence of other
contingencies) are, at the time as of which any determination is being made,
owned by such Person either directly or indirectly through one or more other
entities constituting Subsidiaries, or (ii) a fifty percent (50%) interest in
the profits or capital of whom is, at the time as of which any determination is
being made, owned by such Person either directly or indirectly through one or
more other entities constituting Subsidiaries.
k. “Termination of
Employment,” or words of similar import in relation to the Executive’s
employment by the Company, means the Executive’s ceasing to be employed by the
Company or any of its Subsidiaries. The Executive's cessation of
employment to become an employee of a Person of which the Company is
a Subsidiary (or an employee of a Person of which a former Subsidiary of the
Company is a Subsidiary) or an employee of a Subsidiary of the
Company shall not be considered a Termination of Employment for purposes of this
Agreement. The subsequent cessation of the Executive's employment
with such Person or from such Subsidiary shall be considered a Termination of
Employment for purposes of this Agreement.
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2. Termination
of Prior Agreement; Term.
Effective at 12:00 midnight on December
31, 2007, the Prior Agreement is hereby terminated and of no further force or
effect. This Agreement shall be effective as of the date of this
Agreement and shall continue thereafter until (i) the date of the Termination of
Employment if such date is prior to the Coverage Period or (ii) if the
Termination of Employment shall occur during the Coverage Period,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied.
3. Severance
Benefit.
a. If
at any time during the Coverage Period a Termination of Employment is
effected by the Company for any reason other than Cause, death, or
Disability, or by the Executive in the event of a Constructive Discharge, then
the Company shall pay to the Executive severance pay in a lump sum
cash amount equal to three times the sum of Executive's (i) annual salary and
(ii) target bonus opportunity for the current calendar year (or, if greater than
the target bonus opportunity, the average of the annual bonuses for the three
prior calendar years). The Company shall also pay Executive any
unpaid salary, unreimbursed expenses or benefits accrued to the date of
Termination of Employment. Also, in such event, the Executive shall
be 100% vested in all stock options, stock appreciation rights, contingent
stock, restricted stock and other long-term incentive awards. Without
limiting the generality of the foregoing, (x) all outstanding stock options
shall become immediately exercisable, (y) all transfer restrictions on shares of
restricted stock shall lapse, and (z) all performance shares or units shall
become immediately earned, vested and payable at the level prescribed in the
award agreement in the event of a Change in Control (as defined therein), with
no transfer restrictions on any shares of stock issued on payment.
b. Pursuant
to paragraph 3(a) of this Agreement, the Executive may terminate his Employment
in the event of a Constructive Discharge by providing written notice to the
Company within ninety (90) days after the occurrence of such event, specifying
the event relied upon for a Constructive Discharge. Within ten days
of receiving such written notice from the Executive, the Company may cure the
event that constitutes a Constructive Discharge, in which event the Termination
of Employment shall be of no force or effect.
c. For
a period commencing with the month in which Termination of Employment as
described in paragraph 3(a) above shall have occurred, and ending
twenty-four months
thereafter, the Company shall continue to provide to the Executive all “benefits” as if the
Executive were still employed during such period, at the same level of benefits
that the Executive was receiving at Termination of Employment or at such higher
level and at the same dollar cost as provided by the Company to the Executive as
is available to all of the Company's senior executives generally; provided that,
if and to the extent that providing or payment of such benefits shall not be
permitted under any benefit plan, the Company shall pay or provide tax
equivalent benefits on an individual basis within 60 days of Termination of
Employment, subject to Paragraph 16 of this Agreement. The benefits
provided in accordance with this paragraph 3(c) shall be secondary to any
comparable benefits provided by another employer. As used herein,
“benefits”
shall include, but not be limited to: (i) automobile lease or allowance; (ii)
health and dental
benefits; (iii) life, short term
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disability and long term
disability insurance; (iv) initiation fees, dues and assessments of membership
in a club; and (v) participation in the Company’s retirement, savings and
deferred compensation plans (including without limitation the FPIC Insurance
Group, Inc. Defined Benefit Pension Plan; the Company’s Supplemental Executive
Retirement Plan or any plan or arrangement adopted in lieu thereof; the FPIC
Insurance Group, Inc. Defined Contribution (and Profit Sharing) Plan; and the
FPIC Insurance Group, Inc. Deferred Compensation Plan, to the extent and in the
form they remain in effect from time to time). The Executive’s
entitlement to such “benefits” shall be in accordance
with the Company’s employee benefit plans and other applicable programs,
policies, and practices then in effect, to be interpreted so that payment of
such “benefits” does not violate Section 409A of the Code.
d. In
the event of any Termination of Employment described in paragraph 3(a), the
Executive shall be under no obligation to seek other employment, and, except as
provided in paragraph 3(c), there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration or benefits
attributable to any subsequent employment.
4. INTENTIONALLY
OMITTED
5. Mediation
and Arbitration.
Any
dispute or controversy arising out of or in relation to this Agreement shall
first be submitted to mediation in the City of Jacksonville, Florida in
accordance with the Commercial Mediation Rules of the American Arbitration
Association. If mediation fails to resolve such dispute or
controversy, then such dispute or controversy shall be determined and settled by
arbitration in the City of Jacksonville, Florida, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator may be entered in
any court of competent jurisdiction. The parties hereto agree to use
good faith efforts to select a mediator and, if mediation fails to resolve such
dispute or controversy, an arbitrator. If the parties cannot agree
upon a mediator or arbitrator, such mediator or arbitrator shall be selected in
accordance with the relevant Commercial Rules of the American Arbitration
Association then in effect. The Company's mediation and arbitration
expenses, as well as any litigation costs, including legal counsel and experts
reasonably engaged, shall be paid by the Company. The Executive's
mediation and arbitration costs, as well as any litigation costs, including
legal counsel and reasonable experts, shall be paid by the Company no later than
2 ½ months after the end of the calendar year in which such costs and expenses
were incurred, provided, however, in the event the trier of fact determines the
Executive's claims thereunder are made frivolously or in bad faith, the
Executive shall immediately repay such litigation costs to the
Company. Any payments that would otherwise become due under this
Agreement that are the subject of a dispute may be delayed to the extent
permitted under Section 409A of the Code. Whenever any action is
required to be taken under this Agreement within a specified period of time and
the taking of such action is materially affected by a matter submitted to
mediation or arbitration, such period shall automatically be extended by the
number of days plus ten that are taken for the determination of that matter by
the parties through mediation or otherwise by the arbitrator.
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6. Income
Tax Withholding.
The
Company may withhold from any payments made under this Agreement all federal,
state or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
7. Entire
Understanding.
Except
for the provisions of that certain employment agreement dated as of January 1,
2008 between the Executive and the Company and any compensation, incentive,
indemnification, welfare benefit, retirement, or other arrangement, agreement or
program (“Company
Programs”) in effect from time to time, this Agreement contains the
entire understanding between the Company and the Executive with respect to the
subject matter hereof. The Company's obligation to make payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not affect (other than as expressly stated herein) or operate to
reduce any benefit or compensation inuring to the Executive of any kind
elsewhere provided and not expressly provided for in this Agreement, including
without limitation, any benefit or compensation provided under any of the
Company Programs.
8. Severability.
If,
for any reason, any one or more of the provisions or part of a provision
contained in this Agreement shall be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement not held so invalid, illegal or unenforceable, and
each other provision or part of a provision shall to the full extent consistent
with law continue in full force and effect.
9. Consolidation,
Merger, or Sale of Assets.
If the Company consolidates or merges
into or with, or transfers all or substantially all of its assets to, another
corporation, or if Executive ceases employment with the Company to become an
employee of a Person of which the Company is a Subsidiary (or an employee of a
Person of which a former Subsidiary of the Company is a Subsidiary) or an
employee of a Subsidiary of the Company, the term "Company" as used herein shall
mean such other corporation and this Agreement shall continue in full force and
effect.
10. Notices.
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
if hand delivered or mailed, postage prepaid, certified or registered, first
class as follows:
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a. to
the Company:
FPIC
Insurance Group, Inc.
Attention: Chairman
of the Board
000
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx,
Xxxxxxx 00000
b. to
the Executive:
Xxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxx
00000
or
to such other address as either party shall have previously specified in writing
to the other.
11. 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.
12. Binding
Agreement; Benefit and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Company
(including any Person that shall be deemed to be the “Company” as provided in
paragraph 9 above) and the Executive. The Company shall require any
Person that shall become deemed to be the “Company” as provided in paragraph 9
above (other than those that become so by operation of law) to expressly assume,
in writing, all of the Company’s obligations to the Executive
hereunder. Except as provided in the preceding sentences, this
Agreement and the rights and obligations of the parties hereunder are personal,
and neither this Agreement nor any right, benefit or obligation of either party
hereto shall be subject to voluntary or involuntary assignment, alienation or
transfer, whether by operation of law or otherwise, without the prior written
consent of the other party. In the event that the Executive dies
before all amounts payable under this Agreement have been paid, all remaining
amounts shall be paid to the beneficiary specifically designated by the
Executive in writing prior to his death, or, if no such beneficiary was
designated (or the Company is unable in good faith to determine the beneficiary
designated), to the Executive’s personal representative or estate.
13. Modification
and Waiver.
This
Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written instrument
signed by the party charged with such waiver or estoppel. No such
written waiver
8
shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
14. Headings of No Effect.
The
paragraph headings contained in this Agreement are included solely for
convenience of reference and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.
15. Governing
Law.
This
Agreement and its validity, interpretation, performance, and enforcement shall
be governed by the laws of the State of Florida without giving effect to the
choice of law provisions in effect in such State.
16. Effect
of Section 409A.
It
is expressly contemplated by the parties that this Agreement will conform to,
and be interpreted to comply with, Section 409A of the
Code. Notwithstanding any other provision of this Agreement, if the
Executive is a "specified employee" as defined in Section 409A(a)(2)(B)(i) of
the Code at the time of his separation from service, then the payment of any
amount under or pursuant to this Agreement that is considered deferred
compensation subject to Section 409A of the Code shall be deferred for six (6)
months after his "separation from service" or, if earlier, his death as required
by Section 409A(a)(2)(B)(i) of the Code (the "409A Deferral
Period").
In
the event payments are otherwise due to be made in installments or periodically
during the 409A Deferral Period, the payments that would otherwise have been
made in the 409A Deferral Period shall be accumulated and paid in a lump sum as
soon as the 409A Deferral Period ends, and the balance of the payments shall be
made as otherwise scheduled. If the Executive incurs any interest or
additional tax under Section 409A(a)(1)(B) of the Code with respect to amounts
payable under this Agreement, the Company promptly at that time will pay the
Executive an additional amount so that, after all taxes on such additional
amount, he has an amount remaining equal to such interest or additional
tax. Such gross-up payment, however, shall be made in any event no
later than the end of the Executive's taxable year next following his taxable
year in which the related taxes, interest or penalties are
remitted.
For
purposes of this Agreement, a Termination of Employment shall not be deemed to
exist unless the Executive has a "separation from service" within the meaning of
Section 409A of the Code (generally, where it is reasonably anticipated that the
level of services he will perform after that date, whether as an employee or
independent contractor, will permanently decrease to no more than 20 percent of
the average level of services performed by him over the immediately
preceding 36-month period).
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All
rights to payments and benefits under this Agreement shall be treated as rights
to receive a series of separate payments and benefits to the fullest extent
allowed by Section 409A of the Code. All reimbursements and in kind benefits
provided under this Agreement shall be made or provided in accordance
with the requirements of Section 409A of the Code, including, where applicable,
the requirements that (i) any reimbursement is for expenses incurred during the
Executive’s lifetime (or during a shorter period of time specified in this
Agreement); (ii) the amount of expenses eligible for reimbursement, or in kind
benefits provided, during a calendar year may not affect the expenses eligible
for reimbursement, or in kind benefits to be provided, in any other calendar
year; (iii) the reimbursement of an eligible expense will be made no later than
2 ½ months after the end of the calendar year in which the expense is incurred;
and (iv) the right to reimbursement or in kind benefits is not subject to
liquidation or exchange for another benefit.
17. Parachute
Payments
The
Company will make Gross Up Payments (as defined in Exhibit A hereto) to
Executive to the extent and on the terms described in Exhibit
A.
18. In
Kind Benefits.
Notwithstanding
any other terms of this Agreement, if during the Coverage Period the Executive
becomes entitled to receive benefits and the Company is unable to provide such
benefits to the Executive at substantially the same cost it would incur were the
Executive still employed by the Company (the “Benefit Cost”), the
Company shall have the rights to pay the Executive the Benefit Cost of such
benefits in lieu of providing such benefits to the Executive.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the date first above written.
|
FPIC INSURANCE
GROUP, INC.
|
|||
|
|
By:
|
/s/ Xxxxxxx X. Xxxxxxxxx | |
| Xxxxxxx X. Xxxxxxxxx | |||
| Chairman of the Board | |||
|
|
|
/s/ Xxxx X. Xxxxx | |
| Xxxx X. Xxxxx | |||
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EXHIBIT
A
GROSS
UP PAYMENTS
(a) In the event it is determined (pursuant
to clause (b) below) or finally determined (as defined in
clause (c)(iii) below) that any payment, distribution, transfer, benefit or
other event with respect to Company or its predecessors, successors, direct or
indirect subsidiaries or affiliates (or any predecessor, successor or affiliate
of any of them, and including any benefit plan of any of them), to or for the
benefit of Executive or Executive’s dependents, heirs or beneficiaries pursuant
to the terms of the Severance Agreement (but determined without regard to any
additional payments required under this Exhibit A) (each a "Payment" and collectively the "Payments") is or was subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), and/or any successor provision or any comparable provision of
state or local income tax law (collectively, "Section 4999"), or any
interest, penalty or addition to tax is or was incurred by Executive with
respect to such excise tax (such excise tax, together with any such interest,
penalty or addition to tax, hereinafter collectively referred to as the
"Excise
Tax"), then, within ten
(10) days after such determination or final determination, as the case may be,
Company shall pay to Executive an additional cash payment (hereinafter referred
to as the "Gross Up
Payment") in an amount such
that after payment by Executive of all taxes, interest, penalties and additions
to tax imposed with respect to the Gross Up Payment (including, without
limitation, any income and excise taxes imposed upon the Gross Up Payment),
Executive retains an amount of the Gross Up Payment equal to the Excise Tax
imposed upon such Payment or Payments and the Gross Up Payment. This
provision is intended to put Executive in the same position as Executive would
have been had no Excise Tax been imposed upon or incurred as a result of any
Payment.
(b) Except as provided in clause (c)
below, the determination that a Payment is subject to an Excise Tax shall be
made in writing by a certified public accounting
firm selected by Executive ("Executive's
Accountant"). Such determination shall
include the amount of the Gross Up Payment and detailed computations thereof,
including any assumptions used in such computations (the written determination
of Executive's Accountant, hereinafter, "Executive’s
Determination"). Executive's Determination
shall be reviewed on behalf of Company by a certified public accounting firm
selected by Company ("Company’s
Accountant"). Company shall notify
Executive within ten (10) business days after receipt of Executive’s
Determination of any disagreement or dispute therewith, and failure to so notify
within that period shall be considered an agreement by Company with Executive’s
Determination, and any agreement by Company with Executive's Determination shall
obligate Company to make payment as provided in clause (a) above within ten
(10) days from the expiration of such ten (10) business-day
period. In the event of an objection by Company to Executive's
Determination, any amount not in dispute shall be paid within ten (10) days
following the ten (10) business-day period referred to herein, and with respect
to the amount in dispute Executive's Accountant and Company's Accountant shall
jointly select a third nationally recognized certified public accounting firm to
resolve the dispute and the decision of such third firm shall be final, binding
and conclusive upon Executive and Company. In such a case, the third
accounting firm's findings shall be deemed the binding determination with
respect to the amount in dispute, obligating Company to make any payment as a
result thereof within ten (10) days following the receipt of such third
accounting firm's determination. All fees and expenses of each of the
accounting firms referred to in this Exhibit
A shall be borne solely by
Company.
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(c) The rights of Executive under this
Exhibit A shall be contingent on the agreement by Executive to the provisions
set forth in this clause (c):
(i) Executive shall notify Company in
writing of any claim by the Internal Revenue Service (or any successor thereof)
or any state or local taxing authority (individually or collectively, the
"Taxing
Authority") that, if
successful, would require the payment by Company of a Gross Up
Payment. Such notification shall be given as soon as reasonably
practicable and shall apprise Company of the nature of such claim and the date
on which such claim is requested to be paid. Executive shall not pay
such claim prior to the expiration of the fifteen (15)-day period following the
date on which Executive gives such notice to Company (or such shorter period
ending on the date that any payment of taxes, interest, penalties or additions
to tax with respect to such claim is due). If Company notifies
Executive in writing prior to the expiration of such fifteen (15)-day period
that it desires to contest such claim (and demonstrates to the reasonable
satisfaction of Executive its ability to make the payments to Executive that may
ultimately be required under this section before assuming responsibility for the
claim), Executive shall:
(A) give Company any information reasonably
requested by Company relating to such claim;
(B) take such action in connection with
contesting such claim as Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by Company who is reasonably
acceptable to Executive;
(C) cooperate with Company in good faith in
order effectively to contest such claim; and
(D) permit Company to participate in any
proceedings relating to such claim; provided, however, that Company shall bear
and pay directly all attorneys fees, costs and expenses (including additional
interest, penalties and additions to tax) incurred in connection with such
contest and shall indemnify and hold harmless Executive, on an after-tax basis,
for all taxes (including, without limitation, income and excise taxes),
interest, penalties and additions to tax imposed in relation to such claim and
in relation to the payment of such costs and expenses or
indemnification. Without limitation on the foregoing provisions of
this Exhibit A, and to the extent its actions do not unreasonably interfere with
or prejudice Executive's disputes with the Taxing Authority as to other issues,
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the Taxing Authority in respect of
such claim and may, at its sole option, either direct Executive to pay the tax,
interest or penalties claimed and xxx for a refund or contest the claim in any
permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Company shall determine;
provided, however, that if Company directs Executive to pay such claim and xxx
for a refund, Company shall advance an amount equal to such payment to
Executive, on an interest-free basis, and shall indemnify and hold harmless
Executive, on an after-tax basis, from all taxes (including, without limitation,
income and
12
excise taxes), interest, penalties and
additions to tax imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and, provided, further, that any
extension of the statute of limitations relating to payment of taxes, interest,
penalties or additions to tax for the taxable year of Executive with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount; and, provided, further, that any settlement of any claim shall
be reasonably acceptable to Executive and the Company’s control of the contest
shall be limited to issues with respect to which a Gross Up Payment would be
payable hereunder, and Executive shall be entitled to settle or contest, as the
case may be, any other issue.
(ii) If, after receipt by Executive of an
amount advanced by Company pursuant to clause (c)(i), Executive receives
any refund with respect to such claim, Executive shall (subject to Company’s
complying with the requirements of this Exhibit A) promptly pay to Company an
amount equal to such refund (together with any interest paid or credited thereon
after taxes applicable thereto), net of any taxes (including without limitation
any income or excise taxes), interest, penalties or additions to tax and any
other costs incurred by Executive in connection with such advance, after giving
effect to such repayment. If, after the receipt by Executive of an
amount advanced by Company pursuant to clause (c)(i), it is finally
determined that Executive is not entitled to any refund with respect to such
claim, then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall be treated as a Gross Up Payment and
shall offset, to the extent thereof, the amount of any Gross Up Payment
otherwise required to be paid.
(iii) For purposes of this Exhibit
A, whether the Excise Tax
is applicable to a Payment shall be deemed to be "finally determined" upon the
earliest of: (A) the expiration of the 15-day period referred to
in clause (c)(i) above if Company has not notified Executive that it
intends to contest the underlying claim, (B) the expiration of any period
following which no right of appeal exists, (C) the date upon which a
closing agreement or similar agreement with respect to the claim is executed by
the Executive and the Taxing Authority (which agreement may be executed only in
compliance with this Exhibit
A), (D) the receipt by
Executive of notice from Company that it no longer seeks to pursue a contest
(which notice shall be deemed received if Company does not, within 15 days
following receipt of a written inquiry from Executive, affirmatively indicate in
writing to Executive that Company intends to continue to pursue such
contest).
(d) As
a result of uncertainty in the application of Section 4999 that may exist
at the time of any determination that a Gross Up Payment is due, it may be
possible that in making the calculations required to be made hereunder, the
parties or their accountants shall determine that a Gross Up Payment need not be
made (or shall make no determination with respect to a Gross Up Payment) that
properly should be made ("Underpayment"), or
that a Gross Up Payment not properly needed to be made should be made ("Overpayment"). The
determination of any Underpayment shall be made using the procedures set forth
in clause (b) above and shall be paid to Executive as an additional Gross
Up Payment. Company shall be entitled to use procedures similar to
those available to Executive in clause (b) to determine the amount of any
Overpayment (provided that Company shall bear all costs of the accountants as
provided in clause (b)). In the event of a determination that an
Overpayment was made, any such Overpayment shall be treated for all purposes as
a loan to Executive with interest at the applicable Federal rate provided for in
Section 1274(d) of the Code;
13
provided,
however, that the amount to be repaid by Executive to Company shall be subject
to reduction to the extent necessary to put Executive in the same after-tax
position as if such Overpayment were never made.
