EMPLOYMENT AGREEMENT
EXHIBIT
10.17
This
Agreement, dated October 1, 2007 is between JDS Uniphase Corporation (the
"Company") and Xxxxx X. Xxxxxxx ("Employee").
PREMISES
WHEREFORE,
1. Employee
serves as President and Chief Executive Officer of Company; and
2. Employee
and Company are parties to an Employment Agreement dated August 20, 2003 (the
“2003 Agreement”); and
3. Company
and Employee wish to revise and memorialize the terms of Employee’s employment
relationship in a new agreement intended to supersede all other written and
oral
representations regarding Employee’s employment with Company;
AGREEMENT
NOW,
THEREFORE, based on the foregoing premises and in consideration of the
commitments set forth below, Employee and Company agree as follows:
1. Definitions.
As
used
herein, the following terms are defined as follows:
a. “Cause”
means:
(i) willful
malfeasance by Employee, which has a material adverse effect on the
Company;
(ii) substantial
and continuing willful refusal by Employee to perform duties ordinarily
performed by an employee in the same position and having similar duties as
Employee;
(iii) conviction
of Employee for a felony or misdemeanor which would have a material adverse
effect on the Company’s goodwill if Employee is retained as an employee of the
Company;
(iv) willful
failure by Employee to comply with material policies and procedures of the
Company including but not limited to the JDS Uniphase Corporation Code of
Business Conduct and Policy Regarding Inside Information and Securities
Transactions.
b. “Good
Reason” means the occurrence of any of the events or conditions described in
subsections (i) through (iv) below, provided
however,
that
with respect to subsections (i) through (iii) below only, Employee provides
the
Company with thirty (30) days notice of termination for “Good Reason” pursuant
to the provisions of Section 7 below, during which time the Company shall have
an opportunity to cure the occurrence or condition claimed to constitute “Good
Reason”; and provided
further,
that
such notice of resignation is submitted by Employee no later than sixty (60)
days after the occurrence of the event or condition that Employee claims as
the
basis for termination for “Good Reason”:
(i) a
material reduction in Employee’s base salary or target bonus without Employee’s
prior written consent; or
(ii) a
material adverse change in Employee’s position, duties or responsibilities
without Employee’s prior written consent; or
(iii) an
actual
change in Employee’s principal work location by more than 50 kilometers without
Employee’s prior written consent; or
(iv) failure
by the Company to obtain from any successor company the assumption of the
Company’s obligations under this Agreement.
c. "Change
of Control" means: (i) a change in the ownership of the corporation, (ii) a
change in effective control of the corporation, or (iii) a change in the
ownership of a substantial portion of the assets of the corporation, as those
terms are used and defined in Section 409A(a)(2)(A)(v) of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations thereunder, and where
the word “corporation” used above and in such provisions is taken to refer to
the Company. This provision is intended to incorporate the definition of those
terms in such section and such regulations, and shall be interpreted
accordingly.
d. “Disabled”
shall mean “disabled” as defined in section 409A(a)(2)(C) of the Code and any
regulations thereunder, and “Disability has a corresponding
meaning.
e. “Effective
Date” means:
(i) in
the
event the Company terminates the employment of Employee, the date designated
by
the Company as the last day of Employee’s employment;
(ii) in
the
event Employee resigns his or her employment with the Company, the date
designated by the Company as the effective date of resignation;
(iii) in
the
event Employee dies, the date of death;
(iv) in
the
event Employee becomes Disabled, the date designated by the Company as the
last
day of Employee’s employment.
2. Position,
Duties, Responsibilities
a. Position:
Employee is and will continue to be employed by Company to render services
to
the Company in the position of President and Chief Executive Officer, subject
to
the provisions of Section 3 below. Employee shall perform such duties as are
customarily required by such position and such other responsibilities as may
be
assigned by the Company’s Board of Directors from time to time. Additionally,
Employee shall continue to serve as a member of the Company’s Board of Directors
during the Term of this Agreement.
b. Other
Activities:
Except
upon the prior written consent of the Company, Employee will not (i) accept
any other employment, or (ii) engage, directly or indirectly, in any other
business activity (whether or not pursued for pecuniary advantage) that is
or
may be in conflict with, or that might place Employee in a conflicting position
to that of, the Company.
| 3. |
Compensation
|
In
consideration of the services to be rendered under this Agreement, and subject
to the approval of the Compensation Committee of the Company’s Board of
Directors:
a.
The
Company shall pay Employee a base annual salary of $800,000, retroactive to
September 1, 2007 and payable in accordance with the Company’s standard payroll
practices.
b.
Employee
shall be entitled to participate in the Company’s established incentive plan(s)
for senior executives with a target bonus of 100% of Employee’s base salary and
a maximum bonus of up to 125% of Employee’s base salary. Notwithstanding the
preceding sentence, employee also shall be entitled to participate in an
individual performance-based bonus program (the “CEO Incentive Plan”) with
performance targets as shall be established by the Company’s Board of Directors
and reasonably agreed upon by Employee (the “CEO Bonus Targets”). Subject to
Employee’s achievement of such minimum threshold performance targets as shall be
established within the CEO Performance Targets, Employee shall be entitled
to a
minimum bonus of 50% of Employee’s base salary, and upon exceeding the CEO
Performance Targets Employee shall be entitled to a bonus of up to 125% of
base
salary, the actual bonus to be determined by the Board of Directors based upon
results achieved against such CEO Performance Targets. Any bonus paid to
Employee under the Company’s established incentive plan(s) for senior executives
referred to in the first sentence of this Section 3.b. shall be a credit against
and shall be deducted from any obligation of the Company to Employee under
the
CEO Incentive Plan. In addition, Employee shall be eligible to participate
in
the Company’s benefit plans and to receive perquisites of employment as
established by Company for all regular, full-time employees in the United
States, as may be amended from time to time in Company’s sole
discretion;
c. No
later
than thirty (30) days from the date of this Agreement, Employee shall be awarded
a grant of 175,000 Deferred Stock Units under the Company’s then effective
equity incentive plan(s) and award agreement as such plans and agreements may
be
approved from time to time by the Company’s shareholders and Board of Directors
(the “Deferred Stock Units Award”). The Deferred Stock Units Award be fully
vested upon the date of grant and shall be settled in shares but such shares
shall be delivered to Employee and transferred in the records of the Company
only upon the sooner to occur of: (i) the date upon which Employee’s service to
the Company terminates for any reason; (ii) upon a Change of Control, or (iii)
on the second anniversary of the date of the grant of the Deferred Stock Units
Award;
d. No
later
than thirty (30) days from the date of this Agreement, Employee shall be awarded
a grant of 200,000 Restricted Stock Units (“RSUs”) under the Company’s then
effective equity incentive plan(s) as such plans may be approved from time
to
time by the Company’s shareholders and Board of Directors (the “New Contract RSU
Award”). The New Contract RSU Award shall vest in equal installments on each of
the first and second anniversaries of the date of grant.
e. No
later
than the last business day of the first fiscal quarter of the Company’s 2009
fiscal year, Employee shall be awarded a grant of a minimum of 375,000 RSUs
under the Company’s then effective equity incentive plan(s) as such plans may be
approved from time to time by the Company’s shareholders and Board of Directors
(the “Minimum RSU Award”). The Minimum RSU Award shall be subject to the
following conditions of vesting:
(i) 60%
of
the Minimum RSU Award (the “Minimum RSU Award Time-Based Units”) shall vest in
three equal annual installments on the first, second and third anniversaries
of
the grant date; and
(ii) 40%
of
the Minimum RSU Award (the “Minimum RSU Award Performance Units”) shall vest at
the rate of 1/4th
of the
Minimum RSU Award Performance Units per half fiscal year (for clarity, 37,500
RSUs per half fiscal year), which such vesting shall occur upon the date of
the
Company’s public release on Form 8-K of its fiscal results every other fiscal
quarter, commencing with release of quarterly financial results for the second
fiscal quarter of the Company’s 2009 fiscal year, and subject to the achievement
of performance criteria (the “Minimum RSU Award Performance Criteria”) to be
established by the Board of Directors in its sole discretion from time to time.
f. As
soon
as reasonably practicable following the execution of this Agreement, Company
shall procure at Company expense a policy of insurance which at a minimum shall
provide that in the event Employee’s employment is terminated during the term of
this Agreement as the result of the Death or Disability of Employee, a benefit
equivalent to three years’ salary, at Employee’s annual salary in effect on the
Effective Date, plus three years’ bonus (calculated based upon Employee’s “at
target” bonus under the CEO Incentive Plan), shall be paid to Employee and/or
Employee’s estate or heirs as may be designated by Employee in Employee’s sole
discretion from time to time. For clarity, such policy of insurance shall be
in
addition to, and not in place of, any policies of insurance as may be made
available by the Company to Company employees as part of the Company’s standard
package of employee benefits.
Nothing
in this Section 3 shall be interpreted as precluding the Board of Directors,
in
its sole discretion, subject only to compliance with applicable law and exchange
listing requirements, from awarding Employee additional equity incentives,
cash
bonuses and/or other compensation.
| 4. |
Term
|
The
term
(the “Term”) of this Agreement shall commence on September 1, 2007 and shall
expire on August 31, 2009 unless sooner terminated as provided herein (the
date
of termination of this Agreement, the “Expiration Date”). Notwithstanding the
foregoing, on the second anniversary of the date of this Agreement, and on
the
anniversary date of each one year period thereafter (a “Renewal Date”) the Term
will be automatically extended for an additional one-year period unless, not
later than 60 days prior to such a Renewal Date, the Company provides written
notice to Employee that it has elected not to extend the Term of this
Agreement.
| 5. |
Termination.
|
a. Termination
Benefits Under Certain Circumstances.
If
Employee’s employment is terminated, prior to the expiration of the Term, by
Employee for Good Reason, or by the Company for reasons other than for Cause,
the Death or the Disability of the Employee, and conditioned upon Employee
executing and delivering to the Company a release of claims, reasonably
acceptable to the Company, Employee will be entitled as of the effective date
of
such release of claims, to the following benefits in full satisfaction of any
statutory, contractual or common law entitlements which Employee has or could
have as a result of the termination of the Term:
(i) three
years’ salary, at Employee’s annual salary in effect on the Effective Date, plus
three years’ bonus (calculated based upon Employee’s “at target” bonus under the
CEO Incentive Plan). All amounts paid to Employee pursuant to the terms of
this
Section 5.a.(i) shall be reduced by any amounts to which Employee is otherwise
entitled under any statutory or Company long or short term disability plan
and
any required withholdings or deductions;
(ii) Employee’s
right, title and entitlement to any unvested options, restricted stock units,
or
any other securities or similar incentives which have been granted or issued
to
Employee as of the Effective Date, which would have otherwise vested in the
three year period immediately following the Effective Date, shall immediately
vest, free from any restrictions other than those imposed by applicable state
and federal securities laws, provided that all such securities shall continue
to
be exercisable (if applicable) for one (1) year from the Effective Date or
until
the term such options, restricted stock units or other securities would have
otherwise expired (if applicable), whichever is earlier; and
(iii) should
Employee elect COBRA benefits continuation following termination of employment
the Company shall pay the full cost to Employee for the full 18 month COBRA
period and the Company shall thereafter provide Employee, in one lump sum,
an
amount equal to the cost of reasonably comparable health insurance benefits
for
Employee and Employee dependents for a period of six (6) months. All
amounts payable pursuant to this Section 5.a.(iii) shall be grossed-up
to the
extent such amounts are determined to be a taxable benefit.
b. Termination
For Cause:
This
Agreement shall terminate immediately upon the termination of Employee for
Cause. Thereafter, all obligations of the Company under this Agreement shall
cease.
c. By
Death:
Employee's employment shall terminate automatically upon the death of Employee.
Conditioned upon Employee’s beneficiaries or estate executing and delivering to
the Company a release of claims, reasonably acceptable to the Company,
Employee’s beneficiaries or estate, as applicable, will be entitled as of the
effective date of such release of claims to the compensation set forth in
Sections 5.a.(ii) and 5.a.(iii) above in full satisfaction of any statutory,
contractual or common law entitlements which Employee and Employee’s
beneficiaries or estate has or could have as a result of the termination of
the
Term. Thereafter, all obligations of Company under this Agreement shall cease.
Nothing in this Section 5.c. shall affect any entitlement of Employee's heirs
to
the benefits of any life insurance plan or other applicable benefits, including
benefits available pursuant to Section 3.f. above.
d. By
Disability:
If
Employee suffers from a Disability, then, to the extent permitted by law,
Company may terminate Employee's employment. Conditioned upon Employee’s, or as
applicable Employee’s beneficiaries or estate, executing and delivering to the
Company a release of claims, reasonably acceptable to the Company, Employee,
or
as applicable Employee’s beneficiaries or estate, will be entitled as of the
effective date of such release of claims to the to the compensation set forth
in
Sections 5.a.(ii) and 5.a.(iii) above in full satisfaction of any statutory,
contractual or common law entitlements which Employee has or could have as
a
result of the termination of the Term. Thereafter, all of Company's obligations
under this Agreement shall cease. Nothing in this Section 5.d. shall affect
Employee's rights under any disability plan in which he is a participant,
including benefits available pursuant to Section 3.f. above.
e. Benefits
in the Event of Nonrenewal of the Term:
In the
event that the Company provides notice in accordance with the provisions of
Section 4 above of its intent not to renew the Term for an additional one year
period, and conditioned upon the Employee’s executing and delivering to the
Company a release of claims, reasonably acceptable to the Company, Employee
will
be entitled to the following benefits as of the Effective Date
in full
satisfaction of any statutory, contractual or common law entitlements which
Employee has or could have as a result of the termination of the
Term:
(i) the
Company shall pay to the Employee, in one lump sum, an amount equal to (A)
one
year’s salary, at the Employee’s annual salary in effect on the Effective Date,
plus (B) one year’s bonus (calculated based upon Employee’s “at target”
bonus under the CEO Incentive Plan),
minus
any required withholdings or deductions;
(ii) Employee’s
right, title and entitlement to any unvested options or any other securities
or
similar incentives which have been granted or issued to Employee as of the
Effective Date and which would otherwise have vested according to their terms
within one (1) year of the Effective Date shall immediately vest, free from
any
restrictions (other than those imposed by applicable state and federal
securities laws), and all such securities shall continue to be exercisable
(if
applicable) until the earlier
of (1)
as provided in the applicable plan or grant agreements (but in no event less
than one year) following the Effective Date; or (2) until such term of such
options or other such securities would have otherwise expired (if applicable);
and
(iii)
should Employee elect COBRA benefits continuation
following termination of employment the Company shall pay the full cost to
Employee for the full 18 month COBRA period and the Company shall thereafter
provide Employee, in one lump sum, an amount equal to the cost of reasonably
comparable health insurance benefits for Employee and Employee dependents for
a
period of six (6) months. All amounts payable pursuant to this Section
5(e)(iii) shall be grossed-up to the extent such amounts are determined to
be a
taxable benefit.
f. Certain
Additional Payments by Company:
Notwithstanding anything in this Agreement to the contrary, in the event that
Employee becomes entitled to any of the payments or benefits provided under
this
Section 5 as a result of Employee’s resignation for (i) Good Reason or (ii)
Employee’s termination without cause, in each case following a Change of
Control, and such payments or benefits result in Employee being subject to
the
golden parachute excise tax imposed by Section 4999 of the Internal Revenue
Code, the Company shall make such additional payment as will make executive
whole for such tax obligation, as set forth in Appendix A, which is incorporated
herein by reference.
g. Payment
Date:
All
payments required by Section 5.a., c., d., or e., (including as a
consequence of the exercise of an option or vesting of a restricted stock unit
or other security referred to in Section 5.a.(ii) or 5.e.(ii)) shall be made
by
the fifteenth (15th) day of the third (3rd) month following the Effective Date
of the Employee’s termination of employment which occasioned such payment. All
Gross-up Payments required by Section 5.f. shall be made by the fifteenth
(15th) day of the third (3rd) month following the determination of the amount
of
such Gross-up Payment pursuant to Appendix A hereto, and, in any event, by
the end of the Employee’s taxable year next following the Employee’s taxable
year in which the Employee remitted the Excise Taxes to which the Gross-up
Payment relates. Employee shall not be permitted, directly or indirectly, to
designate the taxable year of any payment.
h. No
Other Obligations:
The
Company shall have no obligations with respect to any termination of the Term
for any reasons other than as specified in this Section 5.
| 6. |
Employee
Termination Obligations
|
a. Return
of Company's Property:
Employee hereby acknowledges and agrees that all personal property, including,
without limitation, all books, manuals, records, reports, notes, contracts,
lists, blueprints, and other documents, or materials, or copies thereof, and
equipment furnished to or prepared by Employee in the course of or incident
to
Employee’s employment, belong to Company and shall be promptly returned to
Company upon termination of Employee’s employment.
b. Cooperation
in Pending Work:
Following any termination of Employee’s employment, Employee shall fully
cooperate with Company in all matters relating to the winding up of pending
work
on behalf of Company and the orderly transfer of work to other employees of
Company. Employee shall also cooperate in the defense of any action brought
by
any third party against Company that relates in any way to Employee’s acts or
omissions while employed by Company.
7. Notices
All
notices or other communications required or permitted hereunder shall be made
in
writing and shall be deemed to have been duly given if delivered by hand or
mailed, postage prepaid, by certified or registered mail, return receipt
requested, and addressed to Company:
JDS
Uniphase Corporation
000
Xxxxx
XxXxxxxx Xxxx
Xxxxxxxx,
Xxxxxxxxxx 00000
Attention:
Chief Legal Officer
and
to
Employee at Employee’s home address as reflected in the Company’s Oracle
database as of the date of such notice or other communication. Employee and
the
Company shall provide written notice to the other (which, notwithstanding any
other provision within this section, may be provided by hand delivery, first
class mail or electronic mail) of any changes to the addresses
above.
8. Entire
Agreement
Subject
to the last sentence of this paragraph, the terms of this Agreement are intended
by the parties to be the final and exclusive expression of their agreement
with
respect to the employment of Employee by Company, superseding all prior such
agreements, and may not be contradicted by evidence of any prior or
contemporaneous statements or agreements. Subject to the last sentence of this
paragraph, the parties further intend that this Agreement shall constitute
the
complete and exclusive statement of its terms and that no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other legal
proceeding involving this Agreement. To the extent that the practices, policies,
or procedures of Company, now or in the future, apply to Employee and are
inconsistent with the terms of this Agreement, the provisions of this Agreement
shall control. Notwithstanding the foregoing, nothing in this agreement shall
limit or modify, in any manner, any existing or future agreement between the
Employee and the Company relating to indemnification against third party claims,
proprietary information, inventions, treatment of confidential information,
non-competition or employee benefits or incentive plans.
9. Amendments,
Waivers
This
Agreement may not be modified, amended, or terminated except by an instrument
in
writing, signed by Employee and by a duly authorized representative of Company
other than Employee. No failure to exercise and no delay in exercising any
right, remedy, or power under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, remedy, or power under
this Agreement preclude any other or further exercise thereof, or the exercise
of any other right, remedy, or power provided herein.
Employee
and the Company each specifically agree and acknowledge that they each waive
recourse to any remedies in tort, and further agree and acknowledge their intent
that all rights and liabilities pertaining to the cessation of the employment
relationship between them, where such cessation occurs on or before the
Expiration Date, be as set out in this Agreement (or in any subsequent
modification of this Agreement, provided that the modification is in writing
and
signed by both parties).
10. Assignment;
Successors and Assigns
Employee
agrees that Employee will not assign, sell, transfer, delegate or otherwise
dispose of, whether voluntarily or involuntarily, or by operation of law, any
rights or obligations under this Agreement, nor shall Employee’s rights be
subject to encumbrance or the claims of creditors. Any purported assignment,
transfer, or delegation shall be null and void. Nothing in this Agreement shall
prevent the consolidation of the Company with, or its merger into, any other
corporation, or the sale by the Company of all or substantially all of its
properties or assets, or the assignment by the Company of this Agreement and
the
performance of its obligations hereunder to any successor in interest. Subject
to the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective heirs, legal representatives,
successors, and permitted assigns, and shall not benefit any person or entity
other than those enumerated above.
11. Severability;
Enforcement
If
any
provision of this Agreement, or the application thereof to any person, place,
or
circumstance, shall be held by a court of competent jurisdiction to be invalid,
unenforceable, or void, the remainder of this Agreement and such provisions
as
applied to other persons, places, and circumstances shall remain in full force
and effect.
12. Governing
Law
The
validity, interpretation, enforceability, and performance of this Agreement
shall be governed by and construed in accordance with the law of the State
of
California.
13. Employee
Acknowledgment
The
parties acknowledge (a) that they have consulted with or have had the
opportunity to consult with independent counsel of their own choice concerning
this Agreement, and (b) that they have read and understand the Agreement,
are fully aware of its legal effect, and have entered into it freely based
on
their own judgment and not on any representations or promises other than those
contained in this Agreement.
14. Compliance
with Code Section 409A
The
parties to this Agreement acknowledge and agree that, notwithstanding anything
herein to the contrary, this Agreement is intended to comply with the provisions
of Code section 409A, as in effect from time to time. The intent of this Section
14 is that Employee not be subject to any tax liability or penalty by reason
of
the application of Code section 409A(a)(1) with respect to any amount payable
under this Agreement. In consideration of the fact that any payments under
Employee’s Prior Employment Agreement would not have been subject to the
provisions of Code section 409A, if the Employee is subject to any liability
under Code section 409A within twelve (12) months after the Effective Date,
or
with respect to any payment made to the Employee on account of his termination
of employment within such twelve-month period, the Company shall indemnify
the
Employee on an after-tax basis for all such liability. To the extent necessary
to comply with the requirements of Code section 409A(a)(2)(B)(i) (prohibiting
certain payments to a “specified employee” within six (6) months of such
employee’s separation from service), any payment hereunder that may be made to
the Employee on account of his termination of employment with the Company shall
be delayed only to the extent necessary to comply with the requirements of
Code
section 409A(a)(2)(B)(i).
15. Date
of Agreement
The
parties have duly executed this Agreement as of the date first written above.
| JDS UNIPHASE CORPORATION | |||
|
|
|
||
|
Name: Xxxxxxxxxxx
X.
Xxxxxx
Its: Senior Vice President and Chief Legal Officer |
Xxxxx X. Xxxxxxx |
APPENDIX
A
Certain
Additional Payments by the Company
(a) Subject
to and as provided by Section 5(f) of this Agreement, 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 Employee (whether pursuant
to the terms of this Agreement or otherwise, but determined without regard
to
any additional payments required under this Appendix A) (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 Employee 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 Employee an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by Employee from the
Gross-Up Payment of all taxes (including any Excise Tax) imposed upon the
Gross-Up Payment, Employee 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
Employee’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
Employee 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 in
the
state and locality in which Employee is subject to taxation at the highest
marginal rate of taxation in each state and locality 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 those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Employee’s adjusted gross income.
Notwithstanding
the foregoing provisions of this Appendix A, if it shall be determined that
Employee 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 10% of the portion of the Payments that would be treated as “parachute
payments” under Section 280G of the Code, then the amounts payable to Employee
under this Agreement shall be reduced (but not below zero) to the maximum amount
that could be paid to Employee without giving rise to the Excise Tax (the “Safe
Harbor Cap”), and no Gross-Up Payment shall be made to Employee. The
reduction of the amounts payable hereunder, if applicable, shall be made by
reducing any cash payments, unless an alternative method of reduction is elected
by Employee. 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 this Appendix A (a), all determinations required to be
made
under this Appendix A, 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 Employee within thirty (30) days of the receipt of notice from
the Company or the Employee 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, Employee 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 reasonable agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. If the Accounting Firm determines that no Excise Tax is
payable by Employee, it shall furnish Employee with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Employee’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 Employee with a written opinion to such effect. The Determination by
the
Accounting Firm shall be binding upon the Company and Employee. 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 Employee 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, to the extent not already within the Excise Tax, 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 Employee. In the event the amount of the
Gross-Up Payment exceeds the amount necessary to reimburse the Employee 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)(B) of the Code) shall be promptly paid by
Employee (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. Employee shall cooperate, 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.
