EMPLOYMENT AGREEMENT dated as of January 1, 2003 between XXXXX XXXXXX,
INC., a Delaware corporation (the "Company"), and XXXXXXX X. XXXXXXX
("Xxxxxxx").
Xxxxxxx is currently Chairman of the Board, Chief Executive Officer
and President of the Company. The Company recognizes that Xxxxxxx has made
substantial contributions to the success of the Company over a long period of
time and desires to assure the Company of Xxxxxxx'x continued service. Xxxxxxx
desires to continue to perform services for the Company.
In consideration of the agreements herein after set forth, the Company
and Xxxxxxx agree as follows:
1. EMPLOYMENT
1.1 CAPACITY; DUTIES. The Company hereby employs Xxxxxxx as the
Company's Chairman of the Board, President and Chief Executive Officer. Xxxxxxx
shall have general supervision over the business and affairs of the Company and
its subsidiaries, shall report and be responsible only to, and subject to the
supervision of, the Board of Directors of the Company, and shall have powers and
authority superior to those of any other officer or employee of the Company or
any of its subsidiaries. The Board of Directors may with Xxxxxxx'x consent,
which consent may be withheld in his reasonable discretion, confer the title of
President upon another person without any diminution in the compensation or
benefits payable to Xxxxxxx hereunder. Subject to Section 6(b) hereof, Xxxxxxx
may serve on the board of directors of any other corporation, or may be involved
in civic or charitable activities and may manage his personal investments, so
long as such service does not interfere with his duties to the Company or its
subsidiaries and such other corporation is not a supplier or customer of the
Company and does not engage in any business that is competitive with the
business of the Company. Xxxxxxx accepts the employment described herein and
agrees to devote his full business time and effort thereto, and to perform those
duties normally attributable to the positions for which he is employed
hereunder.
1.2 EMPLOYMENT PERIOD. Xxxxxxx'x employment shall be for the period
(the "Employment Period") commencing on January 1, 2003, and ending on the
earlier of (i) December 31, 2005, as such date may be extended as provided
below, or (ii) the date on which Xxxxxxx'x employment is terminated earlier
pursuant to Section 4 hereof. The Employment Period may be extended by the
Company from time to time for successive one-year periods by giving Xxxxxxx
notice (an "Extension Notice") thereof at least six months but not more than
twelve months prior to the date that the then applicable Employment Period is to
expire. Notwithstanding the preceding sentence the Employment Period shall not
be extended if Xxxxxxx, within 90 days after any Extension Notice is given,
advises the Company that he chooses not to extend the Employment Period. The
date on which the Employment Period is
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scheduled to expire pursuant to whichever shall be the later of clause (i) above
or the extended date as provided above is hereinafter referred to as the
"Employment Expiration Date."
2. COMPENSATION
2.1 BASE SALARY. During the Employment Period, as compensation for
Xxxxxxx'x employment hereunder, Xxxxxxx shall receive a base salary at the rate
of $800,000 per annum, commencing on January 1, 2003, payable in accordance with
the Company's normal payroll practices for its senior executive officers from
time to time in effect. The base salary may be increased by such amounts and at
such times as shall be determined by the Board of Directors or the Compensation
Committee of the Board of Directors (the "Compensation Committee") from time to
time, in its sole discretion. (The base salary, as it may be increased from time
to time, is hereinafter referred to as the "Base Salary.")
2.2 INCENTIVE COMPENSATION. During the Employment Period, Xxxxxxx
shall be eligible to receive, in addition to his Base Salary, incentive
compensation (the "Incentive Compensation") as follows: With respect to each
year during the Employment Period, the Board of Directors or the Compensation
Committee shall, after consultation with Xxxxxxx, establish a maximum annual
Incentive Compensation opportunity for Xxxxxxx, to be expressed as a percentage
of the Base Salary for such year, and performance criteria consistent with such
performance-based criteria as are applicable to other Company senior management.
All Incentive Compensation shall be payable within five business days of the
determination of such Incentive Compensation.
2.3 ADDITIONAL COMPENSATION. Nothing contained herein shall limit or
otherwise restrict the Board of Directors of the Company from granting to
Xxxxxxx at any time and from time to time such additional compensation as may be
recommended from time to time by the Compensation Committee.
2.4 EXPENSES. The Company shall promptly reimburse Xxxxxxx for all
expenses reasonably incurred by him in the performance of his duties under this
Agreement in accordance with the Company's general policies and practices for
senior executive officers in effect from time to time.
3. BENEFITS
3.1 BENEFITS. During the Employment Period, Xxxxxxx shall be entitled
to participate in all benefit, welfare, perquisite, equity and other similar
plans, policies and programs, in accordance with the terms thereof, as are
generally provided from time to time by the Company for its senior management
employees and for which Xxxxxxx is eligible. Unless the Employment Period shall
have been terminated for Cause (as defined in Section 4.3 hereof) or Xxxxxxx
terminates his employment pursuant to Section 4.1(c)(ii), during the period
commencing immediately after the Employment Period and continuing (x) as to
Xxxxxxx, for the life of Xxxxxxx, (y) as to Xxxxxxx'x spouse, for the life of
his spouse and (z) as to his children, until the earlier to occur of (A) such
child attaining the age of 28 or (B) such child completes his graduate studies
(collectively, his "Family") the Company shall continue the participation of
Xxxxxxx and his Family in all health and medical benefit plans, policies and
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programs in effect from time to time with respect to the senior executive
officers of the Company and their families generally (at the same levels and at
the same cost, if any, as provided to the senior executive officers of the
Company generally). Notwithstanding the foregoing, if Xxxxxxx'x or his Family's
continued participation thereunder is not possible under the general terms and
provisions thereof, the Company shall provide such benefits at such levels to
Xxxxxxx and/or his Family either by obtaining other insurance or by
self-insuring such amounts, net of any reimbursement any of them shall receive
with respect to health and medical costs from insurance other than pursuant to
this Section 3.1; PROVIDED, HOWEVER, that prior to receiving benefits hereunder
from the Company, Xxxxxxx and/or his Family shall first endeavor to obtain
reimbursement with respect to health and medical costs from other insurance
Xxxxxxx and/or his Family may own, if any, or from another employer or another
employer's insurance plans, if any, provided that such reimbursement can be
obtained without unreasonable effort or expense on the part of Xxxxxxx or his
Family.
3.2 VACATION. During each calendar year during the Employment Period,
Xxxxxxx shall be entitled to four (4) weeks of vacation and such other number of
personal days generally afforded to senior executives of the Company.
3.3 AUTOMOBILE. During the Employment Period and, if Xxxxxxx'x
employment hereunder has been terminated by him pursuant to Section 4.1(c)(iii)
hereof, for a period of three years thereafter, or if Xxxxxxx'x employment
hereunder has not been terminated by the Company for Cause (as defined in
Section 4.3 hereof) or by Xxxxxxx pursuant to Section 4.1(c)(ii) or (iii)
hereof, for a period of two years thereafter, the Company shall provide for
Xxxxxxx'x use an automobile of similar make and model to the automobile he
currently drives or its substantial equivalent, and all ancillary equipment
similar to that as he currently uses with his automobile, and shall pay the
costs of fuel, maintenance, repairs and insurance. The Company shall provide
Xxxxxxx (at Xxxxxxx'x option) with the use of a new automobile every three years
and shall continue to provide such ancillary equipment and pay all such costs
during the Employment Period and, if applicable, the two-year or three-year
period referred to above.
3.4 CONVERSION OF BENEFITS. During the Employment Period, Xxxxxxx
shall be entitled to the same conversion privileges (including but not limited
to cash conversions) with regard to the Company's benefit plans, policies and
programs in which Xxxxxxx is entitled to participate under Section 3.1 hereof as
may be generally offered from time to time by the Company to its senior
executive officers.
3.5 GROSS-UP. To the extent that Xxxxxxx incurs any tax obligations
as a result of the provisions of Section 3.3 hereof, the Company shall pay to
Xxxxxxx or the applicable taxing authority on Xxxxxxx'x behalf, no later than 30
days prior to the time the tax is due, an amount equal to the sum of such taxes
and all taxes payable on account of payments made to Xxxxxxx under this Section
3.5.
4. TERMINATION
4.1 TERMINATION OF EMPLOYMENT. Xxxxxxx'x employment (and the
Employment Period) shall terminate prior to the Employment Expiration Date upon
the occurrence of any of the following events:
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(a) upon Xxxxxxx'x death or Xxxxxxx'x Disability (pursuant to Section
4.2 hereof); or
(b) (i) by the Company for Cause; or (ii) by action of the Board of
Directors without Cause upon ninety (90) days' prior written notice to Xxxxxxx;
or
(c) by Xxxxxxx (i) following the occurrence of an event that
constitutes Good Reason, as hereinafter provided, (ii) upon 180 days prior
written notice to the Company, or (iii) upon 30 days prior written notice to the
Company given at any time within one year following a Change in Control, as
hereinafter defined.
A "Change in Control" shall be deemed to occur upon any of the
following: (A) acquisition by any one "person" (as such term is defined in
ss.3(a)(9) of the Securities and Exchange Act of 1934, as amended, and used in
ss. 13(d) and 14(d) thereof, including "group" as defined in ss.13(d) thereof)
of 33% or more of the Company's voting shares without the prior express approval
of the Company's Board of Directors; (B) acquisition by any one "person" (as
referred to in the preceding sentence) of more than 50% of the Company's voting
shares; (C) directors elected to the Board over any 24 month period not
nominated by the Company's Executive Committee represent 30% or more of the
total number of directors constituting the Board at the beginning of the period,
(or such nomination results from an actual or threatened proxy contest); (D) any
merger, consolidation or other corporate combination upon the completion of
which the Company's shares do not represent more than 50% of the combined voting
power of the resulting entity; and (E) upon the sale of all or substantially all
of the consolidated assets of the Company, other than a distribution to
shareholders.
4.1A DEFINITIONS
A "Good Reason" event shall have occurred upon the taking of any of
the following actions, without Xxxxxxx'x written consent; provided that a Good
Reason event shall not be deemed to have occurred unless Xxxxxxx shall have
given written notice to the Company specifying the Good Reason event within 90
days of the occurrence of such event:
(a) a material reduction or material adverse change in Xxxxxxx'x
responsibilities, duties, positions or authority, as provided in
the Agreement, including, the failure to appoint Xxxxxxx to, or
to continue Xxxxxxx in, any position to which he is required to
be appointed under this Agreement.
(b) any failure by the Company to provide the compensation, or any
failure by the Company to provide the material benefits, agreed
to be provided under this Agreement; provided, however, that any
reduction in benefits generally applicable to senior management
employees shall not constitute Good Reason;
(c) any change in location of the Company's principal executive
offices outside of the New York metropolitan area (which shall
consist solely of New York City, Long Island and any other
location within 35 miles of the Company's current principal
executive offices);
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PROVIDED, HOWEVER, that (i) a "Good Reason" event will not include acts which
are cured by the Company within 30 days from receipt by it of a written notice
from Xxxxxxx identifying in reasonable detail the act or acts constituting "Good
Reason," and (ii) if the Company has failed to cure as provided above, a "Good
Reason" event will not exist unless Executive has thereafter given notice of
termination for Good Reason within 30 days after the earlier of the expiration
of the 30-day cure period or the Company's notice to Xxxxxxx that it will not
cure such Good Reason event.
4.2 DISABILITY. If, by reason of physical or mental disability,
Xxxxxxx (i) is unable to carry out the material duties he has agreed to carry
out under this Agreement for more than 180 days in any twelve-month period or
(ii) is expected to be unable to carry out his duties for such period as
certified by a Licensed Physician ("Disability"), the Employment Period shall
terminate hereunder. A "Licensed Physician" shall be any qualified physician
licensed to practice medicine in the State of New York as shall be mutually
agreed by the Company and Xxxxxxx (or his representatives), such approval not to
be unreasonably withheld or delayed. Xxxxxxx shall submit to an examination by a
physician for purposes of the preceding provisions upon the request of the Board
of Directors. During any period of Disability prior to such termination, Xxxxxxx
shall continue to receive all compensation and other benefits provided herein as
if he had not been disabled at the time, in the amounts and in the manner
provided herein, provided that the Company shall be entitled to a credit against
such amounts with regard to the amount, if any, paid to Xxxxxxx for such period
under any disability plan of the Company.
4.3 CAUSE. For purposes of this Agreement, the term "Cause" shall be
limited to (i) action or omission by Xxxxxxx involving willful malfeasance or
willful misconduct having a material adverse effect on the Company (whether
economically or as to reputation), (ii) Xxxxxxx being convicted of, or pleading
NOLO CONTENDERE to, a felony (other than resulting from a traffic violation or
like event) or being convicted of any other crime involving intentional
dishonesty or fraud, (iii) any other action by Xxxxxxx constituting a material
breach of this Agreement which is not cured within 30 days after notice from the
Company thereof. In the case of (i) above, no act or omission by Executive shall
be considered willful if it is done or omitted in good faith and with a
reasonable belief that it was in the best interests of the Company. Termination
by the Company for Cause pursuant to (i) or (iii) above will not be effective
unless the Board of Directors has voted to terminate Xxxxxxx for Cause at a
meeting of the Board called for such purpose after Xxxxxxx has been afforded at
least three days notice of the meeting and an opportunity to be heard at a
meeting of the Board; provided, however, that the Board may suspend Xxxxxxx with
pay and benefits pending such Board meeting.
5. CONSEQUENCES OF TERMINATION
5.1 DEATH. If Xxxxxxx'x employment hereunder is terminated by reason
of Xxxxxxx'x death, the Company shall have no further obligation to Xxxxxxx
under this Agreement except that Xxxxxxx'x heirs or estate shall be paid those
obligations accrued hereunder to the date of his death, consisting only of (a)
Xxxxxxx'x unpaid Base Salary to the extent unpaid through the date of
termination, (b) any deferred compensation earned but not yet paid (together
with any accrued earnings thereon), (c) the annual Incentive Compensation due to
Xxxxxxx, if any, for the last full fiscal year of the Company ending prior to
the date of termination (if not previously paid), (d) the product of (i) the
annual Incentive Compensation
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paid or payable to Xxxxxxx for the last full fiscal year of the Company ending
prior to the date of termination multiplied by (ii) a fraction, the numerator of
which is the number of days in the current fiscal year during which Xxxxxxx was
employed by the Company, and the denominator of which is 365, (e) any accrued
and unpaid vacation pay, and (f) to the extent permitted under this Agreement,
any other amounts or benefits owing to Xxxxxxx or his beneficiaries under the
then applicable benefit plans, policies and programs of the Company. (All
amounts determined pursuant to the provisions of in clauses (a) through (e)
above are hereinafter referred to as "Accrued Obligations".) Unless otherwise
previously directed by Xxxxxxx (or, in the case of any benefit plan qualified
under Section 401(a) of the Internal Revenue Code, as amended (the "Code") (any
such plan hereinafter referred to as a "Qualified Plan"), as may be required by
such Qualified Plan), all Accrued Obligations shall be paid to Xxxxxxx'x estate
or designated beneficiaries, as the case may be, in a lump sum (to the extent
such obligations are able to be paid, under the terms of the plan for which such
obligation arose, in a lump sum) in cash within 30 days after the date of
Xxxxxxx'x death, and, otherwise, in accordance with the terms of the applicable
plan or applicable law. Nothing in this Section 5.1 shall be deemed to limit or
expand in any way the right of Xxxxxxx'x family to receive the applicable
benefits referred to in Section 3.1 hereof.
5.2 [Intentionally Omitted]
5.3 COMPANY TERMINATION FOR CAUSE OR RESIGNATION OTHER THAN FOR GOOD
REASON. If Xxxxxxx'x employment hereunder is terminated by the Company for Cause
or by Xxxxxxx pursuant to Section 4.1(c)(ii) above, or by Xxxxxxx by non-renewal
pursuant to Section 1.2 (a) or (b), the Company shall have no further obligation
to Xxxxxxx under this Agreement, except that, unless otherwise directed by
Xxxxxxx (or in the case of any Qualified Plan, as may be required by such plan)
Xxxxxxx shall be paid all Accrued Obligations to the date of termination (other
than the obligation specified in clauses (c) and (d) of Section 5.1 hereof), in
a lump sum (to the extent such obligations are able to be paid, under the terms
of the plan for which such obligation arose, in a lump sum) in cash within 30
days after the date of termination, and, otherwise, in accordance with the terms
of the applicable plan or applicable law.
5.4 COMPANY TERMINATION WITHOUT CAUSE OR DUE TO DISABILITY;
RESIGNATION FOLLOWING GOOD REASON; NON-RENEWAL. If Xxxxxxx'x employment
hereunder is terminated pursuant to Section 4.2 hereof or by the Company without
Cause or by Xxxxxxx pursuant to Section 4.1(c)(i) above or the Company at any
time chooses not to extend or not to continue to extend the Employment Period,
the Company shall have no further obligation to Xxxxxxx under this Agreement
except that:
(a) Unless otherwise directed by Xxxxxxx (or, in the case of any
Qualified Plan, as may be required by such plan), Xxxxxxx shall be paid all
Accrued Obligations to the date of termination in a lump sum (to the extent such
obligations are able to be paid, under the terms of the plan for which such
obligation arose, in a lump sum) in cash within thirty (30) business days after
the date of termination, and, otherwise, in accordance with the terms of the
applicable plan or applicable law.
(b) Unless otherwise directed by Xxxxxxx, Xxxxxxx shall be paid, as
severance pay, within thirty (30) business days after the date of termination:
6
(i) in a lump sum in cash an amount equal to 200% of Xxxxxxx'x
then annual Base Salary plus in a lump sum in cash an amount equal to 200%
of Xxxxxxx'x average annual Incentive Compensation paid or payable with
respect to the immediately preceding three fiscal years of the Company
ending prior to the date of termination; and
(ii) with respect to each pension plan, as such term is defined
in ERISA Section 3(2)(A), of the Company (or its subsidiaries) in which
Xxxxxxx participated or had a benefit under at the date of termination, a
cash payment equal to the value (to be determined as indicated below) of
the excess of (A) the fully vested value of the benefit to him under such
plan, assuming additional credit for service for all purposes under such
plan for the period from the date of termination through the Employment
Expiration Date (the "Remaining Term"), continuation of Xxxxxxx'x Base
Salary for the Remaining Term, and that there are no earnings on plan funds
in defined contribution type plans for any period after the date of
termination, over (B) Xxxxxxx'x vested accrued benefits pursuant to the
provisions of each respective plan on the date of termination. (For
purposes of this Section 5.4(b)(ii), the value of the excess shall be
calculated using a discount rate equal to the applicable Federal Rate (as
defined in Code Section 1274) in effect on the date of termination of
employment and no other actuarial assumptions).
(c) To the extent permitted or not prohibited by any pension plan, as
such term is defined in ERISA Section 3(2)(A), of the Company (or its
subsidiaries) in which Xxxxxxx is permitted to participate hereunder or by
applicable law, after the date of termination, the Company shall make
immediately available to Xxxxxxx, in a lump sum (to the extent such obligation
is able to be paid in a lump sum under the terms of the plan for which such
obligation arose), all vested amounts under any such plan.
(d) Nothing in this Section 5.4 shall be deemed to limit or expand in
any way Xxxxxxx'x or his Family's rights to receive the applicable benefits
referred to in Section 3.1 hereof.
(e) With respect to an amount due to the Executive pursuant to Section
5.4(b)(i) hereof, the Company shall be entitled to a credit against such amount
with regard to the amount, if any, payable to Xxxxxxx for such period under any
disability plan of the Company.
5.5 TERMINATION FOLLOWING A CHANGE IN CONTROL. If Xxxxxxx'x
employment is terminated by Xxxxxxx pursuant to Section 4.1(c)(iii) above, the
Company shall have no further obligation to Xxxxxxx under this Agreement except
that:
(a) Unless otherwise directed by Xxxxxxx (or, in the case of any
Qualified Plan, as may be required by such plan), Xxxxxxx shall be paid all
Accrued Obligations to the date of termination in a lump sum (to the extent such
obligations are able to be paid, under the terms of the plan for which such
obligation arose, in a lump sum) in cash within thirty (30) business days after
the date of termination, and, otherwise, in accordance with the terms of the
applicable plan or applicable law.
7
(b) Unless otherwise directed by Xxxxxxx, Xxxxxxx shall be paid, as
severance pay, within thirty (30) business days after the date of termination:
(i) in a lump sum in cash an amount equal to 300% of Xxxxxxx'x
then annual Base Salary plus, in a lump sum in cash an amount equal to 300%
of Xxxxxxx'x annual Incentive Compensation paid or payable with respect to
whichever of the immediately preceding two fiscal years of the Company
ending prior to the date of termination was higher; and
(ii) with respect to each pension plan, as such term is defined
in ERISA Section 3(2)(A), of the Company (or its subsidiaries) in which
Xxxxxxx participated or had a benefit under at the date of termination, a
cash payment equal to the value (to be determined as indicated below) of
the excess of (A) the fully vested value of the benefit to him under such
plan, assuming additional credit for service for all purposes under such
plan for the period from the date of termination through the Employment
Expiration Date (the "Remaining Term"), continuation of Xxxxxxx'x Base
Salary for the Remaining Term, and that there are no earnings on plan funds
in defined contribution type plans for any period after the date of
termination, over (B) Xxxxxxx'x vested accrued benefits pursuant to the
provisions of each respective plan on the date of termination. (For
purposes of this Section 5.5(b)(ii), the value of the excess shall be
calculated using a discount rate equal to the applicable Federal Rate (as
defined in Code Section 1274) in effect on the date of termination of
employment and no other actuarial assumptions).
(c) To the extent permitted or not prohibited by any pension plan, as
such term is defined in ERISA Section 3(2)(A), of the Company (or its
subsidiaries) in which Xxxxxxx is permitted to participate hereunder or by
applicable law, after the date of termination, the Company shall make
immediately available to Xxxxxxx, in a lump sum (to the extent such obligation
is able to be paid in a lump sum under the terms of the plan for which such
obligation arose), all vested amounts under any such plan.
(d) Nothing in this Section 5.5 shall be deemed to limit or expand in
any way Xxxxxxx'x or his Family's rights to receive the applicable benefits
referred to in Section 3.1 hereof.
(e) In the event that Xxxxxxx shall become entitled to the payments
and/or benefits provided by this Section 5.5 or any other amounts (whether
pursuant to the terms of this Agreement, including Section 5.4 hereof, or any
other plan, arrangement or agreement with the Company) (collectively the
"Company Payments") and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may
hereafter be imposed), the Company shall pay to Xxxxxxx at the time specified
below, an additional amount (the "Gross-up Payment") such that the net amount
retained by Xxxxxxx, after deduction of any Excise Tax on the Company Payments
and any federal, state and local income tax and Excise Tax upon the Gross-up
Payment provided for by this Section 5.5(e), but before deduction for any
federal, state or local income tax on the Company Payments, shall be equal to
the Company Payments.
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(f) For purposes of determining whether any of the Company Payments
and Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (i) the Total Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Code Section 280G(b)(3) of the Code) shall be treated as subject to the
Excise Tax, unless and except to the extent that, in the written opinion (at the
substantial authority level) of the Company's independent certified public
accountants appointed prior to any change in ownership (as defined under Code
Section 280G(b)(2)) or tax counsel selected by such accountants (the
"Accountants") such Total Payments (in whole or in part) either do not
constitute "parachute payments," represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code in excess
of the "base amount" or are otherwise not subject to the Excise Tax, and (ii)
the value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles of Section 280G
of the Code.
(g) For purposes of determining the amount of the Gross-up Payment,
Xxxxxxx shall be deemed to pay federal income taxes at the highest marginal rate
of federal income taxation in the calendar year in which the Gross-up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of Xxxxxxx'x residence for the calendar year
in which the Company 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 if paid in such year, after taking into account the limitation on
the deductibility of itemized deductions, including such state and local taxes,
under Section 68 of the Code. In the event that the Excise Tax is subsequently
determined finally by the Internal Revenue Service to be less than the amount
taken into account thereunder at the time the Gross-up Payment is made, Xxxxxxx
shall pay to the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the portion of the Gross-up Payment being paid by the Executive if,
and to the extent, such payment results in a reduction in Excise Tax or a
federal and state and local income tax deduction), plus interest on the amount
of such payment at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Gross-up Payment
to be paid to the Company has been paid to any federal, state or local tax
authority, payment thereof (and related amounts) shall not be required until
actual refund or credit of such portion has been made to Xxxxxxx and, interest
payable to the Company shall not exceed the interest received or credited to
Xxxxxxx by such tax authority for the period it held such portion. Xxxxxxx and
the Company shall mutually agree upon the course of action to be pursued (and
the method of allocating the expenses thereof) if Xxxxxxx'x good faith claim for
refund or credit is denied.
In the event that the Excise Tax is later determined by the
Accountants or the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-up Payment), the Company shall make an additional Gross-up Payment
in respect of such excess (plus any interest or penalties payable with respect
to such excess) at the time that the amount of such excess is finally
determined, or earlier if as a result thereof, Xxxxxxx would be subject to the
entry of a judgment against him or
9
other action by the Internal Revenue Service to enforce such assessment (other
than the accrual of interest and penalties which are included in the calculation
of the Gross-up Payment to be made by the Company).
(h) The Gross-up Payment or portion thereof provided for in Section
5.5(f) hereof shall be paid not later than the thirtieth day following an event
occurring which subjects the Executive to the Excise Tax; PROVIDED, HOWEVER,
that if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Xxxxxxx on such day
an estimate, as determined in good faith by the Accountants, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Code Section 1274(b)(2)(B) of the Code),
subject to further payments pursuant to Section 5.5(f) hereof, as soon as the
amount thereof can reasonably be determined, but in no event later than the
ninetieth day after the occurrence of the event subjecting the Executive to the
Excise Tax. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall be payable to
the Company on the fifth day after demand by the Company (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code).
5.6 OFFICE SUPPORT. For two years following termination of Xxxxxxx'x
employment by the Company without Cause or by Xxxxxxx pursuant to Section
4.1(c)(i) above, or due to the Company choosing not to extend the Employment
Period, and for three years following termination of Xxxxxxx'x employment by
Xxxxxxx pursuant to Section 4.1(c)(iii) above, the Company shall, at its cost,
provide Xxxxxxx an office comparable to that used by him prior to termination
and related office support, including making available the services of one
executive assistant.
5.7 VESTING OF OPTIONS, ETC. Notwithstanding anything to the contrary
in any other agreement between the Company and Xxxxxxx, upon the occurrence of a
Change in Control any and all options held by Xxxxxxx (or his assignees, if
assignment is permissible) to purchase Company capital stock, to the extent not
theretofore vested, shall be fully vested and, with respect to any and all
shares of stock theretofore issued to Xxxxxxx bearing restrictions on transfer
imposed by the Company, such restrictions shall thereupon lapse.
6. CONFIDENTIAL INFORMATION, NON-COMPETITION, ETC.
(a) (i) Both during and after the Employment Period, Xxxxxxx
shall hold in a fiduciary capacity for the benefit of the Company and shall
not, without the prior written consent of the Company, communicate or
divulge (other than in the regular course of the Company's business), to
anyone other than the Company, its subsidiaries and those designated by it,
any confidential or proprietary information, knowledge or data relating to
the Company or any of its subsidiaries, or to any of their respective
businesses, obtained by Xxxxxxx before or during the Employment Period
except to the extent (A) disclosure is made during the Employment Period by
Xxxxxxx in the course of his duties hereunder and Xxxxxxx reasonably
determines in good faith that it is in the best interest of the Company to
do so, (B) Xxxxxxx is compelled pursuant to an order of a court or other
body having jurisdiction over such matter to do so (in which case the
Company shall be given prompt written notice of such intention to divulge
not less than five days
10
prior to such disclosure or such shorter period as the circumstances may
reasonably require) or (C) such information, knowledge or data is or
becomes public knowledge or is or becomes generally known within the
Company's industry other than through improper disclosure by Xxxxxxx.
(ii) Xxxxxxx acknowledges and agrees that the whole interest in
any invention, improvement, confidential information, copyright, design,
plan, drawing or data, including all worldwide rights to copyrights or any
other intellectual property rights (collectively, the "Rights") arising out
of or resulting from Xxxxxxx'x performance of his duties during the
Employment Period shall be the sole and exclusive property of the Company.
Xxxxxxx undertakes (at the expense of the Company) to execute any document
or do any reasonably necessary act to enable the Company to obtain or to
assist the Company in obtaining any Rights. Xxxxxxx hereby irrevocably
appoints the Company to be his attorney-in-fact to execute in his name and
on his behalf any instrument required and take any actions reasonably
necessary for the purpose of giving to the Company the full benefit of the
provisions of this subsection; PROVIDED, HOWEVER, that the Company shall
notify Xxxxxxx prior to executing any such instruments or taking any such
actions.
(b) Xxxxxxx will not (other than on behalf of the Company) directly
or indirectly during the Employment Period and for one (1) year thereafter if
Xxxxxxx'x termination is due to a termination by the Company without Cause, by
Xxxxxxx pursuant to Section 4.1(c)(i) or (iii) or because of Xxxxxxx'x
Disability (which term may be extended for an additional year at the Company's
option; PROVIDED, HOWEVER, that upon making such election which shall be made no
less than 180 days prior to the expiration of such term, the Company shall pay
Xxxxxxx 100% of his Base Salary at the rate being paid on the date of such
termination), or until the later of (A) the second anniversary of the expiration
of the Employment Period and (B) the Employment Expiration Date if such
termination is due to a termination by the Company for Cause or by Xxxxxxx
pursuant to Section 4.1(c)(ii), as an individual proprietor, partner,
stockholder, officer, employee, director, joint venturer, investor, lender, or
in any other capacity whatsoever (other than as the holder of not more than one
(1) percent of the total outstanding stock of a publicly held company other than
Schein Pharmaceutical, Inc., (x) engage in any activity competitive with a
material segment of the business of the Company, or (y) recruit, solicit or
induce any employee or employees of the Company (other than his personal
administrative assistant) to terminate their employment with, or otherwise cease
their relationship with, the Company.
(c) If any restriction set forth in Section 6(b) hereof is found by
any court of competent jurisdiction or arbitrator to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
(d) The restrictions contained in Sections 6(a) and (b) hereof are
necessary for the protection of the business and goodwill of the Company and are
considered by Xxxxxxx to be reasonable to such purpose. Xxxxxxx acknowledges and
agrees that money damages would not adequately compensate the Company for any
breach of Sections 6(a) or 6(b) hereof and will
11
cause the Company substantial and irreparable damage and therefore, in the event
of any such breach, in addition to such other remedies which may be available,
the Company shall have the right to seek specific performance and injunctive
relief.
7. INTO MITIGATION; NO SET-OFF
The Company agrees that if Xxxxxxx'x employment with the Company is
terminated prior to the Employment Expiration Date for any reason whatsoever,
Xxxxxxx is not required to seek other employment or to attempt in any way to
reduce any amounts payable to Xxxxxxx by the Company pursuant to this Agreement.
Further, the amount of any payment provided for in this Agreement shall not be
reduced by any compensation earned by Xxxxxxx as the result of employment by
another employer or otherwise; and the amount of any benefit (other than the
health and medical benefits provided for in Section 3.1 hereof) provided for in
this Agreement shall not be reduced by any benefit provided to Xxxxxxx as the
result of employment by another employer or otherwise. The Company's obligations
to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, or other similar right which the Company may have against Xxxxxxx.
8. LEGAL FEES
If Xxxxxxx seeks to collect or negotiates and reaches a settlement for
any part or all of the payments provided for hereunder (or otherwise
successfully enforces the terms of this Agreement) by or through a lawyer, the
Company shall advance all reasonable costs of such collection or enforcement,
including reasonable legal fees and disbursements and other fees and expenses
which Xxxxxxx may incur, promptly after submission of documentation reasonably
acceptable to the Company in respect of such costs and expenses. All amounts
paid by the Company shall promptly be refunded to the Company if and when a
court of competent jurisdiction finds that the Company is entitled to have such
sums refunded or if a settlement is reached which is insubstantial compared to
the damages that were requested. The Company shall pay or reimburse Xxxxxxx for
all reasonable legal fees (not in excess of $7,500) incurred by him in
connection with the negotiation and execution of this Agreement.
9. SUCCESSORS; BINDING AGREEMENT
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to expressly assume
and agree in writing to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
transaction had taken place, provided that Xxxxxxx need only be one of the
senior executive officers with the authority, powers and responsibilities set
forth in Section 1.1 hereof with respect to the subsidiary or subdivision which
operates the business of the Company as it exists on the date of such business
combination. Failure of the Company to obtain such express assumption and
agreement at or prior to the effectiveness of any such transaction shall be a
breach of this Agreement and, if such breach is not cured by the Company within
30 days after written notice from Xxxxxxx specifying the default, shall entitle
Xxxxxxx to compensation and benefits from the Company in the same amount and on
the same terms to which Xxxxxxx would
12
be entitled hereunder if the Company terminated his employment without Cause,
except that for purposes of implementing the foregoing, the date on which any
such transaction becomes effective shall be deemed the date of termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(b) The Company may not assign this Agreement except in connection
with, and to the acquiror of, all or substantially all of the business or assets
of the Company, provided such acquiror expressly assumes and agrees in writing
to perform this Agreement as provided in Section 9(a) hereof.
(c) This Agreement shall inure to the benefit of and be enforceable
by Xxxxxxx and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees; PROVIDED, HOWEVER, that
this Agreement may not be assigned by Xxxxxxx.
(d) The parties agree that Xxxxxxx'x family members are the intended
third party beneficiaries of the provisions of Section 3.1 and Article 5 (only
to the extent that the events described therein would cause Xxxxxxx'x family
members to be entitled to the benefit of rights granted to them under Section
3.1) to the extent that benefits are expressly granted to them in such sections,
with the right to enforce such provisions as fully as if they were parties to
this Agreement.
10. MISCELLANEOUS
(a) Any notices or other communications required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly made,
given or received when hand-delivered, one (1) business day after being
transmitted by telecopier (confirmed by mail) or sent by overnight courier
against receipt, or five (5) days after being mailed by registered or certified
mail, postage prepaid, return receipt requested, to the party to whom such
communication is given at the address set forth below, which address may be
changed by notice given in accordance with this Section:
If to the Company:
Xxxxx Xxxxxx, Inc.
000 Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Corporate Secretary
If to Xxxxxxx:
Xxxxxxx X. Xxxxxxx
c/o Xxxxx Xxxxxx, Inc.
000 Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
13
(b) If any provision of this Agreement shall be held by court of
competent jurisdiction to be illegal, invalid or unenforceable, including,
without limitation, under any provision of the Xxxxxxxx-Xxxxx Act of 2002, as
amended from time to time, such provision shall be construed and enforced as if
it had been more narrowly drawn so as not to be illegal, invalid or
unenforceable and such illegality, invalidity or unenforceability shall have no
effect upon and shall not impair the enforceability of any other provision of
this Agreement.
(c) No provision of this Agreement may be modified, waived or
discharged except by a waiver, modification or discharge in writing signed by
Xxxxxxx and such officer as may be designated by the Board of Directors. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or in compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the time or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement.
(d) This Agreement represents the entire agreement of the parties and
shall supersede any and all previous contracts, arrangements or understandings
between the Company and Xxxxxxx with respect to the subject matter hereof,
including, without limitation, as of the effective date of this Agreement, that
certain employment agreement dated as of January l, 2000 and any letters with
respect thereto.
(e) This Agreement shall be construed, interpreted, and governed in
accordance with the laws of the State of New York, without reference to rules
relating to conflicts of law.
(f) The section headings herein are for the purpose of convenience
only and are not intended to define or limit the contents of any section.
(g) The parties may sign this Agreement in counterparts, all of which
shall be considered one and the same instrument.
[END OF TEXT - SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first above written.
XXXXX XXXXXX, INC.
By: /S/ Xxxxxx Xxxxxxxx
-----------------------------
Authorized Officer
/S/ Xxxxxxx Xxxxxxx
-----------------------------
XXXXXXX X. XXXXXXX
