Exhibit 10(1)
AMENDMENT TO THE
LETTER AGREEMENT
This Amendment to the Letter Agreement dated as of January 1, 2000 (the
"Agreement") between The Xxxx Corporation, an Ohio corporation (the
"Corporation"), and Xxxxxx X. Xxxxx is made as of June 22, 2000.
1. Section 4(d)(ii) of the Agreement is hereby amended in its entirety,
to read as follows:
(ii) the Corporation will pay as severance benefits to you, not later
than the fifth day following the Date of Termination, a lump sum
severance payment equal to three and one-half (3.5) times the sum of
your (A) highest rate of annualized Base Salary in effect at any time
up to and including the Date of Termination, and (B) the greater of
(x) the highest amount of the actual annual incentive and long-term
incentive you received under the Xxxx Annual Incentive Plan and the
Xxxx Long-Term Incentive Plan for the three plan years immediately
preceding the year in which your Date of Termination occurred, and (y)
the highest amount of your target annual incentive and your target
long-term incentive established for the Xxxx Annual Incentive Plan and
the Xxxx Long-Term Incentive Plan for the three plan years immediately
preceding the year in which your Date of Termination occurred (or, if
higher, your target annual incentive and your target long-term
incentive established for the Xxxx Annual Incentive Plan and the Xxxx
Long-Term Incentive Plan for the plan year in which your Date of
Termination occurred);
2. Section 4(d) of the Agreement is hereby amended by re-designating
Subsection (v) as Subsection (vi) and by adding the following new
Subsection (v) to read as follows:
(v) In addition to the retirement benefits to which you are entitled
under each Pension Plan or any successor plan thereto, the Corporation
shall pay you a lump sum amount in cash, calculated under the
assumption that at such Date of Termination you had an additional
three (3) years of age and service credits, provided that your age and
service will not be treated as extending beyond your 65th birthday,
with Compensation (as defined in such Pension Plan) for each of such
three (3) additional years to be treated at (A) your highest rate of
annualized Base Salary in effect at any time up to and including the
Date of Termination, and (B) the greater of (x) the highest amount of
the actual annual incentive you received under the Xxxx Annual
Incentive Plan for the three plan years immediately preceding the year
in which your Date of Termination occurred, and (y) the highest amount
of your target annual incentive established for the Xxxx Annual
Incentive Plan for the three plan years immediately preceding the year
in which your Date of Termination occurred (or, if higher, the target
annual
16
established for the Xxxx Annual Incentive Plan for the plan year in
which your Date of Termination occurred). For purposes of this Section
4(d)(v), "Pension Plan" shall mean any tax-qualified pension or non-
qualified supplemental pension or excess benefit pension plan
maintained by the Corporation and any other plan or agreement entered
into between you and the Corporation which is designed to provide you
with retirement benefits. The three (3) additional years of age and
service shall be used for purposes of all calculations under this
section, including but not limited to the early retirement reduction
calculation so as to offset such reduction. All calculations under
this Agreement with respect to your benefits shall be made without
regard to any amendments to any Pension Plan made subsequent to a
Change in Control which adversely affect in any manner the computation
of retirement benefits hereunder.
3. Section 4 of the Agreement is hereby amended by adding the following
new subsection at the end thereof:
(i) Except as provided in Section 4(e), the Corporation's obligation
to make the payments and the arrangements provided for herein shall be
absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset,
counterclaim, recoupment, defense, or other right which the
Corporation may have against you or anyone else. All amounts payable
by the Corporation hereunder shall be paid without notice or demand.
4. Section 4(e) of the Agreement is hereby amended, in its entirety, to
read as follows:
(i) Whether or not you become entitled to the Severance Payments, if
any of the payments or benefits received or to be received by you in
connection with a Change in Control or termination of your employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Corporation, any Person whose
actions result in a Change in Control or any Person affiliated with
the Corporation or such Person) (all such payments and benefits,
excluding the Gross-Up Payment (as hereinafter defined), being
hereinafter referred to as the "Total Payments") will be subject to
the excise tax (the "Excise Tax") referred to in Section 4999 of the
Internal Revenue Code (the "Code"), or any similar tax that may
hereafter be imposed, the Corporation shall pay you in cash an
additional amount (the "Gross-Up Payment") such that the net amount
retained by you, after deduction of any Excise Tax upon the Total
Payments and any federal, state and local income taxes, employment
taxes, and Excise Tax upon the Gross-Up Payment provided for by this
Section 4(e) (including FICA), shall be equal to the Total Payments;
(ii) For purposes of determining the potential impact of the Excise
Tax and the amount of such Excise Tax, (A) all of the Total Payments
shall be treated as "parachute payments" (within the meaning of
Section 280G(b)(2) of the Code)
17
unless, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to you and selected by the accounting firm which was,
immediately prior to the Change in Control, the Corporation's
independent auditor (the "Auditor"), such payments or benefits (in
whole or in part, and whether received or to be received in the
future) do not constitute parachute payments, including by reason of
Section 280G(b)(4)(A) of the Code, (B) all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel,
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the
meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base
Amount (within the meaning of Section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (C) the value of any noncash benefits
or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of Sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax 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 or locality of your
residence on the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is calculated
for purposes of this Section (e)), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes;
(iii) In the event that the Excise Tax is subsequently determined to
exceed the amount taken into account hereunder in calculating the
Gross-Up Payment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up
Payment), the Corporation shall make an additional Gross-Up Payment in
respect to such excess (plus any interest, penalties or additions
payable by you with respect to such excess) within five (5) business
days following your payment of such excess. If, after receipt of the
Gross-Up Payment, you become entitled to receive any refund with
respect to a determination that there was an overpayment of any Excise
Tax or income tax with respect to the Gross-Up Payment, including
interest and penalties with respect thereto, you shall, within five
(5) business days following receipt of such refund, promptly pay to
the Corporation the amount of such refund (together with any interest
paid or credited thereon (after taxes applicable thereto)).
(iv) You shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Corporation of an additional Gross-Up Payment. Such
notification shall be given no later than ten (10) business days after
the Internal Revenue Service issues to you either a written notice
proposing imposition of the Excise Tax or a statutory notice of
deficiency with respect thereto, and you shall apprise the Corporation
of the nature of such claim and the date on which such claim is
requested to be paid. You shall
18
not pay such claim prior to the expiration of the thirty (30) day
period following the date on which you give such notice to the
Corporation (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Corporation notifies you in writing prior to the expiration of such
period that it desires to contest such claim, you shall: (w) give the
Corporation any information reasonably requested by the Corporation
relating to such claim; (x) take such action in connection with
contesting such claim as the Corporation shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Corporation; (y) cooperate with the
Corporation in good faith in order to effectively contest such claim;
and (z) permit the Corporation to participate in any proceedings
relating to such claim. Provided, however, that the Corporation shall
directly bear and pay all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and
shall indemnify and hold you harmless, on an after-tax basis, for any
Excise Tax, income and employment tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation
of the foregoing, the Corporation 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.
19
