Exhibit 10.4
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FORM OF
AMENDED AND RESTATED SEVERANCE AGREEMENT
BETWEEN XXXXXXXX CORPORATION AND EXECUTIVE OFFICERS
This Agreement is entered into as of the 1st day of February, 2001, by and
between XXXXXXXX CORPORATION, an Iowa corporation (the "Company"), and
______________ (the "Executive").
WHEREAS, the Executive has been offered and has accepted a high level position
with the Company, and the Company recognizes the valuable services that the
Executive can provide to the Company and desires to be assured that Executive
will be available to actively participate in the business of the Company; and
WHEREAS, the Executive is willing to accept employment with the Company but
desires assurance that in the event of any change in control of the Company he
will continue to have the responsibility and status of the position to which he
was appointed; serve the Company but desires assurance that in the event of any
change in control of the Company he will continue to have the responsibility
and status he has earned; and
WHEREAS, the Company and the Executive are parties to a Severance Agreement,
dated as of September 10, 1991, and each of the Company and the Executive
desire to amend certain provisions of such agreement and to restate such
agreement, as so amended, in its entirety;
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein contained, the Company and the Executive hereby agree as follows:
1. Term. This Agreement shall commence on the date hereof and shall terminate,
except to the extent that any obligation of the Company hereunder remains
unpaid as of such time, upon the earliest of (i) three (3) years from the date
hereof; (ii) the termination of the Executive's employment with the Company
based on death, "Disability" (as defined in Section 3(b)), "Mandatory
Retirement" (as defined in Section 3(c)) or "Cause" (as defined in Section
3(d)) or by the Executive other than for "Good Reason" (as defined in Section
3(e)); and (iii) two (2) years from the date of a "Change in Control of the
Company" (as defined in Section 2) if the Executive is employed by the Company
as of such time. The three (3) year period referred to in item (i) above shall
automatically be extended for an additional year on each anniversary date of
this Agreement to renew the three year period referred to in item (i) above,
unless the Company gives written notice to the contrary to the Executive at
least thirty (30) days prior to such anniversary date; provided that the
Company may not deliver a notice of nonrenewal after (A) a Potential Change in
Control (as defined in Section 2 hereof) unless the Board of Directors of the
Company (the "Board") has adopted a Nullification Resolution (as defined in
Section 2 hereof) with respect to such Potential Change in Control or (B) a
Change in Control (as defined in Section 2 hereof).
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2. Change in Control.
(a) Payment of Severance. No compensation shall be payable under this
Agreement unless and until (a) there shall have been a Change in Control of the
Company while the Executive is still an employee of the Company and (b) the
Executive is no longer an employee of the Company as a result of a termination
by the Company other than pursuant to Sections 3(b), 3(c) or 3(d) hereof or by
the Executive for Good Reason; provided, however, that notwithstanding anything
in this Agreement to the contrary, if a Change in Control of the Company occurs
and if the Executive's employment with the Company is terminated prior to the
date on which the Change in Control of the Company occurs, and if there is a
reasonable basis that such termination of employment (1) was at the request of
a third party that has taken steps reasonably calculated to effect a Change in
Control of the Company or (2) otherwise arose in connection with or
anticipation of a Change in Control of the Company, then such termination of
employment shall be treated as a termination of the Executive's employment
following a Change in Control of the Company.
(b) Change in Control Defined. For purposes of this Agreement, a "Change in
Control" of the Company shall mean:
(i) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (x)
the then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (y) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that, for purposes of this definition, the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
company controlled by, controlling or under common control with the Company or
(iv) any acquisition by any corporation pursuant to a transaction that complies
with Sections (iii)(A), (iii)(B) and (iii)(C) of this definition;
(ii) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board;
(iii) consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of
its subsidiaries, a sale or other disposition of all or substantially all of
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the assets of the Company, or the acquisition of assets or stock of another
entity by the Company or any of its subsidiaries (each, a "Business
Combination"), in each case unless, following such Business Combination, (A)
all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement or of the action of the
Board providing for such Business Combination; or
(iv) approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
Notwithstanding anything to the contrary in this Agreement, (A) no Change in
Control of the Company shall be deemed to have occurred for purposes of this
Agreement as a result of any agreement, transaction or Business Combination
involving solely shareholders of the Company who are descendants of E. T.
Xxxxxxxx, founder of the Company or trusts for the benefit of such individuals
or entities, the voting power of which is controlled by such Persons (the
"Xxxxxxxx Shareholders") so long as the Xxxxxxxx Shareholders continue to own
more than 50% of the Outstanding Company Voting Securities following such
transaction and (B) no transaction pursuant to clause (i) of this definition
shall constitute a Change in Control of the Company so long as the Xxxxxxxx
Shareholders own more than 50% of the Outstanding Company Voting Securities
immediately following such transaction, unless and until the Xxxxxxxx
Shareholders own 50% or less of the Outstanding Company Voting Securities while
the Person making the acquisition under clause (i) of the definition continues
to own 20% or more of the Outstanding Company Voting Securities or the
Outstanding Company Common Stock.
(c) Potential Change in Control. For the purposes of this Agreement, a
"Potential Change in Control" shall be deemed to have occurred if (i) any
Person commences a tender offer, with adequate financing, which, if
consummated, would result in such Person having the "beneficial ownership"
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(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 10% or more of the
outstanding voting power of the Company; (ii) the Company enters into an
agreement the consummation of which would constitute a Change in Control; (iii)
any person (including any group (within the meaning of Rule 13d-5(b) under the
Exchange Act)) other than the Company attempts, directly or indirectly, to
replace more than 25% of the directors of the Company; or (iv) any other event
occurs which the Board declares to be a Potential Change in Control.
Notwithstanding the foregoing, if, after a Potential Change in Control and
before a Change in Control, the Board makes a good faith determination that
such Potential Change in Control will not result in a Change in Control, the
Board may nullify the effect of the Potential Change in Control (a
"Nullification") by resolution (a "Nullification Resolution"), in which case
the Executive shall have no further rights and obligations under this Agreement
by reason of such Potential Change in Control.
3. Termination Following Change in Control.
(a) Termination. If a Change in Control of the Company shall have occurred
while the Executive is still an employee of the Company, the Executive shall be
entitled to the compensation provided in Section 4 upon the subsequent
termination of the Executive's employment with the Company by the Executive or
by the Company within the two (2) year period immediately following a Change in
Control of the Company unless such termination is as a result of the
Executive's (i) death; (ii) Disability; (iii) Mandatory Retirement; (iv)
termination by the Company for Cause; or (v) termination by the Executive other
than for Good Reason.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, (i) the Executive shall have been absent from his
duties with the Company on a full-time basis for nine (9) months and (ii)
within thirty (30) days after such nine (9) month period a "Notice of
Termination" (as defined in Section 3(f)) is given by the Company to the
Executive and (iii) thereafter the Executive shall not have returned to the
full-time performance of the Executive's duties, the Company may terminate this
Agreement for "Disability".
(c) Mandatory Retirement. The term "Mandatory Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive's having reached age sixty-five
(65) or such other age as shall have been specified as the Executive's
mandatory retirement age under the Company's retirement policy.
(d) Cause. The Company may terminate the Executive's employment for Cause.
For purposes of this Agreement only, the Company shall have "Cause" to
terminate the Executive's employment hereunder only upon (i) the willful and
continued failure of the Executive to attempt to perform substantially his
duties with the Company (other than any such failure resulting from
Disability), after a demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company, which
specifically identifies the manner in which the Executive has not attempted to
substantially perform his duties, or (ii) the engaging by the Executive in
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willful misconduct which is materially injurious to the Company, monetarily or
otherwise. For purposes of this Section 3(d), 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 and 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 upon the instructions of the Chief
Executive Officer of the Company or a senior officer of the Company 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. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of at least 3/4 of the Board (excluding the Executive) at a
meeting of the Board called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an opportunity,
together with counsel for the Executive, to be heard before the Board) finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the second sentence of this Section 3(d) and specifying the
particulars thereof.
(e) Good Reason. The Executive may terminate his employment for Good Reason
at any time during the term of this Agreement either by resignation or by
retirement (if eligible) other than a Mandatory Retirement. For purposes of
this Agreement "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of duties adversely
inconsistent with the Executive's position, duties, responsibilities and status
with the Company immediately prior to a Change in Control of the Company, a
diminution of the Executive's position, duties, responsibilities and status
with the Company as in effect immediately prior to a Change in Control of the
Company (even if such diminution is solely the result of the Company's ceasing
to be a publicly traded entity), or a change in the Executive's titles or
offices as in effect immediately prior to a Change in Control of the Company,
or any removal of the Executive from or any failure to reelect the Executive to
any of such positions, except in connection with the termination of his
employment for Disability, Mandatory Retirement or Cause or by the Executive
other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary as in effect
immediately prior to the time of a Change in Control of the Company or the
Company's failure to increase (within 12 months of the Executive's last
increase in base salary) the Executive's base salary after a Change in Control
of the Company in an amount which at least equals, on a percentage basis, the
average percentage increase in base salary for all officers of the Company
effected in the preceding twelve (12) months;
(iii) any failure by the Company to continue in effect any plan or arrangement,
including without limitation benefit and incentive plans, in which the
Executive is participating immediately prior to the time of a Change in Control
of the Company (hereinafter referred to as "Plans"), unless the Company
provides for the Executive to participate in replacement benefit and incentive
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plans no less favorable in the aggregate than the Plans, or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any such
Plan or replacement plan or deprive the Executive of any material fringe
benefit enjoyed by the Executive immediately prior to the time of a Change in
Control of the Company;
(iv) the Executive's relocation to any place more than twenty-five (25) miles
from the location at which the Executive performed his duties immediately prior
to the time of a Change in Control of the Company, except for required travel
by the Executive on the Company's business to an extent substantially
consistent with the Executive's business travel obligations immediately prior
to the time of a Change in Control of the Company;
(v) any failure by the Company to provide the Executive with the number of
annual paid vacation days to which the Executive is entitled immediately prior
to the time of a Change in Control of the Company;
(vi) any material breach by the Company of any provision of this Agreement or
any other material agreement with the Executive;
(vii) any failure by the Company to obtain the assumption of this Agreement by
any successor or assign of the Company; or
(viii) any purported termination of the Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 3(f), and for purposes of this Agreement, no such purported termination
shall be effective.
For purposes of this Section 3(e), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason
pursuant to a Notice of Termination given during the 30-day period immediately
following the first anniversary of the Change in Control shall be deemed to be
a termination for Good Reason for all purposes of this Agreement. The
Executive's mental or physical incapacity shall not affect the Executive's
ability to terminate employment for Good Reason.
(f) Notice of Termination. Any termination by the Company pursuant to
Section 3(b), 3(c), or 3(d) or by the Executive pursuant to Section 3(e) shall
be communicated by a Notice of Termination. For purposes of this Agreement, a
"Notice of Termination" shall mean a written notice which shall indicate those
specific termination provisions in this Agreement relied upon and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no such purported termination by
the Company shall be effective without such Notice of Termination.
(g) Date of Termination. "Date of Termination" shall mean (a) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
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full-time basis during such 30-day period) or (b) if the Executive's employment
is terminated by the Company for any other reason or by the Executive for Good
Reason, the date on which a Notice of Termination is given; provided that if
within thirty (30) days after any Notice of Termination is given to the
Executive by the Company the Executive notifies the Company that a dispute
exists concerning the termination, the Date of Termination shall be the date
the dispute is finally determined, whether by mutual agreement by the parties
or upon final judgment, order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal having been
perfected).
4. Severance Payment upon Termination of Employment. If, during the two (2)
year period immediately following a Change in Control of the Company, the
Company shall terminate the Executive's employment other than pursuant to
Section 3(b), 3(c) or 3(d) or if the Executive shall terminate his employment
for Good Reason, then the Company shall pay to the Executive the following as
severance pay (the "Severance Payment"):
(a) a lump sum in cash, within five (5) days of the Date of Termination,
equal to the sum of (1) three (3) times the sum of (i) Executive's annual base
salary (based upon the highest annual rate of base salary earned by the
Executive during the twelve (12) month period immediately preceding the Date of
Termination (the "Annual Base Salary")) and (ii) the higher of (x) Executive's
target annual incentive compensation for the year in which the Date of
Termination occurs or (y) the highest annual incentive compensation paid to the
Executive in respect of the three (3) fiscal years of the Company immediately
prior to the year in which a Change in Control of the Company occurs (such
higher amount, the "Annual Bonus"), (2) the Executive's annual base salary
through the Date of Termination and any previously earned and due annual
incentive payments, to the extent not theretofore paid, (3) any accrued
vacation pay, (4) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and (5) the product of
(x) the Annual Bonus and (y) a fraction, the numerator of which is the number
of days in the fiscal year in which the Date of Termination occurs through the
Date of Termination and the denominator of which is 365 (and any payment under
this clause (5) shall offset any amounts otherwise due as an annual incentive
bonus for the fiscal year in which the Date of Termination occurs);
(b) the Executive and his eligible dependents shall continue, to the extent
permitted by law, to be covered by all executive services, programs and
perquisites and insurance plans or programs in which the Executive participates
in effect immediately prior to the time of the Change in Control of the Company
(or any successor executive services, programs and perquisites and insurance
plans or programs, to the extent more favorable to the Executive), including
without limitation medical coverage and officer medical reimbursement, group
and executive supplemental life insurance, short-term and long-term disability
for thirty-six (36) months after the Executive's Date of Termination; in
addition, notwithstanding anything to the contrary contained in any other
agreement, all rights that have not previously vested relating to stock options
and restricted stock shall immediately vest and all restrictions shall be
waived, but such vesting and waiver of restrictions shall occur under this
Agreement only in the event of a Change in Control under Section 2(b)(i);
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provided, however, that if during such thirty-six (36) month time period the
Executive should enter into employment with a new employer and become eligible
to receive comparable insurance benefits, the continued insurance benefits
described herein shall be secondary to those provided under the plans of such
employer during such applicable period of eligibility. In the event the
Executive is ineligible, for whatever reason, to continue to be so covered with
respect to any of the above-referenced plans or programs, the Company shall
provide substantially equivalent coverage through other sources. Following the
end of the thirty-six (36) month period during which medical benefits are
provided, the Executive shall be eligible for continued health coverage under
"COBRA" as if the Executive's employment with the Company had terminated as of
the end of such period. For purposes of calculating the Executive's age and
years of service for determining eligibility (but not the time of commencement
of benefits) of the Executive for the Company's retiree medical and life
insurance benefits, the Executive shall be considered to have remained employed
until thirty-six (36) months after the Date of Termination and to have retired
on the last day of such period, and such benefits, and costs to the Executive
of such coverage, shall be no less favorable to the Executive than as in effect
as of the Change in Control of the Company and shall not be effected by any
subsequent employment of the Executive;
(c) a lump-sum in cash, payable within five (5) days after the Date of
Termination, equal to the excess (without present value discount, as a result
of receiving such amount prior to the end of the thirty-six (36) month period
following the Date of Termination) of (a) the actuarial equivalent of the
benefit under the qualified defined benefit retirement plan of the Company or
any affiliate in which the Executive participates immediately prior to the
Change in Control of the Company, or under any such plan with more favorable
benefits in which the Executive participates following the Change in Control of
the Company (the "Retirement Plan"), and any excess or supplemental retirement
plan, program or arrangement of the Company or any affiliate in which the
Executive participates immediately prior to the Change in Control of the
Company or under any such plans, programs or arrangements with more favorable
benefits in which the Executive participates following the Change in Control of
the Company (together, the "SERP") that the Executive would receive if the
Executive's employment continued for thirty-six (36) months after the Date of
Termination, assuming for this purpose that (i) the Executive is fully vested
in all benefits to be calculated under this clause (a), (ii) the Executive is
treated as having attained thirty-six (36) additional months of age under the
Retirement Plan or the SERP, including for purposes of reducing any otherwise
applicable actuarial reduction, but not for purposes of reducing the number of
years of the Executive's life expectancy, and (iii) the Executive's annualized
compensation over the thirty-six (36) month period, for purposes of calculating
the benefits under this clause (a) pursuant to the benefit formulas for the
Retirement Plan and SERP, is the Annual Base Salary and Annual Bonus, over (b)
the actuarial equivalent of the Executive's actual benefit (paid or payable),
if any, under the Retirement Plan and the SERP as of the Date of Termination;
provided, that the actuarial assumptions used for determining actuarial
equivalence in this Section 4(c) shall be no less favorable to the Executive
than the most favorable in effect under the Retirement Plan and SERP, as the
case may be, immediately prior to the Change in Control of the Company or on
the Date of Termination; and
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(d) to the extent not theretofore paid or provided, the Company shall timely
pay or provide to the Executive any other amounts or benefits required to be
paid or provided or that the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company.
(e) a lump-sum in cash, payable within five (5) days after the Date of
Termination, equal to the product of (i) three (3) times (ii) the total
matching contributions made by the Company on behalf of the Executive under the
Company's tax qualified defined contribution plan (and under any non-qualified
defined contribution plan providing matching contributions) during, for each
plan, the last plan year ending prior to the year in which the Change of
Control occurs, plus any Company matching contributions under such plans
forfeited as of the Date of Termination.
(f) Certain Additional Payments.
(i) In the event that any payment received or to be received by the Executive
in connection with a Change in Control of the Company or the termination of the
Executive's employment (whether payable pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, any person whose
actions result in a change in control of the Company or any person affiliated
with the Company or such person (together with the Severance Payment, the
"Total Payments", and each a "Payment")) would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any corresponding provisions of state or local tax laws, or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, is
hereinafter collectively referred to as (the "Excise Tax")), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including, but
not limited to, any income taxes, employment taxes, Excise Taxes and any
interest or penalties imposed with respect to any such taxes) imposed upon the
Gross-Up Payment, the Executive will retain an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 4(f), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the portion of the
Payments that would be treated as "parachute payments" under Section 280G of
the Code does not exceed 105% of the greatest amount (the "Safe Harbor Amount")
that could be paid to the Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the amounts payable under this Agreement shall be reduced so that
the Total Payments are reduced to the Safe Harbor Amount. The reduction of the
amounts payable under this Agreement, if applicable, shall be made by first
reducing the payments under Section 4(a)(i); unless an alternative method of
reduction is elected by the Executive. For purposes of reducing the Total
Payments to the Safe Harbor Amount, only amounts payable under this Agreement
(and no other Payments) shall be reduced. If the reduction of the amount
payable under this Agreement would not result in a reduction of the Payments to
the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced
pursuant to this Section 4(f). The Company's obligation to make Gross-Up
Payments under this Section 4(f) shall not be conditioned upon the Executive's
termination of employment.
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(ii) All determinations required to be made under this Section, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Company's independent accountants (the "Accountants") in
consultation with the Executive and his advisors. The Accountants shall
provide detailed supporting calculations to the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment (or, if later, within fifteen (15) days of the date it is determined by
the Accountants that the Payment is subject to the Excise Tax). Any Gross-Up
Payment, as determined pursuant to this Section, shall be paid by the Company
to the Executive within five days of the receipt of the Accountant's
determination. As a result of the uncertainty in the application of Section
4999 of the Code, it is possible that Gross-Up Payments may not have been made
by the Company that should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 4(f) and the Executive thereafter is
required to make a payment of any Excise Tax, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive. If it is
established pursuant to a final determination of a court or an Internal Revenue
Service proceeding or the opinion of independent counsel agreed upon by the
parties that the Excise Tax is less than the amount taken into account under
Section 4(f) of this Agreement, the Executive shall repay to the Company within
thirty (30) days of the Executive's receipt of notice of such final
determination or opinion the portion of the Gross-Up Payment attributable to
such reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by the Executive if such repayment results in a reduction
in Excise Tax or a federal, state and local income tax deduction) plus any
interest received by the Executive on the amount of such repayment.
(iii) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(A) give the Company any information reasonably requested by the Company
relating to such claim,
(B) take such action in connection with contesting such Claim as the Company
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 Company,
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(C) cooperate with the Company in good faith in order effectively to contest
such claim, and
(D) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4(f), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo 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 the Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the 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 the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amounts claimed to be due is limited
solely to such contested amount. Furthermore, 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 the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(iv) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 4(f), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 4(f)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 4(f), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
(v) Notwithstanding any other provision of this Section 4, the Company may, in
its sole discretion, withhold and pay over to the Internal Revenue Service or
any other applicable taxing authority, for the benefit of the Executive, all or
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any portion of any Gross-Up Payment, and the Executive hereby consents to such
withholding; provided, that such withholding shall in no event place the
Executive in a less favorable tax position.
5. No Obligation To Seek Further Employment; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to seek other employment, nor shall
the amount of any payment provided for under this Agreement be reduced by any
compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise, except as may be provided
under Section 4(b) with respect to medical insurance benefits. The Company's
obligation 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, defense, or other claim, right or action that the
Company may have against the Executive or others.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely
as a result of the passage of time, under any employee benefit plan, program or
policy of the Company. Notwithstanding the foregoing, if the Executive
receives payments and benefits pursuant to this Agreement, the Executive shall
not be entitled to any severance pay or benefits under any severance plan,
program or policy of the Company or its affiliates, unless otherwise
specifically provided therein in a specific reference to this Agreement.
6. Successor to the Company.
(a) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree 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 succession or assignment had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this Section 6 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. If at any time during the term of this Agreement the Executive is
employed by any corporation a majority of the voting securities of which is
then owned by the Company, "Company" as used in Sections 3 and 4 hereof shall
in addition include such corporation. In such event, the Company agrees that
it shall pay or shall cause such corporation to pay any amounts owed to the
Executive pursuant to Sections 4 and 11 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amounts are still payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
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terms of this Agreement to the Executive's devisee, legatee, or other designee
or, if there be no such designee, to the Executive's estate.
7. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Xxxxxxxx Corporation
0000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000-0000
Attention: General Counsel
If to the Executive:
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or 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 same 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 set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
conflicts of law principles.
9. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. Legal Fees and Expenses. The Company agrees to pay as incurred (within 10
days following the Company's receipt of an invoice from the Executive), to the
full extent permitted by law, all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus, in
each case, interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
XXXXXXXX CORPORATION The Executive:
By:
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