EXHIBIT 10.34
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EMPLOYMENT CONTINUATION AGREEMENT
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THIS EMPLOYMENT CONTINUATION AGREEMENT (this "Agreement"), dated as of
April 21, 2004, is made and entered by and between Dollar Thrifty Automotive
Group, Inc., a Delaware corporation (the "Company"), and Xxxx X. Xxxxxx (the
"Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company or one or more
of its Subsidiaries and has made and is expected to continue to make major
contributions to the short- and long-term profitability, growth and financial
strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum employment
continuation benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives are not
practically disabled from discharging their duties in respect of a proposed or
actual transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means the greatest of (i) the Executive's annual
fixed or base salary as in effect for the Executive immediately prior to the
occurrence of a Change in Control, or (ii) an amount equal to the average of the
Executive's annual fixed or base compensation as in effect for the Executive
during the two fiscal years immediately preceding the fiscal year in which the
Change in Control occurs, or (iii) the Executive's annual fixed or base salary
as in effect for the Executive immediately prior to his Termination Date.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to Section
3(b) or Section 3(c), the Executive shall have committed:
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(i) a criminal violation involving fraud, embezzlement or
theft in connection with his duties or in the course of his employment with the
Company or any Subsidiary;
(ii) intentional wrongful damage to property of the Company
or any Subsidiary; or
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary;
and any such act shall have been demonstrably and materially harmful to the
Company. For purposes of this Agreement, no act or failure to act on the part of
the Executive shall be deemed "intentional" if it was due primarily to an error
in judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for "Cause" hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the Board then in office at a
meeting of the Board called and held for such purpose, after reasonable notice
to the Executive and an opportunity for the Executive, together with his counsel
(if the Executive chooses to have counsel present at such meeting), to be heard
before the Board, finding that, in the good faith opinion of the Board, the
Executive had committed an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. Nothing herein will limit the
right of the Executive or his beneficiaries to contest the validity or propriety
of any such determination.
(d) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) The Company is merged, consolidated or reorganized
into another corporation or other legal person, unless, in each case,
immediately following such merger, consolidation or reorganization, the Voting
Stock of the Company outstanding immediately prior to such merger, consolidation
or reorganization continues to represent (either by remaining outstanding or by
being converted into Voting Stock of the surviving entity or any parent
thereof), more than 50% of the combined voting power of the then outstanding
shares of Voting Stock of the entity resulting from such merger, consolidation
or reorganization (including, without limitation, an entity which as a result of
such merger, consolidation or reorganization owns the Company or all or
substantially all of the Company's assets either directly or through one or more
Subsidiaries);
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation or legal person, unless,
in each case, immediately following such sale or transfer, the Voting Stock of
the Company outstanding immediately prior to such sale or transfer continues to
represent (either by remaining outstanding or by being converted into Voting
Stock of the surviving entity or any parent thereof), more than 50% of the
combined voting power of the then outstanding shares of Voting Stock of the
entity resulting from such sale or transfer (including, without limitation, an
entity which 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);
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(iii) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 35% or more of the combined voting power of the
Voting Stock of the Company then outstanding after giving effect to such
acquisition;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has occurred or will
occur in the future pursuant to any then-existing contract or transaction; or
(v) 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 two-thirds of
the Directors then comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person is named
as a nominee for Director, without objection to such nomination) shall be deemed
to be or have been a member of the Incumbent Board.
Notwithstanding the foregoing provisions of Section 1(d)(iii) or 1(d)(iv),
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of Section
1(d)(iii) or 1(d)(iv) solely because (A) the Company, (B) a Subsidiary, or (C)
any Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) under the Exchange Act disclosing beneficial ownership
by it of shares of Voting Stock, whether in excess of 35% or otherwise, or
because the Company reports that a change in control of the Company has occurred
or will occur in the future by reason of such beneficial ownership.
(e) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs or arrangements in which Executive is
entitled to participate, including without limitation any Retirement Plan, stock
option, performance share, performance unit, stock purchase, stock appreciation,
savings, pension, supplemental executive retirement, or other retirement income
or welfare benefit, deferred compensation, incentive compensation, group or
other life, health, medical/hospital or other insurance (whether funded by
actual insurance or self-insured by the Company), disability, salary
continuation, expense reimbursement and other employee benefit policies, plans,
programs or arrangements that may now exist or any equivalent successor
policies, plans, programs or arrangements that may be adopted hereafter by the
Company or a Subsidiary, providing perquisites, benefits and service credit for
benefits at least as great in the aggregate as are payable thereunder prior to a
Change in Control.
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(f) "Employment Continuation Period" means the period of time
commencing on the date of the first occurrence of a Change in Control and
continuing until the second anniversary of the occurrence of the Change in
Control.
(g) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Incentive Pay" means the greatest of (i) an annual amount equal
to the average of the annual bonus made, in regard to services rendered in any
fiscal year, during the two fiscal years immediately preceding the fiscal year
in which the Change in Control occurs, (ii) the amount of the annual bonus made
or to be made in regard to services rendered for the fiscal year immediately
preceding the fiscal year in which the Change in Control occurs, or (iii) the
target bonus opportunity for the fiscal year in which the Change in Control
occurs pursuant to the annual bonus program of the Company applicable to the
Executive (whether or not funded), or any successor thereto.
(j) "Retirement Plans" means (i) all "employee pension benefit
plans," as defined in Section 3(2) of ERISA, including without limitation all
pension, thrift, savings, profit-sharing, retirement income, target benefit,
supplemental executive retirement, and excess benefits plans, and (ii) all
supplemental insurance plans, programs and arrangements applicable to the
Executive.
(k) "Subsidiary" means a corporation, company or other entity (i)
more than 50% of whose outstanding shares or securities (representing the right
to vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more than 50% of
whose ownership interest representing the right generally to make decisions for
such other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Company.
(l) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 2005, or
(ii) the expiration of the Employment Continuation Period; provided, however,
that (A) commencing on January 1, 2006 and each January 1 thereafter, the term
of this Agreement will automatically be extended for an additional year unless,
not later than September 30 of the immediately preceding year, the Company or
the Executive shall have given notice that it or the Executive, as the case may
be, does not wish to have the Term extended and (B) subject to the last sentence
of Section 10, if, prior to a Change in Control, the Executive ceases for any
reason to be an employee of the Company and its Subsidiaries, thereupon without
further action the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect. For purposes of this
Subsection, the Executive shall not be deemed to have ceased to be an employee
of the Company and its Subsidiaries by reason of the transfer of Executive's
employment between the Company and any Subsidiary, or among any Subsidiaries.
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(m) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if the
termination is pursuant to Section 3(b) or Section 3(c)).
(n) "Voting Stock" means securities entitled to vote generally in
the election of the Board.
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, without further action, this Agreement shall become immediately
operative.
3. Termination Following a Change in Control.
(a) If the Executive's employment is terminated by the Company or
any Subsidiary during the Employment Continuation Period, the Executive shall be
entitled to the benefits provided by Section 4 unless such termination is the
result of the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) The Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits pursuant to, the
long-term disability plan in effect for, or applicable to, the Executive
immediately prior to the Change in Control; or
(iii) Cause.
(b) If the Executive terminates his employment with the Company and
its Subsidiaries during the Employment Continuation Period, the Executive shall
be entitled to the benefits provided by Section 4 if such termination follows
the occurrence of one or more of the following events (regardless of whether any
other reason, other than Cause as hereinabove provided, for such termination
exists or has occurred, including without limitation other employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially equivalent office or
position, of or with the Company and/or a Subsidiary (or any successor thereto
by operation of law of or otherwise), as the case may be, which the Executive
held immediately prior to a Change in Control, or the removal of the Executive
as a Director of the Company and/or a Subsidiary (or any successor thereto) if
the Executive shall have been a Director of the Company and/or a Subsidiary
immediately prior to the Change in Control;
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(ii) (A) A significant adverse change in the nature or scope
of the authorities, powers, functions, responsibilities or duties attached to
the position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in the aggregate of
the Executive's Base Pay and Incentive Pay received from the Company and any
Subsidiary, or (C) the termination or denial of the Executive's rights to
Employee Benefits or a reduction in the scope or value thereof, any of which is
not remedied by the Company within 10 calendar days after receipt by the Company
of written notice from the Executive of such change, reduction or termination,
as the case may be;
(iii) A determination by the Executive (which determination
will be conclusive and binding upon the parties hereto provided it has been made
in good faith and in all events will be presumed to have been made in good faith
unless otherwise shown by the Company by clear and convincing evidence) that a
change in circumstances has occurred following a Change in Control, including,
without limitation, a change in the scope of the business or other activities
for which the Executive was responsible immediately prior to the Change in
Control, which has rendered the Executive substantially unable to carry out, has
substantially hindered Executive's performance of, or has caused Executive to
suffer a substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the Executive
immediately prior to the Change in Control, which situation is not remedied
within 10 calendar days after written notice to the Company from the Executive
of such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all of its
business and/or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer or otherwise) to which all or
substantially all of its business and/or assets have been transferred (by
operation of law or otherwise) assumed all duties and obligations of the Company
under this Agreement pursuant to Section 13;
(v) The Company relocates its principal executive offices
(if such offices are the principal location of Executive's work), or the
Subsidiary with which the Executive is employed relocates its principal
executive offices, or the Company or any Subsidiary requires the Executive to
have his principal location of work changed, to any location that, in either
case, is in excess of 50 miles from the location thereof immediately prior to
the Change in Control, or requires the Executive to travel away from his office
in the course of discharging his responsibilities or duties hereunder at least
20% more (in terms of aggregate days in any calendar year or in any calendar
quarter when annualized for purposes of comparison to any prior year) than the
average number of days of travel that were required of Executive during the
three full years immediately prior to the Change in Control without, in either
case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company or any successor
thereto which is not remedied by the Company within 10 calendar days after
receipt by the Company of written notice from the Executive of such breach.
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(c) Notwithstanding anything contained in this Agreement to the
contrary, in the event of a Change in Control, the Executive may terminate
employment with the Company for any reason, or without reason, during the 90-day
period immediately following the occurrence of a Change in Control with a right
to employment continuation compensation as provided in Section 4; provided,
however, that for purposes of this Section 3(c), the circumstances described in
Section 1(d)(iv) shall not constitute a Change in Control unless there is an
actual closing or occurrence of the events which gave rise to the filings with
the Securities and Exchange Commission described in said Section 1(d)(iv).
(d) Subject to Section 7, a termination by the Company pursuant to
Section 3(a) (other than as described in Section 3(a)(i), (ii) or (iii)) or by
the Executive pursuant to Section 3(b) or Section 3(c) will not affect any
rights that the Executive may have pursuant to any agreement, policy, plan,
program or arrangement of the Company or any Subsidiary providing Employee
Benefits, which rights shall be governed by the terms thereof.
4. Employment Continuation Compensation.
(a) Subject to Section 9, employment continuation benefits to which
the Executive is entitled pursuant to Section 3 are described on Annex A. The
Company will pay to the Executive the amounts described in Paragraphs 1 and 2 of
Annex A within five business days after the Termination Date or, if later, upon
the expiration of the revocation period provided for in Annex B. The benefits
and perquisites described in Annex A will be provided to the Executive as
described therein.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Southwest Edition of The Wall Street Journal. Such
interest will be payable as it accrues on demand. Any change in such prime rate
will be effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the contrary,
the parties' respective rights and obligations under this Section 4 and under
Sections 5, 8 and 9 will survive any termination or expiration of this Agreement
or the termination of the Executive's employment following a Change in Control
for any reason whatsoever.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that this Agreement shall become operative and it shall be determined
(as hereafter provided) that any payment or distribution by the Company or any
of its affiliates to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock option,
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performance share, performance unit, stock appreciation right or similar right,
or the lapse or termination of any restriction on, or the vesting or
exercisability of, any of the foregoing (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 successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with any such
interest and penalties, being hereafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment"); provided, however, that no
Gross-up Payment shall be made with respect to the Excise Tax, if any,
attributable to (i) any incentive stock option, as defined by Section 422 of the
Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with
any ISO described in clause (i). The Gross-Up Payment shall be in an amount such
that, after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all determinations
required to be made under this Section 5, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (the "Accounting Firm") selected by the Executive in
his sole discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the Company and
the Executive within 30 calendar days after the Termination Date, if applicable,
and any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by
the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive, provided, however,
that the Company can estimate and pay any Excise Tax to any applicable taxing
authority if the Company determines in its sole discretion that such amount is
due and payable prior to the date such determination is made by the Accounting
Firm, and such payment shall reduce the amount of the Gross-Up Payment payable
to the Executive. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor provision thereto) and
the possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to Section 5(f) and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and the Executive as promptly as possible. Any such Underpayment shall
be promptly paid by the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and calculations.
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(c) The Company and the Executive shall each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by Section 5(b). Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and the
Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations contemplated by Section
5(b) shall be borne by the Company. If such fees and expenses are initially paid
by the Executive, the Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after receipt from the
Executive of a statement therefor and reasonable evidence of his payment
thereof.
(f) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than ten
business days after the Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the thirty calendar-day period following the
date on which he gives such notice to the Company and (ii) the date that any
payment of amount 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:
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(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested by the
Company;
(ii) 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 competent in respect of the subject matter and reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) 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 interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against 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 limiting the foregoing provisions of this
Section 5(f), the Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 5(f) 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
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its 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 the tax claimed 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 or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested claim
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.
(g) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 5(f)) within 10 business days after receiving
such refund pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
Section 5(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 or refund prior to the
expiration of thirty calendar days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of any
such advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to the Executive pursuant to this Section 5.
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6. No Mitigation Obligation. The Company hereby acknowledges that it will
be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date and that the covenants
contained in Section 9 will further limit the employment opportunities for the
Executive. In addition, the Company acknowledges that its employment
continuation pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any employment continuation
payment received thereunder. Accordingly, the payment of the employment
continuation compensation by the Company to the Executive in accordance with the
terms of this Agreement is hereby acknowledged by the Company to be reasonable,
and the Executive will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
will any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise, except as expressly provided in Section 7
and in the last sentence of Paragraph 3 of Annex A.
7. Coordination with Other Payments. If the Executive becomes entitled to
receive payments under this Agreement as a result of termination of his
employment, those payments will be in lieu of any and all other claims or rights
that the Executive may have for severance, separation and/or salary continuation
pay upon that termination of employment.
8. Funding; Professional Fees and Expenses.
(a) It is the intent of the Company that the Executive not be
required to incur fees and related expenses for the retention of attorneys,
accountants, actuaries, consultants, and/or other professionals
("professionals") in connection with the interpretation, enforcement or defense
of Executive's rights under this Agreement by litigation or otherwise because
the cost and expense thereof would substantially detract from the benefits
intended to be extended to the Executive hereunder. Accordingly, if it should
appear to the Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any other
person takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain one or more professionals
of the Executive's choice, at the expense of the Company as hereafter provided,
to advise and represent the Executive in connection with any such
interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing
or prior relationship between the Company and such professional, the Company
irrevocably consents to the Executive's entering into a relationship with any
such professional, and in that connection the Company and the Executive agree
that a confidential relationship shall exist between the Executive and any such
professional. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all reasonable fees and related
expenses incurred by the Executive in connection with any of the foregoing.
11
(b) Without limiting the obligations of the Company pursuant to this
Agreement, in the event a Change in Control occurs, the performance of the
Company's obligations under this Agreement may be secured by amounts deposited
or to be deposited in trust pursuant to certain trust agreements to which the
Company shall be a party, providing, among other things for the payment of
employment continuation compensation to the Executive pursuant to Section 4, and
the Gross-Up Payment to the Executive pursuant to Section 5, and providing that
the reasonable fees and related expenses of one or more professionals selected
from time to time by the Executive pursuant to Section 8(a) shall be paid, or
reimbursed to the Executive if paid by the Executive, either in accordance with
the terms of such trust agreements, or, if not so provided, on a regular,
periodic basis upon presentation by the Executive to the trustee of a statement
or statements prepared by such professional in accordance with its customary
practices. Any failure by the Company to satisfy any of its obligations under
this Subsection shall not limit the rights of the Executive hereunder. Upon the
earlier to occur of (i) a Change of a Control or (ii) a declaration by the Board
that a Change in Control is imminent, the Company shall promptly to the extent
it has not previously done so:
(A) transfer to trustees of such trust agreements to be
added to the principal of the trusts a sum equal to (I) the present value on the
date of the Change in Control (or on such fifth business day if the Board has
declared a Change in Control to be imminent) of the payments to be made to the
Executive under the provisions of Sections 4 and 5, such present value to be
computed using a discount rate of 8%, less (II) the balance in the Executive's
accounts provided for in such trust agreements as of the most recent completed
valuation thereof, as certified by the trustee under each trust agreement;
provided, however, that if the trustee under any trust agreement, respectively,
does not so certify by the end of the fourth business day after the earlier of
such Change in Control or declaration, then the balance of such respective
account shall be deemed to be zero. Any payments of employment continuation
compensation or other benefits hereunder by the trustee pursuant to any trust
agreement shall, to the extent thereof, discharge the Company's obligation to
pay employment continuation compensation and other benefits hereunder, it being
the intent of the Company that assets in such trusts be held as security for the
Company's obligation to pay employment continuation compensation and other
benefits under this Agreement; and
(B) transfer to the trustees to be added to the principal
of the trusts under the trust agreements the sum (including deposits pursuant to
the Amended and Restated Employment Continuation Plan for Key Employees of
Dollar Thrifty Automotive Group, Inc.) of FIVE HUNDRED THOUSAND DOLLARS
($500,000) less any principal in such trusts on such fifth business day
dedicated to the payment of the Company's obligations under Section 8(a). Any
payments of the Executive's reasonable professional fees and related expenses by
the trustees pursuant to the trust agreements shall, to the extent thereof,
discharge the Company's obligation hereunder, it being the intent of the Company
that assets in such trust be held as security for the Company's obligation under
Section 8(a). The Executive understands and acknowledges that the corpus of the
trust, or separate portion thereof, dedicated to the payment of the Company's
obligations under Section 8(a) will be $500,000 and that such amount will be
available to discharge not only the obligations of the Company to the Executive
under Section 8(a), but also similar obligations of the Company to other
executives and employees under similar provisions of other agreements.
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(c) Subject to the foregoing, the Executive shall have the
status of a general unsecured creditor of the Company and shall have no right
to, or security interest in, any assets of the Company or any Subsidiary.
9. Confidentiality; Nonsolicitation.
(a) During the Term, the Company agrees that it will disclose to
Executive its confidential or proprietary information (as defined in this
Section 9(a)) to the extent necessary for Executive to carry out his obligations
to the Company. The Executive hereby covenants and agrees that he will not,
without the prior written consent of the Company, during the Term or thereafter
disclose to any person not employed by the Company, or use in connection with
engaging in competition with the Company, any confidential or proprietary
information of the Company. For purposes of this Agreement, the term
"confidential or proprietary information" will include all information of any
nature and in any form that is owned by the Company and that is not publicly
available (other than by Executive's breach of this Section 9(a)) or generally
known to persons engaged in businesses similar or related to those of the
Company. Confidential or proprietary information will include, without
limitation, the Company's financial matters, customers, employees, industry
contracts, strategic business plans, product development (or other proprietary
product data), marketing plans, and all other secrets and all other information
of a confidential or proprietary nature. For purposes of the preceding two
sentences, the term "Company" will also include any Subsidiary (collectively,
the "Restricted Group"). The foregoing obligations imposed by this Section 9(a)
will not apply (i) during the Term, in the course of the business of and for the
benefit of the Company, (ii) if such confidential or proprietary information
will have become, through no fault of the Executive, generally known to the
public or (iii) if the Executive is required by law to make disclosure (after
giving the Company notice and an opportunity to contest such requirement).
(b) The Executive hereby covenants and agrees that during the Term
and during the Continuation Period, the Executive will not, without the prior
written consent of the Company, which consent shall not unreasonably be
withheld, on behalf of Executive or on behalf of any person, firm or company,
directly or indirectly, attempt to influence, persuade or induce, or assist any
other person in so persuading or inducing, any employee of the Restricted Group
to give up, or to not commence, employment or a business relationship with the
Restricted Group.
10. Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of employment of the Executive
or the removal of the Executive from the office or position in the Company or
any Subsidiary following the commencement of any action by or discussion with a
third person that ultimately results in a Change in Control shall be deemed to
be a termination or removal of the Executive after a Change in Control for
purposes of this Agreement entitling the Executive to employment continuation
compensation provided by Section 4.
13
11. Release. Payment of the employment continuation compensation set forth
in Section 4 is conditioned upon the Executive executing and delivering a
release (the "Release") substantially in the form provided in Annex B.
12. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
13. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 13(a) and 13(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by Executive's will or
by the laws of descent and distribution and, in the event of any attempted
assignment or transfer contrary to this Section 13(c), the Company shall have no
liability to pay any amount so attempted to be assigned, transferred or
delegated.
14. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express, UPS, or Purolator, addressed to the Company (to the attention of
Secretary of the Company) at its principal executive office and to the Executive
at his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
14
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
16. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.
17. Miscellaneous. No provision 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 or compliance with
any condition or provision of this Agreement to be performed by such other party
will 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, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
18. 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 agreement.
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
EXECUTIVE:
---------
________________________________________
Xxxx X. Xxxxxx
COMPANY:
-------
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.,
a Delaware corporation
By:_____________________________________
Xxxxxx X. Xxxxxx
Chairman, Human Resources and
Compensation Committee of the Board
of Directors
16
Annex A
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Employment Continuation Compensation
------------------------------------
1. Base Pay and Incentive Pay. A lump sum payment in an amount equal to
(a) any unpaid regular salary through the Executive's Termination Date, (b) any
unpaid bonus for any year prior to the year in which the Executive's Termination
Date occurs, and (c) the prorated portion of the annual bonus payable in the
year in which the Executive's Termination Date occurs, determined at the greater
of actual or target in accordance with the provisions of the annual bonus
program applicable to the Executive or any successor plan.
2. Employment Continuation Pay. A lump sum payment in an amount equal to
(a) the sum of the Executive's Base Pay and Incentive Pay, multiplied by (b)
three.
3. Health and Life Benefits. For three years (or for two years in the
event that the Executive's employment is terminated under Section 3(b)(v)) (the
"Continuation Period"), the Company will arrange to provide the Executive with
Employee Benefits that provide health and life benefits (but not disability,
stock option, performance share, performance unit, stock purchase, stock
appreciation or similar compensatory benefits) substantially similar to those
that the Executive was receiving or entitled to receive immediately prior to the
Termination Date (or, if greater, immediately prior to the reduction,
termination, or denial described in Section 3(b)(ii)), except that the level of
any such Employee Benefits to be provided to the Executive may be reduced in the
event of a corresponding reduction generally applicable to all recipients of or
participants in such Employee Benefits. During any period of continued coverage
pursuant to this Paragraph 3, the Executive will be required to pay the same
cost of coverage, co-pays, deductibles and other similar payments paid by the
Executive immediately prior to the Change in Control. If and to the extent that
any benefit described in this Paragraph 3 is not or cannot be paid or provided
under any policy, plan, program or arrangement of the Company or any Subsidiary,
as the case may be, then the Company will itself pay or provide for the payment
to the Executive, his dependents and beneficiaries, of such Employee Benefits
along with, in the case of any benefit described in this Paragraph 3 which is
subject to tax because it is not or cannot be paid or provided under any such
policy, plan, program or arrangement of the Company or any Subsidiary, an
additional amount such that after payment by the Executive, or his dependents or
beneficiaries, as the case may be, of all taxes so imposed, the recipient
retains an amount equal to such taxes. Notwithstanding the foregoing, or any
other provision of the Agreement, for purposes of determining the period of
continuation coverage to which the Executive or any of his dependents is
entitled pursuant to Section 4980B of the Code (or any successor provision
thereto) under the Company's medical, dental and other group health plans, or
successor plans, the Executive's "qualifying event" shall be the termination of
the Continuation Period and the Executive shall be considered to have remained
actively employed on a full-time basis through that date. Without otherwise
limiting the purposes or effect of Section 5, Employee Benefits otherwise
receivable by the Executive pursuant to this Paragraph 3 will be reduced to the
extent comparable welfare benefits are actually received by the Executive from
another employer during the Continuation Period following the Executive's
Termination Date, and any such benefits actually received by the Executive shall
be reported by the Executive to the Company.
4. Outplacement Services. Outplacement services for a period of up to 12
months by a firm selected by the Executive, at the expense of the Company in an
amount up to 20% of the Executive's Base Pay.
5. Company Car. During the Continuation Period, the Company will arrange
to provide the Executive with one or more cars in accordance with the policies
and procedures of the Company regarding the provision of cars to its employees
existing immediately prior to the Change in Control. At the end of the
Continuation Period, the Company will transfer outright ownership to the
Executive such car or cars.
6. Club Dues; Financial, Investment and Tax Planning. During the
Continuation Period, the Company will reimburse the Executive for his club dues
in accordance with the policies and procedures of the Company regarding such
reimbursement of dues to its senior executives existing immediately prior to the
Change in Control. In addition, during the Continuation Period, the Company will
arrange to provide the Executive with financial, investment and tax planning
services in accordance with the policies and procedures of the Company regarding
the provision of such services to its senior executives existing immediately
prior to the Change in Control.
Annex B
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Form of Release
---------------
WHEREAS, the Executive's employment has been terminated in accordance with
Section 3(a) (other than as described in Section 3(a)(i), (ii) or (iii)),
Section 3(b) or Section 3(c) of the Employment Continuation Agreement dated as
of April 21, 2004, by and between Xxxx X. Xxxxxx (the "Executive") and Dollar
Thrifty Automotive Group, Inc., a Delaware corporation (the "Agreement").
WHEREAS, the Executive is required to sign this Release in order to receive
the employment continuation compensation as described in Annex A of the
Agreement and the other benefits described in the Agreement.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, and intending to be legally bound, the Executive
agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to the Agreement, which the Executive
acknowledges are in addition to payments and benefits which the Executive would
be entitled to receive absent the Agreement, the Executive, for himself and his
dependents, successors, assigns, heirs, executors and administrators (and his
and their legal representatives of every kind), hereby releases, dismisses,
remises and forever discharges Dollar Thrifty Automotive Group, Inc., its
predecessors, parents, subsidiaries, divisions, related or affiliated companies,
officers, directors, stockholders, members, employees, heirs, successors,
assigns, representatives, agents and counsel (the "Company") from any and all
arbitrations, claims, including claims for attorney's fees, demands, damages,
suits, proceedings, actions and/or causes of action of any kind and every
description, whether known or unknown, which Executive now has or may have had
for, upon, or by reason of any cause whatsoever ("claims"), against the Company,
including but not limited to:
(a) any and all claims arising out of or relating to Executive's
employment by or service with the Company and his termination from the Company;
(b) any and all claims of discrimination, including but not limited
to claims of discrimination on the basis of sex, race, age, national origin,
marital status, religion or handicap, including, specifically, but without
limiting the generality of the foregoing, any claims under the Age
Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act
of 1964, as amended and the Americans with Disabilities Act and any applicable
state law provisions; and
(c) any and all claims of wrongful or unjust discharge or breach of
any contract or promise, express or implied.
3. Executive understands and acknowledges that the Company does not admit
any violation of law, liability or invasion of any of his rights and that any
such violation, liability or invasion is expressly denied. The consideration
provided for this Release is made for the purpose of settling and extinguishing
all claims and rights (and every other similar or dissimilar matter) that
Executive ever had or now may have against the Company to the extent provided in
this Release. Executive further agrees and acknowledges that no representations,
promises or inducements have been made by the Company other than as appear in
the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and including
the date of this Release;
(b) He has been advised by the Company to consult with legal counsel
prior to executing this Release, has had an opportunity to consult with and to
be advised by legal counsel of his choice, fully understands the terms of this
Release, and enters into this Release freely, voluntarily and intending to be
bound;
(c) He has been given a period of 21 days to review and consider the
terms of this Release, prior to its execution and that he may use as much of the
21 day period as he desires; and
(d) He may, within seven days after execution, revoke this Release.
Revocation shall be made by delivering a written notice of revocation to the
Secretary of the Dollar Thrifty Automotive Group, Inc. For such revocation to be
effective, written notice must be actually received by the Secretary of the
Dollar Thrifty Automotive Group, Inc. no later than the close of business on the
seventh day after Executive executes this Release. If Executive does exercise
his right to revoke this Release, all of the terms and conditions of the Release
shall be of no force and effect, the Company shall not have any obligation to
make payments or provide benefits to Executive as set forth in Sections 4, 5 and
8 of the Agreement and all benefits provided to Executive under the Agreement
prior to such revocation shall be recoverable by the Company.
5. Executive agrees that he will never file a lawsuit or other complaint
asserting any claim that is released in this Release.
6. Executive does not by this Release relinquish any right whatsoever to
any vested, deferred benefit in any employee benefit plan which provides for
deferred compensation, retirement, pension, savings, thrift and/or employee
stock ownership, as same are defined in the Employee Retirement Income Security
Act, 29 U.S.C. xx.xx. 1001, et seq., maintained by the Company.
7. Executive waives and releases any claim that he has or may have to
reemployment after_______________.
8. Executive agrees to hold harmless the Company from and against any and
all costs or losses whatsoever, including reasonable attorney's fees, caused by
the Executive's breach of any obligation contained herein or if any
representation herein was false when made.
9. Moreover, the provisions of this Release are severable and if any part
of it is found to be unenforceable, the other paragraphs shall remain full,
valid and enforceable.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release
on the date set forth below.
Dated:________________________ ________________________________________
Xxxx X. Xxxxxx
