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EXHIBIT 10.19
XXXX XXXXXXXX CORPORATION
SECTION 280G CHANGE IN CONTROL
GROSS-UP AGREEMENT
THIS AGREEMENT is made as of this day of July, 1999, by and
between Xxxx Xxxxxxxx Corporation, a Delaware corporation ("Xxxx Xxxxxxxx"), and
Xxxxxx Xxxxxx ("Executive").
WITNESSETH, THAT:
WHEREAS, Executive has, for many years, acted as Xxxx
Xxxxxxxx'x Chairman, Chief Executive Officer and President;
WHEREAS, in consideration of his leadership and to provide an
incentive for Executive to continue to perform at a high level for Xxxx
Xxxxxxxx'x benefit during the upcoming years in a challenging and consolidating
industry, Xxxx Xxxxxxxx has made a special grant to Executive of nonqualified
stock options which will have value only if Xxxx Xxxxxxxx achieves aggressive
growth goals (the "Option");
WHEREAS, in the event of a Change-in-Control (as hereinafter
defined), the acceleration of the vesting of the Option and other payments then
due to the Executive may cause Executive to become subject to the special excise
tax provided for pursuant to Sections 280G and 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, in order to achieve the benefits to Xxxx Xxxxxxxx of
the Option grant, Xxxx Xxxxxxxx believes it is in its best interests and the
best interests of its stockholders to provide Executive with rights to receive a
special payment to cover any such special excise taxes that may become due from
Executive in such circumstances.
NOW, THEREFORE, in consideration of the premises set forth
herein, Xxxx Xxxxxxxx and Executive hereby agree as follows:
1. Change in Control
For purposes of this Agreement, Change in Control shall mean:
(a) the public announcement (which, for purposes of this
definition), shall include, without limitation, a report filed pursuant to
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that any person, entity or "group," within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act, other than Xxxx Xxxxxxxx or any of its
subsidiaries, or the Xxxx Xxxxxxxx Retirement Plan or any other employee benefit
plan of Xxxx Xxxxxxxx or any of its subsidiaries, or any entity holding shares
of Stock organized, appointed or established for, or pursuant to the terms of,
any such plan, has become the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of
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35% or more of the combined voting power of Xxxx Xxxxxxxx'x then outstanding
voting securities in a transaction or series of transactions;
(b) the Continuing Directors cease to constitute a majority of
Xxxx Xxxxxxxx'x Board of Directors;
(c) the stockholders of Xxxx Xxxxxxxx approve (1) any
consolidation or merger which Xxxx Xxxxxxxx is not the continuing or surviving
corporation or pursuant to which shares of Xxxx Xxxxxxxx'x stock would be
converted into cash, securities or other property, other than a merger in which
Xxxx Xxxxxxxx stockholders immediately prior to the merger have the same
proportionate ownership of the stock of the surviving corporation immediately
after the merger; (2) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of Xxxx Xxxxxxxx; or (3) any plan of liquidation or dissolution of
Xxxx Xxxxxxxx; or
(d) the majority of the Continuing Directors determine, in
their sole and absolute discretion, that there has been a change in control of
Xxxx Xxxxxxxx.
For purposes of this Agreement, "Continuing Director" shall
mean any person who is a member of the Board of Directors of Xxxx Xxxxxxxx,
while such a person is a member of the Board of Directors, who is not an
Acquiring Person (as hereinafter defined) or an Affiliate or Associate (as
hereinafter defined) of an Acquiring Person, or a representative of an Acquiring
Person or of any such Affiliate or Associate, and who (A) was a member of the
Board of Directors on April 27, 1999, or (B) subsequently becomes a member of
the Board of Directors, if such person's initial nomination for election or
initial election to the Board of Directors is recommended or approved by a
majority of the Continuing Directors.
For purposes of this Agreement, "Acquired Person" shall mean
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) who or which, together with all Affiliates and Associates of such person,
is the "beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of Xxxx Xxxxxxxx
representing 35% or more of the combined voting power of Xxxx Xxxxxxxx'x then
outstanding securities, but shall not include Xxxx Xxxxxxxx, any subsidiary of
Xxxx Xxxxxxxx or any employee benefit plan of Xxxx Xxxxxxxx or of any subsidiary
of Xxxx Xxxxxxxx or any entity holding shares of stock organized, appointed or
established for, or pursuant to the terms of, any such plan; and "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 promulgated under the Exchange Act.
The foregoing definition of Change in Control shall be
interpreted and applied so that it applies in every case when any stock options
granted to Executive by Xxxx Xxxxxxxx become fully exercisable as a result of
such a Change in Control or similar transaction or event.
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2. Gross-Up Payment.
In the event any stock option granted to Executive by Xxxx
Xxxxxxxx becomes fully vested or exercisable as a result of a Change in Control,
as defined herein, or in the event that Executive otherwise becomes entitled to
any payments from Xxxx Xxxxxxxx which are "parachute payments" within the
meaning of Section 280G of the Code, Xxxx Xxxxxxxx shall cause its independent
auditors promptly to review, at Xxxx Xxxxxxxx'x sole expense, the applicability
of Section 4999 of the Code to such stock options and such payments. If such
auditors shall determine that any payment or distribution of any type by Xxxx
Xxxxxxxx to Executive or for Executive's benefit, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then Executive shall be entitled
to receive an additional cash payment (a "Gross-Up Payment") within 30 days of
such determination equal to an amount such that after payment by 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, Executive
would retain an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Total Payments. For purposes of the foregoing determination,
Executive's tax rate shall be deemed to be the highest statutory marginal state
and Federal tax rate (on a combined basis) (including Executive's share of
F.I.C.A. and Medicare taxes) then in effect. If no determination by the Xxxx
Xxxxxxxx auditors is made prior to the time a tax return reflecting the Total
Payments is required to be filed by Executive, Executive will be entitled to
receive a Gross-Up Payment calculated on the basis of the Total Payments
reported by Executive in such tax return, within 30 days of the filing of such
tax return. In all events, if any tax authority determines that a greater Excise
Tax should be imposed upon the Total Payments than is determined by Xxxx
Xxxxxxxx'x independent auditors or reflected in Executive's tax return pursuant
to this Agreement, Executive shall be entitled to receive the full Gross-Up
Payment calculated on the basis of the amount of Excise Tax determined to be
payable by such tax authority from Xxxx Xxxxxxxx within 30 days of such
determination.
3. Miscellaneous
(a) This Agreement shall not confer on Executive any right
with respect to continuance of employment by Xxxx Xxxxxxxx or any of its
subsidiaries, nor will it interfere in any way with the right of Xxxx Xxxxxxxx
to terminate such employment at any time.
(b) This Agreement shall be governed by the internal laws of
the State of Delaware, without regard to any conflict of laws principles.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above written.
XXXX XXXXXXXX CORPORATION
BY
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ITS
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XXXXXX XXXXXX
