EXHIBIT 10.04
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This SECOND AMENDMENT (this "Second Amendment") is made as of the 2nd day
of August 2005 between Xxxxxx Scientific International Inc., a Delaware
corporation having its primary place of business at Xxxxxxx Xxxx, Xxxxxxx, Xxx
Xxxxxxxxx 00000 (the "Company") and Xxxxx X. Xxxxx Xxxxx, residing at 6 Dancer's
Image Lane, North Hampton, New Hampshire 03862 (the "Executive").
The Company and the Executive entered into an employment agreement as of
the 31st day of March, 1998 (the "Employment Agreement") and an Amendment to
Employment Agreement dated December 31, 2003 (the "Amendment"). The Company and
the Executive desire to and hereby amend these agreements as follows:
1. Section 4(a)(i)(B) of the Employment Agreement shall be amended and restated
to read as follows:
within thirty (30) days of the Date of Termination an amount equal to the
product of two (2) times the Executive's Base Salary.
2. Section 4(a)(iii) of the Employment Agreement shall be amended and restated
to read as follows:
during the two year period commencing on the Date of Termination (the
"Severance Period") or such longer period required by COBRA, to the extent
not theretofore paid or provided, the Company shall provide, and timely
pay the premiums for, medical coverage for the Executive and his
dependents in a manner consistent with that provided to other peer
executives of the Company.
3. A new Section 8 shall be added to the Employment Agreement, stating:
8. Certain Additional Benefits.
(a) In the event that any payment(s), benefit(s) or other
entitlement(s) received or to be received by the Executive in connection
with a Change in Control of the Company, as defined in the Company's 2005
Equity and Incentive Plan, as that plan may be amended from time to time
prior to any Change in Control, or it is determined that any payment or
distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the
terms of this Second Amendment but determined without regard to any
additional payments required under this Section 8 (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 comparable federal, state or
local excise tax (such excise tax together with any interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"),
the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in such an amount that after the payment of all taxes
(including, without limitation, any
interest and penalties on such taxes and the Excise Tax) on the Payment
and on the Gross-Up Payment, the Executive shall retain an amount equal to
the Payment minus all applicable taxes other than the Excise Tax on the
Payment; provided, however, that the Executive will be entitled to receive
a Gross-Up Payment only if the amount of a parachute payment as defined in
Section 280G(b)(2) of the Code exceeds the sum of (A) $50,000, plus (B)
2.99 times the Executive's base amount as defined in Section 280G(b)(3) of
the Code, and provided further, that if the Executive is not entitled to
receive a Gross-Up Payment, the Executive will receive the greatest amount
of Total Payments that would not include any excess parachute payments as
defined in Section 280G(b)(1) of the Code. The intent of the parties is
that the Company shall be solely responsible for, and shall pay, any
Excise Tax on any Payment and Gross-Up Payment and any income and
employment taxes (including, without limitation, penalties and interest)
imposed on any Gross-Up Payment, and shall be liable for any loss of tax
deduction caused by the Gross-Up Payment.
(b) All determinations required to be made under this Section 8,
including, without limitation, 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 determinations, shall be made by any
nationally recognized accounting firm, which firm must be acceptable to
the Executive (the "Accounting Firm"). The Company shall cause the
Accounting Firm to provide detailed supporting calculations to the Company
and the Executive within fifteen (15) business days after notice is given
by the Executive to the Company that there has been a Payment, or such
earlier time as is requested by the Company. Within five (5) business days
after said notice is given to the Company, the Company shall instruct the
Accounting Firm to timely provide the data required by this Section 8 to
the Executive. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment as determined pursuant to this
Section 8, shall be paid by the Company to the Internal Revenue Service
and/or other appropriate taxing authority on the Executive's behalf within
five (5) days after receipt of the Accounting Firm's determination. The
Accounting Firm shall make all determinations under the tax standard of
"more likely than not." The Accounting Firm shall furnish the Executive
with a written opinion that failure to disclose or report the Excise Tax
on the Executive's federal income tax return will not constitute a
substantial understatement of tax or be reasonably likely to result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive in the
absence of material mathematical or legal error. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payment will not have been made by the Company that should
have been made ("Underpayment") or that the Gross-Up Payment was made that
should not have been made ("Overpayment"), in each case, consistent with
the calculations required to be made hereunder. In the event that the
Company
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exhausts its remedies and the Executive hereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount
of Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to the Internal Revenue Service or other
appropriate taxing authority on the Executive's behalf or, if such
Underpayment has been previously paid by the Executive, to the Executive.
In the event that the Accounting Firm determines that an Overpayment has
been made, any such Overpayment shall be due and payable within ninety
(90) days after written demand to the Executive by the Company; provided,
however that the Executive shall have no duty or obligation whatsoever to
repay said amount unless the Executive's receipt of the Overpayment, or
any portion thereof, is includible in the Executive's income and the
Executive's repayment of same is not deductible by the Executive for
federal and state income tax purposes.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or state or local taxing authority, that,
if successful, would result in any Excise Tax or an Underpayment
("Claim"). Such notice shall be given as soon as practicable but no later
than fifteen (15) business days after the Executive is informed in writing
of the Claim and shall apprise the Company of the nature of the Claim, the
administrative or judicial appeal period, and the date on which any
payment of the Claim must be paid. The Executive shall not pay any portion
of the Claim prior to the expiration of the thirty (30) day period
following the date on which he gives such notice to the Company (or such
shorter period ending on the date that any amount under the Claim is due).
If the Company notifies the Executive in writing prior to the expiration
of such thirty (30) day period that it desires to contest the Claim, the
Executive shall:
(A) give the Company any information reasonably requested by
the Company relating to the Claim;
(B) take such action in connection with contesting the Claim
as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
concerning the Claim by an attorney selected by the Company who is
reasonably acceptable to the Executive; and
(C) cooperate with the Company in good faith in order to
effectively contest the Claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including, without limitation, additional interest and
penalties, attorneys' fees and costs) incurred in such contests and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including, without limitation, interest and
penalties thereon) imposed as a result
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of such representation. Without limitation upon the foregoing provisions
of this Section 8, except as provided below, the Company shall control all
proceedings concerning such contest and, at its sole option, may pursue or
forego any and all administrative appeal, proceedings, hearings and
conferences with the taxing authority pertaining to the Claim. At the
written request of the Company and upon payment to the Executive of an
amount at least equal to the Claim plus any additional amount necessary to
obtain the jurisdiction of the appropriate tribunal and/or court
("Additional Sum"), the Executive shall pay same and xxx for a refund. The
Executive agrees to prosecute any contest of a Claim 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 requests the Executive to pay the Claim and
xxx for interest-free basis, the Company shall indemnify and hold the
Executive harmless on an after-tax basis, from any Excise Tax or income
tax (including, without limitation, interest and penalties thereon)
imposed on such advance or for any imputed income on such advance. Any
extension of the statute of limitations relating to assessment of any
Excise Tax for the taxable year of the Executive which is the subject of
the Claim shall be limited solely to the Claim. Furthermore, the Company's
control of the contest shall be limited to issues for which a Gross-Up
Payment would be payable hereunder. 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.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8, the Executive receives any refund of a
Claim and/or any Additional Sum, the Executive shall 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 8,
a determination is made that the Executive shall not be entitled to any
refund of the Claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund of a Claim prior to
the expiration of thirty (30) days after such determination, then the
portion of such advance attributable to a Claim shall be forgiven and
shall not be required to be repaid. The amount of such advance
attributable to a Claim shall offset, to the extent thereof, the amount of
the Underpayment required to be paid by the Company to the Executive.
(e) If, after the advance of an Additional Sum by the Company, there
is a "Final Determination" (as defined below) made by the taxing authority
that the Executive is not entitled to any refund of such Additional Sum,
or any portion thereof, then such nonrefundable amount shall be repaid to
the Company by the Executive within thirty (30) days after the Executive
receives notice of such Final Determination. A "Final Determination" shall
occur when the period to contest or
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otherwise appeal any decision by an administrative tribunal or court of
initial jurisdiction has been waived or the time for contesting or
appealing same has expired.
4. A new Section 9 shall be added to the Employment Agreement, stating:
10. Code Section 409A. This Amendment is intended to comply with the
provisions of Section 409A of the Code in such a way that the Executive
will not be subject to taxation in advance of the related distribution,
excise taxes or underpayments, penalties as a result of the timing or form
of the payments to the Executive. Notwithstanding anything to the contrary
contained herein, if the Executive is a Specified Employee (as defined in
Section 409A of the Code) at the time he would otherwise be entitled to
receive any specific payment hereunder, no distributions shall be made
with respect to that specific payment until the earliest date permitted by
Section 409A(a)(2) of the Code. All other payments which do not result in
any additional payments, liability or penalties shall be made as
specified. To the extent any payment is delayed, interest will accrue at
the rate of the United States five-year Treasury rate plus 2 percent on
such delayed payment and be paid to the Executive at the same time as the
delayed payment is made.
5. Except as expressly provided in this Second Amendment, the terms and
provisions of the Employment Agreement, as amended, shall remain in full
force and effect.
The Executive has hereunto set the Executive's hand and, pursuant to the
authorization from the Compensation Committee of the Board of Directors, the
Company has caused this Second Amendment to be executed in its name on its
behalf, all as of the day and year first above written.
/s/ Xxxxx X. Xxxxx Xxxxx
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XXXXX X. XXXXX XXXXX
XXXXXX SCIENTIFIC INTERNATIONAL INC.
/s/ Xxxx X. Xxxxxxx
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By: XXXX X. XXXXXXX
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