EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of this 1st day of June, 2001, by
and between Xxxxxxxx Financial Inc., a Delaware corporation ("Xxxxxxxx") and
Xxxxxx X. Xxxxxxxx, an individual ("Executive").
WHEREAS, Xxxxxxxx and Executive desire for Xxxxxxxx to employ Executive on
the terms and conditions set forth in this Agreement and to provide an incentive
to Executive to remain in the employ of Xxxxxxxx hereafter, particularly in the
event of any Change in Control (as herein defined) of Xxxxxxxx or any
Significant Subsidiary (as herein defined), thereby establishing and preserving
continuity of management of Xxxxxxxx.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between Xxxxxxxx and Executive as follows:
1. Employment. Xxxxxxxx hereby employs Executive as its Vice President and
Chief Financial Officer to serve at the pleasure of the Board of Directors of
Xxxxxxxx (the "Xxxxxxxx Board") and to have such duties, powers and
responsibilities as may be prescribed or delegated from time to time by the
President or other officer to whom Executive reports, subject to the powers
vested in the Xxxxxxxx Board and in the stockholders of Xxxxxxxx. Executive
shall faithfully perform his duties under this Agreement to the best of his
ability and shall devote substantially all of his working time and efforts to
the business and affairs of Xxxxxxxx and its affiliates.
2. Compensation.
(a) Base Compensation. Xxxxxxxx shall pay Executive as compensation for
his services hereunder an annual base salary at the rate of $300,000.00. Such
rate shall not be
increased prior to December 31, 2002 and shall not be reduced except as agreed
by the parties or except as part of a general salary reduction program imposed
by Xxxxxxxx and applicable to all officers of Xxxxxxxx.
(b) Incentive Compensation. For the years ending December 31, 2002,
Executive shall not be entitled to participate in any Xxxxxxxx incentive
compensation plan.
3. Benefits and Stock Ownership.
(a) Benefits. During the period of his employment hereunder, Xxxxxxxx
shall provide Executive with coverage under such benefit plans and programs as
are made generally available to similarly situated employees of Xxxxxxxx,
provided (a) Xxxxxxxx shall have no obligation with respect to any plan or
program if Executive is not eligible for coverage thereunder, and (b) Executive
acknowledges that stock options and other stock and equity participation awards
are granted in the discretion of the Xxxxxxxx Board or the Compensation
Committee of the Xxxxxxxx Board and that Executive has no right to receive stock
options or other equity participation awards or any particular number or level
of stock options or other awards. In determining contributions, coverage and
benefits under any disability insurance policy and under any cash
compensation-based plan provided to Executive by Xxxxxxxx, it shall be assumed
that the value of Executive's annual compensation, pursuant to this Agreement,
is the lower of 175% of Executive's annual base salary or $1,000,000. Executive
acknowledges that all rights and benefits under benefit plans and programs shall
be governed by the official text of each such plan or program and not by any
summary or description thereof or any provision of this Agreement (except to the
extent this Agreement expressly modifies such benefit plans or programs) and
that Xxxxxxxx is not under any obligation to continue in effect or to fund any
such plan or program, except as provided in
2
Paragraph 7 hereof. Xxxxxxxx also shall reimburse Executive for ordinary and
necessary travel and other business expenses in accordance with policies and
procedures established by Xxxxxxxx.
(b) Stock Ownership. During the period of his employment hereunder,
Executive shall retain ownership in himself or in members of his immediate
family of at least a majority of the number of shares of Xxxxxxxx stock acquired
upon the exercise of stock options, but excluding from such number of shares any
such shares transferred to Xxxxxxxx or sold to pay the purchase price upon the
exercise of stock options or to pay or satisfy tax obligations resulting from
such exercise.
4. Termination.
(a) Termination by Executive. Executive may terminate this Agreement
and his employment hereunder by at least thirty (30) days advance written notice
to Xxxxxxxx, except that in the event of any material breach of this Agreement
by Xxxxxxxx, Executive may terminate this Agreement and his employment hereunder
immediately upon notice to Xxxxxxxx.
(b) Death or Disability. This Agreement and Executive's employment
hereunder shall terminate automatically on the death or disability of Executive,
except to the extent employment is continued under Xxxxxxxx'x disability plan.
For purposes of this Agreement, Executive shall be deemed to be disabled if he
qualifies for disability benefits under Xxxxxxxx'x long-term disability plan.
(c) Termination by Xxxxxxxx For Cause. Xxxxxxxx may terminate this
Agreement and Executive's employment "for cause" immediately upon notice to
Executive. For purposes of this Agreement (except for Paragraph 7), termination
"for cause" shall mean termination based upon any one or more of the following:
(i) Any material breach of this Agreement by Executive;
3
(ii) Executive's dishonesty involving Xxxxxxxx or any subsidiary
of Xxxxxxxx;
(iii) Gross negligence or willful misconduct in the performance
of Executive's duties as determined in good faith by the Xxxxxxxx Board;
(iv) Willful failure by Executive to follow reasonable instructions
of the President or other officer to whom Executive reports concerning the
operations or business of Xxxxxxxx or any subsidiary of Xxxxxxxx;
(v) Executive's fraud or criminal activity; or
(vi) Embezzlement or misappropriation by Executive.
(d) Termination by Xxxxxxxx Other Than For Cause.
(i) Xxxxxxxx may terminate this Agreement and Executive's
employment other than for cause immediately upon notice to Executive, and
in such event, Xxxxxxxx shall provide severance benefits to Executive in
accordance with Paragraph 4(d)(ii) below.
(ii) Unless the provisions of Paragraph 7 of this Agreement are
applicable, if Executive's employment is terminated under Paragraph
4(d)(i), Xxxxxxxx shall continue, for a period of two (2) years following
such termination, (a) to pay to Executive as severance pay a monthly amount
equal to one-twelfth (1/12th) of the annual base salary referenced in
Paragraph 2(a) above, at the rate in effect immediately prior to
termination, and, (b) to reimburse Executive for the cost (including state
and federal income taxes payable with respect to this reimbursement) of
continuing the health insurance coverage provided pursuant to this
Agreement or obtaining health insurance coverage comparable to the health
insurance provided pursuant to this Agreement, and obtaining coverage
comparable to the life insurance provided pursuant to this Agreement,
unless Executive is
4
provided comparable health or life insurance coverage in connection with
other employment. The foregoing obligations of Xxxxxxxx shall continue
until the end of such two (2) year period notwithstanding the death or
disability of Executive during said period (except, in the event of death,
the obligation to reimburse Executive for the cost of life insurance shall
not continue). In the year in which termination of employment occurs,
Executive shall be eligible to receive benefits under the Xxxxxxxx
Incentive Compensation Plan and the Xxxxxxxx Executive Plan (if such Plans
then are in existence and Executive was entitled to participate immediately
prior to termination) in accordance with the provisions of such plans then
applicable, and severance pay received in such year shall be taken into
account for the purpose of determining benefits, if any, under the Xxxxxxxx
Incentive Compensation Plan but not under the Xxxxxxxx Executive Plan.
After the year in which termination occurs, Executive shall not be entitled
to accrue or receive benefits under the Xxxxxxxx Incentive Compensation
Plan or the Xxxxxxxx Executive Plan with respect to the severance pay
provided herein, notwithstanding that benefits under such plan then are
still generally available to executive employees of Xxxxxxxx. After
termination of employment, Executive shall not be entitled to accrue or
receive benefits under any other employee benefit plan or program, except
that Executive shall be entitled to participate in the Xxxxxxxx Employee
Stock Ownership Plan and the Xxxxxxxx Section 401(k) Plan with Profit
Sharing Plan Portion in the year of termination of employment only if
Executive meets all requirements of such plans for participation in such
year.
5. Non-Disclosure. During the term of this Agreement and at all times after
any termination of this Agreement, Executive shall not, either directly or
indirectly, use or disclose any Xxxxxxxx trade secret, except to the extent
necessary for Executive to perform his duties for Xxxxxxxx
5
while an employee. For purposes of this Agreement, the term "Xxxxxxxx trade
secret" shall mean any information regarding the business or activities of
Xxxxxxxx or any subsidiary or affiliate, including any formula, pattern,
compilation, program, device, method, technique, process, customer list,
technical information or other confidential or proprietary information, that (a)
derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use, and (b)
is the subject of efforts of Xxxxxxxx or its subsidiary or affiliate that are
reasonable under the circumstance to maintain its secrecy. In the event of any
breach of this Paragraph 5 by Executive, Xxxxxxxx shall be entitled to terminate
any and all remaining severance benefits under Paragraph 4(d)(ii) and shall be
entitled to pursue such other legal and equitable remedies as may be available.
6. Duties Upon Termination; Survival.
(a) Duties. Upon termination of this Agreement by Xxxxxxxx or Executive
for any reason, Executive shall immediately return to Xxxxxxxx all Xxxxxxxx
trade secrets which exist in tangible form and shall sign such written
resignations from all positions as an officer, director or member of any
committee or board of Xxxxxxxx and all direct and indirect subsidiaries and
affiliates of Xxxxxxxx as may be requested by Xxxxxxxx and shall sign such other
documents and papers relating to Executive's employment, benefits and benefit
plans as Xxxxxxxx may reasonably request.
(b) Survival. The provisions of Paragraphs 5, 6(a) and 7 of this
Agreement shall survive any termination of this Agreement by Xxxxxxxx or
Executive, and the provisions of Paragraph 4(d)(ii) shall survive any
termination of this Agreement by Xxxxxxxx under Paragraph 4(d)(i).
6
7. Continuation of Employment Upon Change in Control of Xxxxxxxx.
(a) Continuation of Employment. Subject to the terms and conditions of
this Paragraph 7, in the event of a Change in Control (as defined in Paragraph
7(d)) at any time during the term of this Agreement, Executive agrees to remain
in the employ of Xxxxxxxx for a period of three years (the "Three-Year Period")
from the date of such Change in Control (the "Control Change Date"). Xxxxxxxx
agrees to continue to employ Executive for the Three-Year Period. During the
Three-Year Period, (i) the Executive's position (including offices, titles,
reporting requirements and responsibilities), authority and duties shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 12 month period immediately
before the Control Change Date and (ii) the Executive's services shall be
performed at the location where Executive was employed immediately before the
Control Change Date or at any other location less than 40 miles from such former
location. During the Three-Year Period, Xxxxxxxx shall continue to pay to
Executive an annual base salary on the same basis and at the same intervals as
in effect prior to the Control Change Date at a rate not less than 12 times the
highest monthly base salary paid or payable to the Executive by Xxxxxxxx in
respect of the 12-month period immediately before the Control Change Date.
(b) Benefits. During the Three-Year Period, Executive shall be entitled
to participate, on the basis of his executive position, in each of the following
Xxxxxxxx plans (together, the "Specified Benefits") in existence, and in
accordance with the terms thereof, at the Control Change Date:
(i) any benefit plan, and trust fund associated therewith,
related to (a) life, health, dental, disability, accidental death and
dismemberment insurance or accrued
7
but unpaid vacation time, (b) profit sharing, thrift or deferred savings
(including deferred compensation, such as under Section 401(k) plans), (c)
retirement or pension benefits, (d) ERISA excess benefits and similar plans
and (e) tax favored employee stock ownership (such as under ESOP, and
Employee Stock Purchase programs); and
(ii) any other benefit plans hereafter made generally available
to executives of Executive's level or to the employees of Xxxxxxxx
generally.
In addition, Xxxxxxxx shall use its best efforts to cause all outstanding
options held by Executive under any stock option plan of Xxxxxxxx or its
affiliates to become immediately exercisable on the Control Change Date and to
the extent that such options are not vested and are subsequently forfeited, the
Executive shall receive a lump-sum cash payment within 5 days after the options
are forfeited equal to the difference between the fair market value of the
shares of stock subject to the non-vested, forfeited options determined as of
the date such options are forfeited and the exercise price for such options.
During the Three-Year Period Executive shall be entitled to participate, on the
basis of his executive position, in any incentive compensation plan of Xxxxxxxx
in accordance with the terms thereof at the Control Change Date; provided that
if under Xxxxxxxx programs or Executive's Employment Agreement in existence
immediately prior to the Control Change Date, there are written limitations on
participation for a designated time period in any incentive compensation plan,
such limitations shall continue after the Control Change Date to the extent so
provided for prior to the Control Change Date.
If the amount of contributions or benefits with respect to the Specified
Benefits or any incentive compensation is determined on a discretionary basis
under the terms of the Specified Benefits or any incentive compensation plan
immediately prior to the Control Change Date, the amount of such contributions
or benefits during the Three-Year Period for each of the Specified
8
Benefits shall not be less than the average annual contributions or benefits for
each Specified Benefit for the three plan years ending prior to the Control
Change Date and, in the case of any incentive compensation plan, the amount of
the incentive compensation during the Three-Year Period shall not be less than
75% of the maximum that could have been paid to the Executive under the terms of
the incentive compensation plan.
(c) Payment. With respect to any plan or agreement under which
Executive would be entitled at the Control Change Date to receive Specified
Benefits or incentive compensation as a general obligation of Xxxxxxxx which has
not been separately funded (including specifically, but not limited to, those
referred to under Paragraph 7(b)(i) and (ii) above), Executive shall receive
within five (5) days after such date full payment in cash (discounted to the
then present value on the basis of a rate of seven percent (7%) per annum) of
all amounts to which he is then entitled thereunder.
(d) Change in Control. Except as provided in the last sentence of this
Paragraph 7(d), for purposes of this Agreement, a "Change in Control" means any
one or more of the following:
(i) the acquisition or holding by any person, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), other than by Xxxxxxxx or any
Subsidiary (as defined below), or any employee benefit plan of Xxxxxxxx or
a Subsidiary, of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 20% or more of the then-outstanding common stock
or the combined voting power of the then-outstanding voting securities
("Voting Power") of Xxxxxxxx; provided, however, that no Change in Control
shall occur solely by reason of any such acquisition by a corporation with
respect to which, after such
9
acquisition, more than 60% of both the then-outstanding common shares and
the then-outstanding Voting Power of such corporation are then beneficially
owned, directly or indirectly, by the persons who were the beneficial
owners of the then-outstanding common stock and Voting Power of Xxxxxxxx
immediately before such acquisition, in substantially the same proportions
as their respective ownership, immediately before such acquisition, of the
then-outstanding common stock and Voting Power of Xxxxxxxx; or
(ii) individuals who, as of the date of this Agreement, constitute
the Xxxxxxxx Board (the "Incumbent Board") cease for any reason to
constitute at least 75% of the Xxxxxxxx Board; provided that any individual
who becomes a director whose election or nomination for election by the
stockholders of Xxxxxxxx was approved by at least 75% of the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
"election contest" relating to the election of the directors of Xxxxxxxx
(as such terms are used in Rule 14a-11 under the Exchange Act) or "tender
offer" (as such term is used in Section 14(d) of the Exchange Act) or a
proposed Extraordinary Transaction (as defined below)) shall be deemed to
be a member of the Incumbent Board; or
(iii) approval by the stockholders of Xxxxxxxx of any one or more
of the following:
(A) a merger, reorganization, consolidation or similar
transaction (any of the foregoing, an "Extraordinary Transaction") with
respect to which persons who were the respective beneficial owners of the
then-outstanding common stock and Voting Power of Xxxxxxxx immediately
before such Extraordinary Transaction would not, if such Extraordinary
Transaction were to be consummated immediately after such
10
stockholder approval (but otherwise in accordance with the terms presented
in writing to the stockholders of Xxxxxxxx for their approval),
beneficially own, directly or indirectly, more than 60% of both the
then-outstanding common shares and the then-outstanding Voting Power of the
corporation resulting from such Extraordinary Transaction, in substantially
the same proportions as their respective ownership, immediately before such
Extraordinary Transaction, of the then-outstanding common stock and Voting
Power of Xxxxxxxx,
(B) a liquidation or dissolution of Xxxxxxxx, or
(C) the sale or other disposition of all or substantially
all of the assets of Xxxxxxxx in one transaction or a series of related
transactions; or
(iv) the sale or other disposition by Xxxxxxxx, directly or
indirectly, whether by merger, consolidation, combination, lease, exchange,
spin-off, split-off, or other means, of any Significant Subsidiary or any
reduction in Xxxxxxxx'x direct or indirect beneficial ownership of any
Significant Subsidiary to less than 50% of the Voting Power of such entity.
For purposes of this Agreement, "Subsidiary" shall mean any entity of which at
least 50% of the Voting Power is beneficially owned, directly or indirectly, by
Xxxxxxxx and "Significant Subsidiary" shall mean (A) any Subsidiary which
contributed 30% or more of the total combined revenues of Xxxxxxxx and all
Subsidiaries for the prior calendar year, and (B) any one or more entities,
businesses or groups of assets directly or indirectly sold or disposed of by
Xxxxxxxx (within the meaning of paragraph 7(d)(iv)) within any two year period
that contributed 30% of more of such total combined revenues or would have
contributed such 30% based on revenues of such entities, businesses or groups of
assets for the calendar year prior to their sale or disposition.
11
(e) Termination After Control Change Date. Notwithstanding any other
provision of this Paragraph 7, at any time after the Control Change Date,
Xxxxxxxx may terminate the employment of Executive (the "Termination"), but
unless such Termination is for Cause as defined in subparagraph (g) or for
disability, within five (5) days of the Termination Xxxxxxxx shall pay to
Executive his full base salary through the Termination, to the extent not
theretofore paid, plus a lump sum amount (the "Special Severance Payment") equal
to the product (discounted to the then present value on the basis of a rate of
seven percent (7%) per annum) of (i) 175% of his annual base salary specified in
Paragraph 7(a) multiplied by (ii) three, and Specified Benefits (excluding any
incentive compensation) to which Executive was entitled immediately prior to
Termination shall continue until the end of the Three-Year period ("Benefits
Period") beginning on the date of Termination. If any plan pursuant to which
Specified Benefits are provided immediately prior to Termination would not
permit continued participation by Executive after Termination, then Xxxxxxxx
shall pay to Executive within five (5) days after Termination a lump sum payment
equal to the amount of Specified Benefits Executive would have received under
such plan if Executive had been fully vested in the average annual contributions
or benefits in effect for the three plan years ending prior to the Control
Change Date (regardless of any limitations based on the earnings or performance
of Xxxxxxxx) and a continuing participant in such plan to the end of the
Benefits Period. Following the end of the Benefits Period, Xxxxxxxx shall
continue to provide to the Executive and the Executive's family the following
benefits ("Post-Period Benefits"): (1) prior to the Executive's attainment of
age sixty (60), health, prescription and dental benefits equivalent to those
then applicable to active peer executives of Xxxxxxxx and their families, as the
same may be modified from time to time, and (2) following the Executive's
attainment of age sixty (60) (and without regard to the
12
Executive's period of service with Xxxxxxxx), health and prescription benefits
equivalent to those then applicable to retired peer executives of Xxxxxxxx and
their families, as the same may be modified from time to time. The cost to the
Executive of such Post-Period Benefits shall not exceed the cost of such
benefits to active or retired (as applicable) peer executives, as the same may
be modified from time to time. Notwithstanding the preceding two sentences of
this Paragraph 7(e), if the Executive is covered under any health, prescription
or dental plan provided by a subsequent employer, then the corresponding type of
plan coverage (i.e., health, prescription or dental) required to be provided as
Post-Period Benefits under this Paragraph 7(e) shall cease. The Executive's
rights under this Paragraph 7(e) shall be in addition to, and not in lieu of,
any post-termination continuation coverage or conversion rights the Executive
may have pursuant to applicable law, including without limitation continuation
coverage required by Section 4980 of the Code. Nothing in this Paragraph 7(e)
shall be deemed to limit in any manner the reserved right of Xxxxxxxx, in its
sole and absolute discretion, to at any time amend, modify or terminate health,
prescription or dental benefits for active or retired employees generally.
(f) Resignation After Control Change Date. In the event of a Change in
Control as defined in Paragraph 7(d), thereafter, upon good reason (as defined
below), Executive may, at any time during the 3-year period following the Change
in Control, in his sole discretion, on not less than thirty (30) days' written
notice (the "Notice of Resignation") to the Secretary of Xxxxxxxx and effective
at the end of such notice period, resign his employment with Xxxxxxxx (the
"Resignation"). Within five (5) days of such a Resignation, Xxxxxxxx shall pay
to Executive his full base salary through the effective date of such
Resignation, to the extent not theretofore paid, plus a lump sum amount equal to
the Special Severance Payment (computed as provided in the first sentence of
Paragraph 7(e), except that for purposes of such computation all references to
13
"Termination" shall be deemed to be references to "Resignation"). Upon
Resignation of Executive, Specified Benefits to which Executive was entitled
immediately prior to Resignation shall continue on the same terms and conditions
as provided in Paragraph 7(e) in the case of Termination (including equivalent
payments provided for therein), and Post-Period Benefits shall be provided on
the same terms and conditions as provided in Paragraph 7(e) in the case of
Termination. For purposes of this Agreement, "good reason" means any one or more
of the following:
(i) the assignment to the Executive of any duties which result in
a material adverse change in the Executive's position (including status,
offices, titles, and reporting requirements), authority, duties, or other
responsibilities with Xxxxxxxx, or any other action of Xxxxxxxx which
results in a material adverse change in such position, authority, duties,
or responsibilities, other than an insubstantial and inadvertent action
which is remedied by Xxxxxxxx promptly after receipt of notice thereof
given by the Executive,
(ii) any relocation of the Executive of more than 40 miles from
the place where the Executive was located at the time of the Change in
Control;
(iii) a material reduction or elimination of any component of the
Executive's rate of compensation, including (x) base salary, (y) any
incentive payment or (z) benefits or prerequisites which the Executive was
receiving immediately prior to a Change in Control, or;
(iv) any failure by Xxxxxxxx to comply with any of the provisions
of Paragraph 7;
14
A passage of time prior to delivery of the Notice of Resignation or a failure by
the Executive to include in the Notice of Resignation any fact or circumstance
which contributes to a showing of good reason shall not waive any right of the
Executive under this Agreement or preclude the Executive from asserting such
fact or circumstance in enforcing rights under this Agreement.
(g) Termination for Cause After Control Change Date. Notwithstanding
any other provision of this Paragraph 7, at any time after the Control Change
Date, Executive may be terminated by Xxxxxxxx "for Cause." Cause means
commission by the Executive of any felony or willful breach of duty by the
Executive in the course of the Executive's employment, except that Cause shall
not mean:
(i) bad judgment or negligence;
(ii) any act or omission believed by the Executive in good faith
to have been in or not opposed to the interest of Xxxxxxxx (without intent
of the Executive to gain, directly or indirectly, a profit to which the
Executive was not legally entitled);
(iii) any act or omission with respect to which a determination
could properly have been made by the Xxxxxxxx Board that the Executive met
the applicable standard of conduct for indemnification or reimbursement
under Xxxxxxxx'x by-laws, any applicable indemnification agreement, or
applicable law, in each case in effect at the time of such act or omission;
or
(iv) any act or omission with respect to which Notice of
Termination of the Executive is given more than 12 months after the
earliest date on which any member of the Xxxxxxxx Board, not a party to the
act or omission, knew or should have known of such act or omission.
15
Any Termination of the Executive's employment by Xxxxxxxx for Cause shall be
communicated to the Executive by Notice of Termination.
(h) Gross-up for Certain Taxes. If it is determined (by the reasonable
computation of Xxxxxxxx'x independent auditors, which determinations shall be
certified to by such auditors and set forth in a written certificate
("Certificate") delivered to the Executive) that any benefit received or deemed
received by the Executive from Xxxxxxxx pursuant to this Agreement or otherwise
(collectively, the "Payments") is or will become subject to any excise tax under
Section 4999 of the Code or any similar tax payable under any United States
federal, state, local or other law (such excise tax and all such similar taxes
collectively, "Excise Taxes"), then Xxxxxxxx shall, immediately after such
determination, pay the Executive an amount (the "Gross-up Payment") equal to the
product of:
(i) the amount of such Excise Taxes; multiplied by
(ii) the Gross-up Multiple (as defined in Paragraph 7(k). The
Gross-up Payment is intended to compensate the Executive for the Excise
Taxes and any federal, state, local or other income or excise taxes or
other taxes payable by the Executive with respect to the Gross-up Payment.
Xxxxxxxx shall cause the preparation and delivery to the Executive
of a Certificate upon request at any time. Xxxxxxxx shall, in addition to
complying with this Paragraph 7(h), cause all determinations and
certifications under Paragraphs 7(h)-(o) to be made as soon as reasonably
possible and in adequate time to permit the Executive to prepare and file
the Executive's individual tax returns on a timely basis.
16
(i) Determination by the Executive.
(i) If Xxxxxxxx shall fail (a) to deliver a Certificate to the
Executive or (b) to pay to the Executive the amount of the Gross-up
Payment, if any, within 14 days after receipt from the Executive of a
written request for a Certificate, or if at any time following receipt of a
Certificate the Executive disputes the amount of the Gross-up Payment set
forth therein, the Executive may elect to demand the payment of the amount
which the Executive, in accordance with an opinion of counsel to the
Executive ("Executive Counsel Opinion"), determines to be the Gross-up
Payment. Any such demand by the Executive shall be made by delivery to
Xxxxxxxx of a written notice which specifies the Gross-up Payment
determined by the Executive and an Executive Counsel Opinion regarding such
Gross-up Payment (such written notice and opinion collectively, the
"Executive's Determination"). Within 14 days after delivery of the
Executive's Determination to Xxxxxxxx, Xxxxxxxx shall either (a) pay the
Executive the Gross-up Payment set forth in the Executive's Determination
(less the portion of such amount, if any, previously paid to the Executive
by Xxxxxxxx) or (b) deliver to the Executive a Certificate specifying the
Gross-up Payment determined by Xxxxxxxx'x independent auditors, together
with an opinion of Xxxxxxxx'x counsel ("Xxxxxxxx Counsel Opinion"), and pay
the Executive the Gross-up Payment specified in such Certificate. If for
any reason Xxxxxxxx fails to comply with clause (b) of the preceding
sentence, the Gross-up Payment specified in the Executive's Determination
shall be controlling for all purposes.
(ii) If the Executive does not make a request for, and Xxxxxxxx
does not deliver to the Executive, a Certificate, Xxxxxxxx shall, for
purposes of Paragraph 7(j), be deemed to have determined that no Gross-up
Payment is due.
17
(j) Additional Gross-up Amounts. If, despite the initial conclusion of
Xxxxxxxx and/or the Executive that certain Payments are neither subject to
Excise Taxes nor to be counted in determining whether other Payments are subject
to Excise Taxes (any such item, a "Non-Parachute Item"), it is later determined
(pursuant to subsequently-enacted provisions of the Code, final regulations or
published rulings of the IRS, final IRS determination or judgment of a court of
competent jurisdiction or Xxxxxxxx'x independent auditors) that any of the
Non-Parachute Items are subject to Excise Taxes, or are to be counted in
determining whether any Payments are subject to Excise Taxes, with the result
that the amount of Excise Taxes payable by the Executive is greater than the
amount determined by Xxxxxxxx or the Executive pursuant to Paragraph 7(h) or
Paragraph 7(i), as applicable, then Xxxxxxxx shall pay the Executive an amount
(which shall also be deemed a Gross-up Payment) equal to the product of:
(i) the sum of (a) such additional Excise Taxes and (b) any
interest, fines, penalties, expenses or other costs incurred by the
Executive as a result of having taken a position in accordance with a
determination made pursuant to Paragraph 7(h); multiplied by
(ii) the Gross-up Multiple.
(k) Gross-up Multiple. The Gross-up Multiple shall equal a fraction,
the numerator of which is one (1.0), and the denominator of which is one (1.0)
minus the sum, expressed as a decimal fraction, of the rates of all federal,
state, local and other income and other taxes and any Excise Taxes applicable to
the Gross-up Payment; provided that, if such sum exceeds 0.8, it shall be deemed
equal to 0.8 for purposes of this computation. (If different rates of tax are
applicable to various portions of a Gross-up Payment, the weighted average of
such rates shall be used.)
18
(l) Opinion of Counsel. "Executive Counsel Opinion" means a legal
opinion of nationally recognized executive compensation counsel that there is a
reasonable basis to support a conclusion that the Gross-up Payment determined by
the Executive has been calculated in accord with this Paragraph 7 and applicable
law. "Company Counsel Opinion" means a legal opinion of nationally recognized
executive compensation counsel that (i) there is a reasonable basis to support a
conclusion that the Gross-up Payment set forth in the Certificate of Xxxxxxxx'x
independent auditors has been calculated in accord with this Paragraph 7 and
applicable law, and (ii) there is no reasonable basis for the calculation of the
Gross-up Payment determined by the Executive.
(m) Amount Increased or Contested. The Executive shall notify Xxxxxxxx
in writing of any claim by the IRS or other taxing authority that, if
successful, would require the payment by Xxxxxxxx of a Gross-up Payment. Such
notice shall include the nature of such claim and the date on which such claim
is due to be paid. The Executive shall give such notice as soon as practicable,
but no later than 10 business days, after the Executive first obtains actual
knowledge of such claim; provided, however, that any failure to give or delay in
giving such notice shall affect Xxxxxxxx'x obligations under this Paragraph 7
only if and to the extent that such failure results in actual prejudice to
Xxxxxxxx. The Executive shall not pay such claim less than 30 days after the
Executive gives such notice to Xxxxxxxx (or, if sooner, the date on which
payment of such claim is due). If Xxxxxxxx notifies the Executive in writing
before the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give Xxxxxxxx any information that it reasonably requests
relating to such claim;
19
(ii) take such action in connection with contesting such claim as
Xxxxxxxx reasonably requests in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by Xxxxxxxx;
(iii) cooperate with Xxxxxxxx in good faith to contest such claim;
and
(iv) permit Xxxxxxxx to participate in any proceedings relating
to such claim; provided, however, that Xxxxxxxx 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 related interest and penalties, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing, Xxxxxxxx shall control all proceedings in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim 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. 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 Xxxxxxxx shall determine; provided, however, that if Xxxxxxxx
directs the Executive to pay such claim and xxx for a refund, Xxxxxxxx
shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify the Executive, on an after-tax
basis, for any Excise Tax or income tax, including related interest or
penalties, imposed with respect to such advance; and further provided that
any extension of the statute of limitations relating to payment of taxes
for
20
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount. The
Stilwell's control of the contest shall be limited to issues with respect
to which a Gross-up Payment would be payable. The Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the IRS or other taxing authority.
(n) Refunds. If, after the receipt by the Executive of an amount
advanced by Xxxxxxxx pursuant to Paragraph 7(m), the Executive receives any
refund with respect to such claim, the Executive shall (subject to Xxxxxxxx'x
complying with the requirements of Paragraph 7(m)) promptly pay Xxxxxxxx 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 Xxxxxxxx pursuant to Paragraph 7(m), a determination is made that
the Executive shall not be entitled to a full refund with respect to such claim
and Xxxxxxxx does not notify the Executive in writing of its intent to contest
such determination before the expiration of 30 days after such determination,
then the applicable part of 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. Any contest of a
denial of refund shall be controlled by Paragraph 7(m).
(o) Expenses. If any dispute should arise under this Agreement after
the Control Change Date involving an effort by Executive to protect, enforce or
secure rights or benefits claimed by Executive hereunder, Xxxxxxxx shall pay
(promptly upon demand by Executive accompanied by reasonable evidence of
incurrence) all reasonable expenses (including attorneys' fees) incurred by
Executive in connection with such dispute, without regard to whether Executive
prevails in such dispute except that Executive shall repay Xxxxxxxx any amounts
21
so received if a court having jurisdiction shall make a final, nonappealable
determination that Executive acted frivolously or in bad faith by such dispute.
To assure Executive that adequate funds will be made available to discharge
Xxxxxxxx'x obligations set forth in the preceding sentence, Xxxxxxxx has
established a trust and upon the occurrence of a Change in Control shall
promptly deliver to the trustee of such trust to hold in accordance with the
terms and conditions thereof that sum which the Xxxxxxxx Board shall have
determined is reasonably sufficient for such purpose.
(p) Prevailing Provisions. On and after the Control Change Date, the
provisions of this Paragraph 7 shall control and take precedence over any other
provisions of this Agreement which are in conflict with or address the same or a
similar subject matter as the provisions of this Paragraph 7.
8. Mitigation and Other Employment. After a termination of Executive's
employment pursuant to Paragraph 4(d)(i) or a Change in Control as defined in
Paragraph 7(d), Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and except as otherwise specifically provided in Paragraph 4(d)(ii) with respect
to health and life insurance and in Paragraph 7(e) with respect to health,
prescription and dental benefits, no such other employment, if obtained, or
compensation or benefits payable in connection therewith shall reduce any
amounts or benefits to which Executive is entitled hereunder. Such amounts or
benefits payable to Executive under this Agreement shall not be treated as
damages but as severance compensation to which Executive is entitled because
Executive's employment has been terminated.
9. Notice. Notices and all other communications to either party pursuant to
this Agreement shall be in writing and shall be deemed to have been given when
personally delivered,
22
delivered by facsimile or deposited in the United States mail by certified or
registered mail, postage prepaid, addressed, in the case of Xxxxxxxx, to
Xxxxxxxx at 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000, Attention:
Secretary, or, in the case of the Executive, to him at [Xxxxxxxx'x home
address], or to such other address as a party shall designate by notice to the
other party.
10. Amendment. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or discharge is
agreed to in a writing signed by Executive and the President of Xxxxxxxx. No
waiver by any party hereto at any time of any breach by another 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 time or at any prior or subsequent time.
11. Successors in Interest. The rights and obligations of Xxxxxxxx under
this Agreement shall inure to the benefit of and be binding in each and every
respect upon the direct and indirect successors and assigns of Xxxxxxxx,
regardless of the manner in which such successors or assigns shall succeed to
the interest of Xxxxxxxx hereunder, and this Agreement shall not be terminated
by the voluntary or involuntary dissolution of Xxxxxxxx or by any merger or
consolidation or acquisition involving Xxxxxxxx or upon any transfer of all or
substantially all of Xxxxxxxx'x assets, or terminated otherwise than in
accordance with its terms. In the event of any such merger or consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon and
shall inure to the benefit of the surviving corporation or the corporation or
other person to which such assets shall be transferred. Neither this Agreement
nor any of the payments or benefits hereunder may be pledged, assigned or
transferred by Executive either in whole or in part in any manner, without the
prior written consent of Xxxxxxxx.
23
12. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
13. Controlling Law and Jurisdiction. The validity, interpretation and
performance of this Agreement shall be subject to and construed under the laws
of the State of Missouri, without regard to principles of conflicts of law.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and terminates and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the terms of Executive's employment or
severance arrangements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above stated.
XXXXXXXX FINANCIAL INC.
By /s/ Xxxxxx X. Xxxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
EXECUTIVE
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxx
24
