AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
The Change-of-Control Employment Agreement by and between Xxxxxx Scientific
International, Inc., a Delaware corporation (the "Company") and Xxxx X. Xxxxxxx
(the "Executive"), dated as of the 31st day of July, 1997 (the "Prior
Agreement"), is hereby amended and restated on January 21, 1998, effective as
set forth below.
The Company entered into the Prior Agreement because the Board of Directors
of the Company (the "Board") had determined that it was in the best interests of
the Company and its shareholders to assure that the Company have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company. The Board
believed it was imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company currently and in the event of any threatened or
pending Change of Control, and to provide the Executive with compensation and
benefits arrangements upon a Change of Control which would ensure that the
compensation and benefits expectations of the Executive will be satisfied and
which are competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board caused the Company to enter into the
Prior Agreement.
The Company has now entered into a Second Amended and Restated Agreement
and Plan of Merger, dated as of November 14, 1997, between the Company and FSI
Merger Corp. ((as amended) the "Transaction Agreement"), pursuant to which FSI
Merger Corp. will be merged with and into the Company (the "Transaction"), and
the Company and the Executive desire to amend the terms and conditions of
employment of the Executive following the Transaction.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effect of Agreement. This amended and restated agreement (this
"Agreement") shall take effect if and only if the Transaction is consummated
(the date of consummation being hereafter referred to as the "Effective Date"),
whereupon it shall replace the Prior Agreement. If the Transaction is never
consummated, the Prior Agreement shall remain in effect without regard to this
Agreement.
2. Change of Control. The Company and the Executive acknowledge that the
Transaction will constitute a "Change of Control" within the meaning of the
Prior Agreement.
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3. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the
Employment Period, as defined below. The Employment Period shall mean the period
commencing on the Effective Date and ending on the fifth anniversary of such
date, together with all extensions pursuant to the next sentence. As of the end
of each day during the Employment Period, unless either party hereto shall have
given the other party 30 days' advance notice that there shall be no further
extensions pursuant to this sentence (such notice, a "Notice of Non-Extension"),
the Employment Period shall be extended by an additional day, so that the
Employment Period always consists of five years.
4. Terms of Employment. (a) Position and Duties. (i) During the Employment
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned to the Executive at any time during the 120-day
period immediately preceding the Effective Date and (B) the Executive's services
shall be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 25 miles from
such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic, charitable,
governmental or religious boards or committees, (B) to manage or participate in
activities of General Chemical Group, Inc. and Xxxxxx Associates, Inc., in a
manner consistent with his current practice, (C) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (D) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with
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the performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to $315,000 (the
"Required Bonus Amount"). Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
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(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies. Without limiting the generality of the foregoing, the
Company shall continue to make all required premium payments and fulfill its
other obligations under the split-dollar insurance agreement (the "Split-Dollar
Agreement") entered into by the Company and the Executive and effective as of
February 28, 1995.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe and Other Benefits. During the Employment Period, the
Executive shall be entitled to fringe and other benefits including, without
limitation, benefits payable under Executive's Split-Dollar Agreement, in
accordance with the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, in
all respects equal to that provided to the Executive by the Company during the
120-day
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period immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of the Company in all respects and its affiliated companies as in
effect for the Executive during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or
the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the
Executive's duties, or
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(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason at any time within 90 days after the Executive first
has actual knowledge of the occurrence of such Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
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(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to
the Effective Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement;
(v) delivery by the Company of a Notice of Non-Extension; or
(vi) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 12(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the date on which
the Company notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by
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reason of death or Disability, the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other Than
for Cause, Death or Disability. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause or Disability or
the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Required Bonus Amount and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) five and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Required Bonus
Amount; and
C. an amount equal to the difference between (a) the aggregate
benefit under the Company's qualified defined benefit retirement plans
(collectively, the "Retirement Plan") and any excess or supplemental
defined benefit retirement plans in which the Executive participates,
including without limitation the Company's Executive Retirement and
Savings Plan, (collectively, the "SERP") which the Executive would have
accrued (whether or not vested) if the Executive's employment had
continued for five years after the Date of Termination and (b) the
actual vested benefit, if any, of the Executive under the Retirement
Plan and the SERP, determined as of the Date of Termination (with the
foregoing amounts to be computed on an actuarial present value basis,
based on the assumption that the Executive's compensation in each of
the five years following such termination would have been that required
by Section 4(b)(i) and Section 4(b)(ii), and using actuarial
assumptions no less favorable to the Executive than the most favorable
of those in effect for purposes of computing benefit entitlements under
the Retirement Plan and the SERP at any time from the
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day before the Effective Date) through the Date of Termination;
(ii) for five years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated (including without limitation pursuant to the Split Dollar Agreement)
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility, and
for purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until five years after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in the Executive's sole discretion (but the total cost
thereof shall not exceed $50,000); and
(iv) for a period of five years following the Executive's termination,
to the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan, program,
policy or practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as
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applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
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and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement; Legal Fees. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay
promptly as incurred, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability or entitlement under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company and the Executive or between either of them
and any third party, and including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate ("Applicable
Federal Rate") provided for in Section 7872(f)(2)(A) of the Internal Revenue
Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be 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 Agreement or otherwise, but determined without regard
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to any additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
corresponding provisions of state or local tax laws, or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income or employment taxes (and any interest and penalties imposed with
respect thereto) and 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 Payments.
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Deloitte & Touche
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). 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 9, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. 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 Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment, plus interest at the Applicable Federal Rate, shall
be promptly paid by the Company to or for the benefit of the Executive.
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(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(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 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 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 or employment tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and xxx for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the
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Executive, on an after-tax basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) 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 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Confidential Information; Noncompetition. (a) The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret, proprietary
or confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies. During the period the Executive is employed
with the Company, and for a period of 24 months after termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. The restrictions set
forth in this Section 10 will not apply to information which is generally known
to the public or in the trade, unless such knowledge results from an
unauthorized disclosure by the Executive or representatives of the Executive in
violation of this Agreement. This exception will not affect the application of
any other provisions of this
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Agreement to such information in accordance with the terms of such provision.
All documents and tangible things embodying or containing confidential
information are the Company's exclusive property. The Executive will protect the
confidentiality of their content and will return all copies, facsimiles and
specimens of them and any other form of confidential information in the
Executive's possession, custody or control to the Company before leaving the
employment with the Company.
(b) In consideration of the Put Right (as defined in Section 13 below),
during the Executive's employment with the Company, and for a period of 36
months thereafter, the Executive shall not, directly or indirectly, engage,
participate or invest in or be employed by any business which is engaged in the
scientific and clinical laboratory research distribution business in the United
States. The foregoing restriction shall apply regardless of the capacity in
which the Executive engages or engaged, participates or participated, or invests
or invested in or is or was employed by a given business, whether as owner,
partner, shareholder, consultant, agent, employee, co-venturer or otherwise. The
provisions of this Section 10(b) shall not prevent the Executive from acquiring
or holding publicly traded stock or other publicly traded securities of a
business, so long as the Executive's ownership does not exceed 2 percent of the
outstanding securities of such company of the same class as those held by the
Executive or from engaging in any activity or having an ownership interest in
any business that is reviewed by the Board of Directors. The Executive
understands that the restrictions set out in this Section 10(b) are intended to
protect the Company's interest in its secret, proprietary or confidential
information and established customer relationships and goodwill, and agrees that
such restrictions are reasonable and appropriate for this purpose.
(c) The Executive agrees that it would be difficult to measure any damages
caused to the Company which might result from any breach by the Executive of the
promises set forth in this Agreement, and that in any event money damages would
be an inadequate remedy for any such breach. Accordingly, the Executive agrees
that in the case of breach, or proposed breach, of any portion of this
Agreement, the Company shall be entitled, in addition to all other remedies that
it may have, to an injunction or other appropriate equitable relief to restrain
any such breach without showing or proving any actual damage to the Company.
However, in no event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
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11. Successors. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Xxxx X. Xxxxxxx
00 Xxxxxxxx Xxxx
X. Xxxxxxx, XX 00000
If to the Company:
Attention: General Counsel
Xxxxxx Scientific International Inc.
Xxxxxxx Xxxx
Xxxxxxx, XX 00000
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications
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shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will" and, prior
to the Effective Date, the Executive's employment may be terminated by either
the Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement. From and
after the Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof; provided, that
this Agreement shall not supersede the Split Dollar Agreement, nor shall it
amend the Split Dollar Agreement except to the extent specifically provided in
Section 6(a) and Section 12(g) below.
(g) The second sentence of Section 4(b) of the Split Dollar Agreement is
hereby amended to read in its entirety as follows: "A 'change in control' is
deemed to occur upon the occurrence of a 'Change of Control' as defined in
Section 2 of the Change-of-Control Employment Agreement dated as of July 31,
1997 between the Employer and Employee."
13. Put/Call Right. At any time following the Effective Date, the Executive
and/or any Permitted Transferee (as defined below) shall have the right (the
"Put Right"), exercisable by delivery of a written notice (the "Put Notice") to
the Company, to require the Company to purchase all, but not less than all, of
the 51,666 Executive Performance Options (the "Put Options") granted to the
Executive pursuant to the Xxxxxx Scientific
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International Inc. 1998 Equity and Incentive Plan (the "1998 Option Plan"), for
an aggregate purchase price (the "Put Price") of $5,000,000 in cash, subject to
the provisions of this Section 13. Following receipt of the Put Notice, the
Company shall be required to pay the Put Price to the Executive or the Permitted
Transferee, as applicable, upon the second business day following the first
anniversary of the date the Put Notice is received by the Company; provided,
that if on such second business day, the Executive is a "covered employee" whose
compensation is subject to the limitation on deductibility imposed by Section
162(m) of the Code, such payment shall be delayed until the first date on which
the Executive is no longer such a "covered employee." For purpose of this
Section 13, "Permitted Transferee" shall mean any heir, executor, administrator,
testamentary trustee, legatee or beneficiary of the Executive and any party who
is a legitimate transferee of the Put Options in accordance with the instruments
governing their transfer. The Company shall pay the Executive interest on the
$5,000,000 cash payment due to the Executive following exercise of the Put Right
at a rate equal to the prime rate published by The Chase Manhattan Bank on the
business day nearest to the date on which the Put Right is exercised, compounded
daily. Such interest shall accrue from the date of exercise until the date the
$5,000,000 payment is made to the Executive, and shall be paid to the Executive
concurrently with such $5,000,000 payment.
14. Upon termination of the Executive's employment with the Company for any
reason (a "Call Event"), the Company shall have the right (the "Call Right"),
exercisable by delivery of a written notice (the "Call Notice") to the Executive
and any Permitted Transferees who then own any Put Options within a period of
180 days after the date of occurrence of the Call Event (subject to extension
for up to three months in the event the Company is legally prohibited or
contractually prohibited, by virtue of its debt or other obligations, from
exercising its Call Rights) (the "Call Notice Period"), to require the Executive
and any such Permitted Transferees to sell all, but not less than all, of the
Put Options owned by such Management Investor and such Permitted Transferees on
the date of occurrence of the Call Event at an aggregate price equal to the Put
Price, allocated among the Executive and such Permitted Transferees (if any) in
the same proportions as their ownership of the Put Options. Upon receipt of such
notice the Executive and any such Permitted Transferees shall sell such Put
Options, subject to the terms hereof.
15. The closing of the acquisition by the Company of Put Options following
exercise of the Put Right or the Call Right shall take place at the principal
office of the Company on the tenth business day after the date of the Put Notice
or the Call
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Notice. At such closing, the Company shall pay the Put Price by wire transfer to
the account or accounts designated by the Executive or Permitted Transferee, as
applicable, in writing to the Company or, if the Executive or Permitted
Transferee, as applicable, fails to designate any such account, the Company
shall deliver a certified check or checks in the amount of the applicable Put
Price to the Executive or such Permitted Transferee, as applicable, in each
case, against delivery of duly endorsed certificates representing such Put
Options (to the extent issued in certificated form).
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ XXXX X. XXXXXXX
-----------------------------------
Xxxx X. Xxxxxxx
XXXXXX SCIENTIFIC INTERNATIONAL, INC.
By /s/ XXXX X. XXXXXXX
--------------------------------
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