EXHIBIT 10aa
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Xxxx Atlantic Corporation, a Delaware
corporation (the "Company"), and Xxxxxxx X. Xxxxx (the "Executive"), dated as of
the 14th day of August, 1997.
W I T N E S S E T H
WHEREAS, the Company and NYNEX Corporation, a Delaware corporation
("NYNEX"), have entered into an Amended and Restated Agreement and Plan of
Merger, dated as of July 2, 1996 (the "Merger Agreement"), whereby NYNEX will
merge with a wholly-owned subsidiary of the Company; and
WHEREAS, the Company and NYNEX wish to provide for the orderly succession
of the management of the Company following the Effective Time (as defined in the
Merger Agreement); and
WHEREAS, the Company and NYNEX further wish to provide for the employment
by the Company of the Executive, and the Executive wishes to serve the Company,
in the capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for an initial period (the "Initial Period") and unless the Executive
elects not to continue his employment pursuant hereto, for a further period (the
"Secondary Period") (the Initial Period and the Secondary Period are hereinafter
collectively referred to in the aggregate as the "Employment Period"). The
Initial Period shall begin at the Effective Time, and end on (i) the later of
(a) one year following the Effective Time but no later than December 31, 1998;
or (b) July 1, 1998; or (ii) such earlier date as the Executive ceases to be
Chief Executive Officer of the Company for any reason. A Secondary Period shall
begin at the end of the Initial Period and end on December 31, 1998, or on such
earlier date as the Executive ceases to be the Chairman of the Company for any
reason.
2. POSITION AND DUTIES. (a) During the Initial Period, the Executive
shall serve as Chairman and as Chief Executive Officer of the Company, and if
there shall be a Secondary Period, during the Secondary Period, the Executive
shall serve as Chairman, in each case with such duties and responsibilities as
are customarily assigned to such positions, and such other duties and
responsibilities not inconsistent therewith as may from time to time be assigned
1
to him by the Board. At the expiration of the Initial Period, the Executive
shall resign as Chairman and Chief Executive Officer of the Company; provided,
however, that if there shall be a Secondary Period, then the Executive shall
only resign as Chief Executive Officer at the expiration of the Initial Period,
and shall resign as Chairman at the expiration of the Secondary Period. The
Executive shall be a member of the Board on the first day of the Employment
Period, and the Board shall propose the Executive for re-election to the Board
and for the positions specified above throughout the Employment Period.
(b) The President of the Company shall report to the Executive. An Office
of the Chairman, which shall be comprised solely of the Chairman and the
President, shall be established and the other principal executive officers of
the Company shall report to that Office of the Chairman. During the Employment
Period, the Executive shall serve as Chairman of the Board and as Chief
Executive Officer of the Company, with such duties and responsibilities as are
customarily assigned to such positions, and such other duties and
responsibilities not inconsistent therewith as may from time to time be assigned
to him by the Board.
(c) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive shall 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 under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, 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.
(d) The Company's headquarters shall be located in New York City. The
Company shall reimburse the Executive for reasonable expenses incurred by him
while working in the New York City area during the Employment Period and shall
make an apartment in the New York City area available for use by the Executive
(or provide appropriate reimbursement or allowance for the Executive's occupancy
of an apartment in the New York City area) during the Employment Period and for
a period up to one year after the Employment Period. In the event such expense
reimbursements or the Executive's use of the apartment are not treated as
business expenses excludable from the Executive's gross income for income tax
purposes, the Company shall provide the Executive with a gross-up payment for
the additional income taxes payable by the Executive as a result of such expense
reimbursements and use of the apartment. In addition, the Company shall assure
that the Executive suffers no financial loss on the sale of the second home that
the Executive has maintained in Maryland in connection with the duties performed
by the Executive at the Company's offices in Arlington, Virginia. The amount of
the loss shall be the excess, if any, of the Executive's adjusted basis (as
determined under the Internal Revenue Code) in that home over the adjusted sale
price (as determined under Section 1034(b) of the Internal Revenue Code) of the
home; provided, however, that: (a) such excess shall be reduced by the tax
benefit to the Executive resulting from such loss; and (b) the Company shall
also pay
2
to the Executive a gross-up payment for the additional income taxes payable by
the Executive as a result of the payment for any such loss.
3. COMPENSATION. (a) BASE SALARY. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation of
the committee of the Board having responsibility for approving the compensation
of senior executives (the "Compensation Committee"), subject to the next
sentence and Section 3(b). During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary") of not less than his annual
base salary from the Company as in effect immediately before the Effective Time.
The Annual Base Salary shall be payable in accordance with the Company's regular
payroll practice for its senior executives, as in effect from time to time.
During the Employment Period, the Annual Base Salary shall be reviewed for
possible increase at least annually. Any increase in the Annual Base Salary
shall not limit or reduce any other obligation of the Company under this
Agreement. The Annual Base Salary shall not be reduced after any such increase,
and the term "Annual Base Salary" shall thereafter refer to the Annual Base
Salary as so increased.
(b) INCENTIVE COMPENSATION. During the Employment Period, the Executive
shall participate in short-term incentive compensation plans and long-term
incentive compensation plans (the latter to consist of plans offering stock
options, restricted stock and/or other long-term incentive compensation, as
adopted and approved by the Compensation Committee from time to time) providing
him with the opportunity to earn, in the aggregate, on a year-by-year basis,
short-term and long-term incentive compensation (the "Incentive Compensation")
at least equal to the aggregate amounts that he had the opportunity to earn
under the ordinary annual grants under the comparable plans of the Company as in
effect immediately before the Effective Time. In addition, the Incentive
Compensation awards made to the Executive with respect to the final year of the
Employment Period shall be at least equal to the highest awards made to any
other senior executive of the Company for that year.
(c) OTHER BENEFITS. (i) During the Employment Period and thereafter: (A)
the Executive shall be entitled to participate in all applicable incentive,
savings and retirement plans, practices, policies and programs of the Company to
the same extent as other senior executives (or, where applicable, retired senior
executives) of the Company, and (B) the Executive and/or the Executive's
eligible dependents, as the case may be, shall be eligible for participation in,
and shall receive all benefits under, all applicable welfare benefit plans,
practices, policies, and programs provided by the Company, other than severance
plans, practices, policies and programs but including, without limitation,
medical, prescription, dental, disability, salary continuance, vacation pay
(under the Company's current accrual policies such that 1999 vacation shall be
earned by virtue of completion of the Employment Period as of December 31,
1998), employee life insurance, group life insurance, accidental death and
travel accident insurance plans and programs, and, upon retirement, all
applicable retirement benefit plans to the same extent, and subject to the same
terms, conditions, cost-sharing requirements and the like, as other senior
executives of the Company, as such plans may be amended from time to time.
3
(ii) During the Employment Period, the Executive shall participate in such
one or more supplemental executive retirement plans as may be adopted and
amended by the Compensation Committee from time to time ("SERPS") such that the
aggregate value of the retirement benefits that he and his beneficiaries will
receive at the end of the Employment Period under all pension benefit plans of
the Company and its affiliates (whether qualified or not) will be not less than
the benefits he would have received had he continued, through the end of the
Employment Period, to participate in the Xxxx Atlantic Cash Balance Plan and the
Xxxx Atlantic Senior Management Retirement Income Plan (collectively, the
"Company Plans"), as in effect immediately before the Effective Time.
(iii) In consideration of Executive's agreement to retire at the end of the
Employment Period, rather than at a later date, the Board shall give
consideration to any impairment of compensation or awards that Executive may
incur by reason of retiring at that time and to the extent that the Board
reasonably determines that such an impairment has occurred, shall, on or before
the date of Executive's retirement, undertake to eliminate any such impairment
in such manner as the Board then deems appropriate.
(d) FRINGE BENEFITS. During the Employment Period, the Executive shall be
entitled to receive fringe benefits of comparable value as he received from the
Company immediately before the Effective Time. Financial counseling services,
which are included in such fringe benefits, shall continue to be provided to the
Executive by the Company for two (2) years after the end of the Employment
Period in accordance with the Company's current policies. Further, for such
period after the Employment Period that the Executive continues to represent the
Company on corporate, industry, civic or charitable boards or advisory councils
(but not less than five (5) years), the Company shall continue to provide the
Executive with office space, secretarial support and use of corporate aircraft
(including limited personal use in accordance with the Company's current
policies).
(e) LIFE INSURANCE. (i) Subject to the further terms set forth below, the
Company agrees to participate in the purchase of a life insurance policy (the
"Policy") on the Executive's life under which, by collateral assignment,
endorsement, or co-ownership agreement, a death benefit shall be payable to the
Xxxxxxx X. Xxxxx Life Insurance Trust or such successor beneficiary or
beneficiaries as the trustees of that trust may subsequently designate (the
"Beneficiary").
(ii) Attached hereto is a schedule showing the Beneficiary's share of the
death benefit and premiums under the Policy for each year of the scheduled
coverage period. The Company agrees to pay such portion of the Policy premiums
(after taking account of the Beneficiary's share of the premiums) as necessary
to maintain the Policy in force during the Employment Period and thereafter
until the Executive's ninety-fifth (95th) birthday (or his earlier death) and to
assure that the death benefit under the Policy during such period is at least
equal to the Beneficiary's share, as determined under that schedule. The Company
shall commence making
4
such premium payments as of the first date that premiums are due under the
Policy, provided that if such date precedes the Effective Time and the merger
does not occur, the Company shall have no further obligation under this Section
3(e). The Company's obligations under this Section 3(e) shall also cease in the
event that (i) the Beneficiary has not paid or reimbursed the Company for the
Beneficiary's share of any annual premium, or (ii) the Executive has taken any
action that would give rise to a forfeiture of benefits under the Xxxx Atlantic
Senior Management Retirement Income Plan.
(iii) Nothing in this Agreement shall obligate the Company to pay premiums
of any particular amount or at any particular time under the Policy, and the
Company shall have the right at any time before the Executive's death to
withdraw all or any portion of the cash surrender value of the Policy, provided
--------
that the Company has paid or thereafter continues to pay sufficient premiums (in
excess of the Beneficiary's scheduled share) for the Policy to remain in force
and for the death benefit to remain at least equal to the Beneficiary's
scheduled share of the death benefit for the period described in paragraph (ii),
and further provided that, if the Company fails for any reason to pay sufficient
----------------
premiums (in excess of the Beneficiary's scheduled share) for the death benefit
to remain at that level for that period, the Company shall be liable upon the
Executive's death to make such payments as are necessary to place the
Beneficiary (and, if relevant, the Executive's estate) in the same financial
position (after taking account of any resulting income or other taxes) as if the
Company had paid sufficient premiums for the Beneficiary's share of the death
benefit under the Policy to remain at the scheduled level for the period
described in paragraph (ii). The Company's share of the death benefit under the
Policy shall be limited to the excess, if any, of the total Policy death benefit
over the Beneficiary's scheduled share.
(iv) Notwithstanding subparagraph (iii), nothing in this Agreement shall
preclude the Beneficiary from paying additional premiums or acquiring such
additional incidents of ownership under the Policy as the Company and
Beneficiary may agree. Further, in the event that the Company concludes that the
Executive has taken any action that would result in a forfeiture of benefits
under the Xxxx Atlantic Senior Management Retirement Income Plan, the Company
shall take no action to prevent the Policy from remaining in force, provided
that the Beneficiary agrees to pay all subsequent premiums that may be required
under the Policy; in such event, the Company's interest in the cash surrender
value of the Policy shall be limited to the portion of the cash surrender value
attributable to the premium payments theretofore made by the Company, adjusted
for any withdrawals made by the Company.
(v) The Executive shall possess no incidents of ownership in the Policy,
including the power to change the Beneficiary, to surrender or cancel the
Policy, to assign the Policy, to revoke an assignment of the Policy, to pledge
the Policy for a loan, or to obtain from the insurer a loan against the Policy.
5
(vi) In the event that the purchase of the Policy gives rise to any
obligation by the Company to withhold taxes with respect to a tax liability of
the Executive, the Company shall have the right to withhold such taxes out of
other amounts payable to the Executive or to satisfy the withholding obligations
in such other manner as the Company and the Executive may agree.
(vii) The Company further agrees to use its best efforts to enable the
Executive, the Beneficiary, or another beneficiary designated by the Executive
to purchase additional life insurance from the same insurer on comparable terms,
provided that the Company shall have no obligation to make any premium payments
or advances or incur any other cost for such other life insurance policy or
policies.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. The Company shall be entitled to terminate the Executive's
employment because of the Executive's Disability during the Employment Period.
"Disability" means that (i) the Executive has been unable, for the period
specified in the Company's disability plan for senior executives, but not less
than a period of 180 consecutive business days, to perform the Executive's
duties under this Agreement, as a result of physical or mental illness or
injury, and (ii) a physician selected by the Company or its insurers, and
acceptable to the Executive or the Executive's legal representative, has
determined that the Executive is disabled within the meaning of the applicable
disability plan for senior executives. A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless the Executive
returns to full-time performance of the Executive's duties before the Disability
Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the Executive's
employment during the Employment Period for Cause or without Cause. "Cause"
means the conviction of the Executive for the commission of a felony, or willful
misconduct by the Executive, in either case that results in material and
demonstrable damage to the business or reputation of the Company. 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 that is based upon authority
given pursuant to a resolution duly adopted by the Board, or 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.
(ii) A termination of the Executive's employment for Cause shall be
effected in accordance with the following procedures. The Company shall give the
Executive written notice ("Notice of Termination for Cause") of its intention to
terminate the Executive's employment for Cause, setting forth in reasonable
detail the specific conduct of the Executive that it considers to constitute
Cause and the specific provision(s) of this Agreement on which it relies, and
stating
6
the date, time and place of the Special Board Meeting for Cause. The "Special
Board Meeting for Cause" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Cause, that takes place not less than ten and not more than twenty business days
after the Executive receives the Notice of Termination for Cause. The Executive
shall be given an opportunity, together with counsel, to be heard at the Special
Board Meeting for Cause. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the Special Board Meeting
for Cause by affirmative vote of three quarters of the entire membership of the
Board stating that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in the Notice of Termination for Cause and that
such conduct constitutes Cause under this Agreement.
(iii) A termination of the Executive's employment without Cause shall be
effected in accordance with the following procedures. The Company shall give the
Executive written notice ("Notice of Termination without Cause") of its
intention to terminate the Executive's employment without Cause, stating the
date, time and place of the Special Board Meeting without Cause. The "Special
Board Meeting without Cause" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination without
Cause, that takes place not less than ten and not more than twenty business days
after the Executive receives the Notice of Termination without Cause. The
Executive shall be given an opportunity, together with counsel, to be heard at
the Special Board Meeting without Cause. The Executive's termination without
Cause shall be effective when and if a resolution is duly adopted at the Special
Board Meeting without Cause by affirmative vote of three quarters of the entire
membership of the Board stating that the Executive is terminated without Cause.
(c) GOOD REASON. (i) The Executive may terminate employment for Good
Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with those customarily
associated with the positions to be held by the Executive pursuant
to this Agreement, or any other action by the Company that results
in a diminution in the Executive's position, authority, duties or
responsibilities, other than an isolated, insubstantial and
inadvertent action that is not taken in bad faith and is remedied
by the Company promptly after receipt of notice thereof from the
Executive;
B. any failure by the Company to comply with any provision
of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad
faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
C. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other
than that provided for in paragraph (d) of Section 2 of this
Agreement;
7
D. any purported termination of the Executive's employment
by the Company for a reason or in a manner not expressly permitted
by this Agreement;
E. any failure by the Company to comply with paragraph (c)
of Section 10 of this Agreement; or
F. any other material breach of this Agreement by the
Company that either is not taken in good faith or is not remedied
by the Company promptly after receipt of notice thereof from the
Executive.
(ii) A termination of employment by the Executive for Good Reason
shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in
reasonable detail the specific conduct of the Company that constitutes Good
Reason and the specific provision(s) of this Agreement on which the
Executive relies. A termination of employment by the Executive for Good
Reason shall be effective on the fifth business day following the date when
the Notice of Termination for Good Reason is given, unless the notice sets
forth a later date (which date shall in no event be later than 30 days
after the notice is given).
(iii) A termination of the Executive's employment by the Executive
without Good Reason shall be effected by giving the Company written notice
of the termination.
(d) NO WAIVER. The failure to set forth any fact or circumstance in a
Notice of Termination for Cause or a Notice of Termination for Good Reason shall
not constitute a waiver of the right to assert, and shall not preclude the party
giving notice from asserting, such fact or circumstance in an attempt to enforce
any right under or provision of this Agreement.
(e) DATE OF TERMINATION. The "Date of Termination" means the date of the
Executive's death, the Disability Effective Date, the date on which the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason is effective, or the date on which the
Executive gives the Company notice of a termination of employment without Good
Reason, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN FOR CAUSE,
DEATH OR DISABILITY, OR FOR GOOD REASON. If, during the Employment Period, the
Company terminates the Executive's employment for any reason other than Cause,
death or Disability, or the Executive terminates employment for Good Reason, the
Executive shall, upon termination of employment, cease active participation, and
commence participation as a retiree, in all retirement benefit plans applicable
to similarly situated senior executives, as such plans may be amended from time
to time. In such event, the Executive's benefits under the SERPs, including any
additional accrued benefit under any qualified defined benefit plan which the
Executive will have been precluded from receiving due to the termination
8
of his employment prior to the end of the Employment Period, shall be calculated
as though the Executive had remained employed with the Company pursuant to the
terms of this Agreement and had voluntarily retired at the end of the Employment
Period, but any cashout or annuity conversion of a SERP benefit shall be based
on the Executive's actual age at the time of commencing the benefit. Moreover,
in such event, subject to the terms and conditions of this Agreement, the
Company shall continue to provide the Executive with the compensation and
benefits set forth in paragraphs (a) and (b) of Section 3 as if he had remained
employed by the Company pursuant to this Agreement through the end of the
Employment Period and then retired; provided, that the Incentive Compensation
for such period shall be equal to the maximum Incentive Compensation that the
Executive would have been eligible to earn for such period; provided, further
that in lieu of any further grants of stock-based Incentive Compensation in the
form of options or otherwise, the Executive shall be paid cash equal to the
Black-Scholes value (without regard to any restrictions) of the stock options,
and the fair market value (without regard to any restrictions) of any restricted
stock and other stock-based awards that would otherwise have been granted; and
provided, further, that the Company shall pay to the Executive a sum equal to
the sum of: (a) the maximum value of any and all company matching contributions
or other company contributions which the Executive could have received under any
qualified or nonqualified defined contribution retirement plan, and (b) the
maximum value of the premiums to purchase employee welfare benefits which the
Executive would have received in the form of Company-paid benefits (as measured
by the Company's average plan cost of providing such benefits to such a
participant), which the Executive (and any of his eligible beneficiaries) could
have received had he remained employed pursuant to this Agreement until the end
of the Employment Period. In addition to the foregoing, any restricted stock
outstanding on the Date of Termination and all options outstanding on the Date
of Termination in either case granted by the Company shall remain in effect and
exercisable for the maximum period of years allowed, from the date of the
Executive's actual retirement, under the original terms of the restricted stock
or stock options. Further, any restricted stock and all options granted by the
Company on or after the Effective Time outstanding on the Date of Termination
shall be fully vested and exercisable and shall remain in effect and exercisable
for the maximum period of years allowable, from the date of the Executive's
actual retirement, under the terms of the Company's stock option plan applicable
to a senior executive who is eligible to retire. The payments and benefits
provided pursuant to this paragraph (a) of Section 5 are intended as liquidated
damages for a termination of the Executive's employment by the Company other
than for Cause or Disability or for the actions of the Company leading to a
termination of the Executive's employment by the Executive for Good Reason, and
shall be the sole and exclusive remedy therefor.
(b) DEATH AND DISABILITY. If the Executive's employment is terminated by
reason of the Executive's death or Disability during the Employment Period, the
Company shall pay to the Executive or, in the case of the Executive's death, to
the Executive's designated beneficiaries (or, if there is no such beneficiary,
to the Executive's estate or legal representative), in a lump sum in cash within
30 days after the Date of Termination, the sum of the following amounts (the
"Accrued Obligations"): (1) any portion of the Executive's Annual Base Salary
through the Date of Termination that has not yet been paid; (2) an amount
representing any grants of Incentive
9
Compensation, other than stock options, which have not, prior to the date of
Disability termination or death, resulted in awards of cash or shares for the
period that includes the Date of Termination, computed by assuming that the
amount of all such Incentive Compensation would be equal to the maximum amount
of such Incentive Compensation that the Executive would have been eligible to
earn for such period, and multiplying that amount by a fraction, the numerator
of which is the number of days in such period through the Date of Termination,
and the denominator of which is the total number of days in the relevant period;
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been paid; and (4) any
accrued but unpaid Incentive Compensation and vacation pay; and the Company
shall have no further obligations under this Agreement, except as specified in
Section 6 below, and except as provided under the terms and conditions of any
stock options which are outstanding on such date of Disability termination or
death.
(c) BY THE COMPANY FOR CAUSE; BY THE EXECUTIVE OTHER THAN FOR GOOD REASON.
If the Executive's employment is terminated by the Company for Cause or the
Executive voluntarily terminates employment, other than for Good Reason, during
the Employment Period, the Company shall pay to the Executive in a lump sum in
cash within 30 days of the Date of Termination, (1) any portion of the
Executive's Annual Base Salary through the Date of Termination that has not been
paid; (2) any compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) that has not yet been paid; and (3)
any accrued but unpaid Incentive Compensation and vacation pay; and the Company
shall have no further obligations under this Agreement, except as specified in
Section 6 below.
(d) The Company's obligation to deliver the liquidated damages payments
described in paragraph (a) of this Section 5 shall be contingent on the
Executive delivering to the Company, on or about the Date of Termination, a
legal release in a form acceptable to counsel to the Company, releasing the
Company, its affiliates, and the current and former directors, officers and
employees of the Company, subject to the Company's continuing obligations under
this Agreement, and subject to the Executive's continuing rights under the terms
and conditions of the compensation and benefit plans in which the Executive is a
participant, as such plans may be amended from time to time. Moreover, the
Company's obligation to pay any such liquidated damages shall cease in the event
that the Board determines that the Executive, subsequent to his Termination of
Employment, has either materially breached any covenant of this Agreement which
then remains in force, or violated the terms of any agreement prohibiting
competition by the Executive which may then be in force as applied to the
Executive.
(e) (i) In the event that any payment or benefit received or to be
received by the Executive pursuant to the terms of this agreement (the "Contract
Payments") or of any other plan, arrangement or agreement of the Company (or any
affiliate) ("Other Payments" and, together with the Contract Payments, the
"Payments") would be subject to the excise tax (the "Excise Tax") imposed by
Section 4999 of the Code as determined as provided below, the Company shall pay
to the Executive, at the time specified in Section 5(e)(ii) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of the
10
Excise Tax on Payments and any federal, state and local income tax and the
Excise Tax upon the Gross-Up Payment, and any interest, penalties or additions
to tax payable by the Executive with respect thereto, shall be equal to the
total present value (using the applicable federal rate (as defined in Section
1274(d) of the Code in such calculation) of the Payments at the time such
Payments are to be made. For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amounts of such Excise Tax, (1) the
total amount of the Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of independent
counsel selected by the Company and reasonably acceptable to the Executive
("Independent Counsel"), a Payment (in whole or in part) does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the Code, or
such "excess parachute payments" (in whole or in part) are not subject to the
Excise Tax, (2) the amount of the Payments that shall be treated as subject to
the Excise Tax shall be equal to the lesser of (A) the total amount of the
Payments or (B) the amount of "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code (after applying clause (1) hereof), and (3) the
value of any noncash benefits or any deferred payment or benefit shall be
determined by Independent Counsel in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rates of federal income taxation applicable to the
individuals in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rates of taxation
applicable to individuals as are in effect in the state and locality of the
Executive's residence in the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
(ii) The Gross-Up Payments provided for in Section 5(e)(i) hereof shall be
made upon the earlier of (i) the payment to the Executive of any Payment or (ii)
the imposition upon the Executive or payment by the Executive of any Excise Tax.
(iii) If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding or the opinion of Independent Counsel
that the Excise Tax is less than the amount taken into account under Section
5(e)(i) hereof, the Executive shall repay to the Company within thirty (30) days
of the Executive's receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income tax imposed on the Gross-Up Payment being repaid by the Executive
if such repayment results in a reduction in Excise Tax or a federal, state and
local income tax deduction) plus any interest received by the Executive on the
amount of such repayment. If it is established pursuant to a final determination
of a court or an Internal Revenue Service proceeding or the opinion of
Independent Counsel that the Excise Tax exceeds the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at
11
the time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess within thirty (30) days of the Company's
receipt of notice of such final determination or opinion.
(iv) In the event of any change in, or further interpretation of, sections
280G or 4999 of the Code and the regulations promulgated thereunder, the
Executive shall be entitled, by written notice to the Company, to request an
opinion of Independent Counsel regarding the application of such change to any
of the foregoing, and the Company shall use its best efforts to cause such
opinion to be rendered as promptly as practicable. All fees and expenses of
Independent Counsel incurred in connection with this agreement shall be borne by
the Company.
6. 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
for which the Executive may qualify, nor, subject to paragraph (f) of Section
11, shall anything in this Agreement 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. Vested benefits and other amounts that the
Executive is otherwise entitled to receive under the Incentive Compensation, the
SERPS, or any other plan, policy, practice or program of, or any contract of
agreement with, the Company or any of its affiliated companies on or after the
Date of Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that 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 paragraph (a) of Section 5 with respect to benefits
described in clause (B) of paragraph (c)(iii) of Section 3, such amounts shall
not be reduced, regardless of whether the Executive obtains other employment.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies and
their respective businesses that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Executive's violation of this
Section 8) ("Confidential Information"). The Executive shall not communicate,
divulge or disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior written consent
of the Company or as otherwise required by law or legal process.
12
9. ATTORNEYS' FEES. The Company agrees to pay, as incurred, to the
fullest extent permitted by law, all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome) by
the Company, the Executive or others of the validity or enforceability of or
liability under, or otherwise involving, any provision of this Agreement,
together with interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
10. 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 shall 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 expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would have been required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean both the Company as
defined above and any such successor that assumes and agrees to perform this
Agreement, by operation of law or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, 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 except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
13
(b) All notices and other communications under this Agreement 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:
Xx. Xxxxxxx X. Xxxxx
0000 Xxxx'x Xxxx Xxxx
00-X
Xxxx Xxxxxx, Xxxxxxxxxxxx 00000
If to the Company:
Xxxx Atlantic Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 11. Notices and communications
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. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert, any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 4 of this
Agreement) shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
14
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof. Nothing in this Agreement is intended to nullify any other obligation of
the Executive under any agreement or benefit plan which prohibits the disclosure
of proprietary information or prohibits the Executive from engaging in
competitive activities against the Company.
(g) The Company shall cause to be maintained through January 1, 1999
Section 5.11 of the Bylaws of the Company which requires (among other things) a
three-quarters vote of the entire Board in order to amend or modify the terms of
this Agreement.
(h) The rights and benefits of the Executive under this Agreement may not
be anticipated, assigned, alienated or subject to attachment, garnishment, levy,
execution or other legal or equitable process except as required by law. Any
attempt by the Executive to anticipate, alienate, assign, sell, transfer,
pledge, encumber or charge the same shall be void. Payments hereunder shall not
be considered assets of the Executive in the event of insolvency or bankruptcy.
(i) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
15
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of 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.
------------------------------------------------
Xxxxxxx X. Xxxxx
Xxxx Atlantic Corporation
By
----------------------------------------------
16
