Exhibit 10.4
[LETTERHEAD]
August 4, 2003
Named Executive
Reference is hereby made to that certain Employment Agreement between
ResortQuest International, Inc. (the "COMPANY") and you dated as of October 6,
2002 ("EMPLOYMENT AGREEMENT"). All capitalized terms not defined herein shall
have the meaning ascribed to them in the Employment Agreement.
As you know, effective June 15, 2003, the Company is relocating its headquarters
to Destin, Florida. The board of directors of the Company believes that this
relocation is in the best interest of the Company and its shareholders and will
ultimately maximize the return to the shareholders. In connection with this
relocation, the board of directors has requested that you relocate to Destin,
Florida. The board of directors acknowledges the personal sacrifice that you are
making to relocate your family to Destin, Florida and desires to compensate you
in the event that your employment is terminated in connection with a Change of
Control that occurs within one year of your relocation.
Therefore, if at any time during the period commencing on June 15, 2003 and
ending on June 15, 2004 (the "CHANGE OF CONTROL PERIOD"), following a Change of
Control, your employment is terminated by the Company Without Cause or by you
for Good Reason, in addition to the compensation that you are entitled to
receive pursuant to Section 8(b) of your Employment Agreement, the Company will
pay you an additional amount equal to one and one-half times your Base Salary
(the "RELOCATION PAYMENT"). Such payment will be paid in full in cash by the
Company within fifteen (15) days of the date of termination (or such later date
as is necessary for you to execute the release described in Section 14(e) of the
Employment Agreement (the "RELEASE")). Also, if your employment is terminated by
the Company Without Cause at any time during the one hundred fifty (150)-day
period prior to a Change of Control, provided such Change of Control occurs
during the Change of Control Period, the Company will pay you the Relocation
Payment. Such payment will be paid in full in cash by the Company within fifteen
(15) days of the closing date of the transaction giving rise to the Change of
Control (or such later date as is necessary for you to execute the Release).
Finally, your Employment Agreement shall be amended to add to Section 8, a new
provision (c) that reads as follows:
"(c) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will
be imposed on Executive under section 4999 of the Internal Revenue Code of 1986,
as amended (the "CODE") as a result of Executive's receipt of the monies to be
paid to Executive as a result of Executive's termination of employment Without
Cause or for Good Reason pursuant to Section 7(e) or 8(b) of this Agreement (the
"BENEFITS"), the Company shall indemnify Executive and hold him harmless against
all claims, losses, damages, penalties, expenses, interest, and Excise Taxes. To
effect this indemnification, the Company shall pay to Executive the Additional
Amount which is sufficient to indemnify and hold Executive harmless from the
application of Code sections 280G and 4999, including the amount of (i) the
Excise Tax that will be imposed on Executive under section 4999 of the Code with
respect to the Benefits; (ii) the additional (A) Excise Tax under section 4999
of the Code, (B) hospital insurance tax under section 3111(b) of the Code and
(C) federal, state and local income taxes for which Executive is or will be
liable on account of the payment of the amount described in subitem (i); and
(iii) the further excise, hospital insurance and income taxes for which
Executive is or will be liable on account of the payment of the amount described
in subitem (ii) and this subitem (iii) and any other indemnification payment
under this Agreement. The Additional Amount shall be calculated and paid to
Executive at the time that the Benefits are paid to Executive. In calculating
the Additional Amount, the highest marginal rates of federal and applicable
state and local income taxes applicable to individuals and in effect for the
year in which the termination of Executive's employment occurs shall be used.
Nothing in this paragraph shall give Executive the right to receive
indemnification from the Company for federal, state or local income taxes or
hospital insurance taxes payable solely as a result of Executive's receipt of
(a) the Benefits, or (b) any additional payment, benefit or compensation other
than the Additional Amount. As specified in items (ii) and (iii), above, all
income, hospital insurance and additional Excise Taxes resulting from additional
compensation in the form of the Excise Tax payment specified in item (i), above,
shall be paid to Executive. For the purposes of this Section: (A) "ADDITIONAL
AMOUNT" means the amount the Company shall pay to Executive in order to
indemnify Executive against all claims, losses, damages, penalties, expenses,
interest, and Excise Taxes (including additional taxes on such Additional
Amount) incurred by Executive as a result of Executive receiving the Benefits as
further described in Sections 7(e) and 8(b) of this Agreement; (B) "EXCESS
PARACHUTE PAYMENTS" has the meaning set forth in Section 280G of the Code, and
(C) "EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant to
Code section 4999.
(i) The determination of whether the Executive shall be
entitled to the Additional Amount as provided in this Section 8(c) and
the calculation of the Additional Amount shall be made at the Company's
expense by an accounting firm selected by the Company from among the
four largest accounting firms in the United States (the "ACCOUNTING
FIRM"). The Accounting Firm shall provide its determination (the
"DETERMINATION"), together with detailed supporting calculations and
documentation to the Company and the Executive within ten (10) days of
the date of termination of employment. If the Accounting Firm
determines that no Excise Tax is payable by the Executive with respect
to the Benefits, it shall furnish the Executive with an opinion
reasonably acceptable to the Executive that no Excise Tax will be
imposed with respect to any such payments and, absent manifest error,
such Determination shall be binding, final and conclusive upon the
Company and the Executive. If the Accounting Firm determines that an
Excise Tax would be payable, the Company shall pay the Executive the
Additional Amount calculated by the Accounting Firm in the
Determination which Determination shall be binding, final and
conclusive upon the Company and Executive.
(ii) The provisions of this Section 8(c) are illustrated by
the following example:
Assume that the Benefits result in a total federal, state and
local income tax and hospital insurance tax liability of $180,000; and
an Excise Tax liability under Code section 4999 of $70,000. Under such
circumstances, the Executive is solely responsible for the $180,000
income and hospital insurance tax liability; and the Company must pay
to the Executive $70,000, plus an amount necessary to indemnify the
Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000
payment to the Executive and from all further indemnification to the
Executive of taxes attributable to the initial $70,000 payment.
(iii) As a result of the uncertainty in the application of
Sections 280G and 4999 of the Code at the time of the Determination, it
is possible that payment of an Additional Amount which will not have
been paid by the Company should have been made ("UNDERPAYMENT") or
payment of an Additional Amount will have been made by the Company
which should not have been made ("OVERPAYMENT"), consistent with the
calculations required to be made hereunder. In the event that Executive
thereafter is required to make payment of any Excise Tax or additional
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code)
shall be promptly paid by the Company to or for the benefit of
Executive. In the event the amount of the Gross-Up Payment exceeds the
amount necessary to reimburse Executive for the Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has
been made and any such Overpayment shall be promptly paid by Executive
(to the extent he has received a refund if the applicable Excise Tax
has been paid to the Internal Revenue Service) to or for the benefit of
the Company. Executive shall cooperate, to the extent his expenses are
fully reimbursed by the Company, with any reasonable requests by the
Company in connection with any contest or disputes with the Internal
Revenue Service in connection with the Excise Tax."
Except as set forth herein, all other provisions of your Employment Agreement
will remain in full force and effect. If you are in agreement with the terms of
this Letter Agreement, please execute the copy provided and return it to the
Company.
Very truly yours,
RESORTQUEST INTERNATIONAL, INC.
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AGREED TO AND
ACKNOWLEDGED BY:
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X. Xxxxxxxx Xxxxxxx
