Exhibit 10(a)
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of January 19, 2001 by and between Xxx
Xxxxxxxx Xxxxxxx, a Delaware corporation (together with its successors and
assigns permitted under this Agreement, the "Company"), and Xxxxx X. Xxxxx (the
"Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive and to enter into an
agreement embodying the terms of such employment (this "Agreement") and the
Executive desires to enter into this Agreement and to accept such employment,
subject to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
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(a) "Affiliate" of a specified person or entity shall mean a
person or entity that directly or indirectly controls, is controlled by, or is
under common control with the person or entity specified.
(b) "Base Salary" shall mean the annualized salary provided for in
Section 4 below or any increased salary granted to the Executive pursuant to
Section 4.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Bonus Payment Amount" shall mean the amount actually paid to
the Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or
any comparable provision of any successor annual bonus plan.
(e) "Cause" shall mean:
(i) the Executive is convicted of, or pleads guilty
or nolo contendere to, a felony or of any crime involving moral turpitude; or
(ii) the Executive is guilty of willful gross neglect
in carrying out his duties under this Agreement or of willful gross misconduct
that results, or could reasonably be expected to result, in either case, in
material harm to the business or reputation of the Company, unless, in either
case, the Executive acted, or failed to act, in a good faith belief that such
act or failure to act was in, or not contrary to, the best interests of the
Company.
(f) "Change of Control" shall mean
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then-outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or (B)
the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that, for purposes
of this Section 1(f)(i), the following acquisitions of Outstanding Company
Common Stock or Outstanding Company Voting Securities shall not constitute a
Change of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any Affiliated
Company or (iv) any acquisition by any corporation pursuant to a transaction
that is excluded from Section 1(f)(iii) because it complies with Sections
l(f)(iii)(A), l(f)(iii)(B) and l(f)(iii)(C).
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board.
(iii) Consummation of a reorganization, merger,
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination;
or
(iv) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(g) "Change of Control Effective Date" shall mean the first date
on which a Change of Control occurs. Notwithstanding anything in this Agreement
to the contrary, if a Change of Control occurs and if the Executive's employment
with the Company is terminated prior to a Change of Control, and if it is
reasonably demonstrated by the Executive that such termination of employment (1)
was at the request of a third party that has taken steps reasonably calculated
to effect a Change of Control or (2) otherwise arose in connection with or
anticipation of a Change of Control, then "Change of Control Effective Date"
means the date immediately prior to the date of such termination of employment.
(h) "Commencement Date" shall be January 19, 2001.
(i) "Disability" shall mean the Executive's inability, due to
physical or mental incapacity, to substantially perform his duties and
responsibilities under this Agreement for a period of six consecutive months as
determined by a medical doctor selected by the Company and the Executive. If the
Parties cannot agree on a medical doctor, each Party shall select a medical
doctor and the two doctors shall select a third who shall be the approved
medical doctor for this purpose.
(j) "Fair Market Value", when used with respect to the value of a
security on a particular date, shall mean (A) the average of the high and low
trading prices of the security on the principal national securities exchange or
national market system on which the security is then listed or traded, in each
case during normal business hours on such date or, if such date is not a trading
day, on the most recent trading day that precedes such date or (B) if the
security is not listed or traded on a national market system or national
securities exchange as of such date, then the value as agreed by the Parties, or
in the absence of such agreement, fair market value as determined by an
independent appraiser on a going forward basis, determined without discount for
transfer restrictions, lack of liquidity, minority status, or similar factors.
For purposes of this Section 1(j), an "independent appraiser" is a nationally
recognized, independent investment banking or accounting firm that has relevant
appraisal experience and that is agreed upon by both Parties.
(k) "Good Reason" shall mean the occurrence of any of the
following events without the prior written consent of the Executive:
(i) a reduction in the Executive's then current Base
Salary or target bonus opportunity as a percentage of Base Salary;
(ii) the taking of any other action by the Company
that would diminish the incentive opportunities of the Executive as required
hereunder;
(iii) the taking of any action by the Company that
would significantly diminish the aggregate value of the
benefits (other than an across-the-board reduction applicable to employees
generally) provided to the Executive under the Company's medical, health,
accident, disability, life insurance, thrift and retirement plans;
(iv) the failure to elect or reelect the Executive to
any of the positions described in Section 3 below or removal of him from any
such position;
(v) a material diminution in the Executive's duties
or the assignment to the Executive of duties which are materially inconsistent
with his duties or which materially impair the Executive's ability to function
as the Chairman and Chief Executive Officer of the Company;
(vi) a change in the reporting structure so that the
Executive reports to someone other than the Board;
(vii) relocation of the Executive's principal place of
employment to a location other than Boston, Massachusetts, or, after the Change
of Control Effective Date, requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to such Change
of Control Effective Date;
(viii) a material breach by the Company of any provision
of this Agreement or the stock option agreement the form of which is attached
hereto as Exhibit A;
(ix) any purported termination of the Executive's
employment by the Company that is not effected in accordance with Section 14(b),
Section 14(c) or Section 14(d) (relating, respectively, to Disability, Cause or
"without Cause" terminations); or
(x) the failure of the Company to obtain the
assumption in writing of its obligation to perform this
Agreement by any successor to all or substantially all of the assets of the
Company within 15 days after a merger, consolidation, sale or similar
transaction.
After the Change of Control Effective Date, any good faith determination of Good
Reason by the Executive shall be conclusive.
(l) "Highest Annual Bonus" shall mean an amount equal to the
product of (i) the Executive's Base Salary at the date of termination and (ii)
the Highest Annual Bonus Percentage.
(m) "Highest Annual Bonus Percentage" shall mean the higher of (i)
the Executive's Recent Annual Bonus Percentage and (ii) one-hundred percent
(100%).
(n) "Pro Rata" shall mean a fraction, the numerator of which is
the number of days that the Executive was employed in the applicable performance
period and the denominator of which shall be the number of days in the
applicable performance period.
(o) "Recent Annual Bonus Percentage" shall mean the highest actual
annual bonus percentage awarded to the Executive under the Company's annual
incentive plans, or any comparable bonus under any predecessor or successor
plan, for the last three full fiscal years (or such lesser number of years that
the Executive has been employed) prior to the Change of Control Effective Date.
(p) "Term of Employment" shall mean the period specified in
Section 2 below (including any extension as provided therein).
2. Term of Employment.
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The Term of Employment shall begin as of the Commencement Date,
and shall extend until January 19, 2004, with automatic one-year extensions on
each anniversary of the Commencement Date, commencing with the first
anniversary, unless either Party notifies the other at least 90 days before such
anniversary that the Term of Employment is not to so extend. Notwithstanding the
foregoing, the Term of Employment shall end on the date on which the Executive's
employment is earlier terminated by either Party in accordance with the
provisions of Section 14.
3. Position, Duties and Responsibilities.
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(a) The Executive shall serve as the Chairman of the Board and
Chief Executive Officer of the Company and shall, subject to the following
sentence, be responsible for the general management of the affairs of the
Company. The Executive shall assume his responsibilities as Chief Executive
Officer effective February 12, 2001. The Executive shall be a member of the
Board during the Term of Employment and the Board shall designate the Executive
as its Chairman. The Executive, in carrying out his duties under this Agreement,
shall report to the Board. During the Term of Employment, the Executive shall
devote substantially all of his business time and attention to the business and
affairs of the Company.
(b) Nothing herein shall preclude the Executive from (i) serving
on the boards of directors of a reasonable number of other corporations with the
concurrence of the Board (which approval shall not be unreasonably withheld),
(ii) serving on the boards of a reasonable number of trade associations and/or
charitable organizations, (iii) engaging in charitable activities and community
affairs, and (iv) managing his personal investments and affairs, provided that
such activities set forth in this Section 3(b) do not conflict or materially
interfere with the effective discharge of his duties and responsibilities under
Section 3(a).
4. Base Salary.
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During the Term of Employment, the Executive shall be paid a Base
Salary, payable in accordance with the regular payroll practices of the Company,
of $1 million per year. The Base Salary shall be reviewed annually for any
increase in the discretion of the Personnel Committee of the Board.
5. Annual Incentive Award.
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During the Term of Employment, the Executive shall have a target
bonus opportunity each year equal to 100% of Base Salary, payable in that amount
if the performance goals established for the relevant year are met. If such
performance goals are exceeded, the Executive shall receive a larger amount of
up to 200% of Base Salary. For the year 2001, Executive's minimum award shall be
equal to target, determined on a Pro Rata basis. The performance goals for each
year shall be established by the Personnel Committee in consultation with the
Executive. The Executive shall be paid his annual incentive awards no later than
the date other senior executives of the Company are paid their annual incentive
awards and in no event later than 90 days following the last day of the fiscal
year in respect of which the annual incentive award is being paid. The Company
may, but shall not be required to, implement the foregoing pursuant to a
shareholder-approved bonus plan or arrangement that satisfies the requirements
for exemption from the limitation on deductibility imposed by Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") that is set forth in
Section 162(m)(4)(C) of the Code.
Notwithstanding the foregoing, for each fiscal year of the Company which ends in
the two-year period following the Change in Control Effective Date, the
Executive's award shall be not less than the amount determined by multiplying
his Base Salary for such year by the Recent Annual Bonus Percentage.
6. Sign-on Arrangements.
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(a) Cash Sign-on Bonus. As soon as practicable following the
Commencement Date, the Company shall pay the Executive a cash bonus of $250,000.
(b) Stock Option Grant. As of the Commencement Date the
Company shall grant the Executive a ten-year option to purchase 2 million shares
of Xxx Xxxxxxxx Xxxxxxx common stock, in the form attached hereto as Exhibit A.
7. Additional Long-Term Incentive Awards.
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(a) Stock Options. The Executive shall receive a minimum stock
option grant of 650,000 shares, subject to adjustment as provided in the next
paragraph, in each of 2001, 2002 and 2003. The grants shall be made no later
than the date on which the first grant of options is made to the Company's
senior executives generally for such year, but in no event later than December
31. The grants shall be made pursuant to Xxx Xxxxxxxx Xxxxxxx 1971 Stock Option
Plan (the "Plan") or successor plan (if any) and contain the terms and
conditions set forth in Exhibit B attached hereto. In the event there is no plan
in place under which the options can be granted, the Executive's grants shall be
made substantially in the form attached hereto as Exhibit A, except that the
vesting schedule shall be as set forth in Exhibit B.
If, before the grant of any of the options provided for in this
Section 7(a) there occurs an event described in Section 9 of the Plan (or in the
comparable section of a successor plan), the number and kind of shares to be
granted pursuant to such options shall be adjusted to the extent determined to
be appropriate by the Board, in a manner consistent with the adjustments made to
outstanding stock options held by Executive (if any) and by other senior-level
executives of the Company, in order to preserve the value of the options.
(b) Ongoing Term Incentive Awards. The Executive shall be eligible
to participate in any long-term incentive program that may hereafter be made
available to other senior-level executives generally; provided, that the
Executive's participation therein shall take into account the options to be
granted to him pursuant to Section 7(a) hereof.
8. Stock Purchase.
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Executive agrees to buy $1 million in Xxx Xxxxxxxx Xxxxxxx common
stock with his own funds from the Company on the Commencement Date at a price
per share equal to the Fair Market Value on the Commencement Date, with payment
to be made by the Executive no later than the close of business of the Company
on January 26, 2001 and to hold such stock for a period of no less than the
lesser of three years or until the date of termination of his employment.
9. Employee Benefit Programs.
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During the Term of Employment, the Executive shall be entitled to
participate in all employee pension and welfare benefit plans, programs and
arrangements made available to the Company's senior-level executives or to its
employees generally on the same terms and conditions as other senior-level
executives, as such plans, programs or arrangements may be in effect from time
to time, including, without limitation, pension, profit sharing, savings, estate
preservation and other retirement plans or programs, 401(k), medical, dental,
hospitalization, short-term and long-term disability and life insurance plans,
accidental death and dismemberment protection, travel accident insurance, and
all other pension or retirement plans or programs and employee welfare benefit
plans or programs that may be sponsored by the Company from time to time,
including any plans or programs that supplement the above-listed types of plans
or programs, whether funded or unfunded. Company-provided life insurance will be
no less than 300% of Base Salary. The Executive's participation shall be based
on, and the calculation of all benefits shall be based on, the assumptions that
the Executive has met all service-period and other requirements for such
participation. The Executive shall be entitled to six weeks paid vacation per
calendar year of employment. The Executive agrees to cooperate with any required
eligibility procedures with respect to such plans, programs and arrangements,
including without limitation customary medical underwriting procedures.
10. Supplemental Pension.
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(a) Following any termination of his employment with the Company
other than by the Company for Cause or as a result of his death, the Executive
shall be entitled to receive a supplemental pension benefit with annual payments
equal to five percent (5%) of his Average Final Annual Compensation (as defined
below) multiplied by his full and partial years of service with the Company
(including any additional years of credited service pursuant to Sections 14(d)
and 15(c)); provided however, that the maximum annual pension to which the
Executive shall be entitled shall be 50% of his Average Final Annual
Compensation. For this purpose, "Average Final Annual Compensation" shall be
defined as the Executive's average cash compensation for the 36 consecutive
months of highest cash compensation or such shorter period as the Executive has
been employed by the Company, if the Executive has been employed for less than
36 months with the Company. Cash compensation shall include all salary and
bonuses earned in respect of such 36-month period, regardless of when paid. The
supplemental pension shall be fully vested and shall be paid monthly with the
first payment to be made at the beginning of the first month following the
termination of the Executive's employment hereunder. The Executive's entitlement
to the supplemental pension benefit (apart from the determination of the amount
of the benefit as set forth in the first sentence) shall apply without regard to
the period of the Executive's employment with the Company.
(b) If the Executive should die with a spouse surviving him after
he has commenced receiving a benefit under this Section 10 (or would have
commenced receiving a benefit but for the offset provided under Section 10(c)),
the spouse's benefit, payable monthly, shall be determined in accordance with an
election to be made by the Executive prior to the commencement of the
supplemental pension benefit. The post-retirement benefit provided the spouse
shall result in the normal actuarial discount applied to a joint and survivor
benefit pursuant to the Company's tax-qualified pension plan.
(c) Notwithstanding the foregoing, the supplemental pension
benefit (including a spouse's benefit) determined in accordance with this
Section 10 shall be offset (but not below zero) by any pension benefit
(including a survivor's benefit) or long-term disability benefit received by the
Executive (or pension or survivor benefit received by the spouse) under any of
the Company's defined benefit pension or long-term disability benefit plans but
shall not be offset by any other pension or retirement benefit paid by any prior
employer of the Executive.
11. Perquisites.
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The Executive shall be entitled to perquisites on the same basis
as provided to other senior level executives and, in any event, shall be
entitled to have the Company provide the following:
(a) a car and driver for business purposes, including
commutation, as provided in Section 13, and as needed or required for security
purposes;
(b) reimbursement of tax and financial counseling fees up to
$15,000 per year;
(c) a residential security system;
(d) membership and annual fees for two luncheon clubs; and
(e) an annual physical by the doctor of his choice, including
gross-up for any tax liabilities the Executive incurs in respect to the
provision of such annual physical.
12. Aircraft Travel.
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For security purposes, the Executive shall be required to use, at
Company expense, private aircraft for travel in North America including, without
limitation, his weekly commutation as provided in Section 13. Outside North
America he shall be entitled to first class air travel.
13. Reimbursement of Business and Other Expenses; Commutation;
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Relocation.
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The Executive is authorized to incur reasonable expenses in
connection with carrying out his duties and responsibilities under this
Agreement and the Company shall promptly reimburse him for all such expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy. The Company shall pay
legal fees and expenses up to $100,000 incurred by the Executive in connection
with the negotiation and implementation of the Executive's employment
arrangements with the Company, including, without limitation, gross-up for any
tax liabilities the Executive incurs with respect to such payments.
The Executive shall be under no obligation to relocate his
personal residence to the Boston area. The Company shall provide and maintain
for the Executive a 2-room apartment with full hotel services in the Boston area
mutually acceptable to the Company and the Executive and pay any costs
associated with the Executive's weekly commuting from Boston to the Executive's
residence in Rye, New York including, without limitation, gross-up for any tax
liabilities Executive incurs with respect to commutation costs.
In the event the Executive relocates from the New York area to the
Boston area, the Company will pay all costs associated with his relocation,
including, without limitation, gross-up for any tax liabilities Executive incurs
with respect to such relocation payments or reimbursements.
14. Termination of Employment.
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(a) Termination Due to Death. In the event that the
Executive's employment hereunder is terminated due to his death, his estate or
his beneficiaries, as the case may be, shall be entitled to the following:
(i) Base Salary through the date of his death;
(ii) a Pro-Rata annual incentive award for the year in
which the Executive's death occurs based on the target bonus for the year of
termination, payable promptly following his death; and
(iii) full vesting and exercisability of all
outstanding stock options which shall remain exercisable for a period equal to
the lesser of one year and the remainder of their originally scheduled terms.
(b) Termination Due to Disability. In the event that the
Executive's employment hereunder is terminated by either Party hereto due to the
Executive's Disability, he shall be entitled to the following:
(i) Disability benefits provided in accordance with
the long-term disability program in effect for senior executives at the Company;
provided, however, in no event shall such benefits provide the Executive less
than 50% of his then Base Salary to age 65;
(ii) Base Salary through the end of the month before
the month in which Disability benefits commence;
(iii) a Pro-Rata annual incentive award for the year in
which the termination occurs based on the target bonus for the year of
termination, payable promptly following the termination of his employment;
(iv) full vesting and exercisability of all
outstanding options which shall remain exercisable for a period
equal to the lesser of one year and the remainder of their originally scheduled
terms; and
(v) continued participation in all medical, dental,
vision and hospitalization insurance coverage and benefits and in all other
employee welfare benefit plans or programs in which he was participating on the
date of the termination of his employment for a period of 24 months following
such date, on the same terms and conditions as if he had remained employed by
the Company; provided that to the extent that the Company's
plans do not permit continuation of the Executive's participation throughout
such period, the Company shall provide the Executive, no less frequently than
quarterly in advance, with an amount which, after taxes, is sufficient for him
to purchase equivalent benefits.
In no event shall a termination of the Executive's employment
hereunder for Disability occur until the Party terminating his employment gives
written notice to the other Party in accordance with Section 28 below.
(c) Termination by the Company for Cause.
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(i) A termination for Cause shall not take effect
unless the provisions of this subclause (i) are complied
with. The Executive shall be given written notice by the Board of the intention
to terminate him for Cause, such notice (A) to state in detail the particular
act or acts or failure or failures to act that constitute the grounds on which
the proposed termination for Cause is based and (B) to be given within 60 days
of the Board's learning of such act or acts or failure or failures to act. In
the event the proposed termination is based on subclause (ii) of Section 1(d)
above, the Executive shall have ten calendar days after the date that such
written notice has been given to the Executive in which to cure such conduct. If
he fails to cure such conduct, the Executive shall then be entitled to a hearing
before the Board, and, thereafter, upon a determination by affirmative vote of
no fewer than three-quarters of the members of the Board that Cause exists, he
shall be terminated for Cause.
(ii) In the event the Company terminates the
Executive's employment hereunder for Cause:
(A) he shall be entitled to Base Salary
through the date of the termination; and
(B) all stock options shall be forfeited.
(d) Termination without Cause or Termination for Good Reason.
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In the event (x) the Executive's employment hereunder is
terminated by the Company without Cause, other than due to Disability or death,
or (y) the Executive terminates his employment for Good Reason hereunder at his
initiative within 60 days following the occurrence of a Good Reason which has
not been cured by the Company within 20 calendar days of receipt of notice
thereof from the Executive, the Executive shall be entitled to the following
benefits:
(i) Base Salary through the date of termination;
(ii) a Pro-Rata annual incentive award for the year of
termination, based on the target bonus for such year, payable promptly following
such termination;
(iii) a lump sum payment in an amount equal to two
times the Executive's Base Salary, determined as provided in the last sentence
of this Section 14(d), payable promptly following such termination;
(iv) a lump sum payment in an amount equal to two
times the Executive's target annual incentive award for
the year of termination, payable promptly following such termination;
(v) all outstanding stock options shall become fully
vested and exercisable and shall remain exercisable for a period equal to the
lesser of five years and the remainder of their originally scheduled terms;
(vi) two additional years of service for the purpose
of determining the supplemental pension benefit pursuant to Section 10;
provided, however, that the total number of years of service taken into account
in determining such benefit shall in no event exceed
ten (10); and
(vii) continued participation in all medical, dental,
vision and hospitalization insurance coverage and benefits and in all other
employee and senior-level executive welfare benefit plans, programs and
arrangements in which he was participating on the date of
the termination of his employment, on the same terms and conditions as if he had
remained employed by the Company, for a period equal to 24 months following the
termination of his employment; provided, however, that if the Executive becomes
re-employed 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 above shall be secondary to those provided under such
other plan during such applicable period of eligibility, provided that, to the
extent that the Company's plans, programs and arrangements do not permit such
continuation of the Executive's participation following his termination, the
Company shall provide the Executive, no less frequently than quarterly in
advance with an amount which, after taxes, is sufficient for him to purchase
equivalent benefits.
For purposes of Section 14(d)(iv) above, Base Salary shall be determined by the
Base Salary at the annualized rate in effect on the date of termination of the
Executive's employment, provided however, if, prior to the termination of the
Executive's employment pursuant to this Section 14(d), the Base Salary has been
reduced without the Executive's consent, the Base Salary in effect on the date
of termination of the Executive's employment shall be deemed to be the Base
Salary as in effect prior to such reduction.
(e) Voluntary Termination. In the event that Executive terminates
his employment hereunder on his own initiative, other than a termination in
accordance with Section 14(a), 14(b) or 14(d) (relating respectively to death,
Disability and "without Cause" terminations) (except to the extent otherwise
provided in Section 14(f)), he shall be entitled to:
(i) Base Salary through the date of termination; and
(ii) the lesser of 90 days and the remainder of the
regularly scheduled option term to exercise vested
stock options and all unvested options shall be forfeited.
A voluntary termination by the Executive is not a breach of this Agreement.
(f) Retirement. The Executive shall be entitled to retire, for
purposes of the stock options granted pursuant to Section 6(b) and 7(a) hereof,
by voluntarily terminating his employment on or after the third anniversary of
the Commencement Date. Upon such termination for retirement, any stock options
which are not then vested shall become exercisable and all stock options shall
remain exercisable for a period equal to the lesser of the remainder of the
originally scheduled term and five years.
(g) Other Termination Benefits. In the case of any
termination of his employment with the Company, the Executive or his estate,
where applicable, shall also be entitled to prompt payment or provision of:
(i) the supplemental pension benefit described in
Section 10 (other than following a termination for Cause or death);
(ii) unless Executive has been terminated for Cause,
the balance of any incentive awards due for performance periods which have been
completed, but which have not yet been paid (subject to deferral of payments to
the extent the Executive has elected, irrevocably, such deferral);
(iii) any expense reimbursements due the Executive; and
(iv) other benefits, including senior level executive
benefits, if any, in accordance with applicable plans, programs and arrangements
of the Company.
(h) No Mitigation; No Offset. In the event of any termination of
his employment hereunder, the Executive shall be under no obligation to seek
other employment and except in the event of a termination by the Company for
Cause there shall be no offset against amounts or benefits due the Executive
under this Agreement on account of any claims asserted by the Company or any
remuneration or benefits attributable to any subsequent employment that he may
obtain, except to the extent set forth in Section 14(d)(vii).
(i) Nature of Payments. Any amounts due under this Section
14 are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
(j) Resignation. Notwithstanding any other provision of this
Agreement, upon the termination of the Executive's employment for any reason,
unless otherwise requested by the Board he shall immediately resign from the
Board and from all boards of directors of subsidiaries and Affiliates of the
Company of which he may be a member. The Executive hereby agrees to execute any
and all documentation of such resignations upon request by the Company, but he
shall be treated for all purposes as having so resigned upon termination of his
employment, regardless of when or whether he executes any such documentation.
(k) Cooperation in Litigation. For a period of two years following
the termination of his employment, upon the reasonable request by the Company,
the Executive shall cooperate in any litigation or other dispute relating to any
matter in which he was involved during his employment with the Company;
provided, that the Executive shall not be obligated to spend time and/or travel
in connection with such cooperation to the extent it would interfere with his
other commitments and obligations. The Company shall reimburse the Executive for
all expenses he reasonably incurs in so cooperating, and shall pay the Executive
a mutually agreed fee for his time spent in such cooperation (including without
limitation any travel time); provided, that if the Executive and the Company
cannot agree on such fee, they shall mutually select an independent expert to
determine the appropriate amount of such fee based upon prevailing market
practices. The determination of any such independent expert shall be final and
binding, and the fees and expenses of such expert in making such determination
shall be paid by the Company.
15 Change of Control.
-----------------
(a) Notwithstanding any other provision of this Agreement, the
provisions of this Section 15 shall apply if there occurs a Change of Control
during the Term of Employment and the Executive's employment is terminated (i)
during the period from the Change of Control Effective Date through the second
anniversary thereof by the Company, other than for Cause or as a result of the
Executive's Disability or death, or by the Executive for Good Reason, (ii) by
the Executive for any reason during the 30-day period immediately following the
first anniversary of a Change of Control, or (iii) by the Company prior to a
Change of Control, if, in accordance with the definition of Change of Control
Effective Date, it is reasonably demonstrated by the Executive that such
termination of employment (A) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (B) otherwise arose
in connection with or anticipation of a Change of Control.
(b) In the event of a termination of the Executive's employment
described in Section 15(a), then the Executive shall be entitled to the benefits
set forth in Section 14(d), as modified by this Section 15. In lieu of the lump
sum payments provided for in clauses (i), (ii), (iii) and (iv) of Section 14(d),
the Company shall pay to the Executive, in a lump sum in cash within 30 days
after the date of termination, an amount equal to the aggregate of the following
amounts:
(i) the sum of (A) the Executive's Base Salary
through the date of termination to the extent not
theretofore paid, (B) the product of (x) the Highest Annual Bonus 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,
reduced (but not below zero), if the date of termination occurs in the same
fiscal year as the Change of Control, by the Executive's Bonus Payment Amount,
(C) if elected by the Executive, any compensation previously deferred by the
Executive under the Company's Supplemental Savings Plan, Incentive Bonus Plan
and/or Stock Equivalent Unit Plan or any other plan, agreement or arrangement of
the Company (together with any accrued interest or earnings thereon), and (D)
any accrued vacation pay, in each case to the extent not theretofore paid;
(ii) the amount equal to the product of (A) three and
(B) the sum of (x) the Executive's Base Salary and (y) the Executive's Highest
Annual Bonus; and
(iii) if elected by the Executive within 60 days
following execution of this Agreement and prior to the
Change of Control Effective Date, in lieu of and in substitution for the monthly
benefit represented thereby, an amount equal to the lump sum actuarial
equivalent (utilizing the interest rate and mortality table in effect for lump
sum distributions under the Company's tax-qualified pension plan immediately
prior to the Change of Control Effective Date, and determined assuming benefit
commencement as of the date of termination) of that portion (if any) of the
Executive's monthly supplemental pension benefit otherwise payable under Section
10, that accrues as a result of the application of the first sentence of Section
15(c).
(c) In addition, in the event of a termination of the Executive's
employment described in Section 15(a), in lieu of the benefit provided in clause
(vi) of Section 14(d), the Executive shall be entitled to three (3) additional
years of service for the purpose of determining the supplemental pension benefit
pursuant to Section 10; provided, however, that the total number of years of
service taken into account in determining such benefit shall in no event exceed
ten (10).
(d) Finally, in the event of a termination of the Executive's
employment described in Section 15(a), the following additional benefits shall
be provided to the Executive:
(i) for purposes of determining the Executive's eligibility
for retiree benefits pursuant to the Company's welfare plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until three years after the date of termination, provided, however,
that the Executive's commencement of such retiree benefits shall not be any
sooner than the Executive's earliest retirement date under the Company's
Retirement Plan and Supplemental Retirement Plan;
(ii) 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; and
(iii) clause (vii) of Section 14(d) shall be amended by
changing the phrase "24 months" to "36 months".
16 Excise Tax.
----------
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, benefit
or distribution from the Company or its Affiliates to or for the benefit of the
Executive (whether paid or payable, received or receivable, or distributed or
distributable pursuant to the terms of this Agreement, any plan or program of
the Company or its Affiliates or otherwise but determined without regard to any
additional payments required under this Section 16) (the "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code, 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, collectively, the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (the "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 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 Payment.
(b) Subject to the provisions of Section 16(c), all determinations
required to be made under this Section 16, 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 KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that 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 16, 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 that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 16(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 shall be promptly paid by the Company to or for the
benefit of the Executive.
(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 10 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 the Company 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 other 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 16(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 applicable 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 Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income or other 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 provided, further, 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 the
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 16(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 16(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 16(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.
17. Confidentiality; Non-Competition.
--------------------------------
(a) The Executive agrees that he will not at any time during
the Term of Employment or thereafter disclose or use any confidential
information of a proprietary nature relating to the Company or any Affiliate,
and their respective businesses, which information shall have been obtained by
the Executive during the Executive's employment by the Company or any Affiliate.
For this purpose, "confidential information of a proprietary nature" shall
include pricing policies, technical processes, formulae, inventions, research
projects or other information regarding the financial and business affairs of
the Company or any Affiliate that at the time in question have not been
disclosed to the public or within the relevant trade or industry.
Notwithstanding the foregoing provisions of this Section 17, the Executive may
disclose or use any such information (i) as such disclosure or use may be
required or appropriate in the course of his employment with the Company, (ii)
when required by a court of law, by any governmental agency having supervisory
authority over the business of the Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction, or
(iii) with the prior written consent of the Company.
(b) The Executive agrees that at the time of the termination
of his employment with the Company, whether at the instance of the Executive or
the Company, and regardless of the reasons therefor, he will deliver to the
Company, and not keep or deliver to anyone else, any and all notes, files,
memoranda, papers and, in general, any and all physical matter and computer
files containing information, including any and all documents significant to the
conduct of the business of the Company or any subsidiary or Affiliate of the
Company which are in his possession, except for any documents for which the
Company or any subsidiary or Affiliate of the Company has given written consent
to removal at the time of the termination of the Executive's employment and his
personal rolodex, personal files, phone book and similar items.
(c) During the Term of Employment and for a period of two
years following the termination of his employment, the Executive shall not,
other than in the course of performing his duties hereunder during the Term of
Employment or as agreed by the Company in writing, engage in a "Competitive
Business", directly or indirectly, as an individual, partner, shareholder,
director, officer, principal, agent, employee, trustee, consultant, or in any
other relationship or capacity, in any geographic location in which the Company
or any of its Affiliates is engaged in business.
The Executive shall not be deemed to be in violation of this
Section 17(c) from (i) his acquiring, solely as an investment, up to five
percent (5%) of the outstanding equity securities (measured by value) of any
entity, (ii) his becoming a consultant, advisor and/or agent to any entity
providing consulting, investing or other services to any Competitor, so long as
the Executive does not render services or advice, directly or indirectly, to any
Competitor or Affiliate of the Competitor or (iii) his becoming affiliated with
an entity which is not a Competitor which is subsequently acquired by or merged
with a Competitor; provided that following such acquisition or merger, his
duties do not involve any responsibilities with regard to any Competitive
Business.
"Competitive Business" shall mean a business that competes
with a business that (i) was being conducted by the Company or any of its
Affiliates at the time of the Executive's termination, and is being conducted at
the time of the alleged violation, or (ii) the Company or any of its Affiliates
was seeking to conduct, or seriously considering conducting, at the time of the
Executive's termination and the Company or any of its Affiliates is actually
conducting, or which the Company is seeking to conduct or seriously considering
conducting, at the time of the alleged violation. "Competitor" shall mean any
entity which engages in any Competitive Business.
(d) The Executive agrees that for a period of two years
following the termination of his employment, he will not, without the prior
written consent of the Company, directly or indirectly, knowingly solicit or
encourage any officer, employee or consultant of the Company or any of its
subsidiaries to leave the employ of the Company and its subsidiaries.
Notwithstanding the foregoing, the Company agrees that the Executive's (i)
responding to an unsolicited request of an employee of the Company for advice on
employment matters or (ii) responding to an unsolicited request for an
employment reference regarding an employee of the Company shall not by itself be
deemed a violation of this Section 17(d).
(e) The Executive agrees that the Company's remedies at law
would be inadequate in the event of a breach or threatened breach of this
Section 17; accordingly, the Company shall be entitled, in addition to its
rights at law, to seek injunctive and other equitable relief. If the Company
defers or withholds payment of any amount otherwise payable under this Agreement
on the basis of an asserted violation of the provisions of this Section 17, and
it is subsequently finally determined that the Executive did not commit any such
violation, the Company shall promptly pay all such unpaid amounts to the
Executive, together with interest at the applicable federal rate as defined in
Section 1274 of the Code, from the date such payments should have been made
under this Agreement until the date they are actually paid.
18. Resolution of Disputes.
----------------------
Any dispute arising under, or relating to, this Agreement,
any other agreement between Executive and the Company or its Affiliates, the
Executive's employment with the Company or any termination of such employment
shall be resolved by binding arbitration, to be held in Boston, Massachusetts,
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator, including any
injunctive relief, may be entered in any court having jurisdiction thereof. The
Company shall advance to the Executive all reasonable fees, costs and expenses
incurred by him in connection with such arbitration within 20 days after receipt
by the Company of a written request for such advance, subject to repayment by
the Executive thereof, if the arbitrator(s) determines that the Executive had no
reasonable good faith basis for asserting his position with respect to the
dispute in question.
19. Indemnification.
---------------
(a) The Company agrees that if the Executive is made a
party, or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer or employee of the
Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, limited liability
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, the Executive shall be
indemnified and held harmless by the Company to the fullest extent legally
permitted or authorized by the Company's certificate of incorporation or bylaws
or resolutions of the Company's Board of Directors or, if greater, by the laws
of the State of Delaware, against all cost, expense, liability and loss
(including, without limitation, attorney's fees, judgments, fines, ERISA excise
taxes or other liabilities or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and not otherwise received by him from another source, such as
insurance, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of the Executive's heirs and legal
representatives. The Company shall advance to the Executive all costs and
expenses incurred by him in connection with a Proceeding within 20 calendar days
after receipt by the Company of a written request for such advance. Such request
shall include an undertaking by the Executive to repay the amount of such
advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses; provided that the amount of such
obligation to repay shall be limited to the after-tax amount of any such advance
except to the extent the Executive is able to offset such taxes incurred on the
advance by the tax benefit, if any, attributable to a deduction for the
repayment.
(b) Neither the failure of the Company (including its board
of directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 19(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption that the Executive
has not met the applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors'
and officers' liability insurance policy covering the Executive with terms and
conditions no less favorable than the most favorable coverage then applying to
any other present or former director or officer of the Company, both during the
Term and for six years thereafter; provided, that during any periods when such
insurance policy remains in effect but the Executive is not serving as an
officer or director of the Company, such policy shall cover only acts, omissions
and events occurring during his period of service as an officer or director of
the Company.
20. Assignability; Binding Nature.
-----------------------------
This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors, heirs (in the case of
the Executive) and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the business and assets of the Company and such assignee or transferee assumes
the liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it shall take whatever action it reasonably can in order to
cause such assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his rights to compensation and benefits, which may be transferred
only by will or operation of law, except as provided in Section 26.
21. Entire Agreement.
----------------
This Agreement contains the entire understanding and
agreement between the Parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with respect thereto.
22. Representations.
---------------
(a) The Company represents and warrants that (i) it is fully
authorized by action of its Board (and of any other person, entity or body whose
action is required) to enter into this Agreement and to perform its obligations
under it; (ii) the execution, delivery and performance of this Agreement by it
will not violate any applicable law, regulation, order, judgment or decree or
any agreement, plan or corporate governance document to which it is a party or
by which it is bound; and (iii) upon the execution and delivery of this
Agreement by the Parties, this Agreement shall be a valid and binding obligation
of the Company, enforceable against it in accordance with its terms, except to
the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally.
(b) The Executive represents and warrants that (i) he has
the free and unfettered right to enter into this Agreement and to perform his
obligations under it; (ii) to the best of his knowledge, the execution, delivery
and performance of this Agreement by him will not violate any contract or
agreement to which he is a party or by which he is bound; and (iii) upon the
execution and delivery of this Agreement by the Parties, this Agreement shall be
a valid and binding obligation of the Executive, enforceable against him in
accordance with its terms.
23. Amendment or Waiver.
-------------------
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by the Executive and an authorized
officer of the Company. No waiver by either Party of any breach by the other
Party of any condition or provision contained in this Agreement to be performed
by such other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by the Executive or an authorized officer of the
Company, as the case may be.
24. Severability.
------------
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by law
so as to achieve the purposes of this Agreement.
25. Survivorship.
------------
Except as otherwise expressly set forth in this Agreement,
upon the expiration of the Term of Employment, the respective rights and
obligations of the Parties shall survive such expiration to the extent necessary
to carry out the intentions of the Parties as embodied in the rights (such as
vested rights) and obligations of the Parties under this Agreement. This
Agreement itself (as distinguished from the Executive's employment) may not be
terminated by either Party without the written consent of the other Party.
26. Beneficiaries; References.
-------------------------
The Executive shall be entitled, to the extent permitted
under any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Executive's
death by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, references in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.
27. Governing Law.
-------------
This Agreement shall be governed in accordance with the laws
of Delaware without reference to principles of conflict of laws.
28. Notices.
-------
All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when (a) delivered
personally, (b) three days after mailing by certified or registered mail,
postage prepaid, return receipt requested or (c) delivered by overnight courier
(provided that a written acknowledgment of receipt is obtained by the overnight
courier) to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give such notice of:
If to the Company: Xxx Xxxxxxxx Xxxxxxx
Prudential Xxxxx Xxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: General Counsel
If to the Executive: Xx. Xxxxx X. Xxxxx
c/o Xxx Xxxxxxxx Xxxxxxx
Prudential Xxxxx Xxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
29. Headings.
--------
The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
30. Withholding.
-----------
The Company shall withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
The Executive acknowledges that except for such withholding, and except for such
gross-ups as are specifically provided herein, he is responsible for paying his
own taxes.
31. Counterparts.
------------
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
Xxx Xxxxxxxx Xxxxxxx
By: /s/ Xxxxxx X. XxXxxxx
Xxxxxx X. XxXxxxx
/s/ Xxxxx X. Xxxxx
--------------------------------
Xxxxx X. Xxxxx
EXHIBIT A
STOCK OPTION AGREEMENT
1. Grant of Option. Xxx Xxxxxxxx Xxxxxxx (the "Company") hereby grants
to Xxxxx X. Xxxxx (the "Optionee"), effective as of January 19, 2001 (the "Grant
Date"), an option to purchase an aggregate of 2,000,000 shares of common stock
of the Company (the "Common Stock") at a price of $34.16 per share, purchasable
as set forth in, and subject to the terms and conditions of, this Stock Option
Agreement and the Employment Agreement dated as of January 19, 2001 between the
Company and the Optionee (the "Employment Agreement"). All capitalized terms not
defined in this Stock Option Agreement shall have the meanings ascribed to such
terms in the Employment Agreement.
2. Exercisability of Option.
(a) On the Grant Date, this option shall vest and be
exercisable with respect to 500,000 shares. On each of the first three
anniversaries of the Grant Date, except as otherwise provided below, this option
shall vest and become exercisable with respect to an additional 500,000 shares.
(b) In the event that the Optionee's employment with the
Company is terminated due to death or Disability, pursuant to Section 14(a) or
14(b), respectively, of the Employment Agreement, this option, to the extent not
yet vested and exercisable, shall become fully vested and exercisable as of the
date of termination, and shall remain exercisable for all shares through the
first anniversary of such date, or, if earlier, January 19, 2011, at which time
it shall expire to the extent it is not yet exercised.
(c) In the event that the Optionee's employment with the
Company is terminated for Cause, pursuant to Section 14(c) of the Employment
Agreement, this option shall expire.
(d) In the event that the Optionee's employment with the
Company is terminated without Cause or for Good Reason, pursuant to Section
14(d) of the Employment Agreement, or Retirement, pursuant to Section 14(f) of
the Employment Agreement, this option shall become fully vested and exercisable
as of the date of termination and shall remain fully exercisable through the
fifth anniversary of the date of termination, or, if earlier, January 19, 2011,
at which time it shall expire to the extent it is not yet exercised.
(e) In the event that the Optionee voluntarily terminates his
employment with the Company prior to the third anniversary of the Grant Date,
pursuant to Section 14(e) of the Employment Agreement, this option (x) to the
extent that it is exercisable as of the date of termination, shall remain fully
exercisable for 90 days following such date, or, if earlier, January 19, 2011,
at which time it shall expire, and (y) to the extent that it is not exercisable
as of the date of termination, shall expire.
(f) Anything elsewhere to the contrary notwithstanding, (x)
immediately prior to any Change of Control that occurs while this option remains
outstanding during the Optionee's employment with the Company (to permit the
Optionee, if he chooses, to exercise the option and acquire the shares subject
to such exercise prior to the Change of Control), this option shall become fully
vested and exercisable, (y) upon any termination by the Optionee which occurs
pursuant to notice given by the Optionee within the 30 day period following the
first anniversary of a Change of Control (a Termination under Section 15(a)(ii)
of the Employment Agreement), this option shall remain fully exercisable through
the fifth anniversary of the date of termination, or, if earlier, January 19,
2011, and (z) upon any involuntary termination by the Company without Cause
which occurs during the one year period following a Change of Control, this
option shall remain fully exercisable through January 19, 2011.
(g) Anything herein to the contrary notwithstanding, this
option shall cease to be exercisable with respect to any shares at the end of
the day on January 19, 2011.
3. Exercise of Option.
(a) Method of Exercise and Payments. Subject to the conditions
set forth in this Stock Option Agreement, this option may be exercised in
accordance with any method applicable either to options granted under the
Company's 1971 Stock Option Plan, as amended (so long as the Company has any
options outstanding under such plan and regardless of whether there are options
outstanding thereunder if the Company shall not have adopted a successor plan)
or under any successor stock option plan from time to time in effect
(collectively, the "Plan"), including, without limitation, the provisions for
payment of the exercise price of options and the provisions for delivery of
shares purchased, and in accordance with the practices and procedures of the
Company applicable to exercise of options by senior executives generally. The
Company has in effect, and agrees to continue in effect and to make available to
the Optionee at his election, for the term of this option, a "brokered exercise"
program under the Plan. The Company will make available to the Optionee loans or
guarantees with respect to the exercise price insofar as made available to any
other senior executive or any director of the Company under the Plan or any
other plan, program or arrangement of the Company.
(b) Reservation of Shares. The Company shall at all times
reserve, out of its authorized and unissued shares, a number of shares
sufficient to provide for the exercise in full of this option. All shares issued
upon exercise of this option shall be duly authorized and, when issued upon such
exercise, shall be (i) validly issued, fully paid and nonassessable, (ii)
registered for sale, and for resale, under Federal and state securities laws and
(iii) listed, or otherwise qualified, for trading in the United States on a
national securities exchange or national securities market system.
4. Deferral of Option Gains.
(a) Notwithstanding anything elsewhere in this Agreement to the
contrary, the Optionee shall have the right, by furnishing written notice to the
Company during his employment with the Company and at least six months prior to
any exercise of this option, to elect to defer all or a portion of any gains
realized upon or in connection with such exercise. Any such deferral shall be
made in such manner as may reasonably be required by the Company, including
without limitation such requirements as may apply in order to defer such gains
for Federal and state income tax purposes. Payment of the exercise price for
such exercise shall be made by presenting to the Company shares of Common Stock
(the "Presentation Shares") owned by the Optionee (which, in the event they were
acquired by the previous exercise of a stock option, shall have been held by the
Optionee for at least six months before the date of such exercise) and having a
fair market value (as defined in the Plan) equal to the exercise price. The
excess of the number of shares for which the option is exercised over the number
of Presentation Shares shall be deferred in the form of "Share Units" as
discussed in the next sentence. A "Share Unit" shall represent a share of Common
Stock, including any dividends and other distributions that may be declared or
made thereon during the period of the deferral. The Share Units shall be paid
out under the terms of the Optionee's election to defer in the form of shares of
Common Stock.
(b) To the extent that any gain that would be realized by the Optionee
upon an exercise of this option during his employment with the Company may not
be deductible in full by the Company by virtue of Section 162(m) of the Internal
Revenue Code of 1986, as amended (such Section, together with any successor
thereto and any regulations thereunder, referred to herein as "Section 162(m)"),
then the Optionee shall be deemed to have made a timely election to defer such
portion of such gain pursuant to Section 4(a) above until the later of (i) the
time (if any) actually elected pursuant to Section 4(a) and (ii) 30 days
following the date on which payment of all or part of such deferral amount will
not result in loss of deductibility under Section 162(m) (but only up to that
amount which can be paid without loss of deductibility under Section 162(m)).
5. Nontransferability of Option. This option is personal and
no rights granted hereunder may be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) nor shall any
such rights be subject to execution, attachment or similar process, except that
this option may be transferred in whole or in part (a) by will or the laws of
descent and distribution, (b) to any Family Member or to any trust, limited
liability company, partnership or comparable entity, the principal beneficiaries
of which are the Optionee and/or his Family Members, provided that such Family
Members and/or entities (and upon distribution their beneficiaries) agree to be
bound by the provisions of this Stock Option Agreement or (c) to organizations
qualifying as charitable organizations within the meaning of Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended. For purposes of clause (b) of
the preceding sentence, "Family Member" shall mean the Optionee's spouse,
parents, the parents of the Optionee's spouse, and lineal descendants of any of
the foregoing (including descendants by adoption) and any other individual or
entity included in the definition of "family member" for purposes of Form S-8
Registration Statement, as from time to time amended. Any individual or entity
to whom this option has been transferred in whole or in part in accordance with
the first sentence of this Section 5 shall, to the extent of the transfer,
succeed to the rights, and assume the obligations, of the Optionee under this
Stock Option Agreement but may not transfer this option (in whole or in part)
other than to the Optionee without the prior written consent of the Company,
which consent shall not be unreasonably withheld. The Optionee shall give notice
to the Company of any transfer of this option, in whole or in part, pursuant to
clause (b) of the first sentence of this Section 5. Notwithstanding the
foregoing, no such transfer shall be effective unless and until Optionee and the
transferee(s) have executed such documentation of their respective rights and
obligations as the Company may reasonably determine to be necessary or
appropriate.
6. Adjustment Provisions. The provisions of the Plan (as
defined in Section 3(a) above, including Section 9 of the 1971 Stock Option
Plan, as amended, or any corresponding provision of a successor plan) with
respect to changes in the Common Stock in certain events shall be applicable to
this option as if incorporated herein, and they are hereby incorporated by
reference.
In addition, notwithstanding the last sentence of Section 9 of the 1971
Stock Option Plan, as amended, and any corresponding provision of any successor
plan, upon the occurrence of any event described in such sentence, the Company
shall, if the Optionee so requests and the Board approves, use its reasonable
best efforts to arrange to have the surviving corporation or any corporation of
which the Company has become the direct or indirect subsidiary, assume this
option or grant a replacement option to the Optionee.
7. Tax Withholding. The Company's obligation to deliver shares
upon the exercise of this option shall be subject to the Optionee's satisfaction
of all applicable Federal, state and local income, excise, and employment tax
withholding requirements ("tax obligations"). The Optionee may satisfy any such
tax obligations (a) in any of the manners provided in Section 3(a) above for
payment of the purchase price; (b) by authorizing the Company to sell securities
that would otherwise have been delivered to the Optionee having a Fair Market
Value equal to, but not greater than, the minimum amount of tax required to be
withheld; or (c) by any combination of (a) and (b).
8. The Company's Representations. The Company represents and
warrants that (a) it is fully authorized by action of its Board (and of any
person or body whose action is required) to enter into this Stock Option
Agreement and to perform its obligations under it; (b) the execution, delivery
and performance of this Stock Option Agreement by the Company does not violate
any applicable law, regulation, order, judgment or decree or any agreement, plan
or corporate governance document of the Company or any agreement among holders
of its shares; and (c) upon the execution and delivery of this Stock Option
Agreement by the Company and the Optionee, this Stock Option Agreement shall be
the valid and binding obligation of the Company, enforceable in accordance with
its terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
9. Miscellaneous.
(a) Any dispute arising out of or relating to
this Stock Option Agreement shall be resolved by binding arbitration in
accordance with Section 18 of the Employment Agreement.
(b) All notices and other communications
relating to this Stock Option Agreement shall be given as provided in Section 28
of the Employment Agreement.
(c) Sections 20 (other than the last sentence
thereof), 23, 25, 26 (second sentence only), 29 and 31
of the Employment Agreement (relating, respectively, to assignability; amendment
or waiver; survivorship; references; headings; and counterparts) shall be deemed
incorporated herein in full, with the references to the "Agreement" in such
Sections being treated as references to this Stock Option Agreement and the
references to the "Executive" in such Sections being treated as references to
the Optionee.
(d) Nothing contained in this Stock Option
Agreement shall be construed or deemed under any circumstances to bind the
Company to continue the employment of the Optionee for the period within which
this option may be exercised.
(e) This Stock Option Agreement shall be
governed, construed, performed and enforced in accordance
with its express terms, and otherwise in accordance with the laws of the State
of Delaware, without reference to conflict of laws principles.
Grant Date: January 19, 2001
XXX XXXXXXXX XXXXXXX
By: /s/ Xxxxxx X. XxXxxxx
Name: Xxxxxx X. XxXxxxx
Title: Senior Vice President --
Personnel and Administration
ACCEPTED
OPTIONEE
/s/ Xxxxx X. Xxxxx
------------------------------------------
Xxxxx X. Xxxxx
EXHIBIT B
SUMMARY OF KEY TERMS AND CONDITIONS
FOR ADDITIONAL STOCK OPTIONS
1. Date, Size and Term of Grants: Not less than 650,000 shares in each of 2001, 2002 and
2003, subject to adjustment pursuant to Section 7(a) of
the Employment Agreement. The term of each option shall
be 10 years.
2. Exercise Price: Equal to the Fair Market Value on the date of grant.
3. Vesting: Each option shall vest and become exercisable in
substantially equal annual installments on the first
three anniversaries of its grant date, unless earlier
vested upon termination of employment or Change of
Control.
4. Consequences of Different Terminations:
(a) Death or Disability:
Upon the Executive's death or Disability, all outstanding
options shall be fully vested and remain exercisable for the
lesser of one year and their remaining originally scheduled
terms.
(b) Termination for Cause: All outstanding options shall be forfeited.
(c) Termination by the Company without Cause or All outstanding options shall be fully vested and remain
by the Executive for Good Reason or upon exercisable for the lesser of five years and the
Retirement pursuant to Section 14(f) of the remainder of their originally scheduled terms.
Employment Agreement:
(d) Voluntary Termination: Outstanding options that are vested at the date of
termination shall remain exercisable for the lesser of
90 days and the remainder of their originally scheduled
terms; all unvested options shall be forfeited.
(e) Certain Terminations After a Change of Upon any termination of the Executive's employment (1)
Control: by the Executive pursuant to a notice given by him
within the 30-day period following the first anniversary of a
Change of Control, outstanding options shall remain
exercisable for the lesser of five years and the remainder of
their originally scheduled terms, and (2) by the Company
without Cause during the one-year period the one-year period
following a Change of Control, outstanding options shall remain
exercisable for the remainder of their originally scheduled terms.
5. Consequences of a Change of Control: Immediately prior to any Change of Control, all
outstanding options shall be fully vested.
