Contract
Exhibit 10.2
AMENDMENT
TO EMPLOYMENT AGREEMENT
WHEREAS, an Employment Agreement
(“Agreement”) dated as of September 22, 2007, was entered into by and between
Fred’s, Inc. (“Company”) and Xxxxx X. Xxxxx (“Executive”); and
WHEREAS, Company and Executive now
desire to clarify certain provisions of the Agreement for purposes of
conformance with Internal Revenue Code Section 409A;
NOW, THEREFORE, the Agreement is hereby
amended as follows:
1.
Paragraph 3(b) is amended by adding, at the end of the fourth sentence, the
following:
“and in
any event not later than seventy five (75) days after the calendar year in which
the bonus is awarded”
2. The
Agreement is amended by adding, as a new paragraph 3(d), the
following:
“(d) Compensation in the nature of
expense reimbursements, in-kind benefits or similar payments is intended to meet
the requirements for a fixed schedule of payment under Treasury Regulation
1.409A-3(i)(1)(iv), and this Agreement will be construed and applied
accordingly. Any reimbursement, in-kind benefit or other such payment
shall be subject to the following: (i) the expense which is subject to
reimbursement or other payment must be incurred during the term of this
Agreement, (ii) any expense in one calendar year shall not affect the expenses
eligible for reimbursement or payment in any other taxable year, (iii)
reimbursement or other payment must be made by the end of the calendar year
after the calendar year in which the expense in incurred by Executive, and (iv)
any right of Executive under this paragraph (3) is not subject to liquidation or
exchange for any other benefit.”
3 Paragraph
5(c) of the Agreement is revised to provide as follows:
“(c)
Certain Separations from Service:
(i) Unless otherwise provided in
paragraph 5(d) or otherwise, if, during any term of this Agreement, Company
terminates this Agreement for any reason and Executive thereby incurs a
Separation From Service, or Executive dies, then and in that event, the sole
payments to which Executive, his heirs, legatees and legal representatives shall
be entitled shall be payment to Executive of the base salary compensation herein
provided, paid at the same times as payments of compensation are made to other
executive officers of the Company, at the rate in effect at the time of the
Separation From Service, and in accordance with the salary payment policy then
generally in effect for the Company, for the balance of that Term. In
addition, under such circumstances all of Executive's stock options and the
25,000 shares of restricted stock granted to Executive upon signing on shall
accelerate and immediately vest and be payable to Executive or his heirs,
legatees and legal representatives.
(ii) Unless otherwise provided in
paragraph 5(d) or otherwise, if Executive terminates this Agreement for Cause
and thereby incurs a Separation From Service, Executive shall be entitled to
payment of the compensation herein provided for the balance of the current Term;
provided, however, such compensation shall not be less than six (6) months
salary, nor more than twelve (12) months salary at the rate in effect at the
time of the Separation From Service, with such compensation paid to Executive at
the same times as payments of compensation are made to other executive officers
and in accordance with the salary payment policy then generally in effect for
the Company, for the balance of that Term. In addition, all of
Executive's stock options and the 25,000 shares of restricted stock granted to
Executive upon signing on shall accelerate and immediately vest and be payable
to Executive.
4. Paragraph
5(h) of the Agreement is deleted and is replaced by the following:
“(h)
Notwithstanding any provision of this Agreement to the contrary, if Executive is
a “Specified Employee” (as hereinafter defined) as of the date Executive incurs
a Separation from Service, payment of any amount shall, to the extent subject to
Treas. Reg. §1.409A-3(i)(2), be made no earlier than the first day of the
seventh month following the month in which such Separation from Service
occurs. On such date, Executive shall receive all payments that would
have been made on or before such date but for the provisions of this paragraph
(h), and the terms of this paragraph (h) shall not affect the timing or amount
of any payments to be made after such date under the other provisions of this
Agreement.”
|
|
5. The
Agreement is modified by adding, as a new paragraph 5(i), the
following:
|
“(i) For
purposes of this Agreement, the following definitions and operational provisions
shall apply:
|
|
(1)
A “Separation from Service” shall be determined in accordance with Section
409A. Not by way of limitation, the following rules shall
apply:
|
(A)
Except if Executive is on a bona fide leave of absence as provided below,
Executive shall be deemed to have incurred a Separation from Service if Company
and Executive reasonably anticipate that the level of services to be performed
by Executive after a date certain would be reduced to twenty percent (20%) or
less of the average services rendered by Executive during the immediately
preceding thirty-six (36) month period disregarding periods during which
Executive was on a bona fide leave of absence.
(B) If
Executive is absent from work due to military leave, sick leave or other bona
fide leave of absence, Executive shall incur a Separation from Service on the
first day immediately following the later of (A) the six month anniversary of
the commencement of the leave or (B) the expiration of Executive’s right, if
any, to re-employment or to return to work under statute or
contract.
(C) For
purposes of determining whether a Separation from Service has occurred, Company
and its affiliates shall be treated as a single employer. For this
purpose, an affiliate means a corporation, trade or business that, together with
Company, is treated as a single employer under Section 414(b) or (c) of the
Code, except for the foregoing purposes, common ownership of at least fifty
percent (50%) shall be determinative.
(D) The
Board of Directors of Company specifically reserves the right to determine
whether a sale or a disposition of substantial assets to an unrelated party
constitutes a Separation from Service with respect to Executive if Executive
provides service to the seller immediately prior to the transaction and provides
services to the buyer after the transaction. Such determination shall
be made in accordance with the requirements of Section 409A.
(2) “Specified
Employee” means a person who, as of the date of his Separation from Service, is
a “key employee” of Company or any affiliate, any stock of which is actively
traded on an established securities market or otherwise. A person is
a key employee if he meets the requirements of Section 416(i)(1)(A)(i), (ii) or
(iii) of the Code, (applied in accordance with applicable regulations thereunder
and without regard to Section 416(i)(5)) at any time during the 12-month period
ending on the Specified Employee Identification Date. Such person shall be
treated as a key employee for the entire 12-month period beginning on the
Specified Employee Effective Date.
For purposes of determining whether a
person is a Specified Employee, the compensation of such person shall be
determined in accordance with the definition of compensation provided under
Treas. Reg. §1.415(c)-2(d)(3) (wages within the meaning of Section 3401(a) of
the Code for purposes of income tax withholding at the source, plus amounts
excludible from gross income under Section 125(a), 132(f)(4), 402(e)(3),
402(h)(1)(B), 402(k) or 457(b), without regard to rules that limit the
remuneration included in wages based on the nature or location of the employment
or the services performed).
Notwithstanding anything in this
paragraph to the contrary, (i) if a different definition of compensation has
been designated by Company with respect to another nonqualified deferred
compensation plan in which a key employee participates, the definition of
compensation shall be the definition provided in Treas. Reg. §1.409A-1(i)(2),
and (ii) Company may through action that is legally binding with respect to all
nonqualified deferred compensation plans maintained by Company, elect to use a
different definition of compensation.
In the event of corporate transactions
described in Treas. Reg. §1.409A-1(i)(6), the identification of Specified
Employees shall be determined in accordance with the default rules described
therein, unless Company elects to utilize the available alternative methodology
through designations made within the timeframes specified therein.
(3) “Specified
Employee Identification Date” means September 30, unless Company has elected a
different date through action that is legally binding with respect to all
nonqualified deferred compensation plans maintained by Company.
(4) “Specified
Employee Effective Date” means the first day of the fourth month following the
Specified Employee Identification Date, or such earlier date as is selected by
the Board of Directors.
(5) Notwithstanding
any provision of this Agreement to the contrary, neither Company nor its Board
of Directors may accelerate the time or form of payment of any benefit due to
Executive hereunder unless such acceleration is permitted under Treas. Reg.
§1.409A-3(j)(4) or other applicable authority under Section
409A. Neither Company nor its Board of Directors may delay the time
for payment of any benefit due to Executive hereunder except to the extent
permitted under Treas. Reg. §1.409A-2(b)(7) or other applicable authority under
Section 409A.
IN WITNESS WHEREOF, the parties hereto
have executed this Amendment to the Agreement the 22nd day of December,
2008.
| WITNESS: | FRED'S, INC. |
| /s/ Xxxx XxXxxxx | /s/ Xxxxxxx X. Xxxx |
| XXXXXXX X. XXXX, SECRETARY | |
| WITNESS: | XXXXX X. XXXXX |
| /s/ Xxxx XxXxxxx | /s/ Xxxxx X. Xxxxx |
