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EXHIBIT 10.9
ASSIGNMENT OF AND FIRST AMENDMENT TO
EXECUTIVE OFFICER EMPLOYMENT AGREEMENT
This Assignment of and First Amendment to Executive Officer Employment
Agreement ("Assignment") is made effective as of October 16, 2000 by and between
CALLAWAY GOLF EUROPE LTD., a United Kingdom corporation ("Callaway Golf
Europe"), CALLAWAY GOLF COMPANY, a Delaware corporation ("Callaway Golf"), and
IAN B. ROWDEN ("Employee").
A. Callaway Golf Europe and Employee are parties to that certain
Executive Officer Employment Agreement entered into as of September 1, 2000 (the
"Agreement").
B. On October 16, 2000, Employee resigned his position as Executive Vice
President, Global Advertising of Callaway Golf Europe, and accepted a position
as Executive Vice President, Global Advertising of Callaway Golf.
C. In order to facilitate Employee's resignation of his former position
with Callaway Golf Europe and acceptance of his new position with Callaway Golf,
Callaway Golf Europe wishes to assign the Agreement to Callaway Golf, Callaway
Golf wishes to accept the assignment of the Agreement, and the parties wish to
modify the Agreement accordingly.
ASSIGNMENT
NOW, THEREFORE, in consideration of the foregoing, Callaway Golf Europe,
Callaway Golf and Employee hereby agree as follows:
1. Effective Date. All provisions of this Assignment shall be effective
as of October 16, 2000.
2. Resignation. Employee hereby resigns as Executive Vice President,
Global Advertising of Callaway Golf Europe, and Callaway Golf Europe accepts
such resignation.
3. Appointment. The Board of Directors of Callaway Golf has ratified the
appointment of Employee as Executive Vice President, Global Advertising of
Callaway Golf, and Employee has accepted such appointment.
4. Assignment and Assumption. Callaway Golf Europe hereby assigns to
Callaway Golf all of Callaway Golf Europe's right, title and interest in and to
the Agreement, and Callaway Golf hereby accepts the assignment and assumes and
agrees to keep, perform and fulfill all of the terms, covenants, conditions and
obligations required to be kept, performed and fulfilled by the "Company" under
the Agreement, as amended. After this assignment, all references to the
"Company" in the Agreement, as amended, shall mean Callaway Golf.
AMENDMENT
The Agreement is hereby amended as follows:
5. All references to the "Managing Director" shall be amended to read
"Chief Executive Officer".
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6. Section 2 of the Agreement is hereby amended to add:
"(c) Nature of Services. The Company and Employee agree that the
services being provided by Employee for the Company under the terms of this
Agreement are unique and intellectual in character and that the Employee and
Company are entering into this Agreement so that the Company will have the
exclusive benefit of those services during the entire term of the Agreement and
any extensions of the Agreement."
7. Section 4 of the Agreement is hereby amended to read:
"(a) The Company agrees to pay Employee a base salary at the rate
of $400,000.00 per year, prorated for the year 2000."
(b) No change.
"(c) The Company shall provide Employee an opportunity to earn an
annual bonus based upon participation in the Company's officer bonus plan as it
may or may not exist from time to time. Employee acknowledges that currently all
bonuses are discretionary, that the current officer bonus plan does not include
any nondiscretionary bonus plan, and that the Company does not currently
contemplate establishing any nondiscretionary bonus plan applicable to Employee.
However, for the year 2000, the Company will pay Employee a minimum bonus of
$40,000.00, to be paid at the time of payment of all officer bonuses, if any,
for the year 2000. If bonus payments to officers of the Company are approved for
the year 2001 by Callaway Golf's Board of Directors, the Company will pay
Employee a minimum bonus of $100,000.00."
(d) Delete.
8. Section 5 of the Agreement is hereby amended to read:
(a) No change.
(b) No change.
"(c) Benefits. During Employee's employment with the Company
pursuant to this Agreement, the Company shall provide for Employee to:
(i) participate in the Company's health insurance and
disability insurance plans as the same may be modified from time to time;
(ii) receive, if Employee is insurable under usual
underwriting standards, term life insurance coverage on Employee's life, payable
to whomever the Employee directs, in the face amount of $1,000,000.00, provided
that Employee's physical condition does not prevent Employee from qualifying for
such insurance coverage under reasonable terms and conditions;
(iii) participate in the Company's 401(k) plan pursuant to
the terms of the plan, as the same may be modified from time to time;
(iv) participate in the Company's Executive Deferred
Compensation Plan, as the same may be modified from time to time; and
(v) participate in any other benefit plans the Company
provides from time to time to senior executive officers. It is understood that
benefit plans within the meaning of this subsection do not include compensation
or bonus plans."
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(d) No change.
"(e) Estate Planning and Other Perquisites. To the extent the
Company provides tax and estate planning and related services, or any other
perquisites and personal benefits to other senior executive officers generally
from time to time, such services and perquisites shall be made available to
Employee on the same terms and conditions.
(f) Club Membership. The Company shall pay the reasonable cost of
initiation associated with Employee gaining privileges at a mutually agreed upon
country club. Employee shall be responsible for all other expenses and costs
associated with such club use, including monthly member dues and charges. The
club membership itself shall belong to and be the property of the Company, not
Employee."
9. Section 6 of the Agreement is hereby replaced with the following:
"TAX INDEMNIFICATION. Employee shall be indemnified by the
Company for certain excise tax obligations, as more specifically set forth in
Exhibit A to this Agreement."
(A true and correct copy of Exhibit A is attached hereto and made
a part of the Agreement by this reference.)
10. Section 7(e) of the Agreement is hereby amended to read:
"(e) Non-Interference. While employed by the Company, and for one
(1) year thereafter, Employee shall not in any way undertake to harm, injure or
disparage the Company, its officers, directors, employees, agents, affiliates,
vendors, products, or customers, or their successors, or in any other way
exhibit an attitude of hostility toward them. Employee understands that it is
the policy of the Company that only the Chief Executive Officer, President or
Senior Vice President, Global Press and Public Relations, and their specific
designees, may speak to the press or media about the Company or its business,
and agrees not to interfere with the Company's press and public relations by
violating this policy."
11. Section 9(a) of the Agreement is hereby amended to read:
"(a) If a Change in Control (as defined in Exhibit B hereto)
occurs before the termination of Employee's employment hereunder, then this
Agreement shall be extended (the "Extended Employment Agreement") in the same
form and substance as in effect immediately prior to the Change in Control,
except that the termination date, as specified pursuant to Section 1 of this
Agreement, shall be three (3) years from the effective date of the Change in
Control."
(A true and correct copy of Exhibit B is attached hereto and made
a part of the Agreement by this reference.)
12. Section 11 of the Agreement is hereby amended to read:
"GENERAL RELATIONSHIP. Employee shall be considered an employee
of the Company within the meaning of all federal, state and local laws and
regulations, including, but not limited to, laws and regulations governing
unemployment insurance, workers' compensation, industrial accident, labor and
taxes."
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13. Section 13 of the Agreement is hereby amended to read:
(a) No change.
"(b) As a material part of the terms and understandings of this
Agreement, Employee agrees to assign to the Company all Designs, Inventions and
Innovations developed, conceived and/or reduced to practice by Employee, alone
or with anyone else, in connection with the work performed by Employee for the
Company during Employee's employment with the Company, regardless of whether
they are suitable to be patented, trademarked and/or copyrighted.
(c) Employee agrees to disclose in writing to the Chief Executive
Officer of the Company any Design, Invention or Innovation relating to the
business of the Company and/or its affiliates, which Employee develops,
conceives and/or reduces to practice in connection with any work performed by
Employee for the Company, either alone or with anyone else, while employed by
the Company and/or within twelve (12) months of the termination of employment.
Employee shall disclose all Designs, Inventions and Innovations to the Company,
even if Employee does not believe that he or she is required under this
Agreement, or pursuant to California Labor Code Section 2870, to assign his or
her interest in such Design, Invention or Innovation to the Company. If the
Company and Employee disagree as to whether or not a Design, Invention or
Innovation is included within the terms of this Agreement, it will be the
responsibility of Employee to prove that it is not included.
(d) Pursuant to California Labor Code Section 2870, the
obligation to assign as provided in this Agreement does not apply to any Design,
Invention or Innovation to the extent such obligation would conflict with any
state or federal law. The obligation to assign as provided in this Agreement
does not apply to any Design, Invention or Innovation that Employee developed
entirely on Employee's own time without using the Company's equipment, supplies,
facilities or Trade Secrets and Confidential Information except those Designs,
Inventions or Innovations that either:
(i) Relate at the time of conception or reduction to
practice to the Company's and/or its affiliates' business, or actual or
demonstrably anticipated research of the Company and/or its affiliates; or
(ii) Result from any work performed by Employee for the
Company and/or its affiliates.
(e) Employee agrees that any Design, Invention and/or Innovation
which is required under the provisions of this Agreement to be assigned to the
Company shall be the sole and exclusive property of the Company. Upon the
Company 's request, at no expense to Employee, Employee shall execute any and
all proper applications for patents, copyrights and/or trademarks, assignments
to the Company, and all other applicable documents, and will give testimony when
and where requested to perfect the title and/or patents (both within and without
the United States) in all Designs, Inventions and Innovations belonging to the
Company."
(f) No change.
14. Section 14 of the Agreement is hereby amended to read:
"ASSIGNMENT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and the successors and assigns of the
Company. Employee shall have no right to assign his rights, benefits, duties,
obligations or other interests in this Agreement, it being understood that this
Agreement is personal to Employee."
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15. Section 17 of the Agreement is hereby amended to read:
"NOTICES. Any notice, request, demand, or other communication
required or permitted hereunder, shall be deemed properly given when actually
received or within five (5) days of mailing by certified or registered mail,
postage prepaid, to Employee at his last known residence address and to the
Company, as follows:
Company: Callaway Golf Company
2285 Rutherford Road
Carlsbad, California 92008-8815
Attn: Steven C. McCracken
Senior Executive Vice President,
Chief Legal Officer
or to such other address as Employee or the Company may from time to time
furnish, in writing, to the other."
16. Section 18(c) of the Agreement is hereby amended to read:
"(c) Applicable Law. This Agreement shall constitute a contract
under the internal laws of the State of California and shall be governed and
construed in accordance with the laws of said state as to both interpretation
and performance."
17. Section 19 of the Agreement is hereby replaced with the following:
"IRREVOCABLE ARBITRATION OF DISPUTES.
(a) EMPLOYEE AND THE COMPANY AGREE THAT ANY DISPUTE, CONTROVERSY
OR CLAIM ARISING HEREUNDER OR IN ANY WAY RELATED TO THIS AGREEMENT, ITS
INTERPRETATION, ENFORCEABILITY, OR APPLICABILITY, OR RELATING TO EMPLOYEE'S
EMPLOYMENT, OR THE TERMINATION THEREOF, THAT CANNOT BE RESOLVED BY MUTUAL
AGREEMENT OF THE PARTIES SHALL BE SUBMITTED TO BINDING ARBITRATION. THIS
INCLUDES, BUT IS NOT LIMITED TO, ALLEGED VIOLATIONS OF FEDERAL, STATE AND/OR
LOCAL STATUTES, CLAIMS BASED ON ANY PURPORTED BREACH OF DUTY ARISING IN CONTRACT
OR TORT, INCLUDING BREACH OF CONTRACT, BREACH OF THE COVENANT OF GOOD FAITH AND
FAIR DEALING, VIOLATION OF PUBLIC POLICY, VIOLATION OF ANY STATUTORY,
CONTRACTUAL OR COMMON LAW RIGHTS, BUT EXCLUDING WORKERS' COMPENSATION,
UNEMPLOYMENT MATTERS, OR ANY MATTER FALLING WITHIN THE JURISDICTION OF THE STATE
LABOR COMMISSIONER. THE PARTIES AGREE THAT ARBITRATION IS THE PARTIES' ONLY
RECOURSE FOR SUCH CLAIMS AND HEREBY WAIVE THE RIGHT TO PURSUE SUCH CLAIMS IN ANY
OTHER FORUM, UNLESS OTHERWISE PROVIDED BY LAW. ANY COURT ACTION INVOLVING A
DISPUTE WHICH IS NOT SUBJECT TO ARBITRATION SHALL BE STAYED PENDING ARBITRATION
OF ARBITRABLE DISPUTES.
(b) EMPLOYEE AND THE COMPANY AGREE THAT THE ARBITRATOR SHALL HAVE
THE AUTHORITY TO ISSUE PROVISIONAL RELIEF. EMPLOYEE AND THE COMPANY FURTHER
AGREE THAT EACH HAS THE RIGHT, PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE
SECTION 1281.8, TO APPLY TO A COURT FOR A PROVISIONAL REMEDY IN CONNECTION WITH
AN ARBITRABLE DISPUTE SO AS TO PREVENT THE ARBITRATION FROM BEING RENDERED
INEFFECTIVE.
(c) ANY DEMAND FOR ARBITRATION SHALL BE IN WRITING AND MUST BE
COMMUNICATED TO THE OTHER PARTY PRIOR TO THE EXPIRATION OF THE APPLICABLE
STATUTE OF LIMITATIONS.
(d) THE ARBITRATION SHALL BE CONDUCTED PURSUANT TO THE PROCEDURAL
RULES STATED IN THE NATIONAL RULES FOR RESOLUTION OF EMPLOYMENT DISPUTES OF THE
AMERICAN ARBITRATION ASSOCIATION ("AAA"). THE ARBITRATION SHALL BE CONDUCTED IN
SAN DIEGO BY A FORMER
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OR RETIRED JUDGE OR ATTORNEY WITH AT LEAST 10 YEARS EXPERIENCE IN
EMPLOYMENT-RELATED DISPUTES, OR A NON-ATTORNEY WITH LIKE EXPERIENCE IN THE AREA
OF DISPUTE, WHO SHALL HAVE THE POWER TO HEAR MOTIONS, CONTROL DISCOVERY, CONDUCT
HEARINGS AND OTHERWISE DO ALL THAT IS NECESSARY TO RESOLVE THE MATTER. THE
PARTIES MUST MUTUALLY AGREE ON THE ARBITRATOR. IF THE PARTIES CANNOT AGREE ON
THE ARBITRATOR AFTER THEIR BEST EFFORTS, AN ARBITRATOR FROM THE AMERICAN
ARBITRATION ASSOCIATION WILL BE SELECTED PURSUANT TO THE AMERICAN ARBITRATION
ASSOCIATION NATIONAL RULES FOR RESOLUTION OF EMPLOYMENT DISPUTES. THE COMPANY
SHALL PAY THE COSTS OF THE ARBITRATOR'S FEES.
(e) THE ARBITRATION WILL BE DECIDED UPON A WRITTEN DECISION OF
THE ARBITRATOR STATING THE ESSENTIAL FINDINGS AND CONCLUSIONS UPON WHICH THE
AWARD IS BASED. THE ARBITRATOR SHALL HAVE THE AUTHORITY TO AWARD DAMAGES, IF
ANY, TO THE EXTENT THAT THEY ARE AVAILABLE UNDER APPLICABLE LAW(s). THE
ARBITRATION AWARD SHALL BE FINAL AND BINDING, AND MAY BE ENTERED AS A JUDGMENT
IN ANY COURT HAVING COMPETENT JURISDICTION. EITHER PARTY MAY SEEK REVIEW
PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1286, ET SEQ.
(f) IT IS EXPRESSLY UNDERSTOOD THAT THE PARTIES HAVE CHOSEN
ARBITRATION TO AVOID THE BURDENS, COSTS AND PUBLICITY OF A COURT PROCEEDING, AND
THE ARBITRATOR IS EXPECTED TO HANDLE ALL ASPECTS OF THE MATTER, INCLUDING
DISCOVERY AND ANY HEARINGS, IN SUCH A WAY AS TO MINIMIZE THE EXPENSE, TIME,
BURDEN AND PUBLICITY OF THE PROCESS, WHILE ASSURING A FAIR AND JUST RESULT. IN
PARTICULAR, THE PARTIES EXPECT THAT THE ARBITRATOR WILL LIMIT DISCOVERY BY
CONTROLLING THE AMOUNT OF DISCOVERY THAT MAY BE TAKEN (E.G., THE NUMBER OF
DEPOSITIONS OR INTERROGATORIES) AND BY RESTRICTING THE SCOPE OF DISCOVERY ONLY
TO THOSE MATTERS CLEARLY RELEVANT TO THE DISPUTE. HOWEVER, AT A MINIMUM, EACH
PARTY WILL BE ENTITLED TO AT LEAST ONE DEPOSITION AND SHALL HAVE ACCESS TO
ESSENTIAL DOCUMENTS AND WITNESSES AS DETERMINED BY THE ARBITRATOR.
(g) THE PREVAILING PARTY SHALL BE ENTITLED TO AN AWARD BY THE
ARBITRATOR OF REASONABLE ATTORNEYS' FEES AND OTHER COSTS REASONABLY INCURRED IN
CONNECTION WITH THE ARBITRATION TO THE SAME EXTENT PERMITTED TO BE AWARDED BY A
COURT OF LAW.
(h) THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE EXPIRATION
OR TERMINATION OF THE AGREEMENT, AND SHALL BE BINDING UPON THE PARTIES.
THE PARTIES HAVE READ SECTION 19 AND IRREVOCABLY AGREE TO
ARBITRATE ANY DISPUTE IDENTIFIED ABOVE.
______ (EMPLOYEE) ______ (COMPANY)"
18. Section 20(a) of the Agreement is hereby amended to read:
"(a) Employee's continued compliance with the terms and
conditions of Sections 7(a), 7(b), 7(c), 7(e), 12, 13 and 19;"
19. Section 21 of the Agreement is hereby replaced with the following:
"TRADE SECRETS OF OTHERS. It is the understanding of both the
Company and Employee that Employee shall not divulge to the Company any
confidential information or trade secrets belonging to others, including
Employee's former employers, nor shall the Company seek to elicit from Employee
any such information. Consistent with the foregoing, Employee shall not provide
to the Company, and the Company shall not request, any documents or copies of
documents containing such information."
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20. Further Acts. Callaway Golf Europe, Callaway Golf and Employee agree
to execute and deliver, or cause to be executed and delivered, and to do or make
or cause to be done or made, any and all instruments, documents, acts or things,
supplemental, confirmatory or otherwise, as reasonably may be required by a
party for the purposes of perfecting and completing the assignment of the
Agreement to Callaway Golf as contemplated herein.
21. No Other Change. Except as set forth herein, all other terms and
conditions of the Agreement shall remain unchanged and continue in full force
and effect.
IN WITNESS WHEREOF, Callaway Golf Europe, Callaway Golf and Employee
have caused this Assignment to be executed effective as of the date set forth
above.
CALLAWAY GOLF EUROPE CALLAWAY GOLF
Callaway Golf Europe Ltd., Callaway Golf Company,
a United Kingdom corporation a Delaware corporation
By: By:
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Charles J. Yash, Chairman Ely Callaway, Chairman and CEO
Dated: November ____, 2000 Dated: November ____, 2000
EMPLOYEE
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Ian B. Rowden
Dated: November ____, 2000
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EXHIBIT A
TAX INDEMNIFICATION
Pursuant to Section 6 of Employee's Executive Officer Employment
Agreement ("Section 6"), the Company agrees to indemnify Employee with respect
to certain excise tax obligations as follows:
1. Definitions. For purposes of Section 6 and this Exhibit A, the
following terms shall have the meanings specified herein:
(a) "Claim" shall mean any written claim (whether in the form of
a tax assessment, proposed tax deficiency or similar written notification) by
the Internal Revenue Service or any state or local tax authority that, if
successful, would result in any Excise Tax or an Underpayment.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended. All references herein to any section, subsection or other provision of
the Code shall be deemed to refer to any successor thereto.
(c) "Excise Tax" shall mean (i) any excise tax imposed by Section
4999 of the Code or any comparable federal, state or local tax, and (ii) any
interest and/or penalties incurred with respect to any tax described in 1(c)(i).
(d) Gross-Up Payment shall mean a cash payment as specified in
Section 2.
(e) "Overpayment" and "Underpayment" shall have the meanings
specified in Section 4.
(f) "Payment" shall mean any payment, benefit or distribution
(including, without limitation, cash, the acceleration of the granting, vesting
or exercisability of stock options or other incentive awards, or the accrual or
continuation of any other payments or benefits) granted or paid to or for the
benefit of Employee by the Company or by any person or persons whose actions
result in a Taxable Event (as defined in this Section), or by any person
affiliated with the Company or such person(s), whether paid or payable pursuant
to the terms of this Agreement or otherwise. Notwithstanding the foregoing, a
Payment shall not include any Gross-Up Payment required under Section 6 and this
Exhibit A
(g) "Taxable Event" shall mean any change in control or other
event which triggers the imposition of any Excise Tax on any Payment.
2. In the event that any Payment is determined to be subject to any
Excise Tax, then Employee shall be entitled to receive from the Company a
Gross-Up Payment in an amount such that, after the payment of all income taxes,
Excise Taxes and any other taxes imposed with respect to the Gross-Up Payment
(together with payment of all interest and penalties imposed with respect to any
such taxes), Employee shall retain a net amount of the Gross-Up Payment equal to
the Excise Tax imposed with respect to the Payments.
3. All determinations required to be made under Section 6 and this
Exhibit A, including, without limitation, 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 determinations, shall be made by the accounting
firm of Pricewaterhouse Coopers LLP or, if applicable, its successor as the
Company's independent auditor (the "Accounting Firm"). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Taxable Event to
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which a possible Gross-Up Payment is related, another nationally recognized
accounting firm that is mutually acceptable to the Company and Employee shall be
appointed to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). The Accounting Firm
shall provide detailed supporting calculations to the Company and to Employee
regarding the amount of Excise Tax (if any) which is payable, and the Gross-Up
Payment (if any) required hereunder, with respect to any Payment or Payments,
with such calculations to be provided at such time as may be requested by the
Company but in no event later than fifteen (15) business days following receipt
of a written notice from Employee that there has been a Payment that may be
subject to an Excise Tax. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment as determined pursuant to
Section 6 and this Exhibit A shall be paid by the Company to Employee within
five (5) business days after receipt of the Accounting Firm's determination. If
the Accounting Firm determines that no Excise Tax is payable by Employee, the
Accounting Firm shall furnish Employee with a written opinion that failure to
disclose, report or pay the Excise Tax on Employee's federal or other applicable
tax returns will not result in the imposition of a negligence penalty,
understatement penalty or other similar penalty. All determinations by the
Accounting Firm shall be binding upon the Company and Employee in the absence of
clear and indisputable mathematical error. Following receipt of a Gross-Up
Payment as provided herein, Employee shall be obligated to properly and timely
report his Excise Tax liability on the applicable tax returns or reports and to
pay the full amount of Excise Tax with funds provided through such Gross-Up
Payment. Notwithstanding the foregoing, if the Company reasonably determines
that the Employee will be unable or otherwise may fail to make such Excise Tax
payment, the Company may elect to pay the Excise Tax to the Internal Revenue
Service and/or other applicable tax authority on behalf of the Employee, in
which case the Company shall pay the net balance of the Gross-Up Payment (after
deduction of such Excess Tax payment) to the Employee.
4. As a result of uncertainty in the application of Section 4999 of the
Code, it is possible that a Gross-Up Payment will not have been made by the
Company that should have been made (an "Underpayment") or that a Gross-Up
Payment is made that should not have been made (an "Overpayment"). In the event
that Employee is required to make a payment of any Excise Tax, due to an
Underpayment, the Accounting Firm shall determine the amount of Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to Employee in which case Employee shall be obligated to make a timely
payment of the full amount of the applicable Excise Tax to the applicable tax
authority, provided, however, the Company may elect to pay the Excise Tax to the
applicable tax authority on behalf of Employee consistent with the provisions of
Section 3, in which case the Company shall pay the net balance of the
Underpayment (after deduction of such Excise Tax payment) to Employee. In the
event that the Accounting Firm determines that an Overpayment has been made, any
such Overpayment shall be repaid by Employee to the Company within ninety (90)
days after written demand to Employee by the Company, provided, however, that
Employee shall have no obligation to repay any amount of the Overpayment that
has been paid to, and not recovered from, a tax authority, provided further,
however, in such event the Company may direct Employee to prosecute a claim for
a refund of such amount consistent with the principles set forth in Section 5.
5. Employee shall notify the Company in writing of any Claim. Such
notice (a) shall be given as soon as practicable, but in no event later than
fifteen (15) business days, following Employee's receipt of written notice of
the Claim from the applicable tax authority, and (b) shall include a compete and
accurate copy of the tax authority's written Claim or otherwise fully inform the
Company of the nature of the Claim and the date on which any payment of the
Claim must be paid, provided that Employee shall not be required to give notice
to the Company of facts of which the Company is already aware, and provided
further that failure or delay by Employee to give such notice shall not
constitute a breach of Section 6 or this Exhibit A except to the extent that the
Company is prejudiced thereby. Employee shall not pay any portion of a Claim
prior to the earlier of
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(a) the expiration of thirty (30) days following the date on which Employee
gives the foregoing notice to the Company, (b) the date that any Excise Tax
payment under the Claim is due, or (c) the date the Company notifies Employee
that it does not intend to contest the Claim. If, prior to expiration of such
period, the Company notifies Employee in writing that it desires to contest the
Claim, Employee shall:
(a) give the Company any information reasonably requested by the
Company relating to the Claim;
(b) take such action in connection with contesting the Claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to the Claim by
an attorney selected and compensated by the Company who is reasonably acceptable
to Employee;
(c) cooperate with the Company in good faith in order to
effectively contest the Claim; and
(d) permit the Company to participate (at its expense) in any and
all proceedings and conferences pertaining to the Claim; provided, however, that
the Company shall bear and pay directly all costs and expenses (including,
without limitation, additional interest and penalties and attorneys' fees)
incurred in connection with any such contest, and shall indemnify and hold
Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including, without limitation, interest and penalties with respect thereto) and
all costs imposed or incurred in connection with such contests. Without
limitation upon the foregoing provisions of this Section 5, and except as
provided below, the Company shall control all proceedings concerning any such
contest and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with tax authorities pertaining
to the Claim. At the written request of the Company, and upon payment to
Employee of an amount at least equal to the Claim plus any additional amount
necessary to obtain the jurisdiction of the appropriate tribunal and/or court,
Employee shall pay the same and sue for a refund or otherwise contest the Claim
in any permissible manner as directed by the Company. Employee agrees to
prosecute any contest of a Claim 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
requests Employee to pay the Claim and sue for a refund, the Company shall
indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax
or income tax (including, without limitation, interest and penalties with
respect thereto) and costs imposed or incurred in connection with such contest
or with respect to any imputed income attributable to any advances or payments
by the Company hereunder. Any extension of the statute of limitations relating
to assessment of any Excise Tax for the taxable year of Employee which is the
subject of a Claim is to be limited solely to the Claim. Furthermore, the
Company's control of a contest as provided hereunder shall be limited to issues
for which a Gross-Up Payment would be payable hereunder, and Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other tax authority.
6. If Employee receives a refund from a tax authority of all or any
portion of an Excise Tax paid by or on behalf of Employee with amounts advanced
by the Company pursuant to Section 6 and this Exhibit A, Employee shall promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). Employee shall, if so directed
by the Company, file and otherwise prosecute a claim for refund of any Excise
Tax payment made by or on behalf of Employee with amounts advanced by the
Company pursuant to Section 6 and this Exhibit A, with any such refund claim to
be effected in accordance with the principles set forth in Section 5. If a
determination is made that Employee shall not be entitled to any refund and the
Company does not notify Employee in writing of its intent to contest such denial
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refund prior to the expiration of thirty (30) days after such determination,
then Employee shall have no further obligation hereunder to contest such denial
or to repay to the Company the amount involved in such unsuccessful refund
claim. The amount of any advances which are made by the Company in connection
with any such refund claim hereunder, to the extent not refunded by the
applicable tax authority to Employee, shall offset, as appropriate consistent
with the purposes of Section 6 and this Exhibit A, the amount of any Gross-Up
Payment required hereunder to be paid by the Company to Employee.
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EXHIBIT B
CHANGE IN CONTROL
A "Change in Control" means the following and shall be deemed to occur
if any of the following events occurs:
1. Any person, entity or group, within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") but excluding
the Company and its affiliates and any employee benefit or stock ownership plan
of the Company or its affiliates and also excluding an underwriter or
underwriting syndicate that has acquired the Company's securities solely in
connection with a public offering thereof (such person, entity or group being
referred to herein as a "Person") becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either the then outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding securities entitled to vote generally in the
election of directors; or
2. Individuals who, as of the effective date hereof, constitute the
Board of Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board of Directors of the Company,
provided that any individual who becomes a director after the effective date
hereof whose election, or nomination for election by the Company's shareholders,
is approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered to be a member of the Incumbent Board
unless that individual was nominated or elected by any Person having the power
to exercise, through beneficial ownership, voting agreement and/or proxy, 20% or
more of either the outstanding shares of Common Stock or the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally in the election of directors, in which case that individual shall not
be considered to be a member of the Incumbent Board unless such individual's
election or nomination for election by the Company's shareholders is approved by
a vote of at least two-thirds of the directors then comprising the Incumbent
Board; or
3. Consummation by the Company of the sale or other disposition by the
Company of all or substantially all of the Company's assets or a reorganization
or merger or consolidation of the Company with any other person, entity or
corporation, other than
(a) a reorganization or merger or consolidation that would result
in the voting securities of the Company outstanding immediately prior thereto
(or, in the case of a reorganization or merger or consolidation that is preceded
or accomplished by an acquisition or series of related acquisitions by any
Person, by tender or exchange offer or otherwise, of voting securities
representing 5% or more of the combined voting power of all securities of the
Company, immediately prior to such acquisition or the first acquisition in such
series of acquisitions) continuing to represent, either by remaining outstanding
or by being converted into voting securities of another entity, more than 50% of
the combined voting power of the voting securities of the Company or such other
entity outstanding immediately after such reorganization or merger or
consolidation (or series of related transactions involving such a reorganization
or merger or consolidation), or
(b) a reorganization or merger or consolidation effected to
implement a recapitalization or reincorporation of the Company (or similar
transaction) that does not result in a material change in beneficial ownership
of the voting securities of the Company or its successor; or
4. Approval by the shareholders of the Company or an order by a court of
competent jurisdiction of a plan of liquidation of the Company.
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