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EMPLOYMENT AGREEMENT

Employee Retention Agreement

EMPLOYMENT AGREEMENT | Document Parties: PEDIATRIX MEDICAL GROUP INC You are currently viewing:
This Employee Retention Agreement involves

PEDIATRIX MEDICAL GROUP INC

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Title: EMPLOYMENT AGREEMENT
Governing Law: Florida     Date: 8/22/2008
Industry: Healthcare Facilities     Sector: Healthcare

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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into by and between PEDIATRIX MEDICAL GROUP, INC. , a Florida corporation ("Employer"), and ROGER J. MEDEL, M.D. ("Employee") effective as of the 20th day of August, 2008 (the "Effective Date").

RECITALS

WHEREAS , Employer is presently engaged in "Employer’s Business" as defined on Exhibit A hereto;

WHEREAS , Employee is a founder of Employer and currently serves as Chief Executive Officer of Employer pursuant to an Employment Agreement effective as of November 11, 2004 (the "Prior Employment Agreement");

WHEREAS , Employer and Employee desire to replace the Prior Employment Agreement with this Agreement effective as stated above and set forth herein the terms and conditions of Employee’s employment with Employer following termination of the Prior Employment Agreement; and

WHEREAS , in order to induce Employer to enter into this Agreement on the terms and conditions set forth herein (including an increase in compensation over what was provided under the Prior Employment Agreement), and disclose its trade secrets and Confidential Information in connection with Employee’s employment by Employer and provide incentive compensation from time to time, Employee hereby agrees to be bound by the terms of this Agreement, including the arbitration, non-competition and related restrictive covenants set forth herein.

NOW, THEREFORE , in consideration of the premises and mutual covenants set forth herein, the parties agree as follows:

1. Employment.

1.1. Employment and Term . Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer on the terms and conditions set forth herein for a "Term" that commences on the Effective Date and continues for a period of five (5) years, unless sooner terminated in accordance with the provisions of Section 4. In this Agreement, the term "Employment Period" shall refer to the period of time beginning on the Effective Date and ending on the earlier of the expiration of the Term or such earlier date as the employment of Employee is terminated pursuant to the provisions of Section 4 of this Agreement. Employer and Employee agree that the Prior Employment Agreement shall terminate and be of no further force and effect as of the Effective Date.




1.2. Duties of Employee . During the Employment Period, Employee shall serve as Chief Executive Officer of Employer and perform such duties as are customary to the position Employee holds or as may be reasonably assigned to Employee from time to time by Employer’s Board of Directors ("Employee’s Supervisor"); provided, that such duties as assigned shall be customary to Employee’s role as an executive officer of Employer. Employee’s employment shall be full-time and as such Employee agrees to devote substantially all of Employee’s attention and professional time to the business and affairs of Employer. During the Employment Period, Employer shall promote the proficiency of Employee by, among other things, providing Employee with Confidential Information, specialized professional development programs, and information regarding the organization, administration and operation of Employer. During the Employment Period, Employee agrees that Employee will not, without the prior written consent of Employer (which consent shall not be unreasonably withheld), serve as a director on a corporate board of directors or in any other similar capacity for any institution other than Employer. Employee may continue to serve as a director on any corporate board of directors on which he serves as of the Effective Date, and he may continue to serve in any other similar capacity in which he serves as of the Effective Date for any institution. During the Employment Period, it shall not be a violation of this Agreement to (i) serve on other civic or charitable boards or committees, or (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, so long as such activities do not interfere with the performance of Employee’s responsibilities as an employee of Employer in accordance with this Agreement, including the restrictions of Section 8 hereof.

1.3. Place of Performance . Employee shall be based at Employer’s offices located in Sunrise, Florida, except for required travel relating to Employer’s Business.

2. Base Salary and Performance Bonus.

2.1. Base Salary . Employee shall be paid an annual base salary of Nine Hundred Fifty Thousand Dollars ($950,000.00) (the "Base Salary") beginning June 1, 2008 and continuing during the Employment Period, payable in installments consistent with Employer’s customary payroll schedule and subject to applicable withholding for taxes and Employee directed withholdings. The Compensation Committee of the Board of Directors of Employer (the "Compensation Committee") shall review the amount of Employee’s Base Salary on an annual basis no later than ninety (90) days after the beginning of Employer’s fiscal year. Any change to Employee’s Base Salary that is approved by the Compensation Committee shall become the Base Salary for purposes of this Agreement.

2.2. Performance Bonus . During the Employment Period, Employee shall be eligible for an annual bonus (the "Performance Bonus") in accordance with incentive programs approved from time to time by the Compensation Committee, which programs shall contemplate a target bonus payment of at least One Hundred Fifty Percent (150%) of Employee’s Base Salary upon the fulfillment of reasonable performance objectives set by the Compensation Committee. Each Performance Bonus shall be paid in the calendar year immediately following the calendar year in which it is earned as soon as practicable after the audited financial statements for Employer for the year for which the bonus is earned have been released; provided, however, that if calculation of Employee’s Performance Bonus within such time is not administratively practicable due to events beyond the control of Employer, then Employer may delay payment of the Performance Bonus provided that the payment is made during the first taxable year of Employee in which the calculation of the amount of the payment is administratively practicable.

 

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3. Benefits.

3.1. Expense Reimbursement . Employer shall promptly reimburse Employee for all out-of-pocket expenses reasonably incurred by Employee during the Employment Period on behalf of or in connection with Employer’s Business pursuant to the reimbursement standards and guidelines of Employer in effect from time to time. Employee shall account for such expenses and submit reasonable supporting documentation to Employer in accordance with Employer’s policies in effect from time to time.

3.2. Employee Benefits . During the Employment Period, Employee shall be entitled to participate in such health, welfare, disability, stock purchase, retirement savings and other fringe benefit plans and programs as may be established and maintained by Employer from time to time to the extent that such plans and programs are applicable to other similarly situated employees of Employer and subject to the provisions of such plans and programs.

3.3. Leave Time . During the Employment Period, Employer shall allow Employee thirty eight (38) days of paid time off each year for vacation, illness, injury, personal days or other similar purposes in accordance with Employer’s policies in effect from time to time (prorated for periods of less than a calendar year). Any paid time off not used during each calendar year may be carried over into the next year to the extent permitted by Employer’s policies in effect from time to time.

3.4. Incentive Compensation Plan . During the Employment Period, Employee shall be eligible to participate in Employer’s incentive compensation plans that provide for the issuance of stock options, restricted stock and other awards to its employees. Employee’s stock-based award each year shall be determined by the Compensation Committee based on Employee’s performance and Employer’s performance during the immediately preceding year and shall be consistent with the Compensation Committee’s determination of Employee’s stock-based award in prior years. The terms of any award to Employee and Employee’s rights and interest in any such award shall be controlled by this Agreement, the award agreement and the appropriate incentive compensation plan. Employee acknowledges that this Section 3 is sufficient consideration for Employee to enter into this agreement, including the restrictive covenants set forth in Section 8 below.

3.5. Personal Use of Corporate Aircraft. Corporate aircraft, whether owned by the Company outright, jointly with another person or entity, or by fractional interest, may be used by Employee during the Employment Period for personal matters; provided, however, (i) the aircraft is not being used, nor during the period Employee has requested use for personal matters will it be needed for use, by Employer for business-related matters, as Employer shall have priority over Employee’s personal use; and (ii) Employee’s personal use of the aircraft does not exceed a total of seventy-five (75) hours of flight in any calendar year without the advance approval of the Compensation Committee. Such personal use of the aircraft by Employee shall be treated as imputed income to Employee in accordance with rules and regulations of the Internal Revenue Code of 1986, as amended.

 

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3.6 Legal Fees . Employer shall reimburse Employee for the reasonable legal fees and expenses incurred by Employee in connection with the review and negotiation of this Agreement and the related Restricted Shares Units Agreements. Employer shall also reimburse Employee for all reasonable legal fees and expenses that Employee may incur during the Term or within ten years after the expiration thereof in connection with any dispute between Employee and the Employer involving this Agreement, Employee’s employment with the Employer or the termination thereof, to the greatest extent permitted by law. All reimbursements described in this paragraph shall be made promptly after demand is made by Employee and Employee’s provision to the Employer of reasonably satisfactory evidence of such fees and expenses, but no later than the last day of the calendar year following the calendar year in which Employee incurs such fees and expenses.

4. Termination.

4.1. Termination for Cause . Employer may terminate Employee’s employment under this Agreement for Cause. As used in this Agreement, the term "Cause" shall mean the occurrence of any of (i) Employee’s engagement in (A) willful misconduct resulting in material harm to Employer, or (B) gross negligence; (ii) Employee’s conviction of, or pleading nolo contendere to, a felony or any other crime involving fraud, financial misconduct, or misappropriation of Employer’s assets; (iii) Employee’s willful and continual failure, after written notice from Employee’s Supervisor, to (A) perform substantially his employment duties consistent with his position and authority, or (B) follow, consistent with Employee’s position, duties, and authorities, the reasonable lawful mandates of Employee’s Supervisor; or (iv) Employee’s breach of Section 8.4 of this Agreement. No act or omission shall be deemed willful or grossly negligent for purposes of this definition if taken or omitted to be taken by Employee in a good faith belief that such act or omission to act was in the best interests of the Employer or if done at the express direction of the Employer’s Board . The termination date for a termination of Employee’s employment under this Agreement pursuant to this Section 4.1 shall be the date specified by Employer in a written notice to Employee of finding of Cause, which may not be retroactive. Upon termination of Employee’s employment under this Agreement pursuant to Section 4.1, Employee shall be entitled to compensation in accordance with and subject to, the provisions of Section 5.1 hereof.

4.2. Disability . Employer may terminate Employee’s employment under this Agreement upon the Disability (as defined below) of Employee. Subject to the requirements of applicable law, Employee shall be deemed to have a "Disability" for purposes of this Agreement in the event of (i) Employee’s inability to perform Employee’s duties hereunder, with or without a reasonable accommodation, as a result of physical or mental illness or injury, and (ii) a determination by an independent qualified physician selected by Employer and acceptable to Employee (which acceptance shall not be unreasonably withheld) that Employee is currently unable to perform such duties and in all reasonable likelihood such inability will continue for a period in excess of an additional ninety (90) or more days in any one hundred twenty (120) day period. The termination date for a termination of Employee’s employment under this Agreement pursuant to this Section 4.2 shall be the date specified by Employer in a notice to Employee, which date shall not be retroactive. Upon any termination of Employee’s employment under this Agreement pursuant to this Section 4.2, Employee shall be entitled to compensation and/or benefits in accordance with, and subject to, the provisions of Section 5.2 hereof.

 

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4.3. Death . Employee’s employment under this Agreement shall terminate automatically upon the death of Employee, without any requirement of notice by Employer to Employee’s estate. The date of Employee’s death shall be the termination date of Employee’s employment under this Agreement pursuant to this Section 4.3. Upon any termination of Employee’s employment under this Agreement pursuant to this Section 4.3, Employee shall be entitled to the compensation specified in Section 5.3 hereof.

4.4. Termination by Employer Without Cause . Employer may terminate Employee’s employment without Cause by giving Employee written notice of such termination. The termination date shall be the date specified by Employer in such notice, which shall not be less than ninety (90) days from the date of written notice to Employee. Upon any termination of Employee’s employment under this Agreement pursuant to this Section 4.4, Employee shall be entitled to compensation and/or benefits in accordance with, and subject to, the provisions of Section 5.4 hereof.

4.5. Termination by Employee Due to Poor Health . Employee may terminate Employee’s employment under this Agreement upon written notice to Employer if Employee’s health should become impaired to any extent that makes the continued performance of Employee’s duties under this Agreement hazardous to Employee’s physical or mental health or Employee’s life (regardless of whether such condition would be deemed a Disability under any other Section of this Agreement), provided that Employee shall have furnished Employer with a written statement from a qualified doctor to that effect, and provided further that, at Employer’s written request and expense, Employee shall submit to a medical examination by an independent qualified physician selected by Employer and acceptable to Employee (which acceptance shall not be unreasonably withheld), which doctor shall substantially concur with the conclusions of Employee’s doctor. The termination date shall be ninety (90) days from Employer’s receipt of such notice. Upon any termination of Employee’s employment under this Agreement pursuant to this Section 4.5, Employee shall be entitled to compensation and/or benefits in accordance with, and subject to, the provisions of Section 5.5 hereof.

4.6. Termination by Employee . Employee may terminate Employee’s employment under this Agreement for any reason whatsoever upon not less than ninety (90) days prior written notice to Employer. Upon receipt of such notice from Employee, Employer may, at its option, require Employee to terminate employment at any time in advance of the expiration of such ninety (90) day period. The termination date under this Section 4.6 shall be the date specified by Employer, but in no event more than ninety (90) days after Employer’s receipt of notice from Employee as contemplated by this Section 4.6. Upon any termination of Employee’s employment under this Agreement pursuant to this Section 4.6, Employee shall be entitled to compensation and/or benefits in accordance with, and subject to, the provisions of Section 5.6 hereof.

4.7. Termination by Employee for Good Reason. Employee may terminate Employee’s employment under this Agreement for Good Reason. For purposes of this Section, "Good Reason" shall mean the occurrence of any of the following:

(a) a material diminution in the Employee’s Base Salary or Performance Bonus eligibility;

 

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(b) a material diminution in the Employee’s authority, duties, or responsibilities;

(c) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Employee is required to report, including a requirement that the Employee report to a corporate officer or employee instead of reporting directly to the Board of Directors of the Employer

(d) a material diminution in the budget over which the Employee retains authority;

(e) a material change in the geographic location at which the Employee must perform the services under this Agreement; or

(f) any other action or inaction that constitutes a material breach by the Employer under this Agreement.

For purposes hereof, "Good Reason" shall not be deemed to exist unless the Employee provides the Employer with written notice of the existence of such condition within ninety (90) days after the initial existence of the condition and the Employer fails to remedy the condition within 30 days after its receipt of such notice.

Notice of the condition shall include the proposed termination date of Employee’s employment under this Agreement, which must be ninety (90) days from the date of the notice. If Employer fails to remedy the condition, Employer may, at its option, require Employee to terminate employment at any time in advance of the expiration of such ninety (90) day period. The termination date under this Section 4.7 shall be the date specified by Employer, but in no event more than ninety (90) days after Employer’s receipt of notice from Employee as contemplated by this Section 4.7. If Employee terminates Employee’s employment under this Agreement pursuant to this Section 4.7, then Employee shall be entitled to compensation and/or benefits in accordance with, and subject to, the provisions of Section 5.7 hereof.

4.8 Termination by Employee due to Change in Control of Employer. Employee may terminate Employee’s employment under this Agreement due to a Change in Control, of Employer. For purposes of this Section, a "Change in Control of Employer" shall mean (i) the acquisition by a person or an entity or a group of persons and entities, directly or indirectly, of more than fifty (50%) percent of Employer’s common stock in a single transaction or a series of transactions (hereinafter referred to as a "50% Change in Control"); (ii) a merger or other form of corporate reorganization resulting in an actual or de facto 50% Change in Control; or (iii) the failure of Applicable Directors (defined below) to constitute a majority of Employer’s Board of Directors (the "Board") during any two (2) consecutive year period after the Effective Date (the "Two-Year Period"). "Applicable Directors" shall mean those individuals who are members of the Board at the inception of the Two-Year Period and any new director whose election to the Board or nomination for election to the Board was approved (prior to any vote thereon by the shareholders) by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the Two-Year Period at issue or whose election or nomination for election during such Two-Year Period was previously approved as provided in this sentence.

 

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If Employee desires to terminate Employee’s employment under this Agreement pursuant to this Section 4.8, Employee must, within one year after the Change in Control of Employer provide Employer with a written notice of the termination. Such notice shall include the proposed termination date of Employee’s employment under this Agreement, which must be ninety (90) days from the date of the notice. Upon receipt of such notice from Employee, Employer may, at its option, require Employee to terminate employment at any time in advance of the expiration of such ninety (90) day period. The termination date under this Section 4.8 shall be the date specified by Employer, but in no event more than ninety (90) days after Employer’s receipt of notice from Employee as contemplated by this Section 4.8. If (i) Employee terminates Employee’s employment under this Agreement pursuant to this Section 4.8, or (ii) Employer terminates Employee’s employment under this Agreement for any reason within twenty-four (24) months after a Change in Control of Employer, then Employee shall be entitled to compensation and/or benefits in accordance with, and subject to, the provisions of Section 5.8.

5. Compensation and Benefits Upon Termination.

5.1. Cause . If Employee’s employment is terminated for Cause, Employer shall pay Employee’s Base Salary through the termination date specified in Section 4.1 at the rate in effect at the termination date. Upon payment of such amount, plus any amounts as may be due under Section 5.10 below, Employer shall have no further obligation to Employee under this Agreement, other than any benefits to which Employee is entitled under Section 5.13 below.

5.2. Disability . In the event of Employee’s Disability, Employer shall continue to pay Employee’s monthly Base Salary for a period of twelve (12) months after the termination date. The twelve (12) month period after the termination date during which Employee may continue to receive Base Salary payments pursuant to this Section 5.2 shall be referred to as the "Severance Period" for purposes of this Agreement. Amounts payable under this Section 5.2 are not intended to be in lieu of benefits under any long-term disability plan Employer may maintain from time to time, and Employee’s entitlement to benefits under such plan , if any, shall be determined solely by the plan’s terms.

5.3. Death . Upon Employee’s death during the Employment Period, Employer shall pay to the person or entity designated by Employee in a notice filed with Employer or, if no person is designated, to Employee’s estate any unpaid amounts of Base Salary to the date of Employee’s death, plus any amounts as may be due under Sections 5.10 and 5.11 below. Any payments Employee’s spouse, beneficiaries or estate may be entitled to receive pursuant to any pension plan, employee welfare benefit plan, life insurance policy, or similar plan or policy then maintained by Employer shall be determined and paid in accordance with the written instruments governing the respective plans and policies. In the event of Employee’s death during the Employment Period, Employer shall notify Employee’s designee or estate of the stock awards held by Employee and the procedures pursuant to which all vested stock options may be exercised and other stock awards may be realized under the terms applicable to such awards.

5.4. Termination by Employer Without Cause . If Employer terminates Employee’s employment in accordance with Section 4.4, then Employer shall pay Employee’s Base Salary through the termination date specified in Section 4.4 at the rate in effect at such termination date, plus any amount due under Section 5.10 and 5.11 hereof.

 

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5.5. Termination by Employee Due to Poor Health. If Employee terminates employment under this Agreement pursuant to Section 4.5 hereof, Employer shall pay to Employee any unpaid amounts of Base Salary to the termination date specified in Section 4.5, plus any disability payments otherwise payable by or pursuant to plans provided by Employer, plus any amounts as may be due under Section 5.10 and 5.11 hereof.

5.6. Termination by Employee . If Employee’s employment under this Agreement terminates pursuant to Section 4.6 hereof, Employer shall pay to Employee any unpaid amounts of Base Salary to the termination date specified in Section 4.6, plus any amounts as may be due under Section 5.10 and 5.11 below. In the event that the termination date specified by Employer is less than ninety (90) days after the date of Employer’s receipt of notice as contemplated by Section 4.6, then Employer shall continue Employee’s Base Salary for a period of days equal to ninety (90) minus the number of days from Employee’s notice to the termination date.

In addition, if Employee gives Employer sufficient notice in accordance with Section 4.6 and executes, and does not revoke, a general release of claims pursuant to Section 5.18 of this Agreement, Employer shall pay Employee a bonus calculated in accordance with Section 5.11 hereof.

5.7. Termination by Employee for Good Reason. If Employee’s employment under this Agreement is terminated in accordance with Section 4.7, then (i) Employer shall pay Employee’s Base Salary through the termination date specified pursuant to Section 4.7 at the rate in effect at such termination date, plus any amounts as may be due under Section 5.10 and 5.11 hereof.

5.8. Termination by Employee due to Change in Control of Employer. If Employee’s employment under this Agreement is terminated in accordance with Section 4.8, then Employer shall pay Employee’s Base Salary through the termination date specified pursuant to Section 4.7 at the rate in effect at such termination date, plus any amounts as may be due under Section 5.10 and 5.11 hereof.

5.9. Payments in the Event of a Change in Control of Employer. In the event it shall be determined that any payment, distribution or other action by Employer to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including any additional payments required under Section 5.7) (a "Payment") would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by Employee with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), Employer shall make a payment to Employee (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Employee retains (or has had paid to the Internal Revenue Service on his behalf) an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in Employee’s adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-Up

 

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Payment is to be made. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-Up Payment is to be made, and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

(a) Subject to the provisions of paragraph (b) of this Section, all determinations required to be made under this Section 5.9, 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 a "Big Four" accounting firm (the "Accounting Firm") selected by the Chief Executive Officer; provided, that if the Gross-Up Payment relates to the termination of the Chief Executive Officer’s employment with Employer, then the Accounting Firm shall be selected by the Chief Financial Officer; and provided, further that the Accounting Firm shall not also be Employer’s independent auditor. The Accounting Firm shall provide detailed supporting calculations both to Employer and Employee within thirty (30) business days of the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by Employer. All fees and expenses of the Accounting Firm shall be borne solely by Employer. Any Gross-Up Payment, as determined pursuant to this Section 5.9, shall be paid by Employer to Employee within five (5) days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the Excise Tax on Employee’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon Employer and Employee. 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 may not have been made by Employer should have been made ("Underpayment") consistent with the calculations required to be made hereunder. In the event that Employer exhausts its remedies pursuant to Section 5.9 and Employee 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 Employer to or for the benefit of Employee.

(b) Employee shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than thirty (30) business days after Employee is informed in writing of such claim and shall apprise Employer of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to Employer (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Employer notifies Employee in writing prior to the expiration of such period that it desires in good faith to contest such claim, Employee shall:

(i) give Employer any information reasonably requested by Employer relating to such claim;

 

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(ii) take such action in connection with contesting such claim as Employer 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 Employer;

(iii) cooperate with Employer in good faith in order effectively to contest such claim; and

(iv) permit Employer to participate in any proceedings relating to such claim;

provided, however, that Employer 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 Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such contest and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 5.9(b), Employer shall control all proceedings taken in connection with such contest and, after making a determination in good faith, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee 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 Employer shall reasonably determine; provided, however, that if Employer directs Employee to pay such claim and sue for a refund, Employer shall advance the amount of such payment to Employee, on an interest-free basis and shall indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income 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 further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Employer’s control of the contest shall be limited to issues with respect to 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 taxing authority.

(c) If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 5.9(b), Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to Employer’s complying with the requirements of Section 5.9(b)) promptly pay to Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 5.9(b), a determination is made that Employee shall not be entitled to any refund with respect to

 

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such claim and Employer does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (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.

5.10. Expense Reimbursement. Employee shall be entitled to reimbursement for reasonable business expenses incurred prior to the termination date, subject, however to the provisions of Section 3.1. Such reimbursement shall be made at the times and in accordance with Employer’s normal procedures for reimbursements.

5.11. Performance Bonus . In the situations described in Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7 and 5.8, upon termination of Employee’s employment under this Agreement, Employee shall be paid a bonus with respect to Employer’s fiscal year in which the termination date occurs, equal to the Performance Bonus, if any, that would have been payable to Employee for the fiscal year if Employee’s employment had not been terminated, multiplied by the number of days in the fiscal year prior to and including the date of termination and divided by three hundred sixty-five (365). Any amount payable under this Section 5.11 shall be paid to Employee when Employer pays performance bonuses to its eligible employees, which shall be in the calendar year following the termination date of this Agreement.

5.12. Employment Transition and Severance Agreement. If Employer so requests within five business days following a termination of Employee’s employment under this Agreement pursuant to Section&nb


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