EXHIBIT 10.2
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (this
“Agreement”) is made and entered into by and between
PEDIATRIX MEDICAL GROUP, INC. , a Florida corporation
(“Employer”), and JOSEPH M. CALABRO
(“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 currently serves as President and
Chief Operating 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 one (1) year, unless sooner
terminated in accordance with the provisions of Section 4.
Thereafter, the employment of Employee hereunder shall
automatically renew for successive one (1) year periods until
terminated in accordance with the provisions of Section 4 of
this Agreement. 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 any renewal terms, 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 of this
Agreement.
1.2. Duties of Employee .
During the Employment Period, Employee shall serve as President and
Chief Operating 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 Chief
Executive Officer (“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
date of this Agreement, and he may continue to serve in any other
similar capacity in which he serves as of the date of this
Agreement for any institution. During the Employment Period, it
shall not be a violation of this Agreement to (i) serve on
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 Six Hundred Thousand Dollars
($600,000.00) (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 Percent (100%) 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 forty
(40) 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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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.
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.
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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;
(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;
(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
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(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 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 date of this Agreement
(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.
If Employee desires to terminate
Employee’s employment under this Agreement pursuant to this
Section, 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 5.7
hereof, but shall not be entitled to compensation under any other
subsection of Section 5 hereof.
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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 5.9 below, Employer shall have no
further obligation to Employee under this Agreement.
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 5.9 and 5.10 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 (i) 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 5.9 hereof; and (ii) Employer shall
(a) continue to pay Employee’s monthly Base Salary for a
period of twenty-four (24) months after the termination date,
and (b) on the first (1 st ) and second (2
nd
) anniversaries of the
termination date, pay Employee an amount equal to the greater of
Employee’s Average Annual Performance Bonus (as defined
below) or Employee’s bonus for the year immediately preceding
Employee’s termination, and (c) pay Employee a bonus
calculated in accordance with Section 5.10 hereof. The
twenty-four (24) month period after the termination date
during which Employee may continue to receive Base Salary payments
pursuant to this Section 5.4 shall be referred to as the
“Severance Period” for purposes of this Agreement. For
purposes of this Agreement, “Average Annual Performance
Bonus” shall be equal to Employee’s then applicable
Base Salary multiplied by a percentage obtained by averaging the
quotients of the Performance Bonus paid to Employee for the three
(3) full calendar years prior to the termination date divided
by Employee’s Base Salary in effect for the calendar year for
which the Performance Bonus relates.
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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 5.9 hereof.
Employer shall also pay Employee a bonus calculated in accordance
with Section 5.10 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 5.9 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 a general release of Employer that is satisfactory to
Employer, Employer shall pay Employee a bonus calculated in
accordance with Section 5.10 hereof.
5.7. Termination
by Employee for Good Reason or Due to Change in Control. If
Employee’s employment under this Agreement is terminated in
accordance with Section 4.7 or 4.8, then (i) Employer
shall pay Employee’s Base Salary through the termination date
specified pursuant to Section 4.7 or 4.8 at the rate in effect
at such termination date, plus any amounts as may be due under
Section 5.9 hereof; and (ii) Employer shall
(a) continue to pay Employee’s monthly Base Salary for a
period of twenty-four (24) months after the termination date;
(b) on the first (1 st ) and second (2
nd
) anniversaries
of the termination date, pay Employee an amount equal to the
greater of Employee’s Average Annual Performance Bonus or
Employee’s bonus for the year immediately preceding
Employee’s termination; provided, however, that if
Employee’s employment is terminated in accordance with
Section 4.8 of this Agreement, then Employer shall make such
Performance Bonus payments due to Employee under this Agreement in
a lump sum within ninety (90) days after the termination date
determined under Section 4.8; and (c) pay Employee a
bonus calculated in accordance with Section 5.10 hereof. The
twenty-four (24) month period after the termination date
during which Employee continues to receive Base Salary payments
pursuant to this Section 5.7 shall be referred to as the
“Severance Period” for purposes of this Agreement.
Notwithstanding the foregoing, if Employee’s employment under
this Agreement is terminated in connection with a Change in Control
of Employer, the payments to Employee under this Section shall be
subject to the provisions of Section 5.8 below.
5.8. 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
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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 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 5.8, 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 5.8, 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 5.8 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.
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(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;
(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 5.8(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
