EMPLOYMENT AGREEMENT

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT (this “Agreement”), effective May 4, 2005 (the “Effective Date”), by and between AMN Healthcare Services, Inc., a Delaware corporation (the “Company”), and Susan R. Nowakowski, an individual (the “Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to continue to employ the Executive and the Executive desires to continue to be so employed and to serve from and after the Effective Date, in the capacity of President and Chief Executive Officer and to continue to perform services on its behalf in said position;

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. EMPLOYMENT

 

The Company agrees to continue to employ the Executive, and the Executive agrees to continue to serve the Company, on the terms and conditions set forth herein.

 

2. TERM

 

Subject to Section 5 hereof, the Executive’s employment under this Agreement shall commence on the Effective Date and shall end on the fourth anniversary of the Effective Date (the “Initial Term”); provided that such term shall be automatically extended for additional one-year periods, unless, not later than 120 days prior to the expiration of the Initial Term (or any extension thereof pursuant to this Section 2) either party hereto shall provide written notice of its or her desire not to extend the term hereof to the other party hereto. As used herein, the term “Term” shall mean the Initial Term together with each one-year extension.

 

3. POSITION AND DUTIES

 

(a) The Executive shall be duly elected, effective on the Effective Date, and shall thereafter during the Term continue to serve, as President and Chief Executive Officer of the Company and shall perform such duties and exercise such supervision and powers over and with regard to the business of the Company customarily associated with the position of President and Chief Executive Officer, as well as such duties and services required herein and as may be reasonably assigned to her from time to time by the Board of Directors of the Company (the “Board”). The Executive shall also serve as a director of each wholly-owned subsidiary of the Company to which she is appointed by the Company. Other than (i) the Executive Chairman of the Board and (ii)

 

internal auditors of the Company who report directly to the Audit Committee of the Board, all employees of the Company shall report directly or indirectly to the Executive; and the Executive shall report to the Board. The Executive shall perform her duties to the best of her ability and in a diligent and proper manner. In addition, during the Term, the Company shall nominate the Executive for election to the Board by the shareholders of the Company so that she may continue to serve as a director of the Company in accordance with the Company’s By-Laws.

 

(b) Except during vacations and periods of illness, the Executive shall, during the Term, devote all her business time (as opposed to personal time) and attention to the performance of services for the Company and its subsidiaries hereunder; provided , however , that the Executive shall be permitted, to (i) continue to serve on the boards of the business enterprises on which she is serving as of the Effective Date, (ii) subject to the prior consent of the Corporate Governance Committee of the Board (the “Corporate Governance Committee”), serve on any board of any business enterprise other than those referenced in clause (i) above, and (iii) serve on any board of any non-profit organization without obtaining such a consent. Notwithstanding the foregoing, the Corporate Governance Committee shall have the right, at any time during the Term, to require that the Executive resign from her position on the board or trusteeship of any for-profit organization, effective as soon as such resignation may be properly effected under applicable law, and the charters, by-laws or other governing documents of the applicable for-profit organization. On or before the Effective Date, the Executive shall provide the Corporate Governance Committee with a list of the boards and committees on which she is serving as of the Effective Date.

 

4. COMPENSATION AND RELATED MATTERS

 

(a) Salary .

 

(i) During the Term, the Company shall pay to the Executive a base salary at a rate of not less than $500,000 per annum, payable in accordance with the usual payroll practices of the Company, but not less frequently than monthly. The Executive’s base salary may be increased from time to time by the Compensation Committee of the Board (the “Committee”) and, if so increased, shall not thereafter be decreased during the Term. As used herein, “Base Salary” means the Executive’s initial salary hereunder as the same may be increased during the Term.

 

(ii) With respect to the Executive’s Base Salary for any fiscal year of the Company (“Fiscal Year”) following Fiscal Year 2005, the Committee and the Executive shall work together in good faith to finalize the Base Salary for such Fiscal Year no later than the last day of the immediately preceding Fiscal Year. Following the Effective Date, the Committee shall retain a compensation consultant to prepare a report regarding the base salaries and bonus arrangements extended by comparable companies to their Chief Executive Officers, and the Committee shall take such report into account in determining the Base Salary and the Bonus (as defined below) applicable to Fiscal Year 2006. Notwithstanding anything in this Agreement to the contrary, the Executive shall not be entitled to assert that any breach of this

 

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Section 4(a)(ii) constitutes grounds for the Executive’s termination of her employment for “Good Reason” (as defined below).

 

(b) Welfare and Retirement Benefits . During the Term, the Executive shall be entitled to participate in all of the Company’s employee pension plans, welfare benefit plans, tax-deferred savings plans or other welfare or retirement benefits or arrangements (including any insurance or trust arrangements maintained generally for the benefit of the Company’s employees) and in which the executive officers of the Company are entitled generally to participate (collectively, the “Company Benefit Plans”) on terms no less favorable than those available to other senior executives of the Company as in effect from time to time.

 

(c) Annual Bonus .

 

(i) Subject to and in accordance with the AMN Healthcare Services, Inc. Senior Management Bonus Plan, as such plan may be amended from time to time and approved by the Company’s shareholders (the “Bonus Plan”), the Executive shall be eligible to earn an annual bonus (the “Bonus”) for each Fiscal Year ending during the Term, based upon the Company’s achievement of performance goals, which goals shall be one or more of the “Performance Criteria” set forth in the Bonus Plan. In no event later than 90 days after the commencement of each Fiscal Year (other than Fiscal Year 2005), the Committee shall establish a Company performance goal target (the “Target”) for such Fiscal Year, which may consist of one or more Performance Criteria. Pursuant to the Bonus Plan, the “Actual Performance” of the Company shall be determined by the Committee. The Committee will determine annually if Actual Performance equals or exceeds the Target in respect of such Fiscal Year. In each case, the applicable Base Salary shall be that in effect on the last day of the relevant Fiscal Year. Notwithstanding the foregoing, and subject to the Bonus Plan and the proration described below in this Section 4(c) for the period of Fiscal Year 2005 beginning with the Effective Date, the amount of the Bonus shall be determined as follows:

 

 

For Actual Performance between 100% and 110% of the Target, the Bonus shall be 50% of Base Salary plus 5% of Base Salary for each whole percentage point by which the Actual Performance exceeds 100% of Target.

 

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Notwithstanding the foregoing, the Bonus for Fiscal Year 2005 shall be pro rated to only relate to the period from the Effective Date through December 31, 2005 such that the Bonus shall be determined based on Actual Performance for 2005 pursuant to this Section 4(c)(i) and then multiplied by a fraction the numerator of which shall be the number of days from the Effective Date through the last day of Fiscal Year 2005 and the denominator of which shall be 365. For the portion of Fiscal Year 2005 prior to the Effective Date, the Executive shall receive a pro rata portion of the bonus for Fiscal Year 2005 to which she is entitled under the Bonus Plan and Performance Criteria that the Committee previously approved for the Executive in her prior capacity as President and Chief Operating Officer.

 

(ii) Subject to the Bonus Plan, with respect to the Bonus for any Fiscal Year of the Company following Fiscal Year 2005, the Committee and the Executive shall work together in good faith to establish the Targets, corresponding Base Salary percentages and other terms and conditions applicable to the Bonus for such Fiscal Year no later than the last day of the immediately preceding Fiscal Year. As provided above in Section 4(a)(ii), following the Effective Date, the Committee shall retain a compensation consultant to prepare a report regarding the base salaries and bonus arrangements extended by comparable companies to their Chief Executive Officers, and the Committee shall take such report into account in determining the Base Salary and the Bonus applicable to Fiscal Year 2006. Notwithstanding anything in this Agreement to the contrary, the Executive shall not be entitled to assert that any breach of this Section 4(c)(ii) constitutes grounds for the Executive’s termination of her employment for Good Reason (as defined below).

 

(iii) The Bonus shall be paid on the date on which bonuses are typically paid to the senior most executives of the Company (such date, the “Bonus Payment Date”); provided , however , that the Bonus Payment Date shall in no event be later than two and one-half months following the end of the Fiscal Year to which such Bonus relates, and provided , further , that such Bonus shall not be payable to the Executive if her employment is terminated after the Fiscal Year as to which such Bonus relates and before the Bonus Payment Date by the Company under subsection 5(c) hereof (for Cause).

 

(d) Stock Options . Subject to Committee approval, not later than two days following the Effective Date, the Company shall deliver a Non Qualified Stock Option Agreement in the form annexed hereto as Exhibit A, pursuant to which the Company shall grant to the Executive “non qualified” stock options to purchase 200,000 shares of common stock of the Company, par value $0.01 per share (the “Common Stock”) as provided in such agreement.

 

(e) Stock Option/Restricted Stock/SAR Plans . Subject to Committee approval, the Executive shall be eligible to participate in (i) any stock option plan or program, (ii) any restricted stock plan or program, (iii) any stock appreciation rights plan or program and (iv) any other equity plan or program (each, an “Equity Plan,” and collectively, “Equity Plans”) that the Company adopts during the Term. The

 

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Executive’s participation under any such Equity Plan shall be at a level commensurate with her position as President and Chief Executive Officer as determined by the Committee in its discretion. Notwithstanding the foregoing, the Executive, in her sole discretion, may elect not to participate in any such Equity Plan.

 

(f) Vacations . During the Term, the Executive shall be entitled to the number of days of paid time off (“PTO”) in each Fiscal Year determined in accordance with the Company’s PTO policies.

 

(g) Expenses . During the Term, the Executive shall be entitled to receive reimbursement from the Company of all reasonable business expenses incurred by the Executive in performing services hereunder, including all travel expenses and living expenses while away from home on business or at the request of, and in the service of, the Company.

 

(h) Attorneys’ Fees . The Company shall pay directly or reimburse the Executive on an after-tax basis for all reasonable attorneys’ fees and costs incurred by the Executive in the negotiation and creation of this Agreement and the related Non Qualified Stock Option Agreement; provided , however , that the Company shall have no obligation to reimburse such fees in excess of $20,000.

 

5. TERMINATION

 

The Executive’s employment hereunder and the Term may be terminated under the following circumstances:

 

(a) Death . The Executive’s employment hereunder shall terminate upon her death. In the case of any such termination upon death, the Executive’s estate shall be entitled to the payments and benefits described in Section 6(a).

 

(b) Disability . If the Executive is unable to timely and regularly perform her duties hereunder due to physical or mental illness, injury or incapacity, as determined by the Board in good faith based on medical evidence acceptable to it (a “Disability”), and such Disability continues for a period of six consecutive months, then the Company may terminate the Executive’s employment hereunder. A return to work for less than 30 consecutive days during any period of Disability shall not be deemed to interrupt the running of (and shall be included in) the aforementioned six-month period. In the case of any such termination by the Board on account of Disability, the Executive shall be entitled to the payments and benefits described in Section 6(a).

 

(c) Termination by the Company for Cause . The Company may terminate the Executive’s employment hereunder at any time for Cause. For purposes of this Agreement, “Cause” shall mean a termination of employment of the Executive by the Company due to (i) the commission by the Executive of an act of fraud or embezzlement against the Company or any of its subsidiaries or the conviction of the Executive in a court of law, or guilty plea or no contest plea, of any charge involving an

 

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act of fraud or embezzlement (including the willful and unauthorized disclosure of information of the Company or any of its subsidiaries which the Executive knows or should know to be material, confidential and proprietary to the Company or any of its subsidiaries, which results, or could reasonably have been expected to result, in material financial loss to the Company or any of its subsidiaries), (ii) the conviction of the Executive in a court of law, or guilty plea or no contest plea, to a felony charge, (iii) the willful misconduct of the Executive as an employee of the Company or any of its subsidiaries which is reasonably likely to result in injury or financial loss to (I) the Company or (II) to any subsidiaries of the Company, which injury or loss is material to the Company taken as a whole, (iv) the willful failure of the Executive to render services to the Company or any of its subsidiaries in accordance with the Executive’s employment, which failure amounts to a material neglect of the Executive’s duties to the Company and does not result from physical illness, injury or incapacity, and which failure is not cured promptly after adequate notice of such failure and a reasonably detailed explanation has been presented by the Company to the Executive, or (v) a material breach of any of the covenants in subsections 3(a), 3(b) or Section 10 hereof by the Executive, which breach is not cured, if curable, within 30 days after a written notice of such breach is delivered to the Executive. The Executive shall not be deemed to have been terminated for Cause unless the Company shall have given or delivered to the Executive (1) reasonable notice setting forth the basis for termination for Cause, and (2) a reasonable opportunity for the Executive, together with her counsel, to request reconsideration by and be heard before the Board, provided ; however , that such notice and opportunity to be heard shall not be required if the Board, based on the advice of counsel, deems it inconsistent with its fiduciary duties and so advises the Executive.

 

For purposes of determining whether the Executive was given “reasonable notice” and “reasonable opportunity to be heard” in connection with any determination by the Board as to whether Cause exists, 10 business days’ notice of the Board meeting shall be deemed to constitute “reasonable notice” (without prejudice to the determination of whether some other period would also constitute “reasonable notice”), and the opportunity for the Executive and her counsel to present arguments to the Board at such meeting as to why the Executive believes that no Cause exists shall constitute “reasonable opportunity to be heard” (without prejudice to the determination of whether some other forum or method would also constitute a “reasonable opportunity to be heard”). For purposes of this Agreement, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company.

 

(d) Termination by the Executive for Good Reason . The Executive may voluntarily terminate her employment hereunder at any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean (i) a material breach by the Company of this Agreement (for the avoidance of doubt, other than any breach of Section 4(a)(ii) or 4(c)(ii)) or of the Non-Qualified Stock Option Agreement, which breach is not cured within 30 days after the Board’s receipt of written notice of such non-compliance from the Executive; (ii) the assignment to the Executive without her

 

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consent by the Company of duties materially and adversely inconsistent with the Executive’s position, duties or responsibilities as in effect immediately after the Effective Date, including, but not limited to, any material reduction in such position, duties or responsibilities, or a change in the Executive’s title or office, as then in effect, or any removal of the Executive from any of such positions, titles or offices, or any failure to elect or reelect the Executive as a member of the Board or any removal of the Executive as such a member, except in connection with the termination of her employment pursuant to any of subsections 5(a), 5(b) or 5(c) hereof; or (iii) the relocation of the Company’s headquarters to a place more than 50 miles from its location as of the Effective Date without the approval of the Executive.

 

(e) Termination by the Company Without Cause . The Company may at any time terminate the Executive for any reason, and, except for the amounts payable pursuant to subsection 6(b) hereof (or as otherwise set forth in any equity agreement), the Executive shall have no claim against the Company under this Agreement or otherwise by reason of such termination.

 

(f) Termination by the Executive Without Good Reason . The Executive may at any time terminate her employment hereunder without Good Reason; provided that the Executive will be required to give the Company at least 90 days’ advance written notice of a resignation without Good Reason.

 

(g) Notice of Termination . Any termination of the Executive’s employment hereunder, by the Company or by the Executive (other than termination pursuant to subsection 5(a) hereof), shall be communicated by written “Notice of Termination” to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

 

6. COMPENSATION UPON TERMINATION

 

(a) Death or Disability . If the Executive’s employment hereunder terminates pursuant to subsections 5(a) (Death) or 5(b) (Disability), the Executive or her estate (as the case may be) shall be entitled to receive: (i) a lump sum payment on the date of such termination equal to the amount of any earned, but unpaid Base Salary through the date of such termination; and (ii) an additional lump sum payment not later than thirty (30) days following such termination equal to (A) two times Base Salary, and (B) the amount of any unreimbursed business expenses properly incurred by the Executive in accordance with Company policy prior to the date of the Executive’s termination. In addition, the Executive or her estate, as the case may be, shall be entitled to receive the Bonus for the Fiscal Year in which such termination occurs, which is provided under the Bonus formula for such Fiscal Year, based on Actual Performance for such Fiscal Year as if the Executive had remained in the employ of the Company through the end of such Fiscal Year. Such Bonus to be paid as and when bonuses are paid to the other senior executives of the Company. In addition, for a period of 24 months after such termination, the Executive (unless the termination is the result of the Executive’s death) and her eligible dependents shall, to the extent permitted under the

 

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applicable plans of the Company as in effect on the date of such termination be eligible to continue to participate in the medical, life, dental and disability insurance coverage provided to employees at the Company’s expense; provided , however , that after such termination the Executive shall continue to pay premiums in respect to such coverage to the same extent that the Executive was paying such premiums immediately prior to such termination.

 

(b) Termination by the Company Without Cause or by the Executive for Good Reason .

 

(i) If the Executive’s employment is terminated by the Company pursuant to subsection 5(e) (Without Cause) or if the Executive terminates her employment pursuant to subsection 5(d) (for Good Reason), then the Executive shall be entitled to receive: (A) a lump sum payment on the date of such termination equal to the amount of any earned, but unpaid Base Salary through the date of such termination; and (B) an additional lump sum payment not later than thirty (30) days following such termination equal to (I) any earned but unpaid Bonus; and (II) the amount of any unreimbursed business expenses properly incurred by the Executive in accordance with Company policy prior to the date of the Executive’s termination. In addition, and subject to the Executive’s continued compliance with Section 10 of this Agreement, the Executive shall be entitled to receive (1) the “Salary Severance Benefit” and the “Bonus Severance Benefit” (as each term is defined in subsection 6(b)(ii)) and (2) continued eligibility to participate in the medical, life, dental and disability insurance coverage for the Executive and her eligible dependents to the extent permitted under the applicable plans of the Company as in effect on the date of such termination, at the Company’s expense through the end of the Severance Term; provided , however , that after such termination the Executive shall continue to pay premiums in respect to such coverage to the same extent that the Executive was paying such premiums immediately prior to such termination. The Salary Severance Benefit and the Bonus Severance Benefit shall be paid in equal installments over the Severance Term in accordance with the Company’s usual payroll practices and shall be subject to the Executive’s continued compliance with Section 10 of this Agreement. The Executive shall have no further rights to any compensation or other benefits under this Agreement. Any other benefits (including rights to stock, stock options, retirement income and insurance) due the Executive following termination pursuant to subsection 5(e) or 5(d) hereof shall be determined in accordance with the plans, policies and practices of the Company; provided , however , that the Executive shall not be entitled to payments or benefits under any separately stated severance plan, policy or program of the Company. Notwithstanding anything in this Agreement to the contrary, if required to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then: (A) the Salary Severance Benefit and the Bonus Severance Benefit for the first six (6) months of the Severance Term shall accrue during such six (6) months, but shall not be paid to the Executive until the first day of the seventh month of the Severance Term; and (B) the Executive shall pay the life insurance premiums applicable to the first six (6) months of the Severance Term, for which the Executive shall be reimbursed on an after-tax basis on the first day of the seventh month of the Severance Term.

 

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(ii) For purposes of this Section 6, the following terms shall have the meaning set forth in this subsection 6(b)(ii).

 

(1) “Severance Term” shall mean 24 months.

 

(2) “Salary Severance Benefit” shall mean the Executive’s Base Salary that would have been payable from the effective date of termination through the end of the Severance Term based on the Base Salary in effect on the effective date of the termination.

 

(3) “Bonus Severance Benefit” shall mean an amount equal to two (2) times the Bonus (based on the Company attaining 100% of the Target under the program of the Bonus Plan in effect at the time of such termination).

 

(iii) Termination Following a Change in Control . Notwithstanding anything to the contrary in this Agreement, if the Executive’s employment is terminated pursuant to subsections 5(d) or 5(e) hereof within one year following a Change in Control (as defined below), in lieu of receiving the amounts set forth in the second sentence of Section 6(b)(i) hereof, the Executive shall receive a lump sum payment, payable as soon as reasonably practicable following the date of such termination, in an amount equal to the sum of (A) the Salary Severance Benefit, (B) the Bonus Severance Benefit, and (C) the amount of any unreimbursed business expenses properly incurred by the Executive in accordance with Company policy prior to the date of the Executive’s termination. In addition, for a period of 24 months after such termination, the Executive and her eligible dependents shall, to the extent permitted under the applicable plans of the Company as in effect on the date of such termination, be eligible to continue to participate in the medical, life, dental and disability insurance coverage provided to employees at the Company’s expense; provided , however , that after such termination the Executive shall continue to pay premiums in respect to such coverage to the same extent that the Executive was paying such premiums immediately prior to such termination. In addition, any unvested shares of restricted stock, unvested options or other equity-based compensation awards held by the Executive automatically shall become 100% vested upon any Change in Control, as provided in the Executive’s Stock Option Agreements. For purposes of this Section 6(b)(iii), the term “Change in Control” shall have the meaning set forth in the Non Qualified Stock Option Agreement in the form attached hereto as Exhibit A.

 

(c) Termination by the Company For Cause or by the Executive Without Good Reason . If the Executive’s employment is terminated by the Company under subsection 5(c) (for Cause) or by the Executive under subsection 5(f) (without Good Reason), the Executive shall be entitled to receive: (i) a lump sum payment on the date of such termination equal to the amount of any earned, but unpaid Base Salary through the date of such termination; and (ii) an additional lump sum payment not later than thirty (30) days following such termination for reimbursement of any unreimbursed business expenses properly incurred by the Executive in accordance

 

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with Company policy prior to the date of the Executive’s termination. If the Executive’s employment hereunder is terminated by the Executive under subsection 5(f) (without Good Reason), the Executive shall also be entitled to receive any earned but unpaid Bonus not later than thirty (30) days following such termination. The Executive shall have no further rights to any compensation or other benefits under this Agreement. Any other benefits (including rights to stock, stock options, retirement income and insurance), due the Executive following termination of the Executive’s employment under Section 5(c) or 5(f) shall be determined in accordance with the plans, policies and practices of the Company; provided , however , that the Executive shall not be entitled to any payments or benefits under any separately stated severance plan, policy or program of the Company.

 

(d) Expiration of the Employment Term . In the event that the Company or the Executive elects not to extend the Term as provided in Section 2 hereof, the Executive’s employment shall be terminated upon the expiration of the Term, and, subject to Section 14 hereof, the provisions of this Agreement shall cease to apply effective as of such expiration, and the Executive shall be entitled to receive only the following: (i) any accrued but unpaid Base Salary through the date of termination; (ii) reimbursement of any unreimbursed business expenses properly incurred by the Executive in accordance with Company policy prior to the date of termination; and (iii) any earned but unpaid Bonus. The Executive shall thereafter receive no other compensation or benefits, other than pursuant to the terms of the plans, policies and practices of the Company; provided , however , that the Executive shall not be entitled to any payments or benefits under any separately stated severance plan, policy or program of the Company.

 

(e) Execution of Release of All Claims . Notwithstanding any other provision of this Agreement to the contrary, the Executive acknowledges and agrees that any and all payments to which the Executive is entitled under this Section 6 in the case of termination as a result of Disability, termination by the Company without Cause or termination by the Executive for Good Reason (other than payments of accrued and unpaid Base Salary and Bonus and reimbursement of business expenses) are conditional upon and subject to the Executive’s execution of a release substantially in the form attached hereto as Exhibit B (which form may be reasonably modified from time to time).

 

7. EXCISE TAX GROSS-UP .

 

(a) Notwithstanding anything in this Agreement to the contrary, and except as set forth in the last sentence of this subsection 7(a) below, if it is determined that any payment, benefit or distribution by the Company or its subsidiaries or affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 7) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code, or to any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”),

 

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then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing, if it is determined that the Executive is entitled to a Gross-Up Payment, but that the aggregate value of the Payments do not exceed 105% of the greatest amount (the “Reduced Amount”) that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive, and the Payments, in the aggregate, shall be reduced to the Reduced Amount.

 

(b) Subject to the provisions of Section 7(e) below, all determinations required to be made under this Section 7, including whether any 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 nationally recognized certified public accounting firm selected by the Company (the “Accounting Firm”), which may be the Company’s regular outside auditors. The Company will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the date of the Executive’s termination of employment or any earlier time selected by the Company. All fees and expenses of the Accounting Firm in performing the determinations referred to in this Section 7 shall be paid by the Company. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive no later than five calendar days following receipt of the Accounting Firm’s determination (but in no event later than five calendar days prior to the due date for the Executive’s income tax return on which the Excise Tax is to be included). Absent manifest error, any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive; provided, that following any payment of a Gross-Up Payment to the Executive (or to the Internal Revenue Service or other taxing authority on the Executive’s behalf), the Company may require the Executive to sue for a refund of all or any portion of the Excise Taxes paid on the Executive’s behalf, in which event the provisions of subsection 7(e) below shall apply. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision) at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments will not have been made by the Company, which should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. If the Company exhausts its remedies pursuant to subsection 7(e) hereof, and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall so notify the Company, and the Company shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as soon as reasonably practicable. Any such Underpayment shall be promptly paid by the Company to the Executive (or to the Internal Revenue Service or other applicable taxing authority on the Executive’s behalf).

 

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(c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by subsection 7(b) hereof.

 

(d) The federal, state and local income or other tax returns filed by the Executive and the Company will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive will make proper payment of the amount of any Excise Tax.

 

(e) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Company of a Gross-Up Payment or an Underpayment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive receives written notification of such claim, and the Executive shall further provide to the Company copies of any written correspondence from the Internal Revenue Service regarding such claim. The Executive shall not pay such claim prior to the expiration of the 30-calendar-day period following the date on which she gives such notice to Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

 

(i) provide the Company with any information reasonably requested by the Company relating to such claim,

 

(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

 

(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

 

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

 

provided , however , that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive h