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Exhibit 10.20
SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered
into as of the Effective Date, by and between Danny Heatly (the
"Employee") and Devon Energy Corporation (the "Company");
WITNESSETH THAT :
WHEREAS, the parties desire to
enter into this Agreement pertaining to the employment of the
Employee by the Company;
NOW, THEREFORE, in consideration
of the mutual covenants and agreements set forth below, it is
hereby covenanted and agreed by the Employee and the Company as
follows:
1. Definitions and
Construction. The following words, terms, and phrases used in
this Agreement shall have the meanings set forth in this paragraph
1:
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(a)
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"Affiliate" means any entity during any period
that it is an affiliate of the Company, as the term "affiliate" is
defined under Rule 12b-2 of the Exchange Act (provided that
for this purpose, "Affiliate" shall exclude natural
persons).
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(b)
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The "Agreement Term" shall be the period
beginning on the Effective Date and ending on the earlier of the
Employee’s Date of Termination based upon the circumstances
described in paragraphs 5(a) through 5(f) or two years after the
Company has provided the Employee with written notice of the
Company’s desire to terminate the Agreement; provided if a
Change of Control Date occurs at any time, including during the
above referenced two year notice period, then, the Agreement Term
may not cease prior to the earliest of the Employee’s Date of
Termination or the last day of the 24 th calendar month following the
calendar month in which a Change of Control Date occurs.
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(c)
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"Aggregate Annual Compensation" shall mean the
sum of (i) and (ii) below:
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(i)
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The Employee’s annual base salary rate in
effect on the date immediately prior to the Employee’s Date
of Termination, or any greater annual base salary rate applicable
to the Employee during the two-year period prior to the Date of
Termination.
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(ii)
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An amount equal to the largest annual bonus paid
or payable to the Employee for the three consecutive years prior to
the year in which the Employee’s Date of Termination occurs
(or, if fewer than three, for the years in which the Employee is
employed).
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Determinations under this paragraph
(c) shall be subject to the following:
(I) If any portion of the Employee’s salary has been
reduced to reflect elective deferrals of amounts that would
otherwise be included in salary in the absence of such
deferral,
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those deferred amounts shall be included in the determination of
the Employee’s salary at the time they would have been paid
in the absence of such deferral. Conversely, such amounts shall not
be included in the Employee’s salary when they are paid at
the end of the deferral period.
(II) A bonus is deemed paid for a year if it is earned as a
result of services that are performed by the Employee in that year.
If any portion of the Employee’s bonus has been reduced to
reflect elective deferrals of amounts that would otherwise be
included in bonus in the absence of such deferral, those deferred
amounts shall be included in the determination of the
Employee’s bonus without regard to such deferral. Conversely,
such amounts shall not be included in the Employee’s bonus
when they are paid at the end of the deferral period.
(III) The determination of the bonus amount paid or payable to
the Employee for any year shall be annualized if the Employee is
not employed by the Company or an Affiliate for the entire
year.
(IV) If the Employee’s Date of Termination occurs within
the period beginning on a Change of Control Date and ending on the
last day of the 24th calendar month following the calendar month in
which the Change of Control Date occurs, then the amount determined
in accordance with paragraph (ii) above shall be not less than
the largest of the annual bonus amounts paid or payable to the
Employee for the three consecutive years prior to the year in which
the Change of Control Date occurs (or, if fewer than three, for the
years in which the Employee is employed).
(V) For the avoidance of doubt, it is recited here that
"Aggregate Annual Compensation" will not include the following:
(1) amounts realized from the exercise of a nonqualified stock
option; (2) amounts realized when restricted stock (or
property) held by the Employee either becomes freely transferable
or is no longer subject to a substantial risk of forfeiture; and
(3) amounts realized from the sale, exchange or other
disposition of stock acquired under an incentive stock option or an
employee stock purchase plan.
(VI) If the Employee is employed by one or more Affiliates in
any of the three consecutive years prior to the year in which the
Employee’s Date of Termination occurs, the determination of
the bonus paid or payable in any year shall include amounts paid or
payable by such Affiliate or Affiliates for such year.
(VII) If the Employee has not been employed by the Company
for a sufficient period of time to have been eligible to have
received a bonus from the Company or any Affiliate, the
Employee’s bonus amount shall be the target bonus in effect
for the year in which the Employee’s Date of Termination
occurs.
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(d)
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"Basic Benefits" means health, dental, and life
benefits (including accidental death/dismemberment) for the
Employee and the Employee’s family.
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(e)
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"Board" means the Board of Directors of the
Company.
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(f)
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"Cause" means:
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(i)
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the willful and continued failure by the Employee
to substantially perform his or her duties with the Company (other
than any such failure resulting from the Employee being Disabled),
within a reasonable period of time after a written demand for
substantial performance is delivered to the Employee by the
Employee’s Supervisor, which demand specifically identifies
the manner in which the Employee’s Supervisor believes that
the Employee has not substantially performed such
duties;
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(ii)
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the willful engaging by the Employee in conduct
which is demonstrably and materially injurious to the Company or
any Affiliate, monetarily or otherwise; or
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(iii)
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the engaging by the Employee in egregious
misconduct involving serious moral turpitude to the extent that, in
the reasonable judgment of the Employee’s Supervisor, the
Employee’s credibility and reputation no longer conform to
the standard of the Company’s employees.
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For purposes of this paragraph (f), no act, or
failure to act, on the Employee’s part shall be deemed
"willful" unless done, or omitted to be done, by the Employee not
in good faith and without reasonable belief that the
Employee’s action or omission was in the best interest of the
Company and Affiliates.
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(g)
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A "Change of Control Date" shall be deemed to
have occurred each time any one of the events described in
paragraphs (i), (ii), (iii), or (iv) below occurs; provided
that if a Change of Control Date occurs by reason of an acquisition
by any Person that comes within the provisions of paragraph
(i) below), no addition Change of Control Date shall be deemed
to occur under such paragraph (i) by reason of subsequent
changes in holdings by such Person (except if the holdings by such
Person are reduced below 30% and thereafter increase to 30% or
above). For the purpose of this paragraph (g), the term "Company"
shall include Devon Energy Corporation and any successor
thereto.
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(i)
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The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a "Person") if, immediately after such
acquisition, such Person has beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or
more of either (I) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or
(II) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions
shall not constitute a Change of Control Date: (A) any
acquisition by an underwriter temporarily holding securities
pursuant to an offering of such securities; (B) any
acquisition by the Company; (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company;
or
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(D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B), and
(C) of paragraph (iii) below.
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(ii)
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Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the Effective
Date whose election, appointment or nomination for election by the
Company’s shareholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for purposes of this definition,
any such individual whose initial assumption of office occurs as a
result of an actual or publicly threatened election contest (as
such terms are used in Rule 14a-l 1 promulgated under the
Exchange Act) with respect to the election or removal of directors
or other actual or publicly threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board.
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(iii)
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A reorganization, share exchange, merger or
consolidation (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the ultimate parent entity resulting from
such Business Combination (including, without limitation, an entity
which, as a result of such transaction, has ownership of the
Company or all or substantially all of the assets of the Company
either directly or through one or more subsidiaries) in
substantially the same relative proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then
outstanding common stock of the ultimate parent entity resulting
from such Business Combination or the combined voting power of the
then outstanding voting securities of such entity except to the
extent that such ownership existed prior to the Business
Combination, and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the
Incumbent Board providing for such Business Combination, or were
elected, appointed or nominated by the Incumbent Board.
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(iv)
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Approval by the shareholders of the Company of
(A) a complete liquidation or dissolution of the Company or,
(B) the sale or other disposition of all or substantially all
of the assets of the Company, other than to an entity with respect
to which following such sale or other disposition, (1) more
than 50% of, respectively, the then outstanding shares of common
stock of such entity and the combined voting power of the then
outstanding voting securities of such entity entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same relative
proportions as their ownership, immediately prior to such sale or
other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(2) less than 30% of, respectively, the then outstanding
shares of common stock of such entity and the combined voting power
of the then outstanding voting securities of such entity entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Company or such
entity), except to the extent that such Person owned 30% or more of
the Outstanding Company Common Stock or Outstanding Company Voting
Securities prior to the sale or disposition, and (3) at least
a majority of the members of the board of directors of such entity
were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Incumbent Board
providing for such sale or other disposition of assets of the
Company, or were elected, appointed or nominated by the Incumbent
Board.
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If (I) the Employee’s Date of
Termination occurs on or after the date of approval by the
Company’s shareholders of a transaction described in
paragraph (iii) above; (II) the transaction so approved
by shareholders is consummated and constitutes a Change of Control
Date under paragraph (iii) above; and (III) prior to the
consummation of such transaction, the Employee’s Date of
Termination occurs, then for purposes of applying the provisions of
paragraph 6(c), the Change of Control Date shall be deemed to have
occurred with respect to such Employee immediately prior to such
Employee’s Date of Termination provided that, to the extent
that the application of this sentence results in the Employee
becoming entitled to benefits under this Agreement, commencement of
such benefits shall be required to occur not earlier than the date
of the consummation of the transaction.
If (A) the Employee’s Date of Termination occurs
prior to a Change of Control Date under circumstances described in
paragraph 5(f) (relating to termination of employment by the
Company without Cause); (B) the Participant reasonably
demonstrates that such termination either:
(1) was at the request of a third party who had indicated
an intention or taken steps reasonably calculated to effect a
Change of Control Date or who effectuates a Change of Control Date
or
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(2) was otherwise in connection with, or in anticipation
of, a Change of Control Date which actually occurs,
then, for purposes of this Plan, a Change of Control Date with
respect to that Participant shall be deemed to be the date
immediately prior to the Participant’s Date of Termination;
provided that, to the extent that the application of this sentence
results in the Employee becoming entitled to benefits under this
Agreement, commencement of such benefits shall be required to occur
not earlier than the date of the Change in Control or, in the case
of a Change in Control described in paragraph (ii) above,
consummation of the transaction. If any such termination occurs
while an agreement is pending and the effective provisions of such
agreement provide for a transaction or transactions which, if
consummated, would constitute a Change of Control Date, and such
Change of Control Date occurs, then such termination shall
conclusively be presumed to be in connection with a Change of
Control Date.
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(h)
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"Code" means the Internal Revenue Code of 1986,
as amended.
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(i)
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"Company" means Devon Energy Corporation, a
Delaware corporation.
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(j)
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"Confidential Information" shall include all
non-public information (including, without limitation, information
regarding litigation and pending litigation) concerning the Company
and the Affiliates which was acquired by or disclosed to the
Employee during the course of employment with the Company, or
during the course of consultation with the Company prior to the
commencement of employment and following the Date of Termination
(regardless of whether consultation is pursuant to paragraph
12).
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(k)
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"Date of Termination" means the last day the
Employee is employed by the Company (including any successor to the
Company as determined in accordance with paragraph 18). If the
Employee becomes employed by the entity into which Devon Energy
Corporation is merged, or the purchaser of substantially all of the
assets of Devon Energy Corporation, or a successor to such entity
or purchaser, the Employee shall not be treated as having
terminated employment for purposes of this Agreement until such
time as the Employee terminates employment with the successor
(including, without limitation, the merged entity or purchaser). If
the Employee is transferred to employment with Devon Energy
Corporation (including a successor to Devon Energy Corporation) or
an Affiliate, such transfer shall not constitute a termination of
employment for purposes of this Agreement, provided that the new
employer agrees to assume this Agreement and be substituted for the
Company under this Agreement.
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(l)
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The Employee shall be considered "Disabled"
during any period in which a physical or mental disability which
renders the Employee incapable, after reasonable accommodation, of
performing the duties under this Agreement. The Employee shall be
considered "Permanently Disabled" during any period in which the
Employee is Disabled; provided, however, that the Employee shall
not be considered to be "Permanently Disabled" on the Date of
Termination unless, at that time (i) such disability is
reasonably expected by the Employee’s Supervisor to continue
for at least 90 days after the Date of Termination, and
(ii) at the Date of Termination, the Employee is eligible
for
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income replacement benefits under the
Company’s long-term disability plan or another arrangement
providing substantially similar benefits. In the event of a dispute
as to whether the Employee is Disabled or Permanently Disabled, the
Company may refer the same to a licensed practicing physician of
the Company’s choice, and the Employee agrees to submit to
such tests and examinations as such physician shall deem
appropriate.
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(m)
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"Effective Date" means September 14,
2004.
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(n)
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"Exchange Act" means the Securities Exchange Act
of 1934.
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(o)
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"Good Reason" shall include:
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(i)
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The assignment to the Employee of any position
which results, in the aggregate, in a material reduction in the
Employee’s rank, status, or responsibilities; provided that
the Employee shall not be deemed to have been assigned a position
described in this paragraph (i) solely because of a change in
the Employee’s reporting relationship.
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(ii)
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A revision by the Company of the Employee’s
rate of salary to a rate that is less than the Employee’s
rate of salary immediately prior to such revision, or a material
failure to provide incentive compensation opportunities or benefits
to the Employee that are provided to other similarly situated
employees of the Company.
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(iii)
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The relocation of the Employee’s base
office to an office that is more than 50 highway miles of the
Employee’s base office on the Effective Date.
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(iv)
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The failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement.
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(v)
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Any purported termination of the Employee’s
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of paragraph
(p) below, and for purposes of this Agreement, no such
purported termination shall be effective.
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(vi)
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Any material breach of this Agreement by the
Company not described in paragraphs (i) through (v) next
above.
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(p)
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A "Notice of Termination" means a dated notice
which indicates the Date of Termination (not earlier than the date
on which the notice is provided), and which indicates the specific
termination provision in this Agreement relied on and which sets
forth in reasonable detail the facts and circumstances, if any,
claimed to provide a basis for termination of the Employee’s
employment under the provision so indicated.
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(q)
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"Retiree Medical Benefit Coverage" shall be the
coverage in effect under the retiree medical benefit plan
applicable to the Employee, or which would be applicable to
the
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Employee if the Employee’s employment then
terminated and the Employee satisfied the applicable age and
service requirements.
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(r)
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"The Employee’s "Supervisor" will be the
person to whom the Employee reports. The identity of the
Employee’s "Supervisor" shall be determined by the Chief
Executive Officer or the designee of the Chief Executive Officer of
the Company from time to time.
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2. Rights
Provided By Agreement. This Agreement does not constitute a
guarantee of continued employment but instead provides for certain
rights and benefits in the event the Employee’s employment
with the Company terminates under the circumstances described
herein.
3. Compensation.
Subject to the terms of this Agreement, while the Employee is
employed by the Company, the Company shall provide such
compensation for the Employee’s services as shall be
determined from time to time by the Company. All payments and
distributions under this Agreement are subject to withholding of
all applicable taxes.
4. Certain Additional
Payments by the Company.
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(a)
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Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, benefit, or distribution from the Company, any affiliate
of the Company, or trusts established by the Company or by any
affiliate of the Company for the benefit of its employees, to the
Employee or for the Employee’s benefit, whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, including, by way of example and not
by way of limitation, acceleration of the date of vesting, payment,
rate of payment, benefit or right to future payment or benefit
under any plan, program or arrangement of the Company or by any
other company, person or entity (a "Payment"), would be subject to
the excise tax imposed by section 4999 of the Code or any interest
or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of
all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment
equal to the sum of: (i) the Excise Tax imposed upon the
Payments; plus (ii) an amount equal to the product of any
deductions disallowed for federal, state, or local income tax
purposes because of the inclusion of the Gross-Up Payment in the
Employee’s adjusted gross income multiplied by the highest
applicable marginal rate of federal, state, or local income
taxation, respectively, for the calendar year in which the Gross-Up
Payment is to be made.
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(b)
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Subject to the provisions of paragraph 4(c), all
determinations required to be made under this paragraph 4,
including whether a Gross-Up Payment is required and the amount of
such Gross-Up Payment, shall be made by a nationally recognized
certified public accounting firm as may be selected by the Company
(the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee that there
has been a
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Payment which would be subject to the Excise Tax,
or such earlier time as is requested by the Company. The initial
Gross-Up Payment, if any, as determined pursuant to this paragraph
4(b), shall be paid to the Employee within five days of the receipt
of the Accounting Firm’s determination. If the Accounting
Firm determines that no Excise Tax is payable by the Employee, it
shall furnish the Employee with an opinion that the Employee has
substantial authority not to report any Excise Tax on the
Employee’s federal income tax return. Any determination by
the Accounting Firm shall be binding upon the Company and the
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
Payment which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to paragraph 4(c) and the 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
the Company to or for the benefit of the Employee.
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(c)
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The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Employee knows of such
claim, and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such
notice to the 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 Employee in writing prior to the
expiration of such period that it desires to contest such claim,
the Employee shall:
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(i)
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give the Company any information reasonably
requested by the Company relating to such claim;
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(ii)
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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
reasona
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