AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this "Agreement") is
entered into this 1st day of November, 1993, but effective as of January 1,
1994 ("Effective Date"), by and between Xxxxx X. Xxxxx ("Employee") and U. S.
Long Distance Corp., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Company and Employee are parties to an Employment Agreement
dated effective October 1, 1992 (the "Prior Agreement");
WHEREAS, the Company and Employee desire to amend and restate the terms
of such employment;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Prior Agreement
is hereby amended and restated in its entirety to read as follows:
ARTICLE I
DUTIES
1.1 DUTIES. During the term of this Agreement, the Company agrees to
employ Employee as President and Chief Operating Officer of the Company, and
Employee agrees to serve the Company in such capacities or in such other
capacities (subject to Employee's termination rights under Section 4.2) as
the Board of Directors of the Company may direct, all upon the terms and
subject to the conditions set forth in this Agreement.
1.2 EXTENT OF DUTIES. Employee shall devote substantially all of his
business time, energy and skill to the affairs of the Company as the Company,
acting through its Board of Directors, shall reasonably deem necessary to
discharge Employee's duties in such capacities. Employee may participate in
social, civic, charitable, religious, business, education or professional
associations, so long as such participation would not materially detract from
Employee's ability to perform his duties under this Agreement. Employee
shall not engage in any other business activity during the term of this
Agreement without the prior written consent of the Company, other than the
passive management of employee's personal investments or activities which
would not materially detract from Employee's ability to perform his duties
under this Agreement.
ARTICLE II
TERM OF EMPLOYMENT
The term of this Agreement shall commence on the Effective Date and
continue for a period of two years. The term of this Agreement shall be
automatically extended on each two-year anniversary of this Agreement for an
additional two-year term unless, at least 30 days prior to the end of the
then effective two-year term, the Company shall give Employee written notice
of its election to terminate this Agreement as of the end of the then
effective two-year term. In the event the Company elects to so terminate
this Agreement, (a) the Company shall pay Employee, within 15 days of the
effective date of such termination, a lump-sum payment equal to (without
discounting to present value) two times his then effective annual base salary
under Section 3.1 hereof, and (b) certain outstanding stock options held by
Employee shall become fully vested and exercisable pursuant to the Agreement
Regarding Vesting of Stock Options attached hereto as EXHIBIT A. Payment of
such sum by the Company shall constitute Employee's full severance pay and
the Company shall have no further obligation to Employee arising out of such
termination. This Agreement is also subject to earlier termination as
hereinafter provided.
ARTICLE III
COMPENSATION
3.1 ANNUAL BASE COMPENSATION. As compensation for services rendered
under this Agreement, Employee shall be entitled to receive from Company an
annual base salary of $200,000 (before standard deductions) during the first
year of this Agreement. Employee's annual base salary shall be subject to
review and adjustment by the Compensation Committee of the Company (the
"Compensation Committee") on an annual basis, provided that any such
adjustment shall not result in a reduction in Employee's annual base salary
below $200,000 without Employee's consent. Employee's annual base salary
shall be payable at regular intervals in accordance with the prevailing
practice and policy of the Company.
3.2 INCENTIVE BONUS. As additional compensation for services rendered
under this Agreement, the Compensation Committee may, in its sole discretion
and without any obligation to do so, declare that Employee shall be entitled
to an annual incentive bonus (whether payable in cash, stock, stock rights or
other property) as the Compensation Committee shall determine. If any such
bonus is declared, the bonus shall be payable in accordance with the terms
prescribed by the Compensation Committee.
3.3 OTHER BENEFITS. Employee shall, in addition to the compensation
provided for in Sections 3.1 and 3.2 above, be entitled to the following
additional benefits:
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(a) MEDICAL, HEALTH AND DISABILITY BENEFITS. Employee shall be
entitled to receive all of the medical, health and disability benefits that
may, from time to time, be provided by the Company to its executive officers.
(b) OTHER BENEFITS. Employee shall also be entitled to receive
any other benefits provided by the Company to all employees of Company as a
group, or all executive officers of the Company as a group, including any
profit sharing, 401(k) or retirement benefits.
(c) VACATION PAY. Employee shall be entitled to an annual
vacation as determined in accordance with the prevailing practice and policy
of the Company.
(d) HOLIDAYS. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of the Company.
(e) REIMBURSEMENT OF EXPENSES. The Company shall reimburse
Employee for all expenses reasonably incurred by Employee on behalf of the
Company in accordance with the prevailing practice and policy of the Company.
ARTICLE IV
TERMINATION
4.1 TERMINATION BY THE COMPANY WITHOUT CAUSE. Subject to the
provisions of this Section 4.1, this Agreement may be terminated by the
Company without cause upon 30 days prior written notice thereof given to
Employee. In the event of termination pursuant to this Section 4.1, (a) the
Company shall pay Employee, within 15 days of the effective date of such
termination, a lump-sum payment equal to (without discounting to present
value) two times his then effective annual base salary under Section 3.1
hereof, and (b) certain outstanding stock options held by Employee shall
become fully vested and exercisable pursuant to the Agreement Regarding
Vesting of Stock Options attached hereto as EXHIBIT A. Payment of such sum by
the Company shall constitute Employee's full severance pay and the Company
shall have no further obligation to Employee arising out of such termination.
4.2 VOLUNTARY TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee may at
any time voluntarily terminate his employment for "good reason" (as defined
below). In the event of such voluntary termination for "good reason," (a)
the Company shall pay Employee, within 15 days of the effective date of such
termination, a lump-sum payment equal to (without discounting to present
value) two times his then effective annual base salary under Section 3.1
hereof, and (b) certain outstanding stock options held by Employee shall
become fully vested and exercisable pursuant to the Agreement Regarding
Vesting of Stock Options attached hereto as EXHIBIT A.
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For purposes of this Agreement, "good reason" shall mean the
occurrence of any of the following events:
(a) Removal from the offices Employee holds on the date of this
Agreement or a material reduction in Employee's authority or responsibility,
including, without limitation, involuntary removal from the Board of
Directors, but not including termination of Employee for "cause," as defined
below; or
(b) The Company otherwise commits a material breach of this
Agreement.
4.3. TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
this Agreement at any time if such termination is for "cause" (as defined
below), by delivering to Employee written notice describing the cause of
termination 30 days before the effective date of such termination and by
granting Employee at least 30 days to cure the cause. In the event the
employment of Employee is terminated for "cause," Employee shall be entitled
only to the base salary earned PRO RATA to the date of such termination with
no entitlement to any base salary continuation payments or benefits
continuation (except as specifically provided by the terms of an employee
benefit plan of the Company). Except as otherwise provided in this
Agreement, the determination of whether Employee shall be terminated for
"cause" shall be made by the Board of Directors of the Company, in the
reasonable exercise of its business judgment, and shall be limited to the
occurrence of the following events:
(a) Conviction of or a plea of NOLO CONTENDERE to the charge of a
felony (which, through lapse of time or otherwise, is not subject to appeal);
(b) Willful refusal without proper legal cause to perform, or
gross negligence in performing, Employee's duties and responsibilities;
(c) Material breach of fiduciary duty to the Company through the
misappropriation of Company funds or property; or
(d) The unauthorized absence of Employee from work (other than for
sick leave or disability) for a period of 30 working days or more during any
period of 45 working days during the term of this Agreement.
4.4 TERMINATION UPON DEATH OR PERMANENT DISABILITY. In the event that
Employee dies, this Agreement shall terminate upon the Employee's death.
Likewise, if the Employee becomes unable to perform the essential functions
of the position, with or without reasonable accommodation, on account of
illness, disability, or other reason whatsoever for a period of more than six
consecutive or nonconsecutive months in any
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twelve-month period, this Agreement shall terminate effective upon such
incapacity, and Employee (or his legal representatives) shall be entitled
only to the base salary earned PRO RATA to the date of such termination with
no entitlement to any base salary continuation payments or benefits
continuation (except as specifically provided by the terms of an employee
benefit plan of the Company).
4.5 VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate this
Agreement at any time upon delivering 30 days' written notice of resignation
to the Company. In the event of such voluntary termination other than for
"good reason" (as defined above), Employee shall be entitled to his base
salary earned PRO RATA to the date of his resignation, but no base salary
continuation payments or benefits continuation (except as specifically
provided by the terms of an employee benefit plan of the Company). On or
after the date the Company receives notice of Employee's resignation, the
Company may, at its option, pay Employee his base salary through the
effective date of his resignation and terminate his employment immediately.
4.6 TERMINATION FOLLOWING CHANGE OF CONTROL. Notwithstanding anything
to the contrary contained herein, should Employee at any time within 12
months of the occurrence of a "change of control" (as defined below) cease to
be an employee of the Company (or its successor), by reason of (i)
termination by the Company (or its successor) other than for "cause"
(following a change of control, "cause" shall be limited to the conviction of
or a plea of NOLO CONTENDERE to the charge of a felony (which, through lapse
of time or otherwise, is not subject to appeal), or a material breach of
fiduciary duty to the Company through the misappropriation of Company funds
or property) or (ii) voluntary termination by Employee for "good reason upon
change of control" (as defined below), then in any such event, (a) the
Company shall pay Employee, within 15 days of the effective date of such
termination, a lump-sum payment equal to (without discounting to present
value) two times his then effective annual base salary under Section 3.1
hereof, and (b) certain outstanding stock options held by Employee shall
become fully vested and exercisable pursuant to the Agreement Regarding
Vesting of Stock Options attached hereto as EXHIBIT A.
As used in this Section, voluntary termination by Employee for
"good reason upon change of control" shall mean (i) removal of Employee from
the offices Employee holds on the date of this Agreement, (ii) a material
reduction in employee's authority or responsibility, including, without
limitation, involuntary removal from the Board of Directors, (iii) relocation
of the Company's headquarters from its then current location, or (iv) the
company otherwise commits a breach of this Agreement.
As used in this Agreement, a "change of control" shall be deemed to
have occurred if (i)(a) any "Person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 30% of the combined
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voting power of the Company's then outstanding securities, or (ii) at any
time during the 24-month period after a tender offer, merger, consolidation,
sale of assets or contested election, or any combination of such
transactions, at least a majority of the Company's Board of Directors shall
cease to consist of "continuing directors" (meaning directors of the Company
who either were directors at prior to such transaction or who subsequently
became directors and whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least two-thirds of the
directors then still in office who were directors prior to such transaction),
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
that would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 60% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement of sale
or disposition by the Company of all or substantially all of the Company's
assets.
Notwithstanding the provision of Section 7.9 to the contrary, the
Company shall pay any attorney's fees incurred by Employee in reasonably
seeking to enforce the terms of this Section 4.6.
4.7 EXCLUSIVITY OF TERMINATION PROVISIONS. The termination provisions
of this Agreement regarding the parties' respective obligations in the event
Employee's employment is terminated, are intended to be exclusive and in lieu
of any other rights or remedies to which Employee or the Company may
otherwise be entitled at law, in equity or otherwise. It is also agreed
that, although the personnel policies and fringe benefit programs of the
Company may be unilaterally modified from time to time, the termination
provisions of this Agreement are not subject to modification, whether orally,
impliedly or in writing, unless any such modification is mutually agreed upon
and signed by the parties.
ARTICLE V
CONFIDENTIAL INFORMATION AND NONCOMPETITION
5.1 NONDISCLOSURE. During the term of this Agreement and thereafter,
Employee shall not, without the prior written consent of the Board of
Directors, disclose or use for any purpose (except in the course of his
employment under this Agreement and in furtherance of the business of the
Company) confidential information or proprietary data of the Company (or any
of its subsidiaries), except as required by applicable law or legal process;
provided, however, that confidential information shall not include any
information known generally to the public or ascertainable from public or
published information (other than as a result of unauthorized disclosure by
Employee) or any information of a type not
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otherwise considered confidential by persons engaged in the same business or
a business similar to that conducted by the Company (or any of its
subsidiaries).
5.2 NONCOMPETITION. The Company and Employee agree that the services
rendered by Employee hereunder are unique and irreplaceable. Employee hereby
agrees that, during the term of this Agreement and for a period of eighteen
months thereafter, he shall not (except in the course of his employment under
this Agreement and in furtherance of the business of the Company (or any of
its subsidiaries)) (i) engage in as principal, consultant or employee in any
segment of a business of a company, partnership or firm ("Business Segment")
that is directly competitive with any significant business of the Company in
one of its major commercial or geographic markets or (ii) hold an interest
(except as a holder of less than 5% interest in a publicly traded firm or
mutual funds, or as a minority stockholder or unitholder in a form not
publicly traded) in a company, partnership or firm with a Business Segment
that is directly competitive, without the prior written consent of the
Company.
5.3 VALIDITY OF NONCOMPETITION. The foregoing provisions of Section
5.2 shall not be held invalid because of the scope of the territory covered,
the actions restricted thereby, or the period of time such covenant is
operative. Any judgment of a court of competent jurisdiction may define the
maximum territory, the actions subject to and restricted by Section 5.2 and
the period of time during which such agreement is enforceable.
5.4 NONCOMPETITION COVENANTS INDEPENDENT. The covenants of the
Employee contained in Section 5.2 will be construed as independent of any
other provision in this Agreement; and the existence of any claim or cause of
action by the Employee against the Company will not constitute a defense to
the enforcement by the Company of said covenants. The Employee understands
that the covenants contained in Section 5.2 are essential elements of the
transaction contemplated by this Agreement and, but for the agreement of the
Employee to Section 5.2, the Company would not have agreed to enter into such
transaction. The Employee has been advised to consult with counsel in order
to be informed in all respects concerning the reasonableness and propriety of
Section 5.2 and its provisions with specific regard to the nature of the
business conducted by the Company and the Employee acknowledges that Section
5.2 and its provisions are reasonable in all respects.
5.5 REMEDIES. In the event of a breach or threatened breach by the
Employee of Section 5.2 or its provisions, the Company shall be entitled to a
temporary restraining order and an injunction restraining the Employee from
the commission of such breach. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of money damages.
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ARTICLE VI
ARBITRATION
Any controversy of any nature whatsoever, including but not limited to
tort claims or contract disputes, between the parties to this Agreement or
between the Employee, his heirs, executors, administrators, legal
representatives, successors, and assigns and the Company and its affiliates,
arising out of or related to the Employee's employment with the Company, any
resignation from or termination of such employment and/or the terms and
conditions of this Agreement, including the implementation, applicability and
interpretation thereof, shall, upon the written request of one party served
upon the other, be submitted to and settled by arbitration in accordance with
the provisions of the Federal Arbitration Act, 9 U.S.C. Sections 1-15, as
amended. Each of the parties to this Agreement shall appoint one person as
an arbitrator to hear and determine such disputes, and if they should be
unable to agree, then the two arbitrators shall chose a third arbitrator from
a panel made up of experienced arbitrators selected pursuant to the
procedures of the American Arbitration Association (the "AAA") and, once
chosen, the third arbitrator's decision shall be final, binding and
conclusive upon the parties to this Agreement. Each party shall be
responsible for the fees and expenses of its arbitrator and the fees and
expenses of the third arbitrator shall be shared equally by the parties. The
terms of the commercial arbitration rules of AAA shall apply except to the
extent they conflict with the provisions of this paragraph. It is further
agreed that any of the parties hereto may petition the United States District
Court for the Western District of Texas, San Antonio Division, for a judgment
to be entered upon any award entered through such arbitration proceedings.
ARTICLE VII
MISCELLANEOUS
7.1 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and cancels and supersedes all other agreements
between the parties which may have related to the subject matter contained in
this Agreement.
7.2 MODIFICATION; AMENDMENT; WAIVER. No modification, amendment or
waiver of any provisions of this Agreement shall be effective unless approved
in writing by both parties. The failure at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of either party thereafter to
enforce each and every provision hereof in accordance with its terms.
7.3 GOVERNING LAW; JURISDICTION. This Agreement and performance under
it, and all proceedings that may ensue from its breach, shall be construed in
accordance with and under the laws of the State of Texas.
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7.4 EMPLOYEE'S REPRESENTATIONS. Employee represents and warrants that
he is free to enter into this Agreement and to perform each of the terms and
covenants of it. Employee represents and warrants that he is not restricted
or prohibited, contractually or otherwise, from entering into and performing
this Agreement, and that his execution and performance of this Agreement is
not a violation or breach of any other agreement between Employee and any
other person or entity.
7.5 COMPANY'S REPRESENTATIONS. Company represents and warrants that it
is free to enter into this Agreement and to perform each of the terms and
covenants of it. Company represents and warrants that it is not restricted
or prohibited, contractually or otherwise, from entering into and performing
this Agreement and that its execution and performance of this Agreement is
not a violation or breach of any other agreements between Company and any
other person or entity. The Company represents and warrants that this
Agreement is a legal, valid and binding agreement of the Company, enforceable
in accordance with its terms.
7.6 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
7.7 ASSIGNMENT. The rights and obligations of the parties under this
Agreement shall be binding upon and inure to the benefit of their respective
successors, assigns, executors, administrators and heirs, provided, however,
that neither the Company nor Employee any assign any duties under this
Agreement without the prior written consent of the other.
7.8 LIMITATION. This Agreement shall not confer any right or impose
any obligation on the Company to continue the employment of Employee in any
capacity, or limit the right of the Company or Employee to terminate
Employee's employment.
7.9 ATTORNEYS' FEES AND COSTS. If any action at law or inequity is
brought to enforce or interpret the terms of this Agreement or any obligation
owing thereunder, venue will be in Bexar County, Texas and the prevailing
party shall be entitled to reasonable attorney's fees and all costs and
expenses of suit, including, without limitation, expert and accountant fees,
and such other relief which a court of competent jurisdiction may deem
appropriate.
7.10 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given in person or by either
personal delivery, overnight delivery, or first class mail, certified or
registered with return receipt requested, with postage or delivery charges
prepaid, and shall be deemed to have been duly given when
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delivered personally, upon actual receipt, and on the next business day when
sent via overnight delivery, or three days after mailing first class,
certified or registered with return receipt requested, to the respective
persons named below:
If to the Company: Corporate Secretary
U. S. Long Distance Corp.
0000 Xxx Xxxxx
Xxx Xxxxxxx, Xxxxx 00000
If to the Employee: Xxxxx X. Xxxxx
0000 Xxx Xxxxx
Xxx Xxxxxxx, Xxxxx 00000
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year indicated above.
COMPANY: U. S. LONG DISTANCE CORP.
By /s/ XXXXXX X. XXXXXX, XX.
---------------------------------
Title Chairman of the Board & CEO
EMPLOYEE: /s/ XXXXX X. XXXXX
---------------------------------
Xxxxx X. Xxxxx
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FIRST AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT between U.S. Long Distance Corp., a Delaware corporation
(the "Company"), and Xxxxx X. Xxxxx (the "Employee"),
WITNESSETH:
WHEREAS, on November 1, 1993, the Company and the Employee executed that
certain employment agreement styled "Amended and Restated Employment
Agreement" (the "Agreement"); and
WHEREAS, the Company and the Employee retained the right in Section 7.2
of the Agreement to amend the Agreement in writing from time to time as may
be agreed to by the parties; and
WHEREAS, the Company and the Employee both desire to amend the Agreement
so as to extend the severance benefit that may be paid to the Employee in
certain circumstances;
NOW, THEREFORE, the parties hereto agree that the Agreement is
hereby amended, effective as of the date hereof, as follows:
1. The second paragraph of Section 4.6, TERMINATION FOLLOWING CHANGE
OF CONTROL, is hereby amended in its entirety to read as follows:
As used in this Section, voluntary termination by Employee for
"good reason upon change of control" shall mean (i) removal of Employee
from the offices Employee holds on the date of this Agreement, (ii) a
material reduction in Employee's authority or responsibility,
including, without limitation, involuntary removal from the Board of
Directors, (iii) relocation of the Company's headquarters from its then
current location, (iv) a reduction in Employee's compensation, or (v)
the Company otherwise commits a breach of this Agreement.
2. All other terms and conditions of the Agreement are hereby
ratified in their entirety.
IN WITNESS WHEREOF, the Company and the Employee have executed
this Agreement this 3rd day of January, 1995.
U.S. LONG DISTANCE CORP.
By: /s/ XXXXXX X. XXXXXX, XX.
----------------------------------
Title: Chairman of the Board and
Chief Executive Officer
COMPANY
/s/ XXXXX X. XXXXX
--------------------------------------
Xxxxx X. Xxxxx
EMPLOYEE
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SECOND AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT between U.S. Long Distance Corp., a Delaware
corporation (the "Company"), and XXXXX X. XXXXX (the "Employee"),
WITNESSETH:
WHEREAS, on November 1, 1993, the Company and the Employee
executed that certain employment agreement styled "Amended and Restated
Employment Agreement" (the "Agreement"); and
WHEREAS, the Company and the Employee retained the right in
Section 7.2 of the Agreement to amend the Agreement from time to time;
and
WHEREAS, the Company, acting upon the recommendation of the
Compensation Committee of the Board of Directors, and the Employee both
desire to amend the Agreement to provide certain protections to the
Employee in the event his employment is terminated under certain
conditions following a change of corporate control of the Company;
NOW, THEREFORE, the parties hereto agree that the Agreement is
hereby amended, effective as of the date of execution hereof, as
follows:
1. Section 4.6, TERMINATION FOLLOWING CHANGE OF CONTROL, is
hereby amended in its entirety to read as follows:
4.6 TERMINATION FOLLOWING CHANGE OF CONTROL.
(a) Notwithstanding anything to the contrary contained
herein, should Employee at any time within 12 months of the occurrence
of a "change of control" (as defined below) cease to be an employee of
the Company (or its successor), by reason of (i) termination by the
Company (or its successor) other than for "cause" (following a
change of control, "cause" shall be limited to the conviction of or a
plea of NOLO CONTENDERE to the charge of a felony which, through lapse
of time or otherwise, is not subject to appeal), or a material breach
of fiduciary duty to the Company through the misappropriation of
Company funds or property) or (ii) voluntary termination by Employee
for "good reason upon change of control" (as defined below), then in
any such event, (1) the Company shall pay Employee, within 45 days of
the severance of employment described in this Section 4.6, a lump-sum
payment equal to (without discounting to present value) two times his
then effective base salary under Section 3.1 hereof, and (2) certain
outstanding stock options held by Employee shall become fully vested
and exercisable pursuant to the Agreement Regarding Vesting of Stock
Options attached hereto as EXHIBIT A.
(b) Employee shall be entitled to the payment set forth in
(a) above, regardless of whether or not that payment, when aggregated
with all payments to Employee (whether pursuant to this Agreement or
any other agreement whatsoever) in connection with a change of control
as defined in this Section 4.6 exceeds in aggregate, the maximum amount
that could be paid to Employee, without triggering an excess parachute
payment under Section 280G(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the resulting excise tax under Section 4999
of the Code, (referred to herein as the "maximum payment amount").
(c) In determining the limitation determined under Section
280G of the Code, (i) no portion of the total payments which Employee
has waived in writing prior to the date of the payment of benefits
under this Agreement will be taken into account, (ii) no portion of the
total payments which nationally recognized tax counsel (whether through
consultation or retention of any actuary, consultant or other expert),
selected by the Company's independent auditors and acceptable to
Employee, (referred to herein as "Tax Counsel") determines not to
constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code will be taken into account, (iii) no portion of
the total payments which Tax Counsel determines to be reasonable
compensation for services rendered within the meaning of Section
280G(b)(4) of the Code will be taken into account, and (iv) the value
of any non-cash benefit or any deferred payment or benefit included in
the total payments will be determined by the Company's independent
auditors in accordance with Sections 280G(d)(3) and (iv) of the Code.
(d) As used in this Section, voluntary termination by
Employee for "good reason upon change of control" shall mean (i)
removal of Employee from the offices Employee holds on the date of this
Agreement, (ii) a material reduction in Employee's authority or
responsibility, including, without limitation, involuntary removal from
the Board of Directors, (iii) relocation of the Company's headquarters
from its then current location, (iv) a reduction in Employee's
compensation, or (v) the Company otherwise commits a breach of this
Agreement.
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(e) As used in this Agreement, a "change of control" shall
be deemed to have occurred if (i) any "Person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), is or becomes a "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing more than 30% of the combined
voting power of the Company's then outstanding securities, or (ii) at
any time during the 24-month period after a tender offer, merger,
consolidation, sale of assets or contested election, or any combination
of such transactions, at least a majority of the Company's Board of
Directors shall cease to consist of "continuing directors" (meaning
directors of the Company who either were directors prior to such
transaction or who subsequently became directors and whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least two-thirds of the directors then still in office who
were directors prior to such transaction), or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation that would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity)
at least 60% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement of sale or disposition by the Company of
all or substantially all of the Company's assets.
(f) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company or any of its affiliates to or for the benefit of Employee, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (any such payments or distributions being individually
referred to herein as a "Payment," and any two or more of such payments or
distributions being referred to herein as "Payments"), would be subject to
the excise tax imposed by Section 4999 of the Code (such excise tax, together
with any interest thereon, any penalties, additions to tax, or additional
amounts with respect to such excise tax, and any interest in respect of such
penalties, additions to tax or additional amounts, being collectively
referred herein to as the "Excise Tax"), then Employee shall be entitled to
receive an additional payment or payments (individually referred to herein as
a "Gross-Up Payment" and any two or more of such additional payments being
referred to herein as "Gross-Up Payments") in an amount such that after
payment by Employee of all taxes (as defined in paragraph (p) below) imposed
upon the Gross-Up Payment, Employee retains an amount of such Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(g) Subject to the provisions of paragraph (h) through (n) below,
any determination (individually, a "Determination") required to be made under
this Section 4.6, including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall initially be made, at the Company's
expense, by Tax Counsel. Tax
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Counsel shall provide detailed supporting legal authorities, calculations,
and documentation both to the Company and Employee within 15 business days of
the termination of Employee's employment, if applicable, or such other time
or times as is reasonably requested by the Company or Employee. If Tax
Counsel makes the initial Determination that no Excise Tax is payable by
Employee with respect to a Payment or Payments, it shall furnish Employee
with an opinion reasonably acceptable to Employee that no Excise Tax will be
imposed with respect to any such Payment or Payments. Employee shall have
the right to dispute any Determination (a "Dispute") within 15 business days
after delivery of Tax Counsel's opinion with respect to such Determination.
The Gross-Up Payment, if any, as determined pursuant to such Determination
shall, at the Company's expense, be paid by the Company to Employee within
five business days of Employee's receipt of such Determination. The
existence of a Dispute shall not in any way affect Employee's right to
receive the Gross-Up Payment in accordance with such Determination. If there
is no Dispute, such Determination shall be binding, final and conclusive upon
the Company and Employee, subject in all respects, however, to the provisions
of paragraph (h) through (n) below. As a result of the uncertainty in the
application of Sections 4999 and 280G of the Code, it is possible that
Gross-Up Payments (or portions thereof) which will not have been made by the
Company should have been made ("Underpayment"), and if upon any reasonable
written request from Employee or the Company to Tax Counsel, or upon Tax
Counsel's own initiative, Tax Counsel, at the Company's expense, thereafter
determines that Employee is required to make a payment of any Excise Tax or
any additional Excise Tax, as the case may be, Tax Counsel shall, at the
Company's expense, determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to Employee.
(h) The Company shall defend, hold harmless, and indemnify
Employee on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Employee resulting from any Final Determination (as defined
in paragraph (o) below) that any Payment is subject to the Excise Tax.
(i) If a party hereto receives any written or oral communication
with respect to any question, adjustment, assessment or pending or threatened
audit, examination, investigation or administrative, court or other
proceeding which, if pursued successfully, could result in or give rise to a
claim by Employee against the Company under this paragraph (i) ("Claim"),
including, but not limited to, a claim for indemnification of Employee by the
Company under paragraph (h) above, then such party shall promptly notify the
other party hereto in writing of such Claim ("Tax Claim Notice").
(j) If a Claim is asserted against Employee ("Employee Claim"),
Employee shall take or cause to be taken such action in connection with
contesting such
-4-
Employee Claim as the Company shall reasonably request in writing from time
to time, including the retention of counsel and experts as are reasonably
designated by the Company (it being understood and agreed by the parties
hereto that the terms of any such retention shall expressly provide that the
Company shall be solely responsible for the payment of any and all fees and
disbursements of such counsel and any experts) and the execution of powers of
attorney, provided that:
(i) within 30 calendar days after the Company receives or
delivers, as the case may be, the Tax Claim Notice relating to such
Employee Claim (or such earlier date that any payment of the taxes
claimed is due from Employee, but in no event sooner than five calendar
days after the Company receives or delivers such Tax Claim Notice), the
Company shall have notified Employee in writing ("Election Notice")
that the Company does not dispute its obligations (including, but not
limited to, its indemnity obligations) under this Agreement and that
the Company elects to contest, and to control the defense or
prosecution of, such Employee Claim at the Company's sole risk and sole
cost and expense; and
(ii) the Company shall have advanced to Employee on an
interest-free basis, the total amount of the tax claimed in order for
Employee, at the Company's request, to pay or cause to be paid the tax
claimed, file a claim for refund of such tax and, subject to the
provisions of the last sentence of paragraph (l) below, xxx for a
refund of such tax if such claim for refund is disallowed by the
appropriate taxing authority (it being understood and agreed by the
parties hereto that the Company shall only be entitled to xxx for a
refund and the Company shall not be entitled to initiate any proceeding
in, for example, United States Tax Court) and shall indemnify and hold
Employee harmless, on a fully grossed-up after tax basis, from any tax
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and
(iii) the Company shall reimburse Employee for any and all
costs and expenses resulting from any such request by the Company and
shall indemnify and hold Employee harmless, on fully grossed-up
after-tax basis, from any tax imposed as a result of such reimbursement.
(k) Subject to the provisions of paragraph (j) above, the Company
shall have the right to defend or prosecute, at the sole cost, expense and
risk of the Company, such Employee Claim by all appropriate proceedings,
which proceedings shall be defended or prosecuted diligently by the Company
to a Final Determination; PROVIDED, HOWEVER, that (i) the Company shall not,
without Employee's prior written consent, enter into any compromise or
settlement of such Employee Claim that would adversely affect Employee, (ii)
any request from the Company to Employee regarding any extension of the
statute of limitations relating to assessment, payment, or collection of
taxes for the taxable year of Employee with respect to which the contested
issues involved in, and
-5-
amount of, the Employee Claim relate is limited solely to such contested
issues and amount, and (iii) the Company's control of any contest or
proceeding shall be limited to issues with respect to the Employee Claim and
Employee shall be entitled to settle or contest, in his sole and absolute
discretion, any other issue raised by the Internal Revenue Service or any
other taxing authority. So long as the Company is diligently defending or
prosecuting such Employee Claim, Employee shall provide or cause to be
provided to the Company any information reasonably requested by the Company
that relates to such Employee Claim, and shall otherwise cooperate with the
Company and its representatives in good faith in order to contest effectively
such Employee Claim. The Company shall keep Employee informed of all
developments and events relating to any such Employee Claim (including,
without limitation, providing to Employee copies of all written materials
pertaining to any such Employee Claim), and Employee or his authorized
representatives shall be entitled, at Employee's expense, to participate in
all conferences, meetings and proceedings relating to any such Employee Claim.
(l) If, after actual receipt by Employee of an amount of a tax
claimed (pursuant to an Employee Claim) that has been advanced by the Company
pursuant to paragraph (j)(ii) above, the extent of the liability of the
Company hereunder with respect to such tax claimed has been established by a
Final Determination, Employee shall promptly pay or cause to be paid to the
Company any refund actually received by, or actually credited to, Employee
with respect to such tax (together with any interest paid or credited thereon
by the taxing authority and any recovery of legal fees from such taxing
authority related thereto), except to the extent that any amounts are then
due and payable by the Company to Employee, whether under the provisions of
this Agreement or otherwise. If, after the receipt by Employee of an amount
advanced by the Company pursuant to paragraph (j)(ii) above, a determination
is made by the Internal Revenue Service or other appropriate taxing authority
that Employee shall not be entitled to any refund with respect to such tax
claimed and the Company does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of thirty days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of any Gross-Up Payments and other payments
required to be paid hereunder.
(m) With respect to any Employee Claim, if the Company fails to
deliver an Election Notice to Employee within the period provided in
paragraph (j)(i) above or, after delivery of such Election Notice, the
Company fails to comply with the provisions of paragraph (j)(ii) above and
(iii) and (k) above, then Employee shall at any time thereafter have the
right (but not the obligation), at his election and in his sole and absolute
discretion, to defend or prosecute, at the sole cost, expense and risk of the
Company, such Employee Claim. Employee shall have full control of such
defense or prosecution and such proceedings, including any settlement or
compromise thereof. If requested by Employee, the Company shall cooperate,
and shall cause its affiliates to cooperate, in good faith with Employee and
his authorized representatives in order to contest effectively such Employee
Claim. The Company may attend, but not participate in or control, any
-6-
defense, prosecution, settlement or compromise of any Employee Claim
controlled by Employee pursuant to this paragraph (m) and shall bear its own
costs and expenses with respect thereto. In the case of any Employee Claim
that is defended or prosecuted by Employee, Employee shall, from time to
time, be entitled to current payment, on a fully grossed-up after tax basis,
from the Company with respect to costs and expenses incurred by Employee in
connection with such defense or prosecution.
(n) In the case of any Employee Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this paragraph
(n), the Company shall pay, on a fully grossed-up after tax basis, to
Employee in immediately available funds the full amount of any taxes arising
or resulting from or incurred in connection with such Employee Claim that
have not theretofore been paid by the Company to Employee, together with the
costs and expenses, on a fully grossed-up after tax basis, incurred in
connection therewith that have not theretofore been paid by the Company to
Employee, within ten calendar days after such Final Determination. In the
case of any Employee Claim not covered by the preceding sentence, the Company
shall pay, on a fully grossed-up after tax basis, to Employee in immediately
available funds the full amount of any taxes arising or resulting from or
incurred in connection with such Employee Claim at least ten calendar days
before the date payment of such taxes is due from Employee, except where
payment of such taxes is sooner required under the provisions of this
paragraph (n), in which case payment of such taxes (and payment, on a fully
grossed-up after tax basis, of any costs and expenses required to be paid
under this paragraph (n) shall be made within the time and in the manner
otherwise provided in this paragraph (n).
(o) For purposes of this Agreement, the term "Final Determination"
shall mean (i) a decision, judgment, decree or other order by a court or
other tribunal with appropriate jurisdiction, which has become final and
non-appealable; (ii) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not
limited to, a closing agreement under Section 7121 of the Code; (iii) any
disallowance of a claim for refund or credit in respect to an overpayment of
tax unless a suit is filed on a timely basis; or (iv) any final disposition
by reason of the expiration of all applicable statutes of limitations.
(p) For purposes of this Agreement, the terms "tax" and "taxes"
mean any and all taxes of any kind whatsoever (including, but not limited to,
any and all Excise Taxes, income taxes, and employment taxes), together with
any interest thereon, any penalties, additions to tax, or additional amounts
with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts.
(q) For purposes of this Agreement, the terms "affiliate" and
"affiliates" mean, when used with respect to any entity, individual, or other
person, any other entity, individual, or other person which, directly or
indirectly, through one or more intermediaries controls, or is controlled by,
or is under common control with such entity, individual or person. The term
"control" and derivations thereof when used in the immediately
-7-
preceding sentence means the ownership, directly or indirectly, of 50% or
more of the voting securities of an entity or other person or possessing the
power to direct or cause the direction of the management and policies of such
entity or other person, whether through the ownership of voting securities,
by contract or otherwise.
(r) The Company shall defend, hold harmless, and indemnify Employee on
a fully grossed-up after tax basis from and against any and all costs and
expenses (including reasonable attorneys', accountants' and experts' fees and
expenses) incurred by Employee from time to time as a result of any contest
(regardless of the outcome) by the Company or others contesting the validity
or enforcement of, or liability under, any term or provision of this
Agreement, plus in each case interest at the applicable federal rate provided
for in Section 7872(f)(2)(B) of the Code.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement this 15 day of November, 1995.
U.S. LONG DISTANCE CORP.
By /s/ XXXXXX X. XXXXXX, XX.
----------------------------------
Title Chairman & CEO
COMPANY
/s/ XXXXX X. XXXXX
--------------------------------------
Xxxxx X. Xxxxx
EMPLOYEE
-8-
AGREEMENT REGARDING VESTING AND
ADJUSTMENT OF STOCK OPTIONS
This Agreement is entered into on June 25, 1996, between Xxxxx X. Xxxxx
("Employee"), U.S. Long Distance Corp., a Delaware corporation (the
"Company"), and Billing Information Concepts Corp., a Delaware corporation
("Billing"), but effective as of the date of distribution of the common stock
of Billing to holders of the Company's common stock (the "Distribution
Date"). Since the effectiveness of this Agreement is expressly contingent on
the spinoff of Billing through its distribution to the Company's
stockholders, if such condition precedent does not occur as anticipated by
the parties hereto, this Agreement will be void AB INITIO, and the prior
agreement regarding vesting of stock options entered into between the parties
will remain in full force and effect.
WHEREAS, Employee has been granted and may hereafter be granted options
under the Company's 1990 Employee Stock Option Plan (as amended from time to
time, the "Option Plan") to acquire shares of common stock, $.01 par value,
of the Company; and
WHEREAS, Billing and Employee have entered into an Amended and Restated
Employment Agreement effective January 1, 1994 (the "Employment Agreement");
and
WHEREAS, as contemplated in the Employment Agreement, the parties desire
that (i) options granted to Employee under the Option Plan ("Options") become
fully exercisable by Employee upon the Distribution Date, (ii) Options
granted prior to the Distribution Date be adjusted in exercise price and/or
number, as may be appropriately determined by the Company in good faith, to
prevent diminution in value of the Options granted to Employee prior to the
Distribution Date as a result of the spinoff of Billing, taking into
consideration options granted to Employee by a stock option plan to be
established by Billing (the "Billing Option Plan"), and (iii) that all
previously granted Options be exercisable until two years following the
Distribution Date, notwithstanding any employment requirement otherwise
required under the Option Plan; and
WHEREAS, in consideration of Employee's efforts in increasing the value
of Billing prior to the Distribution Date, and in order to prevent diminution
in value of Options previously granted to Employee, Billing desires to
establish the Billing Option Plan and to grant Employee options to purchase
shares of Billing's common stock ("Billing Options") under terms and
conditions substantially identical to Options previously granted to Employee
by the Company (without an employment requirement limiting the exercise
period, unless and until Employee becomes an employee of Billing), ratably
adjusted in good faith by Billing to ensure that following the Distribution
Date Employee will have Options and Billing Options which, taken in
aggregate, provide that same economic benefit to Employee as Options
previously granted to Employee prior to the Distribution Date;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, notwithstanding any provisions to the
contrary contained in resolutions granting or agreements governing Options
heretofore granted to Employee under the Option
Plan, conditioned expressly upon the distribution of the common stock of
Billing to holders of the Company's common stock as of the Distribution Date,
then, in any such event, immediately upon the Distribution Date, (i) all
Options which have not lapsed shall become fully vested and exercisable (if
not already vested and exercisable) by Employee for the remainder of the
exercise period established under the Option Plan, or two years following the
Distribution Date, whichever occurs later, (ii) the Company shall, in good
faith, cause the Options to be adjusted in exercise price or number so as to
prevent any diminution in the value of the Options as a result of the spinoff
of Billing, taking into consideration options granted to Employee by a stock
option plan to be established by Billing; and (iii) Billing shall cause to be
granted to Employee Billing Options determined by Billing, in good faith, in
such amount and at such exercise prices when, taken in aggregate with Options
previously granted to Employee and as subsequently adjusted as provided
herein, prevent any diminution in value of the Options previously granted to
Employee prior to the Distribution Date as a result of the spinoff of
Billing, such Billing Options to be exercisable at such time as originally
provided for under the Option Plan, without regard to any employment
requirement of the Employee at Billing (unless Employee transfers employment
to Billing, in which case the employment requirement for exercise shall be
applicable from that date forward).
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date indicated above.
COMPANY: U.S. LONG DISTANCE CORP.
By: /s/ XXXXX XXXX
-------------------------------
Name: Xxxxx Xxxx
BILLING: BILLING INFORMATION CONCEPTS CORP.
By: /s/ XXXXXX X. XXXXXX, XX.
-------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
EMPLOYEE: /s/ XXXXX X. XXXXX
----------------------------------
XXXXX X. XXXXX
-2-
