EXHIBIT 10.5 (b)
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into as of the 1st day of January 2001, by and between
Rural Cellular Corporation ("RCC" or "Company") and Xxxxxxx X. Xxxxxxxx (the
"Employee").
WHEREAS, the Company and the Employee have heretofore entered into an
Employment Agreement dated as of January 22, 1999 (the "Employment Agreement"),
which agreement is now in full force and effect;
WHEREAS, the Employment Agreement provides certain protections for the
Employee in the event of a change in control of the Company; and
WHEREAS, the Company's Board of Directors has determined it is appropriate, and
in the best interests of the Company and its shareholders, to improve the
protections provided to the Employee in the event of a change in control, and to
thereby reinforce and encourage her continued attention and dedication to her
assigned duties without distraction in potentially disturbing circumstances
arising from the possibility of a change in control;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Company and the Employee agree as follows:
1. Section 11 of the Employment Agreement is hereby amended in its
entirety, to read as follows:
"11. CHANGE IN CONTROL.
(a) The Employee will be entitled to the payments and
benefits described in this Section 11 if the Employee's employment
under this Agreement is terminated:
(i) by the Company, other than for Just Cause, in
connection with or within 24 months after the occurrence of a
Change in Control (as defined in Appendix A hereto); or
(ii) by the Employee, for Good Reason, within 24 months
after the occurrence of a Change in Control (as defined in
Appendix A hereto).
(b) If the Employee satisfies the requirements set forth in
paragraph (a), the Employee shall be paid an amount equal to the
greater of either:
(i) 299% of the Employee's "base amount" as defined in
Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code") and regulations promulgated thereunder, or
(ii) provided that the Company's reported EBITDA
(earnings before taxes, interest, depreciation and amortization)
margins for the three immediately preceding fiscal years have
averaged 30%, or greater, an amount equal to the sum of (A) 299%
of the Employee's annual base salary at the highest rate in
effect during the period beginning 12 months prior to the
occurrence of the Change in Control and ending on the date of the
Employee's termination of employment plus (B) 299% of the largest
bonus and/or incentive payment (excluding "pay to stay" or
similar bonuses) payable to the Employee for any fiscal year of
the Company that ended during the period beginning 12 months
prior to the occurrence of the Change in Control and ending on
the date of the Employee's termination of employment.
Said amount shall be paid to the Employee in one lump sum, within five
days after the Employee's termination of employment.
(c) TERMINATION FOR "GOOD REASON." For the purposes of this
Section 11, "Good Reason" for termination of employment by the
Employee shall be the occurrence of any of the following events, which
have not been consented to in advance by the Employee in writing:
(i) If the Employee is employed at the Company's
principal executive offices at the time of a Change in Control, a
relocation of such principal executive offices to a location more
than fifty miles from such location, or a requirement that the
Employee be based anywhere other than the Company's principal
executive offices at the time of the Change in Control.
(ii) If the Employee is not employed at the Company's
principal executive offices at the time of a Change in Control,
the Employee's relocation to any place other than the location at
which the Employee principally performed her duties prior to the
Change in Control.
(iii) Required travel by the Employee on the Company's
business to an extent substantially greater than the Employee's
business travel obligations at the time of the Change in Control.
(iv) A requirement that the Employee report to a person
or persons other than the Board of Directors in the
organizational structure of RCC.
(v) A failure by RCC to maintain the Employee's
base compensation in effect as of the date of the Change in
Control and material fringe benefit, performance incentive and
employee benefit plans substantially equivalent to those in
effect as of the date of the Change in Control.
(vi) An assignment to the Employee of duties and
responsibilities other than those normally associated with her
position as referenced at Section 1 of this Agreement.
(vii) A material diminution or reduction of the
Employee's responsibilities or authority.
(d) EXCISE TAX PAYMENTS.
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(i) If any payments or benefits due to the Employee
under this Agreement and/or under any other plan or program of
the Company would be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code, and if the amount of the
Employee's parachute payments (as defined in Section 280G(b)
(2) of the Code) taken into account for the purposes of such
Excise Tax does not exceed 330% of the Employee's base amount
(as defined in Section 280G(b)(3) of the Code), then the
payments or benefits which are subject to the Excise Tax shall
be adjusted until the amount of such parachute payments equals
299% of such base amount. The adjustments shall be made in
such manner, and to such payments or other benefits, as the
Employee and the Company shall mutually agree.
(ii) If any payments or benefits due to the Employee
under this Agreement and/or under any other plan or program of
the Company would be subject to the Excise Tax, and if the
amount of the Employee's parachute payments (as defined in
Section 280G(b)(2) of the Code) taken into account for the
purposes of such Excise Tax exceeds 330% of the Employee's
base amount (as defined in Section 280G(b)(3) of the Code),
the Company shall pay to the Employee an additional amount
(the "Gross-Up Payment") so that the net amount that is
retained by the Employee, after the deduction of the Excise
Tax and any other taxes (including Excise Taxes) that are
imposed upon the Gross-Up Payment (other than interest and
penalties imposed by reason of the Employee's failure to file
a timely tax return or pay taxes shown as due on his return),
is equal to the payments and other benefits the Employee would
have retained in the absence of the Excise Tax. For the
purpose of calculating the Gross-Up Payment, the Employee's
tax rate will be deemed to be the highest marginal rate of
federal individual income tax, plus the highest marginal rates
of state, local and/or foreign individual income taxes in the
state and locality or foreign jurisdiction of the Employee's
residence (net of the reduction in federal income taxes which
could be obtained from any deduction or credit attributable to
the state, local or foreign taxes), that are in effect for the
calendar year in which the Gross-Up Payment is to be made.
(iii) An initial determination as to whether a
Gross-Up Payment is required pursuant to this Agreement and
the amount of such Gross-Up Payment shall be made at the
Company's expense by an accounting firm selected by the
Company and reasonably acceptable to the Employee which is
designated as one of the five largest accounting firms in the
United States (the "Accounting Firm"). The Accounting Firm
shall provide its determination (the "Determination"),
together with detailed supporting calculations and
documentation, to the Company and the Employee within five
days of the date of termination of the Employee's employment,
if applicable, or at such other time as may be requested by
the Company or the Employee (provided the Employee reasonably
believes that she may be subject to the Excise Tax). If the
Accounting Firm determines that no Excise Tax is payable by
the Employee, it shall furnish the Employee with an opinion to
that effect which is reasonably acceptable to the Employee.
Within ten days of the delivery of the Determination to the
Employee, the Employee shall have the right to dispute the
Determination (the "Dispute"). The Gross-Up Payment, if any,
as determined pursuant to this paragraph (d), shall be paid by
the Company to the Employee within five days of the receipt of
the Determination. The existence of the Dispute shall not in
any way affect the Employee's right to receive the Gross-Up
Payment in accordance with the Determination. Upon the final
resolution of a Dispute, the Company shall promptly pay to the
Employee any additional amount required by such resolution,
or, if it is determined that the Excise Tax is lower than
originally determined, the Employee shall repay to the Company
the excess amount of the Gross-
2
Up Payment. If there is no Dispute, the Determination shall be
binding, final and conclusive upon the Company and the Employee,
subject to the application of subparagraph (v) below.
(v) Notwithstanding anything contained in this
Agreement to the contrary, in the event that, according to the
Determination, an Excise Tax will be imposed on any payment or
benefit, the Company shall pay to the applicable government
taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the
payment or benefit.
(e) The Employee's payments and benefits under this Section
11 shall be in consideration of the Employee's past service and the
Employee's continued service from the date of this Agreement, and the
Employee's entitlement thereto shall not be governed by any duty to
mitigate damages by seeking further employment nor offset by any
compensation which the Employee may receive from future employment.
(f) The payments and other benefits provided under this
Section 11 shall be in lieu of any other future payments which the
Employee would otherwise be entitled to receive under Section 9 of
this Agreement."
2. A new paragraph (c) is added at the end of Section 13 of the
Employment Agreement, to read as follows:
"(c) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment
had taken place. Any failure of the Company to obtain such agreement prior
to the effectiveness of any such succession or assignment shall be a
material breach of this Agreement and shall entitle the Employee to
terminate the Employee's employment for Good Reason (as defined in Section
11), whereupon the Employee shall be entitled to receive the payments and
other benefits described in this Agreement as though such termination had
occurred upon or after the occurrence of a Change in Control."
3. Except to the extent specifically amended by this Agreement, the
Employment Agreement shall continue in full force and effect.
* * *
ATTEST RURAL CELLULAR CORPORATION
By /s/ XXXXXX X. XXXXXXX By /s/ XXX X. XXXXXXX
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Assistant Secretary Xxx X. Xxxxxxx
Executive Vice President and
Chief Operating Officer
WITNESS
/s/ XXXXX XXXXXXXXXX /s/ XXXXXXX X. XXXXXXXX
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Xxxxx Xxxxxxxxxx Xxxxxxx X. Xxxxxxxx
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