EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of October 8, 2002 (the "Agreement")
is made by and between Metrocall Holdings, Inc., a Delaware corporation (the
"Company"), Metrocall, Inc., a Delaware corporation ("OPCO") and Xxxxxxx X.
Xxxxxxx, III (the "Executive").
WHEREAS, the Company filed for chapter 11 of title 11 of the United States
Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code") on June 3, 2002 and
simultaneously with such filing, filed with the bankruptcy court its proposed
Plan of Reorganization and Disclosure Statement (the "Plan of Reorganization"),
which included, among other provisions, the identification of the Executive as
the Chief Executive Officer of the Company after the confirmation of the Plan of
Reorganization;
WHEREAS, the Executive desires to waive all rights and claims with respect
to any agreements relating to the Executive's employment with the Company as of
the effective date of the Company's Plan of Reorganization;
WHEREAS, the Executive shall provide services for the Company and OPCO, as
directed by the Board of Directors of the Company (the "Board"); and
WHEREAS, the term "Company" contained herein shall also include OPCO,
except as otherwise set forth herein so that the obligations under this
Agreement of the Company shall also be obligations of which OPCO is jointly and
severally liable with the Company.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Employment. Effective upon the effective date of the Plan of
Reorganization (the "Effective Date"), the Company shall employ the
Executive as the Chief Executive Officer and President of the Company
based upon the terms and conditions set forth in this Agreement, for the
period of time specified in Section 3. In such position, the Executive
shall report directly and exclusively to the Board.
2. Duties and Authority. During the term of this Agreement, the Chief
Executive Officer and President of the Company, under the direction and
subject to the control of the Board (which direction shall be such as is
customarily exercised over a chief executive officer of a public company),
the Executive shall be responsible for the business, affairs, properties
and operations of the Company, and shall have general executive charge,
management and control of the Company, with all such powers and authority
with respect to such business, affairs, properties, and operations as may
be reasonably incident to such duties and responsibilities, and shall
perform such other duties for the Company as the Board may determine from
time to time. The Executive shall initially occupy the office of chairman
of the Board for the Agreement Term, and agrees to continue, if elected,
to serve as chairman of the Board, for no additional compensation. The
Executive shall devote the Executive's reasonable best efforts and full
business time, energies and talents
to the performance of the Executive's duties and the advancement of the
business and affairs of the Company.
3. Term. The term of this Agreement and the period of employment of the
Executive by the Company hereunder shall commence on the Effective Date
and shall end on the third anniversary of the Effective Date (the
"Agreement Term"), unless earlier terminated pursuant to Section 7 herein;
provided, however, that the Agreement Term shall be automatically extended
for additional one (1) year periods on each anniversary date of this
Agreement, unless and until either party provides non-renewal Notice to
the other party not less than ninety (90) days before such anniversary
date that such party is terminating this Agreement, which termination
shall be effective as of the end of such initial Agreement Term or
extended term, as the case may be (the "Expiration Date"), or until sooner
terminated as hereinafter set forth.
4. Compensation and Expenses.
(a) In consideration for the Executive's services and subject to the
terms and conditions of this Agreement, the Company shall pay to the
Executive an annual base salary (the "Base Salary") equal to Five
Hundred Thirty Thousand Dollars ($530,000). The Base Salary shall be
payable biweekly or in such other installments as shall be
consistent with the Company's payroll procedures. The Company shall
deduct and withhold all necessary social security and withholding
taxes and any other similar sums required by law or authorized by
the Executive with respect to the payment of the Base Salary. The
Board shall review the Executive's salary annually before December
31 and may, in its discretion, increase, but not decrease, his Base
Salary in any renewal, extension or replacement of this Agreement.
The Board shall also review the appropriateness of creating
additional forms of nonqualified executive compensation to cover the
Executive.
(b) To the maximum extent permitted by applicable state and federal law,
the Executive shall be eligible, at no cost to the Executive, to
participate in all of the Company's benefit plans, including fringe
benefits, available to the Company's senior executives, as such
plans or programs are in effect from time to time, and use of an
automobile.
(c) The Executive shall be entitled to (i) time off for all public
holidays observed by the Company and (ii) vacation days in
accordance with the applicable policies for the Company's senior
executives as in effect from time to time.
(d) The Company shall reimburse the Executive for all reasonable
expenses the Executive incurs in accordance with the reasonable
policies and procedures adopted from time to time by the Company.
(e) Until the one-year anniversary of the date on which the redemption
of the Company's 15% Senior Preferred Voting Stock (the "Preferred
Stock") occurs, the Executive shall be entitled to receive a cash
performance bonus in addition to
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his Base Salary for each annual period during the Agreement Term.
The amount of the cash performance bonus in any annual period will
depend upon attaining established paydown targets (the "Target
Paydowns") as contained in (i) that certain Credit Agreement dated
as of October 8, 2002 by and among OPCO, the Agent and the Lenders
(both as defined therein)(the "Senior Secured Credit Agreement"),
and (ii) that certain Senior Secured PIK Credit Agreement dated as
of October 8, 2002 by and among the Company, the Agent and the
Lenders (both as defined therein) (the "PIK Credit Agreement"), as
follows:
Percentage of Target Percentage of Base Salary
Paydowns Attained as Cash Performance Bonus
-------------------- ----------------------------------
80% 80%
90% 90%
100% 100%
115% 115%
120% 120%
125% 125%
130% 150% (subject to a maximum of
200%, upon approval of
the Board)
The following are the Target Paydowns (Mandatory Prepayments under the
Senior Secured Credit Agreement and the PIK Credit Agreement) ("FYE" means
fiscal year end):
FYE December 31, 2002 $26,500,000
FYE December 31, 2003 $24,300,000
FYE December 31, 2004 $10,000,000
The cash performance bonus, if any, pursuant to this Section 4(e) shall be
paid to the Executive within ten (10) business days after the determination of
the applicable Target Paydown attained. After the annual period in which the
redemption of the Preferred Stock of the Company occurs, the Executive shall be
entitled to an annual cash bonus, if any, in an amount determined by the Board,
in its sole discretion.
(f) On the Effective Date, the Executive shall be granted 100,000 shares
of Preferred Stock of the Company, representing one and sixty seven
one hundredths percent (1.67%) of the Preferred Stock shares of the
Company, subject to restrictions established as of the Effective
Date ("Restricted Stock") on the transferability of such Restricted
Stock and the forfeiture of such Restricted Stock upon a termination
of employment for Cause or without Good Reason as set forth in
Section 8 of this Agreement. The restrictions shall lapse as to
one-third (1/3) of the shares of Preferred Stock on the first,
second and third anniversaries of the Effective Date. The Executive
may file an election pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Tax Code") with respect to
the Restricted Stock within thirty (30) days after the Effective
Date.
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(g) Upon the consummation of a transaction described in the definition
of "Change of Control" contained in Section 8 of this Agreement, the
Executive shall be entitled to a payment equal to .20% of the new
capital invested in the Company in connection with the Change of
Control (the "New Capital Infusion"), paid in a lump sum cash
payment within ten (10) days after the consummation date of the
transaction.
5. Confidential Information.
(a) "Confidential Information" means any and all Company and Company
subsidiary proprietary information, technical data, patent
applications, inventions or discoveries (whether patentable or not),
know-how and trade secrets, as well as operating, design and
manufacturing procedures disclosed to the Executive, including
before the Effective Date. "Confidential Information" further means,
without limitation, research, product development activities,
processes, products, specifications, designs, diagrams,
illustrations, programs, concepts, ideas, marketing plans,
proposals, financial information, confidential reports,
communications and customer lists and data, as well as the nature
and results of the Company's and its subsidiaries' research and
development activities, and all other materials and information
related to the business or activities of the Company and its
subsidiaries that are not generally known to the public; provided,
however, that the term "Confidential Information" excludes
information that (i) is or becomes generally available to the public
other than through acts by the Executive in violation of this
Agreement, (i) was legally within the Executive's possession prior
to disclosure to the Executive by or on behalf of the Company, which
prior possession can be evidenced by the Executive's written records
in existence prior to the effective date of any Existing Employment
Document, or (ii) becomes available to the Executive on a
non-confidential basis from a source other than the Company or a
subsidiary of the Company, provided that such source is not bound by
a confidentiality agreement with the Company or any of its
subsidiaries, or by any other contractual, legal or fiduciary
obligation of confidentiality to the Company or any of its
subsidiaries, or any other party with respect to such information.
(b) Except as may be required by the lawful order of a court or agency
of competent jurisdiction, the Executive covenants and agrees that,
during the Agreement Term and at all times thereafter, the Executive
will keep secret and confidential all Confidential Information, and
will not at any time, without the prior written consent of the Board
or a person authorized by the Board, publish or disclose any
Confidential Information, either directly or indirectly, to any
third party, use for the Executive's own benefit or advantage, or
make available for others to use (except to third parties in
connection with possible transactions or business with the Company).
(c) To the extent that any court or agency seeks to have the Executive
disclose Confidential Information, the Executive shall promptly
inform the Company, and
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shall take all reasonable steps necessary to prevent disclosure of
any Confidential Information until the Company has been informed of
such requested disclosure, and the Company has an opportunity to
respond to such court or agency. To the extent that the Executive
obtains information on behalf of the Company or any of its
subsidiaries that may be subject to attorney-client privilege as to
the Company's attorneys, the Executive shall take reasonable steps
necessary to maintain the confidentiality of such information and to
preserve such privilege.
(d) The Executive acknowledges that the restrictions contained in
Section 5(b) and 5(c) are reasonable and necessary, in view of the
nature of the Company's business, in order to protect the legitimate
interests of the Company, and that any violation thereof would
result in irreparable injury to the Company. Therefore, the
Executive agrees that in the event of a breach or threatened breach
by the Executive of the provisions of Section 5(b) and (c), the
Company shall be entitled to obtain from any court of competent
jurisdiction, preliminary or permanent injunctive relief restraining
the Executive from disclosing or using any such confidential
information. The Executive also acknowledges that nothing in this
Section 5 shall be construed as limiting the Executive's duty of
loyalty to the Company, or any other duty he may otherwise have to
the Company, while he is employed by the Company.
6. Covenant Not to Compete. The Executive agrees that, through the position
of Chief Executive Officer, the Executive has established and will
continue to establish valuable and recognized expertise in the paging
business and has had and will have access to the Company's Confidential
Information. The Executive hereby enters into a covenant restricting the
Executive from soliciting employees of the Company and its subsidiaries
and from competing against the Company upon the terms and conditions
described below:
(a) During the Executive's employment and for a period of two (2) years
after the Date of Termination for any reason, the Executive shall
not:
(i) induce or attempt to induce any employees of the Company or
those of any of its subsidiaries to terminate their
employment, or refrain from renewing or extending such
employment, with the Company or such subsidiary in order to
become an director, officer, employee, consultant or
independent contractor to or for any other individual or
entity other than the Company or its subsidiaries;
(ii) at any time and in any state or other jurisdiction in the
United States in which the Company is engaged in business or
has developed plans to engage in business: (1) engage or be a
part of any Person (including as a director, consultant,
employee, agent, or representative), or have any direct or
indirect financial interest (whether as a partner,
shareholder, or owner) in any Person that engages in the
business of owning and operating narrowband one-way paging and
wireless messaging networks, voice mail services or data
transmitting services (the "Business"); or (2) participate as
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an employee or officer in any enterprise in which the
Executive's responsibility relates to the Business;
(iii) directly or indirectly own an equity interest in any
Competitor (other than ownership of 1% or less of the
outstanding stock of any corporation listed on a national
stock exchange or included in the NASDAQ System). The term
"Competitor" means any Person a portion of the business of
which (and during any period in which it intends to enter into
business activities that would be) is materially competitive
in any way with the Business of the Company; The ownership by
the Executive of his percentage of equity securities as of the
Effective Date or his position as an officer or director of
USA Telecommunications, Inc. or Xxxxxxx Broadcasting Systems
shall not be deemed a violation of this Section 6(a)(ii) or of
Section 6(a)(iii); or
(iv) solicit or cause or encourage any person to solicit any
Business in competition with the Company or a subsidiary from
any Person who is a client of the Company or of a subsidiary
during the Executive's employment hereunder.
(b) The Executive agrees that the restrictions set forth in this Section
6 are reasonable, proper, and necessitated by legitimate business
interests of the Company and do not constitute an unlawful or
unreasonable restraint upon the Executive' ability to earn a
livelihood. The parties agree that in the event any of the
restrictions in this Agreement, interpreted in accordance with the
Agreement as a whole, are found to be unreasonable a court of
competent jurisdiction, such court shall determine the limits
allowable by law and shall enforce the same. The parties further
agree that nothing in this Section 6 shall be construed as limiting
the Executive's duty of loyalty to the Company, or any other duty he
may otherwise have to the Company, while he is employed by the
Company.
(c) The Executive further acknowledges that it may be impossible to
assess the monetary damages incurred by the Executive's violation of
this Agreement, and that violation of this Agreement will cause
irreparable injury to the Company. Accordingly, the Executive agrees
that the Company will be entitled, in addition to all other rights
and remedies that may be available, to an injunction enjoining and
restraining the Executive and any other involved party from
committing a violation of this Agreement.
7. Termination. Notwithstanding any other provision of this Agreement, this
Agreement shall terminate upon the death of the Executive, or it may be
terminated with thirty (30) days' written notice as follows:
(a) The Company may terminate this Agreement:
(i) at any time if the Executive is Disabled (as defined below)
for a period of six (6) months or more;
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(ii) at any time with "Cause." For purposes of this Agreement.
"Cause" means (A) dishonesty of a material nature that relates
to the performance of services under this Agreement; (B)
criminal conduct (other than minor infractions and traffic
violations) that relates to the performance of services under
this Agreement, (C) the Executive's willfully breaching or
failing to perform his duties as described in Section 2 hereof
(other than any such failure resulting from the Executive's
being Disabled), within a reasonable period of time after a
written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has
not substantially performed his duties; or (D) the willful
engaging by the Executive in conduct that is demonstrably and
materially injurious to the Company, monetarily or otherwise.
No act or failure to act on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that
such action or omission was in the best interests of the
Company. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive a
certificate of a resolution duly adopted by the affirmative
vote of not less than seventy-five percent (75%) of the entire
membership of the Board at a meeting of the Board called and
held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive, together with
the Executive's counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, the
Executive has engaged in the conduct set forth in this
paragraph and specifying the particulars thereof in detail; or
(iii) at any time without Cause upon Notice from the Company to the
Executive, which Notice shall be effective immediately or such
later time as is specified in such Notice.
(b) The Executive may terminate this Agreement at any time upon sixty
(60) days' Notice to the Company.
(c) At any time by the mutual agreement of the parties. Any termination
of the Executive's employment by mutual agreement of the parties
shall be memorialized by written agreement signed by the Executive
and duly-appointed officers of the Company and OPCO.
(d) Any purported termination of the Executive's employment by the
Company or by the Executive shall be communicated by written Notice
of Termination to the other party hereto in accordance with Section
9. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice that shall indicate the Date of Termination (which
shall not be earlier than the date on which such Notice is sent),
the specific provision of this Agreement relied upon and that shall
set forth in reasonable detail the facts and circumstances claimed
to provide a basis for
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termination of the Executive's employment. The "Date of Termination"
means the last day the Executive is employed by the Company
hereunder (including any successor to the Company as determined in
accordance with Section 14). If the Executive becomes employed by
the entity into which the Company is merged, or the purchaser of
substantially all of the assets of the Company, or a successor to
such entity or purchaser, the Executive shall not be treated as
having terminated employment for purposes of this Agreement until
such time as the Executive terminates employment with the successor
(including, without limitation, the merged entity or purchaser).
8. Compensation Upon Termination.
(a) Death. If the Executive's employment is terminated by the
Executive's death, the Company shall pay to the Executive's estate,
or as may be directed by the legal representatives to such estate
(i) the Executive's Base Salary in effect on the date immediately
prior to the Executive's death, through the Executive's date of
death; (ii) all other unpaid amounts, if any, to which the Executive
is entitled as of the date of the Executive's death, under any
Company fringe benefit or incentive compensation plan or program, at
the time such payments would otherwise ordinarily be due; and (iii)
the Executive's full Base Salary that would have been payable to the
Executive from the Executive's date of death through the Expiration
Date, in a lump sum within forty-five (45) days after his death.
(b) Disability. Following the use of all sick days to which the
Executive is entitled under the policies applicable to the Company's
senior executives, while he is Disabled, the Company shall, in lieu
of payment of his Base Salary, (i) pay the Executive a disability
benefit equal to 50% of the Base Salary that he would otherwise be
entitled to receive for the period in which he is Disabled; (ii) all
other unpaid amounts, if any, to which the Executive is entitled as
of the Executive's date of disability, under any Company fringe
benefit or incentive compensation plan or program, at the time such
payments are due; and (iii) the Executive's full Base Salary that
would have been payable to the Executive from the Executive's Date
of Termination through the Expiration Date, in a lump sum within
forty-five (45) days after such Date of Termination; provided,
however, that any payments made to the Executive during the
Disability Period shall be reduced by any amounts paid or payable to
the Executive under any Company disability benefit plans. Subject to
the terms of this Agreement, the Executive shall not be required to
perform services under this Agreement during any period that he is
Disabled. The Executive shall be considered "Disabled" during any
period in which he has an illness, or a physical or mental
disability, or similar incapacity, that renders him incapable, after
reasonable accommodation, of performing his duties under this
Agreement. In the event of a dispute as to whether the Executive is
Disabled, the Company may refer the same to a licensed practicing
physician of the Company's choice, and the Executive agrees to
submit to such tests and examinations as such physician shall deem
appropriate. During
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the period in which the Executive is Disabled, the Company may
appoint a temporary replacement to assume the Executive's
responsibilities.
(c) For Cause. If the Company terminates the Executive's employment for
Cause, the Company shall pay the Executive's Base Salary in effect
on the date immediately prior to such termination, through the date
specified in the Notice of Termination and the Company shall have no
further obligations to the Executive under this Agreement. Upon a
termination for Cause, the Executive shall forfeit all shares of
Restricted Stock that remain restricted on the date of termination.
(d) Voluntary. If the Executive terminates his employment for other than
Good Reason, the Company shall pay the Executive the Executive's
Base Salary in effect on the date immediately prior to such
termination, through the date specified in the Notice of
Termination. Upon a termination for other than Good Reason, the
Executive shall forfeit all shares of Restricted Stock that remain
restricted on the date of termination. The Company shall have no
further obligations to the Executive under this Agreement.
"Good Reason" means the occurrence, without the Executive's express
written consent, of any of the following circumstances:
(i) the Company's failure to perform or observe any of the
material terms or provisions of this Agreement and the
continued failure of the Company to cure such default within
fifteen (15) days after the Executive gives a written demand
for performance to the Company, which demand shall describe
specifically the nature of such alleged failure to perform or
observe such material terms or provisions;
(ii) the assignment to the Executive of any duties inconsistent
with, or any substantial diminution in, such Executive's
status or responsibilities as in effect on the date hereof,
including imposition of travel obligations that are materially
greater than is reasonably required by the Company's business;
(iii) (I) a reduction in the Executive's Base Salary as in effect on
the date hereof, as that amount may be increased from time to
time; or (II) the failure to pay a bonus award to which the
Executive is otherwise entitled, at the time such bonuses are
usually paid;
(iv) a change in the principal place of the Executive's employment,
as in effect on the date hereof or as in effect after any
subsequent change to which the Executive consented in writing,
to a location more than thirty-five (35) miles distant from
the location of such principal place;
(v) (I) the Company's failure to continue in effect any incentive
compensation plan or stock option plan in which the Executive
participates, unless the Company has provided an equivalent
alternative compensation
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arrangement (embodied in an ongoing substitute or alternative
plan) to the Executive, or (II) the Company's failure to
continue the Executive's participation in any such incentive
or stock option plan on substantially the same basis, both in
terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants;
(vi) the Company's violation of any applicable criminal law not due
to the Executive's gross negligence or willful misconduct;
(vii) the failure of the Company or any successor to obtain a
satisfactory written agreement from any successor to assume
and agree to perform this Agreement, as contemplated in
Section 14 below; or
(viii) any purported termination of the Executive's employment that
is not effected pursuant to a Notice of Termination satisfying
the requirements of Sections 7(a)(ii) or 7(d), as applicable.
For purposes of this Agreement, no such purported termination
shall be effective except as constituting Good Reason.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(e) Other. If the Company terminates the Executive's employment other
than for Cause or Disability or if the Executive terminates
employment with the Company for Good Reason, the Company shall pay
the Executive:
(i) the Executive's Base Salary through the date specified in the
Notice of Termination within ten (10) business days after such
date and all other unpaid amounts, if any, to which the
Executive is entitled as of the date specified in the Notice
of Termination under any Company fringe benefit or incentive
compensation plan or program, at the time such payments are
due;
(ii) an amount equal to the product of (a) two times (b) the full
Base Salary then in effect within forty-five (45) days after
such date specified in the Notice of Termination;
(iii) an amount equal to the cash performance bonus paid or payable
to the Executive with respect to the annual period prior to
the year in which the termination of the Executive's
employment occurs;
(iv) the lapse of all restrictions with respect to the Restricted
Stock.
(v) Gross-Up Payments. (1) If any payment or the value of any
benefit received or to be received by the Executive in
connection with the Executive's termination or contingent upon
a Change of Control of the Company (whether received or to be
received pursuant to the terms of this
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Agreement (the "Agreement Payments") or of any other plan,
arrangement, or agreement of the Company, its successors, any
person whose actions result in a Change of Control of the
Company, or any person affiliated with any of them (or which,
as a result of the completion of the transactions causing a
Change of Control, will become affiliated with any of them
("Other Payments" and, together with the Agreement Payments,
the "Payments")) would be subject to the excise tax imposed by
Section 4999 of the Tax Code or any comparable federal, state,
or local excise tax (such excise tax, together with any
interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), as determined as provided below, the
Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount the Executive
retains, after deduction of the Excise Tax on Agreement
Payments and Other Payments and any federal, state, and local
income tax and Excise Tax upon the payment provided for by
Section 8 hereof, and any interest, penalties, or additions to
tax payable by the Executive with respect thereto shall be
equal to the total present value of the Agreement Payments and
Other Payments at the time such Payments are to be made. The
intent of the parties is that the Company shall be solely
responsible for and shall pay, any Excise Tax on any Payments
and Gross-Up Payment and any income and employment taxes
(including, without limitation, penalties and interest)
imposed on any Gross-Up Payments as well as any loss of
deduction caused by the Gross-Up Payment.
(2) All determinations required to be made under this
Section 8(e)(v), including, without limitation, whether
and when a Gross-Up Payment is required and the amount
of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determinations, shall be
made by tax counsel (either a law firm or a nationally
recognized public accounting firm) selected by the
Company and reasonable acceptable to the Executive ("Tax
Counsel"). The Company shall cause the Tax Counsel to
provide detailed supporting calculations to the Company
and the Executive within fifteen (15) business days
after notice is given by the Executive to the Company
that any or all of the Payments have occurred, or such
earlier time as is requested by the Company. Within two
(2) business days after such notice is given to the
Company, the Company shall instruct the Tax Counsel to
timely provide the data required by this Section 8(e)(v)
to the Executive. The Company shall pay all fees and
expenses of the Tax Counsel. The Company shall pay any
Excise Tax determined pursuant to this Section 8(e)(v)
to the Internal Revenue Service (the "IRS") and/or other
appropriate taxing authority on behalf of the Executive
within five (5) days after receipt of the Tax Counsel's
determination. If the Tax Counsel determines that there
is substantial authority (within the meaning of Section
6662 of the
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Tax Code) that no Excise Tax is payable by the
Executive, the Tax Counsel shall furnish the Executive
with a written opinion that the failure to disclose or
report the Excise Tax on the Executive's federal income
tax return will not constitute a substantial
understatement of tax or be reasonably likely to result
in the imposition of a negligence or similar penalty.
Any determination by the Tax Counsel shall be binding
upon the Company and the Executive in the absence of
material mathematical or legal error.
As a result of the uncertainty in the application of
Section 4999 of the Tax Code at the time of the initial
determination by the Tax Counsel hereunder, it is
possible that the Company will not have made Gross-Up
payments that should have been made or that it will have
made Gross-Up Payments that should not have been made,
in each case, consistent with the calculations required
to be made hereunder. If the Company exhausts its
remedies pursuant to Section 8(e)(v)(3) below and the
Executive is thereafter required to pay an Excise Tax,
the Tax Counsel shall determine the amount of
underpayment of Excise Taxes that has occurred and the
Company shall promptly pay any such underpayment to the
IRS or other appropriate taxing authority on the
Executive's behalf or, if the Executive has previously
paid such underpayment, to the Executive. If the Tax
Counsel determines that an overpayment of Gross-Up
payments has occurred, any such overpayment shall be
treated for all purposes as a loan to the Executive with
interest at the applicable federal rate provided in
Section 7872(f)(2) of the Tax Code, due and payable
within ninety (90) days after written demand to the
Executive by the Company; provided, however, that the
Executive shall have no duty or obligation whatsoever to
repay such loan if the Executive's receipt of the
overpayment, or any portion thereof, is includible in
the Executive's income and the Executive's repayment of
the same is not deductible by the Executive for federal
and state income tax purposes.
(3) The Executive shall notify the Company, in writing of
any claim by the IRS or state or local taxing authority,
that, if successful, would result in any Excise Tax or
an underpayment of Gross-Up Payments. Such notice shall
be given as soon as practicable but no later than
fifteen (15) business days after the Executive is
informed in writing of the claim and shall inform the
Company of the nature of the claim, the administrative
or judicial appeal period, and the date on which any
payment of the claim must be paid. The Executive shall
not pay any portion of the claim before the expiration
of the thirty (30) day period following the date on
which the Executive gives such notice to the Company (or
such shorter period ending on the date that any amount
under the claim is due).
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If the Company notifies the Executive in writing before
the expiration of such thirty (30) day period that it
desires to contest the claim, the Executive shall:
(A) give the Company any information reasonably
requested by the Company relating to the claim;
(B) take such action in connection with contesting the
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation
concerning the claim by an attorney selected by
the Company who is reasonably acceptable to the
Executive; and
(C) cooperate with the Company in good faith in order
to effectively contest the claim; provided,
however, that the Company shall bear and pay
directly all costs and expenses (including,
without limitation, additional interest and
penalties and attorneys' fees) incurred in such
contests and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including, without
limitation, interest and penalties thereon)
imposed as a result of such representation.
Without limitation upon the foregoing provisions
of this Section 8(e)(v)(3)(C), except as provided
below, the Company shall control all proceedings
concerning such contest and, in its sole opinion,
may pursue or forgo any and all administrative
appeal, proceedings, hearings and conferences with
the taxing authority pertaining to the claim. At
the Company's written request and upon payment to
the Executive of an amount at least equal to the
claim plus any additional amount necessary to
obtain the jurisdiction of the appropriate
tribunal and/or court, the Executive shall pay the
same and xxx for a refund. The Executive agrees to
prosecute any contest of a claim to a
determination before any administrative tribunal,
in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall
determine; provided, however, that if the Company
requests the Executive to pay the claim and xxx
for a refund, the Company shall advance the amount
of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold
the Executive harmless on an after-tax basis, from
any Excise Tax or income tax (including, without
limitation, interest and penalties thereon)
imposed on such advance or for any imputed income
on such advance. Any extension of the statute of
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limitations relating to the assessment of any
Excise Tax for the taxable year of the Executive
that is subject of the claim is to be limited
solely to the claim. Furthermore, the Company's
control of the contest shall be limited to the
issues for which a Gross-Up Payment would be
payable hereunder. The Executive shall be entitled
to settle or contest, as the case may be, any
other issue raised by the IRS or any other taxing
authority.
(4) If, after the Executive receives an amount the Company
advanced pursuant to Section 8(e)(v)(3) above, the
Executive receives any refund of a claim and/or any
additional amount that was necessary to obtain
jurisdiction, the Executive shall promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the Executive receives an amount the
Company advanced pursuant to Section 8(e)(v)(3) above, a
determination is made that the Executive shall not be
entitled to any refund of the claim, and the Company
does not notify the Executive in writing of its intent
to contest such denial or refund of a claim before the
expiration of the thirty (30) days after such
determination, then the portion of such advance
attributable to a claim shall be forgiven and shall not
be required to be repaid. The amount of such advance
attributable to a claim shall offset, to the extent
thereof, the amount of the underpayment required to be
paid by the Company to the Executive.
(5) If, after the Company advances an additional amount
necessary to obtain jurisdiction, there is a final
determination made by the taxing authority that the
Executive is not entitled to any refund of such amount,
or any portion thereof, then the Executive shall repay
such nonrefundable amount to the Company within thirty
(30) days after the Executive receives notice of such
final determination. A final determination shall occur
when the period to contest or otherwise appeal any
decision by an administrative tribunal or court of
initial jurisdiction has been waived or the time for
contesting or appealing the same has expired.
"Change of Control" means the first to occur of the following:
(i) any Person or group of Persons acting in concert, in a
transaction or a series of transactions, is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding
securities that have the right to vote for the election of
directors generally (not including in such securities
beneficially owned by such Person any securities acquired
directly from or received through an exchange offer
14
with the Company); or (ii) there is consummated a merger,
consolidation or other business combination (including an
exchange of securities with the security holder's of a
corporation that is a constituent in such business
combination) of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other
than a merger, consolidation or business combination which
would result in the voting securities of the Company
outstanding immediately prior to such merger, consolidation or
business combination continuing to represent at least a
majority of the combined voting power of the securities having
the right to vote for the election of directors generally of
the Company or the surviving entity or any parent thereof
outstanding immediately after such merger, consolidation or
business combination (either by remaining outstanding or by
being converted into or exchanged for voting securities of the
surviving entity or parent thereof) or (iii) there is
consummated an agreement for the sale, lease or other
disposition by the Company of all or substantially all of the
Company's assets, other than a sale, lease or other
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least a majority of the
combined voting power of the outstanding securities of which
are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately
prior to such sale.
(vi) Notwithstanding the foregoing, a "Change of Control" shall not
be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions
immediately following which the record holders of the stock
(entitled to vote for directors) of the Company immediately
prior to such transaction or series of transactions continue
to have substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets of
the Company immediately following such transaction or series
of transactions; provided, that, a transaction with Arch
Wireless, Inc. and/or its affiliates shall not be subject to
the provisions of this paragraph and shall be subject to the
other provisions contained in the definition of "Change of
Control."
(f) Mitigation. The Executive shall not be required to mitigate amounts
payable pursuant to this section by seeking other employment or
otherwise.
9. Effect of Termination. If the Executive (a) is a member of the Board or
that of any of the Company's subsidiaries, or (b) holds any other position
with the Company and the Company's subsidiaries, on the Date of
Termination, the Executive shall resign from all such positions as of such
date.
10. Termination of Other Agreements. By their execution of this Agreement,
each of the Company and the Executive, as of the Effective Date, consent
to and do hereby terminate all rights and obligations that each of the
parties may have under (a) that certain Employment Agreement between the
Executive and the Company, dated as of May 15,
15
1996, together with all amendments thereto (the "Existing Employment
Agreement"); (b) that certain Change of Control Agreement between the
Executive and the Company, dated as of May 15, 1996, together with all
amendments thereto (the "Change of Control Agreement"); (c) that certain
Retention Agreement between the Executive and the Company, dated as of
April 1, 2001, together with all amendments thereto (the "Retention
Agreement"); and (d) any other employment, consulting, non-competition,
bonus or other compensatory plan, program, arrangement or contract
relating to the employment of the Executive, written or oral, between the
Executive and the Company or any person affiliated with the Company (any
such arrangement, collectively with the Existing Employment Agreement, the
Change of Control Agreement, and the Retention Agreement, the "Prior
Employment Documents").
11. Notices. All notices, demands, requests, or other communications required
or permitted to be given or made hereunder (collectively, "Notice") shall
be in writing and shall be delivered, telecopied, or mailed by first class
registered or certified mail, postage prepaid, addressed as follows:
(a) if to the Company:
Metrocall, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
(b) if to the Executive:
Xxxxxxx X. Xxxxxxx, III
000 Xxxxx Xxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
or to such other address as may be designated by either party in a notice
to the other. Each notice, demand, request, or other communication that
shall be given or made in the manner described above shall be deemed
sufficiently given or made for all purposes three (3) days after it is
deposited in the U.S. mail, postage prepaid, or at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt,
the answer back or the affidavit of messenger being deemed conclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
16
12. Severability. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which shall
remain in full force and effect. The parties agree that in the event any
of the provisions in this Agreement, interpreted in accordance with the
Agreement as a whole, are found to be unenforceable by a court of
competent jurisdiction, such court shall determine the limits allowable by
law and shall enforce the same.
13. Survival. It is the express intention and agreement of the parties that
the provisions of Section 5 shall survive the termination of this
Agreement, and that the provisions of Section 6 shall survive for two (2)
years following the termination of this Agreement.
14. Assignment; Successors. The rights and obligations of the parties to this
Agreement shall not be assignable, except that the rights and obligations
of the Company hereunder shall be assignable in connection with any
subsequent merger, consolidation, sale of substantially all of the assets
of the Company, or similar reorganization of a successor. The Company will
require any successor (whether direct or in direct, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company is
required to perform it. Failure of the Company to obtain such assumption
and agreement before the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation
from the Company as provided in Section 8(e) herein.
15. Binding Effect. Subject to any provisions restricting assignment, this
Agreement shall be binding upon the parties and shall inure to the benefit
of the parties and their respective heirs, devisees, executors,
administrators, legal representatives, successors, and assigns.
16. Amendment Waiver. This Agreement shall not be amended, altered or modified
except by an instrument in writing duly executed by all parties. Neither
the waiver by any of the parties of a breach of or a default under any of
the provisions of this Agreement, nor the failure of either of the
parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder, shall
thereafter be construed as a waiver of any subsequent breach or default of
a similar nature, or as a waiver of any such provisions, rights, or
privileges.
17. Headings. Section headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction, or scope of any of the provisions of this
Agreement.
18. Governing Law. This Agreement, the rights and obligations of the parties,
and any claims or disputes arising from this Agreement, shall be governed
by and construed in accordance with the laws of the Commonwealth of
Virginia (but not including the choice of law rules thereof).
17
19. Entire Agreement. This Employment Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto,
including, but not limited to, the Prior Employment Documents.
20. Indemnification. In consideration of this Agreement, the Executive hereby
waives any and all rights under and releases, and indemnifies and holds
the Company (and its officers, directors, employees and agents) and its
successors and assigns, harmless from any damage, loss, liability,
judgment, fine, penalty, assessment, settlement, cost, or expense
including, without limitation, reasonable expenses of investigation,
reasonable attorneys' fees and other reasonable legal costs and expenses
incident to any of the foregoing or to the enforcement of this Section 20,
whether or not suit is brought or, if brought, whether or not such suit is
successful, in whole or in part arising out of or relating to any and all
employment, consulting, non-competition, bonus, or other compensatory
plan, program, arrangement, or contract relating to the employment of the
Executive, written or oral, between the Executive and the Company or any
person affiliated with the Company, including, without limitation, the
Prior Employment Documents.
21. Arbitration. Either party may designate in writing to the other (in which
case this Section 21 shall have effect but not otherwise) that any dispute
that may arise directly or indirectly in connection with this Agreement,
the Executive's employment, or the termination of the Executive's
employment, whether arising in contract, statute, tort, fraud,
misrepresentation, or other legal theory, shall be determined solely by
arbitration in Washington, D.C. under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
(the "AAA"). The only legal claims between the Executive, on the one hand,
and the Company or any subsidiary, on the other, that would not be
included in this Agreement to arbitration are claims by the Executive for
workers' compensation or unemployment compensation benefits, claims for
benefits under a Company or subsidiary benefit plan if the plan does not
provide for arbitration of such disputes, and claims by the Executive that
seek judicial relief in the form of specific performance of the right to
be paid until the termination date during the pendency of any dispute or
controversy arising under Section 7(a)(ii). If this Section 21 is in
effect, any claim with respect to this Agreement, the Executive's
employment, or the termination of the Executive's employment must be
established by a preponderance of the evidence submitted to the impartial
arbitrator. A single arbitrator shall conduct any arbitration. The
arbitrator shall have the authority to order a pre-hearing exchange of
information by the parties including, without limitation, production of
requested documents, and examination by deposition of parties and their
authorized agents. If this Section 21 is in effect, the decision of the
arbitrator (i) shall be final and binding, (ii) shall be rendered within
ninety (90) days after the impanelment of the arbitrator, and (iii) shall
be kept confidential by the parties to such arbitration. The arbitration
award may be enforced in any court of competent jurisdiction. The Federal
Arbitration Act, 9 U.S.C. Sections 1-15, not state law, shall govern the
arbitrability of all claims.
18
22. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which shall be deemed to
constitute one and the same instrument.
19
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or
have caused this Agreement to be duly executed, on their behalf as of the day
and year first hereinabove written.
METROCALL HOLDINGS, INC.
Date: _________________, 2002 By: ____________________________________
Its:
Date: ________________, 2002 ________________________________________
Xxxxxxx X. Xxxxxxx, III
METROCALL, INC.
Date: _________________, 2002 By: ____________________________________
Its:
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