CHANGE OF CONTROL AGREEMENT
Exhibit
10.6
THIS CHANGE IN CONTROL AGREEMENT (“Agreement”) is made as the 6th day of June,
2007, (“Date of Agreement”) between Xxxxxx Communications Corporation, an Oklahoma corporation (the
“Company”) and, together with any of its subsidiaries or successors in interest, including a
successor in a Change in Control (as defined below), (“Employer”), and Xxxxx X. XxXxxxx
(“Executive”).
WHEREAS, Executive provides valuable services to the Company;
WHEREAS, the Company recognizes that a Change in Control can create uncertainties for
Executive resulting in the possibility of Executive leaving the employment of the Company or
Executive’s distraction from management duties to the detriment of the Company;
WHEREAS, the Company desires to induce Executive to remain employed at the Company and to
eliminate distractions to Executive related to a Change in Control by offering Executive certain
severance payments and benefits as described in this Agreement which the Employer shall provide to
Executive; and
WHEREAS, Executive desires to remain employed by the Company and to avoid distractions which a
Change in Control may cause.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the
Company and Executive agree as follows:
1. Severance Payment.
(a) If, subject to the conditions set forth in Section 1(b) below, Executive’s employment with
the Employer is terminated under the circumstances contemplated by Section 1(b), Employer shall pay
Executive, a single lump sum severance payment equal to .5 times Executive’s Annual Compensation as
in effect immediately prior to the Change of Control (the “ Severance Payment”). In addition,
Executive shall be paid by Employer for Executive’s pro rata bas annual salary, accrued vacation
pay, and any other amount of compensation due Executive through the last day of Executive’s
employment with Employer (“Date of Termination”).
(b) Executive shall only be entitled to the Severance Payment or other benefits under this
Agreement if: (i) the Company has undergone a Change in Control prior to the third anniversary of
the Date of Agreement; (ii) Executive is employed by the Company at the time of the Change in
Control; (iii) Executive makes herself immediately available for continued employment by the
Employer; and (iv) (A) the Employer elects not to continue Executive’s employment in connection
with such Change in Control or (B) prior to the first anniversary of such Change in
Control, Executive’s employment with the Employer is terminated by the Employer without Cause. For
the avoidance of doubt, if Executive’s employment with the Employer terminates under any other
circumstances, including by reason of death, disability, retirement, resignation, or termination by
the Employer for Cause, Executive shall not be entitled to any Severance Payment or other benefits
under this Agreement whatsoever.
(c) The Employer shall pay the Severance Payment to Executive in cash or wire transfer of
immediately available funds within 30 days of the Date of Termination under the circumstances
contemplated by Section 1(b). If Executive dies after such termination but before the Severance
Payment is paid in full, Employer shall pay the Severance Payment to Executive’s legal heirs or
estate. The Severance Payment shall be subject to all required tax withholdings by the Employer.
(d) Upon a termination under the provisions of Section 1(b), Executive shall also receive a
prorated payment under any annual cash incentive bonus plan then in effect, subject to the terms
and conditions set forth below. The Company’s current annual cash incentive bonus plan establishes
both subjective and objective performance criteria (and for some Executives, individual and Company
criteria) that must be satisfied for an employee to be eligible for a bonus. In determining whether
Executive is entitled to a prorated payment of an annual bonus under this provision, the Company
shall: (i) assume that any subjective or individual performance criteria applicable to the
Executive have been 100% satisfied; and (ii) with respect to any objective Company performance
criteria applicable to the Executive, compare the actual performance of the Company for the
respective fiscal year through the end of the month prior to the Date of Termination, against the
budget targets for those objective Company performance criteria levels for such period. The
performance criteria will then be evaluated under the terms of the annual cash incentive bonus
plan. To the extent such criteria are deemed to be satisfied in accordance with the foregoing, and
a bonus would be payable to Executive, such bonus shall be prorated for the respective fiscal year
through the Date of Termination. Such prorated bonus, if any, shall be due and payable within ten
(10) days of the Date of Termination.
(e) The Employer will maintain in full force and effect, for the continued benefit of
Executive (and Executive’s spouse and/or Executive’s dependents, as applicable) for a period of six
(6) months following the Date of Termination the medical, hospitalization, and dental programs, in
which Executive (and Executive’s spouse and/or Executive’s dependents, as applicable) participated
immediately prior to the Date of Termination at the level in effect and upon substantially the same
terms and conditions (including without limitations contributions required by Executive for such
benefits) as existed immediately prior to the Date of Termination; provided, if the Executive (or
Executive’s spouse) is eligible for Medicare of a similar type of government medical benefit, such
benefit shall be the primary provider before the Employer’s medical benefits are provided. If
Executive (or Executive’s spouse and/or Executive’s dependents) cannot continue to participate in
the Employer’s programs providing such benefits, the Employer shall arrange to provide Executive
(and Executive’s spouse and/or Executive’s dependents, as applicable) with the economic equivalent
of such benefits which they otherwise would have been entitled to receive under such plans and
programs (“Continued Benefits”). However, if Executive becomes reemployed with another employer and
is eligible to receive medical, hospitalization and dental benefits under another employer-provided
plan, the medical, hospitalization and dental benefits described herein shall be secondary to those
provided under such other plan during the applicable period.
(f) The Employer shall reimburse Executive, pursuant to the Employer’s policy, for reasonable
business expenses incurred, but not paid, prior to the Date of Termination.
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(g) Executive shall be entitled to any other rights, compensation and/or benefits as may be
due to Executive following such termination to which Executive is otherwise entitled in accordance
with the terms and provisions of any plans or programs of the Company in effect immediately prior
to the Change in Control and/or of the Employer after the Change in Control.
2. No Guarantee of Employment. Executive hereby acknowledges and agrees that nothing
in this Agreement constitutes a guarantee or assurance of continued employed with the Company or
the Employer and that Executive’s only rights under this Agreement are to payment of the Severance
Payment, and other listed benefits in accordance with the terms of this Agreement.
3. Certain Definitions. The following capitalized terms used in this Agreement have
the meanings set forth below:
(a) “Annual Compensation” means Executive’s annual base salary as in effect
immediately prior to the Change in Control, plus the amounts paid to Executive as a cash bonus
during the twelve month period immediately prior to the Change of Control.
(b) “Cause” means termination of employment for one of the following reasons: (i) the
conviction of the Executive by a federal or state court of competent jurisdiction of a felony which
relates to the Executive’s employment at the Employer; (ii) an act or acts of dishonesty taken by
the Executive and intended to result in substantial personal enrichment of the Executive at the
expense of the Employer; or (iii) the Executive’s “willful” failure to follow a direct, reasonable
and lawful written directive from Executive’s supervisor or the Board of Directors (the “Board”),
within the reasonable scope of the Executive’s duties, which failure is not cured to the
satisfaction of the Board within thirty (30) days. Further, for purposes of this Subsection (b):
(1) No act or omission by the Executive shall be deemed “willful” unless done,
or omitted by the Executive in bad faith and without reasonable belief that the
Executive’s action or omission was in the best interest of the Employer.
(2) The Executive shall not be deemed to have been terminated for Cause unless
and until the Employer delivers to the Executive a copy of the resolution duly
adopted by the affirmative vote of not less than three-fourths (3/4ths) of the
entire membership of the Board of Directors of the Employer, at a meeting of the
Board of Directors 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 of Directors), finding that in the good faith
opinion of the Board of Directors, the Executive was guilty of conduct set forth in
clauses (i), (ii), or (iii) above and specifying the particulars thereof in detail
and in writing.
(c) Change in Control. A “Change in Control” shall be deemed to have occurred if any
of the conditions set forth below shall have occurred:
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(1) Xxxxxx XX Limited Partnership, an Oklahoma limited partnership, and its
affiliates cease to beneficially own at least 35% of the total combined voting power
of all classes of outstanding capital stock of the Company entitled to vote in the
election of the directors of the Company; or
(2) Any “person” or “group” within the meaning of Section 13 (d) or 14 (d)(2)
of the Securities Exchange Act of 1934 becomes the ultimate “beneficial owner,” as
defined in Rule 13d-3 under the Exchange Act, of more than 35% of the total combined
voting power of all classes of outstanding capital stock of the Company entitled to
vote in the election of directors of the Company, on a fully diluted basis, and such
beneficial ownership represents a greater percentage of such total combined voting
power, on a fully diluted basis, than is held by Xxxxxx XX Limited Partnership and
its affiliates on such date; or
(3) Individuals who on March 1, 2007 constituted the Board of Directors of the
Company, together with any new directors whose election by the Board of Directors of
the Company or whose nomination for election by the Company’s stockholders was
approved by a majority of the members of the Board of Directors of the Company when
in office who either were members of the Board of Directors of the Company on March
1, 2007 or whose election or nomination for election was previously approved, cease
for any reason to constitute a majority of the members of the Company’s Board of
Directors then in office; or
(4) The sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, or all
or substantially all of the combined assets of the Company and all of its
subsidiaries, taken as a whole, to any person other than a wholly-owned subsidiary
of the Company or Xxxxxx XX Limited Partnership or any of its affiliates; or
(5) The adoption of a plan of liquidation or dissolution of the Company.
Where a Change in Control results from a series of related transactions, the Change in Control
shall be deemed to have occurred on the date of the consummation of the first such transaction.
(d) “Subsidiary” means any corporation or other entity of which the securities or
other ownership interests having the voting power to elect a majority of the Board of Directors or
other governing body are, at the time of determination, owned by the Employer, directly or through
one or more Subsidiaries.
4. Mitigation. Executive will not be required to mitigate amounts payable under this
Agreement by seeking other employment or otherwise, and there will be no offset against amounts due
Executive under this Agreement on account of subsequent employment except as specifically provided
herein.
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5. Withholding. All payments hereunder will be subject to any required withholding of
Federal, state and local taxes pursuant to any applicable law or regulation.
6. Section 280G Limitations. In the event that the compensation and other benefits
provided for in this Agreement (or otherwise payable to Executive under any other agreement with
Employer) (i) constitute “parachute payments” within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the “Code”), and (ii) but for the application of this Section,
would result in the Employer’s payment or payments to Executive of an “excess parachute payment”
within the meaning of Code Section 280G, then at the Employer’s sole option Executive’s total
compensation and benefits payable under this Agreement (and any other agreement between Executive
and the Employer) may be reduced by the amount necessary to cause the value of all compensation and
benefits payable to Executive to be $1.00 below the amount of payments that would cause any portion
of such payments to be classified as an “excess parachute payment” within the meaning of Code
Section 280G. Unless the Employer and Executive otherwise agree in writing, any determination
required under this Section shall be made in writing by the Employer’s independent public
accountants (the “Accountants”), whose determination shall be conclusive and binding upon the
Executive and the Employer for all purposes. For purposes of making the calculations required by
this Section, the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations concerning the application
of Code Sections 280G and 4999. The Employer and Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Employer shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section.
7. Section 409A Limitations. This Agreement is intended to comply with Section 409A of
the Internal Revenue Code of 1986, as amended, to the extent that section is applicable, and it
shall be interpreted in a manner that complies with such section to the fullest extent possible.
The Employer and Executive agree that the Employer at its sole option shall have the power to
adjust the timing or other details relating to the payments described in this Agreement if the
Employer determines that such adjustments are necessary in order to comply with or become exempt
from the requirements of Section 409A. The Employer and Executive further acknowledge that if
Executive is determined to be a “specified employee” as such term is defined in Section 409A upon
Executive’s Date of Termination, that certain payments to Executive under this Agreement may be
required to be postponed to comply with Section 409A. Thus, the Employer and Executive agree that,
in such event, any payments that are so postponed will be paid to Executive on the first day of the
calendar month following the end of the required postponement period.
8. 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 is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any action in any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
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9. Complete Agreement. Subject to any rights of Executive pursuant to applicable law,
applicable benefit plans and stock award agreements, this Agreement embodies the complete agreement
and understanding among the parties and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which may have related to
the subject matter hereof in any way.
10. No Strict Construction. The language in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no rule of strict
construction shall be applied against any party.
11. Counterparts. This Agreement may be executed in separate counterparts, each of
which is deemed to be an original and all of which taken together constitute one and the same
agreement.
12. Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive, the Company and their respective heirs, successors and
assigns including without limitation the Employer, except that Executive may not assign Executive’s
rights or delegate Executive’s duties or obligations hereunder without the prior written consent of
the Company and/or Employer. The Company shall require Employer to expressly assume and agree to
perform this Agreement.
13. Choice of Law. All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by, and construed in accordance
with, the laws of the State of Oklahoma, without giving effect to any choice of law or conflict of
law rules or provisions (whether of the State of Oklahoma or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of Oklahoma.
14. Arbitration; Legal Fees and Expenses. The parties agree that Executive’s
employment and this Agreement relate to interstate commerce, and that any disputes, claims or
controversies between Executive and the Employer which may arise out of or relate to the Executive
or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the
termination of this Agreement. Any arbitration shall be in accordance with the Rules of the
American Arbitration Association and undertaken pursuant to the Federal Arbitration Act.
Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another
location. The decision of the arbitrator(s) will be enforceable in any court of competent
jurisdiction. The parties agree that punitive damages shall not be awarded by the arbitrator(s)
unless such damages would have been awarded by a court of competent jurisdiction. If any contest or
dispute arises between the Employer and Executive regarding any provision of this Agreement, the
Employer shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive
in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable
following the final, non-appealable resolution of such contest or dispute to the extent the
Employer receives reasonable written evidence of such fees and expenses.
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15. Amendment and Waiver. The provisions of this Agreement may be amended or waived
with the prior written consent of the Employer and Executive, and no course of conduct or course of
dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of
this Agreement shall affect the validity, binding effect or enforceability of this Agreement or be
deemed to be an implied waiver of any provision of this Agreement.
16. Expiration. This Agreement shall expire on the third anniversary of the Date of
Agreement unless the Company and Executive agree in writing to extend it.
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the Date
of Agreement.
| XXXXXX COMMUNICATIONS CORPORATION |
||||
| /s/ Xxxxxx X. Xxxxxx | ||||
| By: Xxxxxx X. Xxxxxx | ||||
| Its: Chief Executive Officer and President | ||||
| EXECUTIVE |
||||
| /s/ Xxxxx X. XxXxxxx | ||||
| By: Xxxxx X. XxXxxxx | ||||
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