AGREEMENT REGARDING COMPENSATION ON CHANGE OF CONTROL (As Amended and Restated)
COMPENSATION
ON CHANGE OF CONTROL
(As
Amended and Restated)
This
Agreement was initially made and entered into on the 17 day of August, 2004
(the
“Effective Date”), by and between PAC-WEST TELECOMM, INC., a California
corporation, (the “Company”) and Xxxxxxx Xxxx, (“Executive”) who is employed by
the Company at will as its Vice President Customer Network Services. This
Agreement is being amended and restated in its entirety effective this 30 day
of
August, 2006.
WHEREAS,
the
Board of Directors of Company (the “Board”) deem it to be in the best interests
of the Company that the possibility of a future Change of Control (as
hereinafter defined) exists and that the potential, or the occurrence of a
Change of Control can result in significant distraction of key personnel because
of the corporate and personal uncertainties inherent in such a situation;
and
WHEREAS,
the
Board has determined that it is of paramount importance and in the best
interests of the Company and its shareholders to retain the services of
Executive in the event of the imminence, or occurrence, of a Change of Control
and to ensure Executive’s continued dedication and efforts in such event without
undue distraction or concern for his or her personal financial and employment
security; and
WHEREAS,
in
order to assure that Executive remains in the employ of the Company or any
Employer (as hereinafter defined), particularly in the event of a threat, or
the
occurrence, of a Change of Control, the Board desires that the Company enter
into this agreement (the “Agreement”) with Executive to provide Executive with
certain benefits in the event of termination of Executive’s employment within a
period beginning nine (9) months before and ending twelve (12) months following
a Change in Control;
NOW,
THEREFORE,
it is
agreed as follows:
1. Term
of Agreement.
This
Agreement is effective as of the Effective Date and shall remain in force and
effect until the first anniversary of a Change of Control; provided, however,
that the Company shall in all events remain liable to provide any amounts or
benefits to which Executive became entitled hereunder prior to such
anniversary.
2. Definitions.
For the
purposes of this Agreement, the following definitions shall apply:
(a) “Base
Salary”
shall
mean the highest annual base salary paid to Executive between the Effective
Date
and the Termination Date (as hereinafter defined).
(b) “Cause”
shall
mean the termination of Executive due to:
(i) Executive’s
theft or embezzlement, or attempted theft or embezzlement, of money or property
of the Company or any of its affiliates, Executive’s perpetration or attempted
perpetration of fraud, or Executive’s participation in a fraud or attempted
fraud, on the Company or any of its affiliates or Executive’s unauthorized
appropriation of, or Executive’s attempt to misappropriate, any tangible or
intangible assets or property of the Company or any of its
affiliates;
(ii) Executive’s
conviction or commission of a felony or conviction for any crime involving
acts
which tend to insult or offend community moral standards or public decency
or
that materially and adversely affect the reputation or business activities
of
the Company or its affiliates;
(iii) Executive’s
substance abuse, including abuse of alcohol or use of illegal narcotics, or
other illegal drugs or substances, for which Executive fails to undertake and
maintain treatment within fifteen (15) days after requested by the Company;
or
(iv) Executive’s
refusal to carry out any lawful instructions of the Chief Executive Officer
or
the Board of Directors that are consistent with a reasonable, legitimate
business purpose following receipt of written notice of such instructions from
the Chief Executive Officer.
(c) “Change
of Control”
shall
mean any of the following transactions:
(i) The
consummation of a consolidation or merger of the Company in which the Company
is
not the surviving entity, or pursuant to which the shares of the Company’s
common voting equity are to be converted to cash, securities or other property,
other than any such merger or consolidation in which the shareholders of the
Company prior to such merger or consolidation own at least 50% of the voting
equity of the successor entity following such merger or consolidation. For
the
purposes of this Agreement, a consolidation or merger with a corporation which
was a wholly-owned direct or indirect subsidiary of the Company immediately
before the consolidation or merger is not a Change of Control;
(ii) The
sale,
lease, exchange or other transfer (in one transaction or a series of
transactions) of all or substantially all of the Company’s assets, other than a
sale or exchange in which the acquiring party is an affiliate of the Company
in
which at least 51%of the voting equity is held (directly or indirectly) by
the
shareholders of the Company; or
(iii) Any
person, as that term is used in Section 13(d) and 14(d) of the Exchange Act
(other than the Company, any trustee or other fiduciary holding securities
of
the Company under an employee benefit plan of the Company, a direct or indirect
wholly owned subsidiary of the Company or any other company owned, directly
or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of the Company’s common voting equity), is or
becomes the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly of 50% or more of the Company’s (or a
successor’s) then outstanding common voting equity.
(d) “COBRA”
shall
mean the Consolidated Omnibus Reconciliation Act of 1985, as
amended.
(e) “Demoted”
shall
mean circumstances in which the any of the following events or conditions take
place without the written consent of Executive:
(i) Executive’s
Base Salary is reduced from its then current level; or
(ii) A
significant diminution in Executive’s title, duties or
responsibilities.
(f) “Employer”
shall
mean the Company, or any parent, subsidiary, or affiliate of the Company (as
defined pursuant to sections 414(b) or 414(c) of the Internal Revenue Code,
as
amended) or successor thereto, for which Executive performs services or is
employed, from time to time.
(g) “Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended.
(h) “Termination
Date”
shall
mean the effective date of any voluntary or involuntary termination of
Executive’s employment.
3. Compensation
on Change of Control.
In the
event that Executive is Demoted or the employment of Executive is involuntarily
terminated by the Company or its successor without Cause at any time during
the
twenty-one (21) month period beginning nine (9) months prior to the effective
date of a Change of Control and ending twelve (12) months after the effective
date of a Change of Control (the “Applicable Period”), Executive shall be
entitled to receive (i) a lump sum payment equal to 150% of Executive’s Base
Salary; and (ii) payment (or reimbursement to the extent necessary) by the
Company of twelve (12) months of COBRA coverage premiums for the continuation
of
medical and dental and vision coverage on Executive, Executive’s spouse and
dependents, to the extent elected by Executive and subject to Executive’s
continued eligibility for such COBRA coverage, with all such payments subject
to
applicable income and employment tax withholding obligations. In the event
that
Executive is Demoted or the employment of Executive is involuntarily terminated
by the Company without Cause within nine (9) months prior to the effective
date
of a Change of Control, the payments described above shall be made at the time
of the Change of Control. In the event that Executive is Demoted or the
employment of Executive is involuntarily terminated by the Company or its
successor without Cause within twelve (12) months after the effective date
of a
Change of Control, the payments described above shall be made at the time
Executive is Demoted or the employment of Executive is involuntarily terminated
without Cause.
Notwithstanding
the foregoing, the Company shall have the authority to delay any payments made
pursuant to this Section 3 to the extent it deems necessary or appropriate
to comply with Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986,
as
amended (the “Code”) (relating to payments made to certain “key employees” of
certain publicly-traded companies); in such event, any payments to which
Executive would otherwise be entitled during the six (6) month period following
the Termination Date will be paid on the first business day following the
expiration of such six (6) month period.
4. Limitations.
No
benefits shall be paid to Executive in the event of termination for cause,
retirement, or voluntary resignation, except in the case of either a voluntary
resignation and\or retirement following Demotion of Executive during the
Applicable Period.
5. Joint
and Several Liability.
Each
entity included in the definition of “Employer” and any successors or assigns
shall be jointly and severally liable with the Company under this
Agreement.
6. Section 280G
Parachute Payments.
(a) In
the
event that the payments and other benefits provided to Executive pursuant to
this Agreement and any other agreement, benefit, plan, or policy of the Company
(i) constitute “parachute payments” within the meaning of Section 280G of
the Code and (ii) but for this Section 6, such payments and benefits
would be subject to the excise tax imposed by Section 4999 of the Code,
then Executive’s payments and other benefits under this Agreement and any other
agreement, benefit, plan, or policy of the Company shall be payable either:
(a) in full; or (b) as to such lesser amount which would result in no
portion of such payments and other benefits being subject to excise tax under
Section 4999 of the Code, whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and the excise
tax
imposed by Section 4999, results in the receipt by Executive on an after-tax
basis, of the greatest amount of payments and other benefits under this
Agreement and any other agreement, benefit, plan, or policy of the Company.
(b) Any
determination required under this Section 6 shall be made in writing by the
Company’s independent public accountants (the “Accountants”), whose
determination shall be conclusive and binding upon Executive and the Company
for
all purposes. For purposes of making the calculations required by this
Section 6, the Accountants shall make reasonable assumptions and
approximations concerning applicable taxes and shall rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999
of the Code. The Company and Executive shall furnish to the Accountants such
information and documents as the Accountants shall reasonably request in order
to make a determination under this Section 6. The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 6.
7. Governing
Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of California without giving effect to the conflict of law
principles thereof.
8. Successors
and Assigns.
This
Agreement shall be binding upon and shall inure to the benefit of the Company,
its successors and assigns, and the Company shall require any successor or
assign to expressly assume and agree to perform the obligations of Company
hereunder to the same extent that Company would be obligated to perform if
no
such succession or assignment had taken place assuming the existence of a Change
of Control. The term Company as used herein shall include such successors and
assigns. The terms “successors and assigns” as used herein shall mean a
corporation or other entity acquiring all of the stock or all or substantially
all of the assets and business of the Company whether by operation of law or
otherwise.
9. Entire
Agreement\Severability.
This
Agreement constitutes the entire agreement between Company and Executive with
respect to the matters covered and supersedes all prior agreements with respect
thereto, including, but not limited to, the Agreement Regarding Compensation
on
Change of Control between Company and Executive, dated August 17, 2004. The
individual provisions of this Agreement shall be deemed severable, and the
invalidity or unenforceability of any provision hereof shall not affect the
validity or enforceability of the other provisions hereof.
Notwithstanding
the foregoing, Executive acknowledges that the Company, in the exercise of
its
sole discretion and without the consent of Executive, may amend or modify this
Agreement in any manner and delay the payment of any severance or other benefits
payable pursuant to this Agreement to the minimum extent necessary to meet
the
requirements of Section 409A of the Code as amplified by any Internal
Revenue Service or U.S. Treasury Department guidance as the Company deems
appropriate or advisable.
10. Attorneys
Fees.
In any
action or proceeding to enforce or interpret the provisions of this Agreement,
the prevailing party shall be entitled to recover its attorney fees and costs
including attorney fees and costs associated with any mediation, arbitration,
court trial or proceedings and including fees and costs on appeal.
COMPANY: EXECUTIVE:
PAC-WEST
TELECOMM, INC.
By:
/s/
Xxxxx Xxxxxxxxx /s/
Xxxxxxx
Xxxx