Exhibit 10.31
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This is the second amendment (the "Second Amended Agreement") to that certain
agreement (the "Agreement") dated as of the 25th day of April, 2002, between
Mpower Communications Corp., a Nevada corporation (the "Company") and S. Xxxxxxx
Xxxxxxxxx ("Executive"), and also an amendment to the first amended agreement
dated as of September 20, 2002 (the "First Amended Agreement").
The Company and Executive, for and in consideration of the promises, terms and
conditions contained herein, do hereby agree to make the following amendments to
the Agreement and First Amended Agreement.
1. Section 2 of the First Amended Agreement is amended as follows:
The phrase $300,000 is replaced with the phrase "$250,000", with the reduced
salary to commence on April 7, 2003.
2. Section 3 of the First Amended Agreement is amended by deleting subparagraph
(b) and adding the following:
"(b) Not later than March 18, 2003 or such later date as may be required by any
federal or state regulatory authority (the "Grant Date"), you shall be granted
stock options to purchase three shares of the Company's common stock for every
annualized dollar of salary reduction sustained pursuant to this Agreement (the
"New 2003 Options"). Subject to the requirements of any federal or state
regulatory authority, such New 2003 Options shall (i) have an exercise price
equal to $0.19 per share; (ii) vest in six equal installments commencing on
April 30, 2003 and on the last day of each month thereafter through September
30, 2003; (iii) have a term (the "Option Term") of ten years from the Grant
Date; (iv) remain exercisable, to the extent vested on the Termination Date, for
five years after the termination of your employment with the Company for any
reason, but in no event after the expiration of the Option Term; and (v) be
non-qualified options within the meaning of the Internal Revenue Code.
By way of example, if your salary is reduced by $10,000.00 annually pursuant to
this Agreement, you shall receive 30,000 options at an exercise price equal to
$0.19 per share, with those options vesting as follows: 5,000 on April 30, 2003
and 5,000 on May 31, June 30, July 31, August 31, and September 30, 2003.
(c) All of Executive's unexercised stock options as of the Effective Date, other
than the New 2003 Options (the "Existing Options") shall be amended so that they
remain exercisable, to the extent vested on the Termination Date, for five (5)
years after the termination of Executive's employment with the Company for any
reason, but in no event later than 10 years after the date they were granted."
3. Section 4.02 of the First Amended Agreement is hereby deleted in its
entirety, and replaced by the following:
Section 4.02 of the Agreement, from subsection (ii) through the end of the
paragraph, is amended to read as follows:
"(b) (ii) a severance benefit (the "SEVERANCE BENEFIT") equal to two times (a)
the higher of the Fixed Salary paid immediately preceding the Termination Date
or the Fixed Salary on March 17, 2003 and (b) the "HIGHEST BONUS", where the
Highest Bonus equals the greater of the Annual Bonus paid by the Company to you
(x) during the period from twelve (12) months immediately preceding the
Effective Date through the Termination Date, or (y) if your reduction in your
Fixed Salary is not restored in whole or part, the amount your Annual Bonus
would have been from the date of this Agreement through the Termination Date,
calculated as if all reductions had been restored, but only to the extent that
any such Annual Bonus paid during this period utilized the amount of your Fixed
Salary in calculating said Annual Bonus; provided, however, that you shall have
no right to have paid or payable from the Trust adopted by Company on October
23, 2001 pursuant to a Trust Agreement with HSBC Bank USA as trustee (the "OLD
TRUST"), any portion of your Severance Benefit (i) attributable to any increase
in your Fixed Salary after March 31, 2002, or (ii) otherwise in excess of the
Severance Benefit or other severance payment that you would have been eligible
to receive if your employment with the Company had terminated as of March 31,
2002 under circumstances entitling you to a Severance Benefit or other severance
payment. Payment of the Severance Benefit shall be contingent upon your
execution of a waiver and release of claims (a "RELEASE") in favor of the
Company and its affiliates and their respective employees and agents,
substantially in the form set forth in Appendix A. The
Severance Benefit shall be paid by the Company in a lump sum, no later than two
(2) business days after the expiration of the Revocation Period, as defined in
the Release."
4. Section 4 of the Agreement is amended, to add a new Section 4.08, to read as
follows:
"4.08. Parachute Payment Reduction. In the event that any amount or benefit
paid, distributed or otherwise provided to the Executive by the Company whether
pursuant to this Agreement or otherwise constitute a "parachute payment" within
the meaning of Section 280G (b)(2) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and the amount of the parachute payment, reduced by all
federal, state and local taxes applicable thereto, including the excise tax
imposed pursuant to Section 4999 of the Code, is less than the amount the
Executive would receive if the Executive were paid three times his base amount,"
as defined in Section 280G(b)(3) of the Code, less $1.00, reduced by all
federal, state and local taxes applicable thereto, then the aggregate of the
amounts constituting the parachute payment shall be reduced to an amount that
will equal three times the Executive's base amount less $1.00. The
determinations to be made with respect to this Section 4.08 shall be made, at
the Company's expense, by the accounting firm that is the Company's independent
accounting firm (the "ACCOUNTING FIRM"). If a determination is made by the
Accounting Firm that a reduction in the aggregate of all payments due to a
Executive is required by this Section 4.08, the Executive shall have the right
to specify the portion of such reduction, if any, that will be made under this
Agreement and each plan or program of the Company. If the Executive does not so
specify within 60 days following the date of a determination by the Accounting
Firm pursuant to the preceding sentence, the Company shall determine, in its
sole discretion, the portion of such reduction, if any to be made under this
Retention Plan and each plan or program of the Company."
5. Section 5 of the First Amended Agreement and Section 6 of the Agreement are
amended by deleting the "Good Reason" definition in its entirety and replacing
it as follows:
""GOOD REASON" shall mean the occurrence of any of the following events: (i) a
material adverse change in your title or duties in effect on the Effective Date;
(ii) a material reduction in your Fixed Salary or Annual Bonus opportunity in
effect on March 18, 2003; (iii) any resignation by you, for any reason,
occurring not earlier than 90 days or later than 270 days after a Change of
Control; and (iv) the relocation of your principal place of business to a
location that is more than 35 miles from your principal place of business on the
Effective Date."
6. You hereby agree to waive in all respects your entitlement to any Severance
Benefit on the ground that the reduction in your salary pursuant to this Second
Amended Agreement constitutes a material reduction in your Fixed Salary as it
existed prior to this Second Amended Agreement. However, any further material
reduction in the Fixed Salary in effect on March 18, 2003 shall, as set forth
above, be considered Good Reason for you to resign and become entitled to
Severance Benefits pursuant to your various employment agreements.
Except as amended by this Second Amended Agreement, all terms and condition of
the Agreement shall remain in full force and effect. Moreover, it is the
intention of the parties hereto that if this Second Amended Agreement is void,
becomes voidable, or otherwise is or becomes unenforceable as drafted, then the
Agreement and First Amended Agreement shall continue in full force and effect,
in accordance with the terms and conditions thereof immediately prior to the
execution of this Second Amended Agreement. This Second Amended Agreement may be
executed in any number of counterparts which together shall constitute one
instrument, shall be governed by and construed in accordance with the laws and
decisions of the State of New York applicable to contracts made and to be
performed therein without giving effect to the principles of conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this Second Amended
Agreement as of this 19th day of March, 2003.
MPOWER COMMUNICATIONS CORP.
By: /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx
Chairman and CEO
/s/ S. Xxxxxxx Xxxxxxxxx
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S. Xxxxxxx Xxxxxxxxx
