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Exhibit 10.24
AGREEMENT
This Agreement, made as of the 30th day of December, 1997 by and between
TOLLGRADE COMMUNICATIONS, INC., a Pennsylvania corporation (the "Corporation")
and Xxxx X. Xxxxxxxx, an individual residing in the Commonwealth of Pennsylvania
and an employee of the Corporation (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors of the Corporation has determined that it is in
the best interests of the Corporation to enter into this Agreement with the
Executive to provide for compensation of the Executive upon termination of
employment under certain circumstances relating to a change in control of the
Corporation; and
WHEREAS, the Executive desires to obtain such benefits in the event the
Executive's employment is terminated under the circumstances provided herein.
NOW, THEREFORE, in consideration of the covenants and premises contained herein,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. DEFINITION OF TERMS. The following terms when used in this Agreement shall
have the meaning hereafter set forth:
"ANNUAL SALARY ADJUSTMENT PERCENTAGE" shall mean the mean average percentage
increase in base salary for all elected officers of the Corporation during the
two full calendar years immediately preceding the time to which such percentage
is being applied; provided however, that if after a Change-in-Control, as
hereinafter defined, there should be a significant change in the number of
elected officers of the Corporation or in the manner in which they are
compensated, then the foregoing definition shall be changed by substituting for
the phrase "elected officers of the Corporation" the phrase "persons then
performing the functions formerly performed by the elected officers of the
Corporation."
"CAUSE FOR TERMINATION" shall mean:
(a) the deliberate and intentional failure by the Executive to devote
substantially his entire business time and best efforts to the performance of
his duties (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or disability) after a demand for
substantial performance is delivered to the Executive by the Board of Directors
which specifically identifies the manner in which the Board of Directors
believes that the Executive has not substantially performed his duties,
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or
(b) wilfully engaging by the Executive in conduct which constitutes a fraud
against the Corporation or a material breach of this Agreement,
or
(c) the Executive's conviction of any crime which constitutes a felony.
For purposes of this definition, no act, or failure to act, on the Executive's
part shall be considered "deliberate and intentional" or "willfully" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that his action or omission was in the best interests of the
Corporation.
"CHANGE-IN-CONTROL" shall mean the determination (which may be made effective as
of a particular date specified by the Board of Directors of the Corporation) by
the Board of Directors of the Corporation, made by a majority vote that a change
in control has occurred, or is about to occur. Such a change shall not include,
however, a restructuring, reorganization, merger, or other change in
capitalization in which the Persons who own an interest in the Corporation on
the date hereof (the "Current Owners")(or any individual or entity which
receives from a Current Owner an interest in the Corporation through will or the
laws of descent and distribution) maintain more than a sixty-five percent (65%)
interest in the resultant entity. Regardless of the Board's vote or whether or
not the Board votes, a Change-in-Control will be deemed to have occurred as of
the first day any one (1) or more of the following subparagraphs shall have been
satisfied:
(a) Any Person (other than the Person in control of the Corporation as of the
date of this Agreement, or other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, or a corporation
owned directly or indirectly by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation), becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing more than thirty five percent (35%)
of the combined voting power of the Corporation's then outstanding securities;
or
(b) The stockholders of the Corporation approve:
(i) A plan of complete liquidation of the Corporation;
(ii) An agreement for the sale or disposition of all or substantially all of the
Corporation's assets; or
(iii) A merger, consolidation, or reorganization of the Corporation with or
involving any other corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least sixty-five percent (65%) of the combined voting power
of the voting securities of the Corporation (or such
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surviving entity) outstanding immediately after such merger, consolidation, or
reorganization.
However, in no event shall a Change in Control be deemed to have occurred, with
respect to the Executive, if the Executive is part of a purchasing group which
consummates the Change-in-Control transaction. The Executive shall be deemed
"part of the purchasing group" for purposes of the preceding sentence if the
Executive is an equity participant or has agreed to become an equity participant
in the purchasing company or group (except for (i) passive ownership of less
than five percent (5%) of the voting securities of the purchasing company; or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise deemed not to be significant, as determined prior to the
Change-in-Control by a majority of the non-employee continuing Directors of the
Board of Directors of the Corporation).
"DATE OF TERMINATION" shall mean:
(a) if the Executive's employment is terminated for Disability, the date that a
Notice of Termination is given to the Executive;
(b) if the Executive terminates due to his death or Retirement, the date of
death or Retirement, respectively;
(c) if the Executive decides to terminate employment upon Good Reason for
Termination, the date following such decision specified by the Corporation after
it has been notified of the Executive's decision to terminate employment; or
(d) if the Executive's employment is terminated for any other reason, the date
on which such termination becomes effective pursuant to a Notice of Termination.
"DISABILITY" shall mean such incapacity due to physical or mental illness or
injury as causes the Executive to be unable to perform his duties with the
Corporation during 180 consecutive days.
"GOOD REASON FOR TERMINATION" shall mean the occurrence of:
(a) without the Executive's express written consent, the assignment to the
Executive of any duties materially and substantially inconsistent with his
positions, duties, responsibilities and status with the Corporation immediately
prior to a Change-in-Control, or a material change in his reporting
responsibilities, titles or offices as in effect immediately prior to a
Change-in-Control, or any removal of the Executive from or any failure to
re-elect the Executive to any of such positions, except in connection with the
termination of the Executive's employment due to Cause for Termination,
Disability or Retirement (as hereinafter defined) or as a result of the
Executive's death;
(b) (i) a reduction by the Corporation prior to a Change-in-Control in the
Executive's base salary unless such reduction is the result of the Board of
Directors of the Corporation determining that the Executive has not adequately
discharged his duties;
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(ii) a reduction by the Corporation after a Change-in-Control in the Executive's
base salary as in effect immediately prior to any Change-in-Control or a failure
by the Corporation after a Change-in-Control to increase the Executive's base
salary by the Annual Salary Adjustment Percentage;
(c) a failure by the Corporation to continue to provide incentive compensation
comparable to that provided by the Corporation immediately prior to any
Change-in-Control;
(d) a failure by the Corporation after a Change-in-Control to continue in effect
any benefit or compensation plan, stock option plan, pension plan, life
insurance plan, health and accident plan or disability plan in which the
Executive is participating immediately prior thereto (provided, however, that
there shall not be deemed to be any such failure if the Corporation substitutes
for the discontinued plan, a plan providing the Executive with substantially
similar benefits) or the taking of any action by the Corporation which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any of such plans or deprive the Executive of any
material fringe benefit enjoyed by the Executive immediately prior to a
Change-in-Control (provided, however, that any act or failure to act by the
Corporation that is on a plan-wide basis, i.e., it similarly affects all
employees of the Corporation or all employees eligible to participate in any
such plan, as the case may be, shall not constitute Good Reason for
Termination);
(e) the failure of the Corporation to obtain the assumption of this Agreement by
any successor as contemplated in SECTION 10(c) hereof;
(f) any purported termination of the employment of the Executive by the
Corporation which is not (i) due to the Executive's Disability, Retirement (as
hereinafter defined) or Cause for Termination, or (ii) effected as a Notice of
Termination, as defined herein; or
(g) the Corporation's requiring the Executive to be based anywhere other than
the Corporation's executive offices at which the Executive has his principal
office immediately prior to a Change-in-Control or executive offices located
within 50 miles of the location of the Corporation's executive offices
immediately prior to a Change-in-Control, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's present business travel obligations.
"NOTICE OF TERMINATION" shall mean a written statement which sets forth the
specific reason for termination and, if such is claimed to be a Cause for
Termination or Good Reason for Termination, in reasonable detail the facts and
circumstances which indicate that such is Cause for Termination or Good Reason
for Termination.
"OPTIONS" shall mean any stock options issued pursuant to any present or future
stock option plan of the Corporation.
"PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the
Securities Exchange Act of 1934, as in effect on the date hereof and used in
Sections 13(d) and 14(d) thereof, including a "group" as defined in Section
13(d) thereof.
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"RETIREMENT" shall mean the termination of the Executive's employment after age
65 or in accordance with any mandatory retirement arrangement with respect to an
earlier age agreed to by the Executive.
"STOCK APPRECIATION RIGHT" shall mean any stock appreciation rights issued
pursuant to any stock option plan of the Corporation or any future stock
appreciation rights plan.
2. TERMS OF EMPLOYMENT. The Executive acknowledges that this Agreement does not
constitute an employment contract and that the Executive's employment
relationship with the Corporation is at-will and not for any particular period.
Rather, this Agreement is only intended to set forth certain liquidated damages
to be paid in the event of termination of the Executive upon the terms and
conditions specified herein.
3.TERM OF AGREEMENT. The initial term of this Agreement shall be for a period of
four (4) years. Upon expiration of the initial term, the Company shall, in its
sole discretion, determine whether this Agreement shall be renewed upon such
terms it deems advisable.
4. PAYMENTS FOLLOWING TERMINATION OF EMPLOYMENT UPON A CHANGE-IN-CONTROL.
(a) If the Executive's employment with the Corporation shall be terminated:
(i) due to the Executive's death,
(ii) by the Executive other than the Executive's having terminated for Good
Reason for Termination following a Change-in-Control, or
(iii) by the Corporation due to Cause for Termination or for Disability or
Retirement, then the Corporation shall have no obligations to the Executive
other than to pay the Executive any unpaid portion of base salary due until the
Date of Termination and any other sums due in accordance with the then various
policies, practices and benefit plans of the Corporation.
(b) If the Executive's employment with the Corporation shall have terminated
during the period commencing six months prior to the date of a Change-in-Control
and ending on the third anniversary of a Change-in-Control other than in the
circumstances described in subsection (a) above, then the Corporation shall pay
on or before the fifth day following the Date of Termination (or if the Date of
Termination preceded the date of the Change-in-Control, on or before the fifth
day following the date of the Change-in-Control), to the Executive the following
sums:
(i) in cash any unpaid portion of the Executive's full base salary for the
period from the last period for which the Executive was paid to the
Date of Termination, or the date of the Change-in-Control,
as the case may be; and
(ii) an amount in cash as liquidated damages for lost future renumeration equal
to the product obtained by multiplying
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(A) the lesser of
(1) two, or
(2) a number equal to the number of calendar months remaining from the Date of
Termination to the date on which the Executive is 65 years of age (or, if
earlier, the age agreed to by the Executive pursuant to any prior arrangement)
divided by twelve, or
(3) a number equal to the greater of (i) one (1.0) and (ii) thirty six (36) less
the number of completed months commencing after the date of the
Change-in-Control during which the Executive was employed by the Corporation and
did not have Good Reason for Termination times (iii) one-twelfth (1/12)
times
(B) the sum of
(1) the greater of
(i) the Executive's annual base salary for the year in effect on the Date of
Termination (provided that in the case of Termination for Good Reason by the
Executive the date immediately preceding the date of the earliest event which
gave rise to the Termination for Good Reason by the Executive shall be used
instead of the Date of Termination)
or
(ii) the Executive's annual base salary for the year in effect on the date of
the Change-in-Control;
plus
(2) the greater of
(i) the average annual cash award received by the Executive as incentive
compensation or bonus for one calendar year immediately preceding the Date of
Termination (provided that in the case of Termination for Good Reason by the
Executive the date immediately preceding the date of the event which gave rise
to the Termination for Good Reason by the Executive shall be used instead of the
Date of Termination)
or
(ii) the average annual cash award received by the Executive as incentive
compensation or bonus for one calendar year immediately preceding the date of
the Change-in-Control.
5.OUTPLACEMENT SERVICES. If the Executive's employment with the Corporation
should terminate under circumstances as to entitle the Executive to receive
payment hereunder, the Corporation shall reimburse
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the Executive for any reasonable fees or other costs incurred by the Executive
during the two (2) years following the Date of Termination in retaining
executive placement agencies, up to a maximum dollar amount not to exceed
fifteen percent (15%) of the Executive's base salary at the time of such
termination. Such reimbursement shall be made within five (5) days following the
Executive's presentment of bills or other evidence of the costs incurred with
executive placement agencies.
0.XXX IMPLICATIONS. If any payment due to the Executive pursuant to this
Agreement result in a tax being imposed on the Executive pursuant to Section
4999 of the Internal Revenue Code of 1954, as amended, or any successor
provision ("Section 4999"), then the Corporation shall, at the Executive's
option, either (i) reduce the total payments payable to the Executive to the
maximum amount payable without incurring the Section 4999 tax, or (ii) pay to
the Executive the total amount payable, with the understanding that Section 4999
tax will be due on that total amount.
7.BENEFITS. If the Executive's employment with the Corporation should terminate
under circumstances as to entitle the Executive to receive payment hereunder,
the Executive shall also be deemed, for purposes of medical insurance, pension
and other benefits of the Corporation, to have remained in the continuous
employment of the Corporation for the two (2) year period following the Date of
Termination and shall be entitled to all of the medical insurance, pension or
other benefits provided by the Corporation as if the Executive had so remained
in the employment of the Corporation. If, for any reason, whether by law or
provisions of the Corporation's employee medical insurance, pension or other
benefit plans, or otherwise any benefits which the Executive would be entitled
to under this SECTION 6 cannot be paid pursuant to such employee benefit plans,
then the Corporation contractually agrees to pay the Executive the difference
between the benefits which the Executive would have received in accordance with
this Section if the relevant employee medical insurance, pension or other
benefit plan could have paid such benefit and the amount of benefits, if any,
actually paid by such employee medical insurance, pension or other benefit plan.
The Corporation shall not be required to fund its obligation to pay the
foregoing difference.
8.OTHER EMPLOYMENT. In the event of termination under the circumstances
contemplated in SECTION 4(b) hereunder, the Executive shall have no duty to seek
any other employment after termination of his employment with the Corporation
and the Corporation hereby waives and agrees not to raise or use any defense
based upon the position that the Executive had a duty to mitigate or reduce the
amounts due him hereunder by seeking other employment whether suitable or
unsuitable and should the Executive obtain other employment, then the only
effect of such on the obligations of the Corporation shall be that the
Corporation shall be entitled to credit against any payments that would
otherwise be made pursuant to SECTION 7 hereof, any comparable payments to which
the executive is entitled under the employee benefit plans maintained by the
Executive's other employer or employers in connection with services to such
employer or employers after termination of this employment with the Corporation.
9.STOCK APPRECIATION RIGHTS AND OPTIONS. If the Executive's employment should
terminate under circumstances as to entitle the Executive to receive payment
hereunder, then with respect to any standing Stock Appreciation Rights and/or
Options which did not immediately become exercisable upon the occurrence of a
Change-in-Control, such Stock Appreciation Right or Option shall be
automatically
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vested and remain outstanding in accordance with its terms and be exercisable
thereafter until the stated expiration date of such Stock Appreciation Right or
Option.
10.MISCELLANEOUS.
(a)This Agreement shall be construed under the laws of the Commonwealth of
Pennsylvania.
(b)This Agreement constitutes the entire understanding of the parties hereto
with respect to the subject matter hereof and may only be amended or modified by
written agreement signed by the parties hereto.
(c)The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner required of the Corporation and to perform it as if
no such succession had taken place. As used in this Agreement, "Corporation"
shall mean the Corporation as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this subsection (c) or which otherwise becomes bound by all of
the terms and provisions of this Agreement by operation of law.
(d)This Agreement shall inure to the benefit of and be enforceable by the
Executive and the Corporation and their respective legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
his devisee, legatee or other designee or, if there be no such designee, to his
estate.
(e)Any notice or other communication provided for in this Agreement shall be in
writing and, unless otherwise expressly stated herein, shall be deemed to have
been duly given if mailed by United States registered mail, return receipt
requested, postage prepaid, addressed in the case of the Executive to his office
at the Corporation with a copy to his residence and in the case of the
Corporation to its principal executive offices, attention to the Chief Executive
Officer.
(f)No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing signed by the
Executive and approved by resolution of the Board of Directors of the
Corporation. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(g)The invalidity or unenforceability of any provisions of this Agreement shall
not affect the validity or unenforceability of any other provision of this
Agreement, which shall remain in full force and effect. If any provision hereof
shall be deemed invalid or unenforceable, either in whole or in part, this
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Agreement shall be deemed amended to delete or modify, as necessary, the
offending provision and to alter the bounds thereof in order to render it valid
and enforceable.
(h)This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which taken together will
constitute one and the same instrument.
(i)If litigation should be brought to enforce, interpret or challenge any
provision contained herein, the prevailing party shall be entitled to its
reasonable attorney's fees and disbursements and other costs incurred in such
litigation and, if a money judgment be rendered in favor of the Executive, to
interest on any such money judgment obtained calculated at the prime rate of
interest in effect from time to time at Mellon Bank, N.A., from the date that
the payment should have been made or damages incurred under this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed on the date first above
written.
ATTEST: TOLLGRADE COMMUNICATIONS, INC.
/s/ XXXX X. XXXXX By: /s/ XXXXXXXXX X. XXXXXXX
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WITNESS:
/s/ XXXX X. XXXXX /s/ XXXX X. XXXXXXXX
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Xxxx X. Xxxxxxxx
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