Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 18, 1996, by and between J. Xxxxxx Xxxxxxx
(the "Executive") and United USN, Inc., a Delaware corporation (the "Company")
and, as to Sections 5(c)(iii) and 5(c)(iv) hereof only, the current shareholders
of the Company listed on the signature pages hereof (the "Original
Shareholders").
WHEREAS, during the course of Executive's employment with the Company, the
Executive has performed outstanding services for the Company; and
WHEREAS, it is deemed by the Company to be in the best interests of the
Company to assure continuation of Executive's employment; and
WHEREAS, the Company and the Executive have determined to enter into this
Agreement pursuant to which the Company will continue to employ the Executive on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts such employment, on the terms and conditions
hereinafter set forth.
2. Term. This Agreement shall become effective on the date hereof (the
"Effective Date"). Unless earlier terminated as herein provided, the Executive's
employment with the Company hereunder shall commence at the Effective Date and
shall end on the last day of the "Term". For purposes of this Agreement, the
"Term" of this Agreement shall mean the full three-year term of the Agreement,
plus any extensions made as provided in this Section 2. On each anniversary of
the Effective Date, the Term shall automatically be extended for an additional
year unless, not later than ninety (90) days prior to any such anniversary, the
Company or the Executive shall have given notice not to extend the Term. For
purposes of this Agreement, the "Employment Period" (which
in no event shall extend beyond the Term) shall mean the period during which
Executive has an obligation to render services hereunder, as described in
Section 3 hereof, taking into account any Notice of Termination (as defined in
Section 6(e) hereof) which may be given by either the Company or the Executive.
Nothing in this Section shall limit the right of the Company or the Executive to
terminate the Executive's employment hereunder on the terms and conditions set
forth in Section 6 hereof.
3. Position and Duties. On and after the Effective Date, the Executive
shall serve as President and Chief Executive Officer of the Company and shall
have such additional duties and responsibilities as may be assigned to him by
the Board of Directors of the Company (the "Board"), provided that such duties
and responsibilities are consistent with the Executive's positions as President
and Chief Executive Officer of the Company. The Executive shall report to the
Board. The Executive agrees to devote substantially all his full working time,
attention and energies during normal business hours to the performance of his
duties for the Company, provided that the Executive may serve as a director on
the boards of such companies and organizations as may be agreed upon in writing
by the Board and the Executive.
4. Place of Performance and Related Expenses. The principal place of
employment and office of the Executive shall be in Chicago, Illinois or such
other location as may be agreed to in writing by the Executive. If the Executive
decides to relocate, or is required by the Company to relocate, to the Chicago
area (the "Relocation"), the Company shall reimburse the Executive for all
reasonable relocation expenses up to $50,000 (and any additional amount agreed
to by the Board) incurred with respect to the relocation of the Executive and
his family. The Company shall reimburse the Executive for all reasonable
commuting expenses until a Relocation occurs. The Company shall also reimburse
the Executive for all reasonable expenses which he may incur with respect to
temporary living quarters in the Chicago area until a Relocation occurs. If any
such relocation, commuting or living-quarters expenses are treated as taxable
income to the Executive, the Company shall make an additional payment to the
Executive which shall make him whole with respect to the imposition of any
Federal, state or local income tax on such taxable income.
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5. Compensation and Related Matters.
(a) Base Salary. As compensation for the performance by the
Executive of his duties hereunder, the Company shall pay the Executive an annual
base salary of One Hundred Ninety-five Thousand Dollars ($195,000) (such amount,
as it may be increased from time to time, is hereinafter referred to as "Base
Salary"). Base Salary shall be payable in accordance with the Company's normal
payroll practices, shall be reviewed annually and may be increased upon review
by the Board. Base Salary, once increased, shall not be decreased.
(b) Annual Bonus. The Executive shall be entitled to an annual
bonus (the "Annual Bonus") for each calendar year which ends within the
Employment Period, including, without limitation, the year in which this
Agreement is executed. Subject to meeting performance objectives established by
the Board and approval of the Annual Bonus by the Board, the Executive's Annual
Bonus shall be at least fifty percent (50%) of his then-current Base Salary. In
the discretion of the Board, or its designated committee, upon the attainment of
reasonable performance goals established by the Board (or such committee) in
good faith, the Annual Bonus paid for any year may exceed such percentage of
Base Salary. The Annual Bonus for each fiscal year which ends within the
Employment Period shall be paid as soon as practicable after the end of such
year, and no later than the thirtieth (30th) day immediately following the end
of such fiscal year. The percentage of Base Salary which determines the
Executive's Annual Bonus opportunity shall be reviewed by the Board annually and
may be increased upon review by the Board. Within the ten-(10)-day period
immediately following any Change in Control (as defined in Section 9 hereof),
the Company shall pay the Executive a lump sum amount equal to a pro rata
portion of the Annual Bonus for the year in which the Change in Control occurs,
calculated by multiplying the award that the Executive would have earned for the
entire year, assuming the achievement, at the target level, of any performance
goals established with respect to such award, by a fraction the numerator of
which shall be the number of days of employment in such year up to and including
the date of the Change in Control and the denominator of which shall be three-
hundred-sixty-five (365).
(c) Stock Options. The Executive shall be entitled to
participate, at a level appropriate to his
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positions with the Company, in any stock option plan or stock-based compensation
plan which the Company maintains from time to time. The Executive already holds
certain stock options ("Options") for shares of common stock of the Company
("Shares") under the Company's 1994 Stock Option Plan (the "1994 Plan"). The
Company agrees that it will take such actions as are necessary (including,
without limitation, amendment of the 1994 Plan and options outstanding
thereunder, subject to any required consents of participants therein) to assure
the following:
(i) All Options held by the Executive shall become fully vested and
exercisable and all restrictions upon any restricted Shares held by the
Executive will lapse immediately prior to a Change in Control;
(ii) During the Employment Period, if the Company shall at any time or from
time to time raise capital by selling shares of Company stock of any class,
the Executive shall have the right to purchase three and eight-tenths
percent (3.8%) of the shares which are being sold, upon the same terms and
conditions as such shares are being sold to others;
(iii) If one or more of the Original Shareholders (including, for purposes
of this Section 5(c)(iii), their respective successors) shall sell to any
Person (as defined in Section 9(b) hereof) any of their Shares in the
Company under circumstances such that the sale transaction creates a Change
in Control at a time (whether or not during the Employment Period) when the
Executive holds Options or owns any Shares as a result of the exercise of
any Option or otherwise, the Original Shareholders shall require such
Person to purchase, at the Executive's election, the same percentage of the
Executive's Shares (including any Shares acquired by the Executive pursuant
to exercise of an Option which has become fully vested and exercisable
immediately prior to the Change in Control and any Shares as to which
restrictions have lapsed immediately prior to the Change in Control) as the
percentage of the aggregate Shares of the Original Shareholders which is
being purchased; the purchase from the Executive shall be made on the same
terms and for the same consideration as the purchase from the Original
Shareholders;
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(iv) If one or more of the Original Shareholders (including, for purposes
of this Section 5(c)(iv), their respective successors) shall sell to any
Person Shares in the Company which constitute twenty percent (20%) of the
Shares outstanding on the date of such sale at a time (whether or not
during the Employment Period) when no equity securities of the Company are
listed and traded on a national securities exchange or on the Nasdaq
National Market and when the Executive holds Options or owns any Shares as
a result of the exercise of any Option or otherwise, the Original
Shareholders shall require the such Person to purchase, at the Executive's
election, the same percentage of the Executive's Shares as the percentage
of the aggregate Shares of the Original Shareholders which is being
purchased; the purchase from the Executive shall be made on the same terms
and for the same consideration as the purchase from the Original
Shareholders; and
(v) Upon the occurrence during the Employment Period of any event not
described in Sections 5(c)(ii) through 5(c)(iv) hereof which affects the
Shares in such a way that an adjustment of the Options is appropriate in
order to prevent dilution of the rights of the Executive under the Options
(including, without limitation, any dividend or other distribution (whether
in cash or in kind), recapitalization, stock split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase,
or share exchange, or other similar corporate transaction or event), the
Company shall make appropriate equitable adjustments, which may include,
without limitation, adjustments to any or all of the number and kind of
shares of stock of the Company (or other securities) which may thereafter
be issued in connection with future grants of options pursuant to this
Section 5(c) and which may thereafter be issued upon exercise of the then
outstanding Options and adjustments to the exercise prices of all such
Options.
(d) Expenses. The Company shall reimburse the Executive for all
reasonable business expenses, subject to the applicable and reasonable policies
and procedures of the Company in force from time to time.
(e) Services Furnished. The Company shall furnish the Executive
with appropriate office space
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and such other facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties as set forth in Section
3 hereof, such office space and other facilities and services to be furnished at
the location set forth in Section 4 hereof.
(f) Other Benefits. The Company shall provide to the Executive
such employee benefit and compensation plans and arrangements and fringe
benefits as are generally available to senior officers of the Company.
6. Termination. The Executive's employment hereunder may be terminated
as follows:
(a) Death. The Executive's employment shall terminate upon his
death. Upon such a termination, the Executive's estate or designated
beneficiary, as the case may be, shall become entitled to the payments provided
in Section 7(b) hereof.
(b) Disability. If, as a result of the Executive's incapacity due
to physical or mental illness (as determined by a medical doctor mutually agreed
to by the Executive or his legal representative and the Company), the Executive
shall have been absent from his duties hereunder on a full-time basis for either
one-hundred-eighty (180) consecutive days or for an aggregate two-hundred-ten
(210) days within a consecutive two-hundred-seventy (270) day period and, within
thirty (30) days after Notice of Termination is given, shall not have returned
to the performance of his duties hereunder on a full-time basis ("Disability"),
the Company may terminate the Executive's employment for Disability. Upon such a
termination, the Executive shall become entitled to the payments provided in
Section 7(b) hereof.
(c) Cause. The Company may terminate the Executive's employment
hereunder for "Cause" (as defined in this Section 6(c)). Upon such a
termination, the Executive shall become entitled to the payments provided in
Section 7(b) hereof. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon (i) the willful
(or grossly negligent) and continued failure by the Executive to substantially
perform his duties hereunder (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual
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or anticipated failure after the issuance of a "Notice of Termination" by the
Executive for "Good Reason", as defined in Section 6(d)(i) hereof, or during a
"Window Period", as defined in Section 6(d)(ii) hereof), after demand for
substantial performance is delivered by the Company that specifically identifies
the manner in which the Company believes the Executive has not substantially
performed his duties, (ii) the willful or grossly negligent engaging by the
Executive in misconduct, (iii) any breach by the Executive of any of the
provisions of Section 10 hereof, or (iv) the Executive's being convicted of, or
pleading guilty to, a felony. For purposes of this paragraph, no act, or failure
to act, on the Executive's part shall be considered "willful" unless done, or
omitted to be done, by him not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company. Further, unless
the Executive has been convicted of, or pleaded guilty to, a felony, the
Executive shall not be deemed to have been terminated for Cause without (1)
reasonable notice to the Executive setting forth the reasons for the Company's
intention to terminate for Cause, (2) an opportunity for the Executive, together
with his counsel, to be heard before the Board, and (3) delivery to the
Executive of a Notice of Termination from the Board finding that, in the good
faith opinion of a majority of the Board, the Executive was guilty of conduct
set forth above in clause (i), (ii) or (iii) of the second sentence of this
Section 6(c), and specifying the particulars thereof in reasonable detail.
(d) Termination by the Executive.
(i) The Executive may terminate his employment hereunder for
"Good Reason", which, for purposes of this Agreement, shall mean (A) assignment
of duties materially inconsistent with his status as President and Chief
Executive Officer, or substantial adverse alteration in responsibilities, which
assignment or alteration is not cured within thirty (30) days after notice from
the Executive; (B) any failure of the Company to pay any compensation to
Executive within thirty (30) days of the Executive's notice to Company that
payment is overdue; or (C) Company's breach of a material term or condition of
the Agreement, and failure to correct breach within thirty (30) days after the
Executive's notice thereof (specifying in reasonable detail the particulars of
such noncompliance). Upon a Good Reason termination,
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the Executive shall become entitled to the payments and benefits provided in
Section 7(c) hereof.
(ii) The Executive may terminate his employment hereunder
without Good Reason by giving a Notice of Termination during a "Window Period",
which, for purposes of this Agreement, shall mean the sixty-(60)-day period
beginning with the first day following the ninety-(90)-day period which
immediately follows a Change in Control. Upon a Window Period termination, the
Executive shall become entitled to the payments and benefits provided in Section
7(c) hereof.
(iii) The Executive may terminate his employment hereunder
without Good Reason and outside of a Window Period, upon giving three months
notice to the Company. In the event of such a termination, the Executive shall
comply with any reasonable request of the Company to assist in providing for an
orderly transition of authority, but such assistance shall not delay the
Executive's termination of employment longer than six months beyond the giving
of the Executive's Notice of Termination. Upon such a termination, the Executive
shall become entitled to the payments provided in Section 7(b) hereof.
(e) Notice of Termination. Any purported termination of the
Executive's employment (other than termination pursuant to Section 6(a) hereof)
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 15 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice that shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(f) Date of Termination. For purposes of this Agreement, "Date of
Termination" shall mean the following: (i) if the Executive's employment is
terminated by his death, the date of his death; (ii) if the Executive's
employment is terminated pursuant to Section 6(b) hereof, thirty (30) days after
the Notice of Termination is given; (iii) if the Executive's employment is
terminated pursuant to Section 6(c) hereof, the date specified in the Notice of
Termination; (iv) if the Executive's employment is terminated pursuant to
Section
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6(d)(i) or 6(d)(ii) hereof, thirty (30) days after the Notice of Termination is
given; and (v) if the Executive's employment is terminated pursuant to Section
6(d)(iii) hereof, the date determined in accordance with said Section.
(g) Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 6(g)), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier to occur of (i) the date on which the Term ends or (ii) the
date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by the final determination of a court of law, which
is not subject to appeal; provided, however, that the Date of Termination shall
be extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.
(h) Compensation During Dispute. If the Date of Termination is
extended in accordance with Section 6(g) hereof, the Company shall continue to
pay the Executive the full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, Base Salary and Annual
Bonus) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 6(g) hereof. Amounts paid under this
Section 6(h) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
7. Compensation During Disability or Upon Termination.
(a) Disability Period. During any period during the Term that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness ("Disability Period"), the Executive shall continue
to (i) receive his full Base Salary, (ii) remain eligible to receive an Annual
Bonus under Section 5(b) hereof, and (iii) participate in the plans
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and arrangements described in Section 5(f) hereof (except to the extent such
participation is not permitted under the terms of such plans and arrangements).
Such payments made to the Executive during the Disability Period shall be
reduced by the sum of the amounts, if any, payable to the Executive at or prior
to the time of any such payment under disability benefit plans of the Company or
under the Social Security disability insurance program, and which amounts were
not previously applied to reduce any such payment.
(b) Termination other than (x) by the Company without Cause, (y)
by the Executive with Good Reason, or (z) by the Executive during a Window
Period. If the Executive's employment hereunder is terminated other than (x) by
the Company without Cause, (y) by the Executive with Good Reason, or (z) by the
Executive during a Window Period, then:
(i) as soon as practicable after the Date of Termination,
the Company shall pay any amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination to the Executive
(or the Executive's estate or designated beneficiary, as the case may be);
and
(ii) the Company shall have no additional obligations to the
Executive (or the Executive's estate or designated beneficiary) under this
Agreement except to the extent provided in Sections 5(c) and 5(d) hereof or
otherwise provided in the applicable plans and programs of the Company.
(c) Termination (x) by Company without Cause, (y) by the
Executive with Good Reason or (z) by the Executive during a Window Period. If
the Executive's employment hereunder is terminated (x) by the Company without
Cause, (y) by the Executive with Good Reason, or (z) by the Executive during
Window Period, then:
(i) as soon as practicable after the Date of Termination,
the Company shall pay any amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination to the Executive;
(ii) notwithstanding any provision of any Annual Bonus plan
to the contrary, the Company shall pay to the Executive, as soon as
practica-
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ble after the Date of Termination, a lump sum amount, in cash, equal to the
sum of (A) any Annual Bonus which has been allocated or awarded to the
Executive for a completed fiscal year preceding the Date of Termination
under any Annual Bonus plan, and (B) a pro rata portion to the Date of
Termination of the Annual Bonus for the year in which the Date of
Termination occurs, calculated by multiplying the award that the Executive
would have earned for the entire year, assuming the achievement, at the
target level, of any performance goals established with respect to such
award, by a fraction the numerator of which shall be the number of days of
employment in such year up to and including the Date of Termination and the
denominator of which shall be three-hundred-sixty-five (365); provided,
however, that any amount otherwise payable pursuant to this clause (B) of
this Section 7(c)(ii) shall be reduced by any pro-rated Annual Bonus
payment already received by the Executive pursuant to Section 5(b) hereof
with respect to the year in which the Date of Termination occurs;
(iii) in lieu of any further salary or bonus payments to
the Executive for periods subsequent to the Date of Termination, the
Company shall pay as a severance payment to the Executive (in a lump sum
within the ten (10) days immediately following the Date of Termination) an
amount (the "Severance Amount") equal to one year's Base Salary at the
Executive's highest annual Base Salary rate in effect during the Employment
Period;
(iv) subject to the Executive's continuing compliance
with Section 11 hereof, the Company shall pay to the Executive an amount
equal to one year's Base Salary at the Executive's highest annual Base
Salary rate in effect during the Employment Period; such amount shall be
paid in substantially equal monthly or more frequent installments over the
two-year period immediately following the Date of Termination; such
installment payments shall cease upon any violation of Section 11 hereof;
(v) the Company shall maintain in full force and effect,
for the continued benefit of the Executive until the later of (x) the
second anniversary of the Date of Termination or (y) the end of the Term,
each "employee welfare benefit
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plan" (as defined in section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), other than any disability
plan, in which the Executive was entitled to participate immediately prior
to the Date of Termination, provided that the Executive's continued
participation is possible under the general terms and provisions of such
plans. In the event that the Executive's participation in any such plan is
barred, the Company shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would otherwise have
been entitled to receive under the plan from which his continued
participation is barred;
(vi) if the Date of Termination shall occur within the
two (2) years immediately following a Change in Control, then, in lieu of
Shares issuable upon exercise of the Executive's Options (which Options
shall be cancelled upon the making of the payment referred to below), the
Company shall pay the Executive a lump sum amount, in cash, equal to the
product of (1) the excess of (x) the higher of the "Fair Market Value" (as
defined in Section 7(d) hereof) of a Share on the Date of Termination or
the highest price per Share actually paid in connection with such Change in
Control over (y) the exercise price per Share of each such Option held by
the Executive (whether or not then fully exercisable), times (2) the number
of Shares covered by such Option;
(vii) if the Date of Termination shall occur within the
two (2) years immediately following a Change in Control, then, upon
surrender by the Executive of all Shares owned outright by him and all
rights which he may have to any restricted Shares, in payment for and in
lieu of all such Shares, the Company shall pay the Executive a lump sum
amount, in cash, equal to the product of (1) the higher of the Fair Market
Value of a Share on the Date of Termination or the highest price per Share
actually paid in connection with such Change in Control, times (2) the
number of all such Shares (whether or not restricted) of the Executive; and
(viii) the Company shall have no additional obligations to
the Executive under this Agreement except to the extent provided in
Sections
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5(c) and 5(d) hereof or otherwise provided in the applicable plans and
programs of the Company.
(d) Fair Market Value. For purposes of this Agreement, if the
Shares are publicly traded on any date for which the "Fair Market Value" of a
Share is required by this Agreement, the "Fair Market Value" shall be the
closing price of a Share on the date the Fair Market Value is to be determined,
or if no sale is reported for such date, then on the next preceding date for
which a sale is reported. If the Shares are not publicly traded on any date for
which the Fair Market Value of a Share is required by this Agreement, the Fair
Market Value shall be determined in accordance with the following procedure: The
Executive and the Company shall each select a nationally recognized appraiser,
which shall determine a value for a Share of the Company. If the higher of the
two original appraisal values is not more than ten percent (10%) above the lower
appraisal value, the Fair Market Value shall be the value agreed upon by the two
original appraisers or, in the absence of such an agreement, the Fair Market
Value shall be the average of the two original appraisal values. If the higher
of the two original appraisal values is more than ten percent (10%) above the
lower appraisal value, the two appraisers shall select a third nationally
recognized appraiser who shall determine a Fair Market Value which shall be at
least equal to the lower appraisal value and whose determination of the Fair
Market Value shall be final.
8. No Mitigation. The Executive shall not be required to mitigate
amounts payable pursuant to Section 7 hereof by seeking other employment or
otherwise, but any payments made or benefits provided pursuant to Section
7(c)(v) hereof shall be offset by any similar payments or benefits made
available without cost to the Executive from any subsequent employment during
the Term (determined immediately prior to such termination of employment).
9. Change in Control.
(a) For purposes of this Agreement, a "Change in Control" shall
be deemed to have occurred if an event set forth in any one of the following
paragraphs (i)-(iv) shall have occurred:
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(i) any Person (as defined in Section 9(b) hereof) is or
becomes the Beneficial Owner (as defined in Section 9(c) hereof), directly
or indirectly, of securities of the Company representing thirty-five
percent (35%) or more of the combined voting power of the Company's then
outstanding securities, excluding any Person who becomes such a Beneficial
Owner in connection with a transaction described in clause (x) of paragraph
(iii) below; or
(ii) prior to any initial public offering, the following
individuals cease for any reason to constitute a majority of the number of
directors then serving: individuals who, on the date hereof, constitute the
Board and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved
or recommended; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or the issuance of
voting securities of the Company in connection with a merger or
consolidation of the Company (or any direct or indirect subsidiary of the
Company) pursuant to applicable stock exchange requirements, other than (x)
a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting power of the
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (y) a merger
or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirect-
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ly, of securities of the Company representing thirty-five percent (35%) or
more of the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets.
Notwithstanding the foregoing, a "Change in 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
common stock 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.
(b) For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the Company
or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, or (v) any of the following entities or their
affiliates: BT Capital Partners, Inc., Chase Capital Partners, CIBC Wood Gundy
Ventures, Inc., Xxxxxxx Venture Partners IV and Enterprises &
Transcommunications, L.P.
(c) For purposes of this Agreement, "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.
10. Gross-Up Payment.
(a) Whether or not the Executive becomes entitled to the
Severance Amount, if any of the payments
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or benefits received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (such payments or benefits,
excluding the Gross-Up Payment, being hereinafter referred to as the "Total
Payments") will be subject to the Excise Tax, the Company shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment taxes and Excise
Tax upon the Gross-Up Payment, shall be equal to the Total Payments.
(b) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended from time to time (the "Code")) unless, in the opinion of tax counsel
("Tax Counsel") reasonably acceptable to the Executive and selected by the
accounting firm which was, immediately prior to the Change in Control, the
Company's independent auditor (the "Auditor"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of
the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance
with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income tax at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the
16
Date of Termination (or if there is no Date of Termination, then the date on
which the Gross-Up Payment is calculated for purposes of this Section 10), net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(c) In the event that the Excise Tax is finally determined to be
less than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, at the time that the amount
of such reduction in Excise Tax is finally determined, the portion of the Gross-
Up Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive
to the extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction) plus interest on the
amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total Payments.
(d) The payment provided in this Section 10 shall be made not
later than the tenth (10th) day following the Date of Termination; provided,
however, that if the amount of such payment cannot be finally determined on or
before such day, the Company shall pay to the Executive on such day an estimate,
as determined in accordance with this Section 10 of the minimum amount of such
payment to which the Executive is clearly entitled and shall pay the remainder
of such payment (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at 120%
of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the
17
thirtieth (30th) day after the Date of Termination. In the event that the amount
of the estimated payment exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company (together
with interest at 120% of the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 10, the Company
shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
11. Confidentiality, Noncompetition and Nonsolicitation.
(a) The Executive will not, during or after the Term, disclose
to any entity or person any information (including, but not limited to,
information about customers or about the design, manufacture or marketing of
products or services) which is treated as confidential by the Company and to
which the Executive gains access by reason of his position as an employee of the
Company.
(b) While the Executive continues to be an employee of the
Company and for the two-year period immediately following his Date of
Termination, the Executive shall not, within any geographic region of the United
States of America in which the Company then conducts business or in which the
Company plans to conduct business pursuant to a business strategy adopted by the
Board before the Executive's termination of employment, except as permitted by
the Company upon its prior written consent, (i) enter, directly or indirectly,
into the employ of, or render or engage in, directly or indirectly, any services
to any person, firm or corporation which directly competes with the Company with
respect to any business then conducted by the Company or any business which the
Company plans to enter pursuant to a business strategy adopted by the Board
before the Executive's termination of employment (a "Competitor"), or (ii)
become interested, directly or indirectly, in any such Competitor as an
individual, partner, shareholder, creditor, director, officer, principal, agent,
employee,
18
trustee, consultant, advisor or in any other relationship or capacity. The
ownership of up to one percent (1%) of any class of the outstanding securities
of any publicly traded corporation, even though such corporation may be a
Competitor, shall not be deemed as constituting an interest in such Competitor
which violates clause (ii) of the immediately preceding sentence.
(c) While the Executive continues to be an employee of the
Company and for the two-year period immediately following his Date of
Termination, the Executive shall not, except as permitted by the Company upon
its prior written consent, (i) attempt, directly or indirectly, to induce any
employee employed by or performing services for the Company (or its affiliates)
to be employed or perform services elsewhere, or (ii) solicit, directly or
indirectly, the customers of the Company (or its affiliates), the suppliers of
the Company (or its affiliates) or entities or individuals having other business
relationships with the Company (or its affiliates) for the purpose of
encouraging them to terminate (or reduce or detrimentally alter) their
respective relationships with the Company (or its affiliates).
(d) Any violation by the Executive of Section 11(a), 11(b) or
11(c) hereof occurring after the Date of Termination shall entitle the Company
to cease making any payments and providing any benefits otherwise required under
Section 7(c) hereof. Additionally, the Company shall have the right and remedy
to have the provisions of this Section 11 specifically enforced, including by
temporary and/or permanent injunction, it being acknowledged and agreed that any
such violation may cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
12. Independence and Severability of Section 11 Provisions. Each of
the rights and remedies enumerated in Section 11 hereof shall be independent of
the others and shall be severally enforceable and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity. If any of the
covenants contained in Section 11 hereof or if any of the rights or remedies
enumerated in Section 11 hereof, or any part of any of them, is hereafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants or rights or remedies which
19
shall be given full effect without regard to the invalid portions. If any of the
covenants contained in Section 11 is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the authority to reduce the
duration and/or area of such provision, and in its reduced form said provision
shall then be enforceable.
13. Indemnification. The Company shall indemnify the Executive to
the full extent authorized by law and the Charter and By-Laws of the Company, as
applicable, for all expenses, costs, liabilities and legal fees which the
Executive may incur in the discharge of his duties hereunder. The Executive
shall be insured under the Company's Directors' and Officers' Liability
Insurance Policy as in effect from time to time. Any termination of the
Executive's employment or of this Agreement shall have no effect on the
continuing operation of this Section 13.
14. Successors; Binding Agreement.
(a) The Company will require any purchaser of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 14 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's personal or
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 the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
20
15. Notices. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or received by facsimile or three
(3) days after mailing by United States certified mail, return receipt
requested, postage prepaid, addressed, if to the Executive, to the address
inserted below the Executive's signature on the final page hereof and, if to the
Company, to the address set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
United USN, Inc.
00 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Secretary
16. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of 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. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Illinois (without regard to its principles of conflicts of laws).
All references to sections of ERISA shall be deemed also to refer to any
successor provisions to such sections. Payments provided for hereunder shall be
paid net of any applicable withholding required under federal, state or local
law and any additional withholding to which the Executive has agreed. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect. Captions and Section headings in
this Agreement are provided merely for convenience and shall not affect the
interpretation of any of the provisions herein. The obligations of the Company
and the Executive
21
under this Agreement which by their nature may require either partial or total
performance after the expiration of the Term shall survive such expiration.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement supersedes, as of the Effective
Date, all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by the parties hereto in
respect of the subject matter contained herein; and any prior agreement of the
parties hereto in respect of the subject matter contained herein shall be
terminated and cancelled as of the Effective Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
UNITED USN, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
------------------------------
Name:
Title:
/s/ J. Xxxxxx Xxxxxxx
------------------------------
J. Xxxxxx Xxxxxxx
------------------------------
------------------------------
------------------------------
Address
Signed and agreed upon, as to
Sections 5(c)(iii) and 5(c)(iv) hereof only:
BT CAPITAL PARTNERS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
------------------------
Name:
Title:
22
CHASE CAPITAL PARTNERS
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
--------------------------------
Name:
Title:
CIBC WOOD GUNDY VENTURES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name:
Title:
XXXXXXX VENTURE PARTNERS IV
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Name:
Title:
ENTERPRISES & TRANSCOMMUNICATIONS, L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name:
Title:
/s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxxxxx
/s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx, Xx.
---------------------------------
Xxxxxx X. Xxxxxxx, Xx.
/s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxxx
23
/s/ Xxxx X. Xxxxxxxxx
--------------------------------
Xxxx X. Xxxxxxxxx
24
