EXHIBIT 10 (k)
LETTER AGREEMENT
Roseville Communications Company
X.X. Xxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
January 16, 2001
Xxxx X. Xxxxxxx
Vice President - Marketing
Roseville Telephone Company
X.X. Xxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Dear Phil:
Roseville Communications Company (the "Company") considers it essential to
the best interests of the Company and its shareholders to xxxxxx the continued
employment of key management personnel in a period of uncertainty regarding the
Company's future in light of the consolidation in the telecommunications
industry. In this connection, the Board of Directors of the Company (the
"Board") recognizes that the possibility of a change in control exists and that
such possibility, and the uncertainty and questions which it necessarily raises
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders when their
undivided attention and commitment to the best interests of the Company and its
shareholders are particularly important.
Accordingly, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including you, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Section 2 hereof, the Company
agrees that you shall receive the benefits set forth in this letter agreement
("Agreement") in the event of a "change in control of the Company" and a
"constructive termination" (each as defined in Section 2 hereof) under the
circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and
shall continue in effect through December 31, 2001; provided, however, that
commencing on January 1, 2001 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than by November 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; provided, further, that
following a change in control of the Company (as hereinafter defined) the term
of this Agreement shall automatically extend to the date which is two (2) years
following such change in control.
2. Change in Control and Constructive Termination. No benefits shall be
payable hereunder unless there shall have been a change in control of the
Company and thereafter a constructive termination, as set forth below. For
purposes of this Agreement, a "change in control of the Company" shall be deemed
to have occurred if (A) any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing Twenty percent (20%) or
more of the combined voting power of the Company's then outstanding voting
securities; (B) there is a merger or consolidation of the Company in which the
Company does not survive as an independent public company; or (C) the business
or businesses of the Company for which your services are principally performed
are disposed of by the Company pursuant to a partial or complete liquidation of
the Company, a sale of assets (including stock of a subsidiary) of the Company,
or otherwise. For purposes of this Agreement, "constructive termination" shall
mean a change in control of the company, as well as, and as a direct result
thereof, (i) a decrease in the total amount of your base salary below its level
in effect on the date hereof or as the same may be increased from time to time,
or a decrease in the bonus percentage to which you are entitled, without your
consent, provided, however, nothing herein shall be construed to guarantee your
bonus award if performance is below target, or (ii) a reduction in the
importance of your job responsibilities without your consent, with the
determination of whether a reduction in job responsibility has taken place to be
in your discretion or, (iii) your geographical relocation without your consent.
Absent written consent, after a change in control of the Company, no action or
inaction by you within ninety (90) days following the occurrence of the events
described in (i), (ii) or (iii) hereof shall be deemed consent to such events.
3. Compensation Following Change of Control and Constructive Termination.
Subject to the terms and conditions of this Agreement, following a change in
control of the Company and constructive termination, as defined in Section 2,
the Company shall pay you a lump sum payment, within ten (10) days after the
constructive termination, in the amount equal to the sum of:
(A) The sum of your then effective annual base salary through the
termination date and any accrued vacation pay, plus
(B) two times the sum of (I) your full annual base salary on the date of
the constructive termination, plus (II) the greater of your target bonus or the
most recent annual bonus paid to you.
In addition, the Company shall continue to provide to you and your family
at the Company's expense, for twenty-four (24) months following the change in
control and the constructive termination, the life insurance, medical, dental
and other benefits provided to you and your family immediately prior to the
change in control and constructive termination. The Company also shall pay to
you all legal fees and expenses incurred by you in seeking to obtain or enforce
any right or benefit provided by this Agreement. You shall not be required to
mitigate the amount of any payment provided for in this Section 3 by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 3 be reduced by any compensation earned by you as
the result of employment by another employer or by retirement benefits after the
date of termination, or otherwise.
4. Certain Additional Payments by the Company.
(i) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for your benefit (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or any corresponding provisions of
state or local tax laws, or any interest or penalties are incurred by you with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
you shall be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after your payment of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(ii) Subject to the provisions of Section 4(iii), all determinations
required to be made under this Section 4, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by you
(the "Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and you within 15 business days of the receipt of notice
from you that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change of control, you
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 4, shall be paid by the Company to you within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and you. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4(iii) and you thereafter are required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for your benefit.
(iii) You shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten business days after you are informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. You shall not pay such claim prior to
the expiration of the 30-day period following the date on which you give such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies you
in writing prior to the expiration of such period that it desires to contest
such claim, you shall:
(A) give the Company any information reasonably requested by the Company
relating to such claim,
(B) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(C) cooperate with the Company in good faith in order effectively to
contest such claim, and
(D) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold you harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 4(iii), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct you to pay the tax claimed and xxx for a refund or contest the claim in
any permissible manner, and you agree to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs you to pay such claim
and xxx for a refund, the Company shall advance the amount of such payment to
you, on an interest-free basis and shall indemnify and hold you harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for your taxable year with respect to which such contested amount is claimed to
be due is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and you shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(iv) If, after your receipt of an amount advanced by the Company pursuant
to Section 4(iii), you become entitled to receive any refund with respect to
such claim, you shall (subject to the Company's complying with the requirements
of Section 4(iii)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after your receipt of an amount advanced by the Company pursuant
to Section 4(iii), a determination is made that you shall not be entitled to any
refund with respect to such claim and the Company does not notify you in writing
of its intent to contest such denial of refund prior to the expiration of 30
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
5. Successors; Binding Agreement.
(i) The Company will require any successor (whether direct or indirect, by
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly agree to perform this Agreement.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same amount and on the
same terms as you would be entitled hereunder following a change in control of
the Company and constructive termination, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date on which you become entitled to such
compensation from the Company. 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 assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee or other designee or, if there is no such designee, to
your estate.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of a change of address shall be effective only upon receipt.
7. 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 you 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 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 expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California.
8. Validity. 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.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Supercedes Prior Agreements. The Company and you agree that this
Agreement supercedes all prior agreements, whether written or oral, relating to
the subject matter of this Agreement including, without limitation, any prior
letter agreements relating to payments in the event of a change in control of
the Company, or any provisions of any letters of offer of employment with the
Company."
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely yours,
ROSEVILLE COMMUNICATIONS COMPANY
By ___________________________
Xxxxxx X. Xxxxx
Chairman
AGREED TO this _____ day
of ________________, 2001.
_______________________________
Xxxx X. Xxxxxxx
