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Exhibit 10-1
EXECUTIVE SEVERANCE AGREEMENT
This AGREEMENT ("Agreement") dated June 4, 1998, by and between GTE
Service Corporation, a New York corporation (the "Company"), and <> (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company recognizes the valuable services that the
Executive has rendered thereto and desires to be assured that the Executive
will continue to attend to the business and affairs of the Company without
regard to any potential or actual change in control of GTE Corporation, a New
York corporation and the Company's sole shareholder ("GTE"); and
WHEREAS, the Executive is willing to continue to serve the
Company, but desires assurance that he will not be materially disadvantaged by
a change in control of GTE;
NOW, THEREFORE, in consideration of the Executive's continued
service to the Company and the mutual agreements herein contained, the Company
and the Executive hereby agree as follows:
ARTICLE I
ELIGIBILITY FOR BENEFITS
Section 1.1. Qualifying Termination. Except as provided
in Section 2.6 hereof, the Company shall not be required to provide any
benefits to the Executive pursuant to this Agreement unless a Qualifying
Termination occurs before the Agreement expires in accordance with Section 6.1
hereof. For purposes of this Agreement, a Qualifying Termination shall occur
only if
(a) a Change in Control occurs, and
(b) (i) within two years after the Change in Control, the
Company terminates the Executive's employment other than for Cause; or
(ii)(A) within two years after the Change in Control,
a Good Reason arises, and (B) the Executive terminates employment with the
Company within (I) six months after the Good Reason arises or (II) two years
after the Change in Control, whichever occurs later; provided, that a
Qualifying Termination
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shall not occur if the Executive's employment with the Company terminates by
reason of the Executive's Retirement, Disability, or death. A Qualifying
Termination may occur even though the Executive retires from employment with the
Company other than by reason of Retirement or Disability.
Section 1.2. Change in Control. Except as provided below,
a Change in Control shall be deemed to occur when and only when the first of
the following events occurs:
(a) an acquisition (other than directly from GTE) of
securities of GTE by any Person, immediately after which such Person, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of securities of GTE representing 20 percent or more of the Voting Power
or such lower percentage of the Voting Power that, from time to time, would
cause the Person to constitute an "Acquiring Person" (as such term is defined
in the Rights Plan); provided that, in determining whether a Change in Control
has occurred, the acquisition of securities of GTE in a Non-Control Acquisition
shall not constitute an acquisition that would cause a Change in Control; or
(b) three or more directors, whose election or nomination
for election is not approved by a majority of the members of the "Incumbent
Board" (as defined below) then serving as members of the Board, are elected
within any single 12-month period to serve on the Board; provided that an
individual whose election or nomination for election is approved as a result of
either an actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Securities Exchange Act of 1934, as amended from time to
time) or other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board (a "Proxy Contest"), including by
reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest, shall be deemed not to have been approved by a majority of the
Incumbent Board for purposes hereof; or
(c) members of the Incumbent Board cease for any reason
to constitute at least a majority of the Board; "Incumbent Board" shall mean
individuals who, as of the close of business on June 4, 1998, are members of
the Board; provided that, if the election, or nomination for election by GTE's
shareholders, of any new director was approved by a vote of at least
three-quarters of the Incumbent Board, such new director shall, for purposes of
this Agreement, be considered as a member of the Incumbent Board; provided
further that no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of either an actual or
threatened Election Contest or other actual or threatened Proxy Contest,
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(d) approval by shareholders of GTE of:
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(i) a merger, consolidation, or reorganization
involving GTE, unless
(A) the shareholders of GTE, immediately
before the merger, consolidation, or reorganization, own, directly or
indirectly immediately following such merger, consolidation, or reorganization,
at least 50 percent of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger, consolidation, or
reorganization (the "Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities immediately before such
merger, consolidation, or reorganization;
(B) individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at least a majority
of the board of directors of the Surviving Corporation; and
(C) no Person (other than GTE or any
subsidiary of GTE, any employee benefit plan (or any trust forming a part
thereof) maintained by GTE, the Surviving Corporation, or any subsidiary of
GTE, or any Person who, immediately prior to such merger, consolidation, or
reorganization, had Beneficial Ownership of securities representing 20 percent
(or such lower percentage the acquisition of which would cause a Change in
Control pursuant to paragraph (a) of this definition of "Change in Control") or
more of the Voting Power) has Beneficial Ownership of securities representing
20 percent (or such lower percentage the acquisition of which would cause a
Change in Control pursuant to paragraph (a) of this definition of "Change in
Control") or more of the combined Voting Power of the Surviving Corporation's
then outstanding voting securities;
(ii) a complete liquidation or dissolution of GTE;
or
(iii) an agreement for the sale or other
disposition of all or substantially all of the assets of GTE to any Person
(other than a transfer to a subsidiary of GTE).
For purposes of this Section, the following terms shall have
the definitions set forth below:
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended from time to time.
"Board" means the Board of Directors of GTE.
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"Non-Control Acquisition" means an acquisition by (1) an
employee benefit plan (or a trust forming a part thereof) maintained by GTE or
any of its subsidiaries, (2) GTE or any of its subsidiaries, or (3) any Person
in connection with a "Non-Control Transaction."
"Non-Control Transaction" means a transaction described in
clauses (A) through (C) of paragraph (d)(i) of the definition of "Change in
Control" herein.
"Person" shall mean any individual, firm, corporation,
partnership, joint venture, association, trust, or other entity; and a Person
shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially
own," any securities:
(x) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
(y) which such Person or any of such Person's Affiliates
or Associates has (i) the right or obligation to acquire (whether such right or
obligation is exercisable or effective immediately or only after the passage of
time) pursuant to any agreement, arrangement, or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights, rights
(other than the rights granted pursuant to the Rights Plan), warrants or
options, or otherwise; provided that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," securities tendered pursuant
to a tender or exchange offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (ii) the right to vote pursuant to any agreement,
arrangement, or understanding (whether or not in writing); provided that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
any security under this clause (y) if the agreement, arrangement, or
understanding to vote such security (A) arises solely from a revocable proxy
given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the Securities
Exchange Act of 1934, as amended from time to time, and (B) is not also then
reportable by such person on Schedule 13D under the Securities Exchange Act of
1934, as amended from time to time (or any comparable or successor report); or
(z) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement, or understanding (whether or not in writing), or with which such
Person or any of such Person's Affiliates or Associates have otherwise formed a
group for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in clause (ii)(A) of subparagraph (y), above), or
disposing of any securities of GTE.
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"Rights Plan" means the Rights Agreement, dated as of December
7, 1989, between GTE and The First National Bank of Boston (as successor Rights
Agent to State Street Bank and Trust Company), as it may be amended from time
to time, or any successor thereto.
"Voting Power" means the voting power of all securities of GTE
then outstanding generally entitled to vote for the election of directors of
GTE.
Section 1.3. Termination for Cause. The Company shall
have Cause to terminate the Executive for purposes of Section 1.1 hereof only
if the Executive (a) engages in unlawful acts intended to result in the
substantial personal enrichment of the Executive at the Company's expense, or
(b) engages (except by reason of incapacity due to illness or injury) in a
material violation of his responsibilities to the Company that results in a
material injury to the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to him a Notice of Termination, consisting of a copy
of a resolution duly adopted by the affirmative vote of not less than three
quarters of the entire membership of GTE's Board of Directors at a duly held
meeting of the Board of Directors (with reasonable notice to the Executive and
an opportunity for the Executive, together with counsel, to be heard before the
Board of Directors), finding that the Executive has engaged in the conduct set
forth above in this Section 1.3 and specifying the particulars thereof in
detail. GTE's Board of Directors may not delegate or assign its duties under
this Section 1.3.
Section 1.4. Termination for Good Reason. The Executive
shall have a Good Reason for terminating employment with the Company only if
one or more of the following occurs after a Change in Control:
(a) a change in the Executive's status or position(s)
with the Company that, in the Executive's reasonable judgment, represents a
demotion from the Executive's status or position(s) in effect immediately
before the Change in Control;
(b) the assignment to the Executive of any duties or
responsibilities that, in the Executive's reasonable judgment, are inconsistent
with the Executive's status or position(s) in effect immediately before the
Change in Control;
(c) layoff or involuntary termination of the Executive's
employment, except in connection with the termination of the Executive's
employment for Cause or as a result of the Executive's Retirement, Disability,
or death;
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(d) a reduction by the Company in the Executive's total
compensation (which shall be deemed, for this purpose, to be equal to his base
salary plus the greater of (i) the most recent award that he has earned under
the GTE Corporation Executive Incentive Plan, as amended from time to time, or
any successor thereto (the "EIP"), or (ii) an EIP award equal to the
Executive's Average Percentage of the annual value (i.e., the dollar amount) of
the normal payment under the EIP for the Executive's salary level (such annual
value and normal payment being those that are in effect under the EIP
immediately before the date on which the Change in Control occurs for the
Executive's salary level immediately before the date on which the Change in
Control occurs). For purposes of this paragraph (d), the Executive's "Average
Percentage" means the average of the Executive's Annual Percentages for the
Determination Years. For purposes of this paragraph (d), the Executive's
"Annual Percentage" for each Determination Year means a fraction (expressed as
a percentage), the numerator of which is the EIP award earned by the Executive
for such Determination Year, and the denominator of which is the annual value
of the normal payment under the EIP for the Executive's salary level (such
annual value and normal payment being those that were in effect under the EIP
for such Determination Year for the Executive's salary level for such
Determination Year). For purposes of this paragraph (d), a "Determination
Year" means each of the last three EIP plan years ending before the date on
which the Change in Control occurs (or, if less, the number of those three plan
years during which the Executive was a participant in the EIP);
(e) a material increase in the Executive's
responsibilities or duties without a commensurate increase in total
compensation;
(f) the failure by the Company to continue in effect any
Plan in which the Executive is participating at the time of the Change in
Control (or plans or arrangements providing the Executive with substantially
equivalent benefits) other than as a result of the normal expiration of any
such Plan in accordance with its terms as in effect at the time of the Change
in Control;
(g) any action or inaction by the Company that would
adversely affect the Executive's continued participation in any Plan on at
least as favorable a basis as was the case on the date of the Change in
Control, or that would materially reduce the Executive's benefits in the future
under the Plan or deprive him of any material benefits that he enjoyed at the
time of the Change in Control, except to the extent that such action or
inaction by the Company is required by the terms of the Plan as in effect
immediately before the Change in Control, or is necessary to comply with
applicable law or to preserve the qualification of the Plan under section
401(a) of the Internal Revenue Code of 1986, as amended from time to time or
any successor thereto (the "Code") and except to the extent that the Company
provides the Executive with substantially equivalent benefits;
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(h) the Company's failure to provide and credit the
Executive with the number of days of paid vacation, holiday, or leave to which
he is then entitled in accordance with the Company's normal vacation, holiday,
or leave policy in effect immediately before the Change in Control;
(i) the imposition of any requirement that the Executive
be based anywhere other than within 50 miles of where his principal office was
located immediately before the Change in Control;
(j) a material increase in the frequency or duration of
the Executive's business travel;
(k) the Company's failure to obtain the express
assumption of this Agreement by any successor to the Company as provided by
Section 6.3 hereof;
(l) any attempt by the Company to terminate the
Executive's employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 1.3 hereof or that does not afford the
Executive the procedural protections prescribed by that Section; or
(m) any violation by the Company of any agreement
(including this Agreement) between it and the Executive. Notwithstanding the
foregoing, no action by the Company shall give rise to a Good Reason if it
results from the Executive's termination for Cause, Retirement, or death, and
no action by the Company specified in paragraphs (a) through (d) of the
preceding sentence shall give rise to a Good Reason if it results from the
Executive's Disability. A Good Reason shall not be deemed to be waived by
reason of the Executive's continued employment as long as the termination of
the Executive's employment occurs within the time prescribed by Section
1.1(b)(ii)(B) hereof. For purposes of this Section 1.4, "Plan" means any
compensation plan, such as an incentive, stock option, or restricted stock
plan, or any employee benefit plan, such as a thrift, pension, profit-sharing,
stock bonus, long-term performance award, medical, disability, accident, or
life insurance plan, or a relocation plan or policy, or any other plan, program
or policy of the Company that is intended to benefit employees.
Section 1.5. Retirement. For purposes of this Agreement,
"Retirement" shall mean the Executive's termination of employment upon or after
attaining age 65.
Section 1.6. Disability. For purposes of this Agreement,
"Disability" shall mean an illness or injury that prevents the Executive from
performing his duties (as they existed immediately before the illness or
injury) on a full-time basis for six consecutive months.
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Section 1.7. Notice. If a Change in Control occurs, the
Company shall notify the Executive of the occurrence of the Change in Control
within two weeks after the Change in Control.
ARTICLE II
BENEFITS AFTER A QUALIFYING TERMINATION
Section 2.1. Basic Severance Payment.
(a) If the Executive incurs a Qualifying Termination, the
Company shall pay to the Executive a cash amount equal to 200% of the Base
Amount. The Base Amount shall be an amount equal to the greater of
(A) the sum of (I) the Executive's base annual
salary immediately before the Change in Control plus (II) the Executive's
Average Percentage of the annual value (i.e., the dollar amount) of the normal
payment under the EIP for the Executive's salary level (such annual value and
normal payment being those that are in effect under the EIP immediately before
the date on which the Change in Control occurs for the Executive's salary level
immediately before the date on which the Change in Control occurs). For
purposes of this paragraph (A), the Executive's "Average Percentage" means the
average of the Executive's Annual Percentages for the Determination Years. For
purposes of this paragraph (A), the Executive's "Annual Percentage" for each
Determination Year means a fraction (expressed as a percentage), the numerator
of which is the EIP award earned by the Executive for such Determination Year,
and the denominator of which is the annual value of the normal payment under
the EIP for the Executive's salary level (such annual value and normal payment
being those that were in effect under the EIP for such Determination Year for
the Executive's salary level for such Determination Year). For purposes of
this paragraph (A), a "Determination Year" means each of the last three EIP
plan years ending before the date on which the Change in Control occurs (or, if
less, the number of those three plan years during which the Executive was a
participant in the EIP); or
(B) the sum of (I) the Executive's base annual
salary immediately before the Qualifying Termination plus (II) the Executive's
Average Percentage of the annual value (i.e., the dollar amount) of the normal
payment under the EIP for the Executive's salary level (such annual value and
normal payment being those that are in effect under the EIP immediately before
the date on which the Qualifying Termination occurs for the Executive's salary
level immediately before the date on which the Qualifying Termination occurs).
For purposes of this paragraph (B), the Executive's "Average Percentage" means
the average of the Executive's Annual Percentages for the Determination Years.
For purposes of this paragraph (B), the Executive's "Annual Percentage" for
each
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Determination Year means a fraction (expressed as a percentage), the numerator
of which is the EIP award earned by the Executive for such Determination Year,
and the denominator of which is the annual value of the normal payment under
the EIP for the Executive's salary level (such annual value and normal payment
being those that were in effect under the EIP for such Determination Year for
the Executive's salary level for such Determination Year). For purposes of
this paragraph (B), a "Determination Year" means each of the last three EIP
plan years ending before the date on which the Qualifying Termination occurs
(or, if less, the number of those three plan years during which the Executive
was a participant in the EIP).
(b) The Company shall make the payment to the Executive
pursuant to subsection (a) of this Section 2.1 in a lump sum within 30 days of
the Qualifying Termination.
Section 2.2. Insurance. If the Executive incurs a
Qualifying Termination, the Company shall provide the Executive, at the
Company's expense, for a period beginning on the date of the Qualifying
Termination, the same medical insurance and life insurance coverage as was in
effect immediately before the Change in Control (or, if greater, as in effect
immediately before the Qualifying Termination occurs). Such coverage shall end
upon the expiration of 24 months after the Qualifying Termination. For
purposes of this Section 2.2, "at the Company's expense" means that the Company
shall make all contributions or premium payments required to obtain coverage,
and that the Executive shall not make any such contributions or premium
payments, but that the Executive shall be subject to any deductibles and
co-payment provisions in effect immediately before the Change in Control (or,
if applicable, immediately before the Qualifying Termination). Except to the
extent otherwise required by law, the period of coverage for any health care
continuation coverage required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, shall begin on the date of the
Executive's Qualifying Termination.
Section 2.3. Outplacement Counseling. If the Executive
incurs a Qualifying Termination, the Company shall make available to the
Executive, at the Company's expense, outplacement counseling that is at least
equivalent to the outplacement counseling that the Company provided to its
terminated senior executives during the most recent year that ended before the
Change in Control occurred and during which the Company provided outplacement
counseling to its terminated senior executives. Subject to the foregoing, the
Executive may select the organization that will provide the outplacement
counseling; provided, that this sentence shall not require the Company to
provide the Executive with outplacement counseling that is more costly to the
Company than the outplacement counseling that this Section 2.3 otherwise
requires the Company to provide to the Executive.
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Section 2.4. Financial Counseling. If the Executive
incurs a Qualifying Termination, the Company shall, within 30 days of the
Qualifying Termination, make available to the Executive three individual
financial counseling sessions, of at least two hours each and at times and
locations that are convenient to the Executive, with a nationally recognized
financial counseling firm. At the financial counseling sessions, the financial
counseling firm shall provide the Executive with detailed financial advice that
is tailored to the Executive's particular personal and financial situation.
The Company shall specify to the Executive the information regarding his
personal and financial situation that he must provide to the financial
counseling firm in order for the firm to provide the counseling services
required by this Section 2.4. The Company shall take all reasonable and
appropriate measures to assure that the financial counseling firm preserves the
confidentiality of all information conveyed by the Executive to the counseling
firm.
Section 2.5. Benefit Credit. If the Executive incurs a
Qualifying Termination,
(a) the Executive shall receive service credit, for the
purpose of receiving benefits and for vesting, retirement eligibility, benefit
accrual, and all other purposes, under all employee benefit plans sponsored by
the Company (including, but not limited to, health, life insurance, pension,
savings, stock, and stock ownership plans, but excluding the Company's
short-term and long-term disability plans) in which he participated immediately
before the Change in Control, for 24 months;
(b) for purposes of determining the Executive's benefits
under all defined benefit pension plans maintained by the Company, including
the GTE Excess Pension Plan and the GTE Supplemental Executive Retirement Plan
(collectively "SERP"), the Executive's compensation shall include the amount
payable to the Executive pursuant to Section 2.1 hereof, and for purposes of
this subsection (b), the Executive shall be deemed to have received such amount
in monthly installments, each equal to 1/24th of the amount payable to the
Executive pursuant to Section 2.1 hereof; and
(c) the Executive shall be considered to have not less
than 76 points and 15 years of Accredited Service for purposes of determining
(i) his eligibility for early retirement benefits under the Company's defined
benefit pension plans (including, but not limited to, the SERP), and (ii) his
eligibility for benefits under the GTE Executive Retired Life Insurance Plan
(or any predecessor or successor thereto). [Note: This sentence superseded by
the following provisions for Xxxxxxx X. Xxxxx.]
[Applicable to Xxxxxxx X. Xxxxx ONLY:
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(c) if the Executive has not completed at least 10 years
of service for purposes of determining whether he has a nonforfeitable interest
in his accrued benefit under a funded define benefit pension plan maintained by
the Company in which he participated immediately before the Change in Control,
then in addition to any service credit that the Executive receives pursuant to
Section 2.5(a) hereof, the Executive shall receive credit for each year of
service with which he is otherwise credited (without regard to Section 2.5(a)
hereof) for vesting, retirement eligibility, benefit accrual, and all other
purposes under the plan, under the SERP, and under the GTE Executive Retired
Life Insurance Plan (or any predecessor or successor thereto) in accordance
with the following table:
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Years of Service Otherwise Credited Service Credited
Without Regard to Section 2.5(a) Pursuant to this Section 2.5(c)
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5 or less 2 times years of service otherwise credited
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more than 5, but not more than 10 10 years of service
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more than 10 years of service otherwise credited
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(d) the Executive shall be considered to have not less
than 76 points and 15 years of Accredited Service for purposes of determining
(i) his eligibility for early retirement benefits under the Company's defined
benefit pension plans (including, but not limited to, the SERP), and (ii) his
eligibility for benefits under the GTE Executive Retired Life Insurance Plan
(or any predecessor or successor thereto) and for purposes of determining his
eligibility under the Company's post retirement medical benefits plan (as in
effect immediately prior to the Change in Control).]
Notwithstanding the service credit granted under subsection (a) of this Section
2.5 and the compensation recognized under subsection (b) of this Section 2.5,
nothing in this Section 2.5 shall prevent the Executive from receiving any
benefits to which the Executive is entitled under any defined benefit or
defined contribution pension plan maintained by the Company, including the SERP
(as such benefits are modified by this Agreement) in any form permitted by such
plans (including but not limited to a lump-sum distribution) immediately
following the Executive's Qualifying Termination. To the extent that the
Company's tax-qualified retirement plans cannot provide the benefits specified
by this Section 2.5 without jeopardizing the tax qualification of such plans,
the Company shall provide such benefits under the SERP. [Applicable to Xxxxxxx
X. Xxxxx ONLY: and, in the case of GTE's post retirement medical plan as
specified in Section 2.5(d), if the benefit cannot be provided on a tax-free
basis, the Company shall provide such benefit on a basis
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that avoids an adverse income tax effect upon the Executive (for example, by
purchasing third party insurance).]
Section 2.6. Certain Additional Payments by the Company.
(a) Except as provided in Section 2.6(f) hereof, if any
payment or distribution by the Company to or for the benefit of the Executive,
whether pursuant to the terms of this Agreement or otherwise (a "Payment"), is
subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive 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"), the Company shall
make an additional payment (a "Gross-Up Payment") to the Executive in an amount
such that, after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any federal, state, or local income and employment taxes and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed on the Payment.
(b) Subject to the provisions of Section 2.6(c) hereof,
all determinations under this Section 2.6, including whether a Gross-Up Payment
is required and the amount of the Gross-Up Payment, shall be made by the
Company's certified public accounting firm immediately before the Change in
Control occurs (the "Accounting Firm"), which shall provide detailed supporting
calculations to both the Company and the Executive within 15 business days
after the Change in Control (or any other change in ownership or effective
control that triggers application of the Excise Tax) and, if a Qualifying
Termination occurs, within 15 days after the Qualifying Termination. All fees
and expenses of the Accounting Firm shall be borne solely by the Company. The
initial Gross-Up Payment determined pursuant to this Section 2.6(b) shall be
paid by the Company to the Executive within five days after it receives the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal tax return will not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm shall be binding
on the Company and the Executive. Notwithstanding the foregoing, as a result
of uncertainty in applying Section 4999 of the Code, it is possible that the
Company will not have made Gross-Up Payments that it should have made hereunder
(an "Underpayment"). If the Company exhausts its remedies pursuant to Section
2.6(c) hereof and the Executive thereafter is required to pay any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment, inform the
Company and the Executive of the Underpayment in writing, and, within five days
of receiving such written report, the Company shall pay the amount of such
Underpayment to or for the benefit of the Executive.
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(c) The Executive 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 the
Executive is 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. The Executive shall not pay such claim before the expiration of 30 days
following the date on which he gives 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 the Executive in writing before
the expiration of such 30-day period that it desires to contest such claim, the
Executive shall (i) give the Company any information reasonably requested by
the Company relating to such claim, and (ii) 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 selected by the
Company; provided, that the Company shall pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any tax, including interest and penalties, imposed as a result of
such representation and payment of costs and expenses. The Company shall
control all proceedings in connection with such contest and may, at its sole
option, either direct the Executive to pay the tax claimed and xxx for a refund
or to contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any appropriate administrative
tribunal or court, as the Company shall determine; provided, that if the
Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any tax, including interest or penalties, imposed with
respect to such advance. 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 the Executive shall be entitled to settle or contest any other issue.
(d) If, after the Executive receives an advance by the
Company pursuant to Section 2.6(c) hereof, the Executive becomes entitled to
receive a refund claimed pursuant to such Section 2.6(c), the Executive shall
(subject to the Company's complying with the requirements of such Section
2.6(c)) promptly pay to the Company the amount of such refund (together with
any interest thereon, after taxes applicable thereto). If, after the Executive
receives an amount advanced by the Company pursuant to Section 2.6(c) hereof, a
determination is made that the Executive shall not be entitled to any refund
claimed pursuant to such Section 2.6(c), and the Company does not notify the
Executive in writing of its intent to contest such denial of refund before the
expiration of 30 days after such
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determination, the Executive shall not be required to repay such advance, and
the amount of such advance shall offset, to the extent thereof, the amount of
the required Gross-Up Payment.
(e) Any payments otherwise required by this Section 2.6
shall be made regardless of whether a Qualifying Termination occurs.
(f) If the Executive Compensation and Organizational
Structure Committee of the Board (or any successor thereto) determines in its
sole discretion that (i) consummation of a transaction may be contingent upon
the parties' ability to use pooling of interest accounting and (ii) a provision
of this Section would preclude the use of pooling of interest accounting, said
Committee may, in its sole discretion, eliminate or modify that provision to
the extent required to allow pooling of interest accounting; provided that said
Committee may not take any action pursuant to this Section 2.6(f) after a
Change in Control.
Section 2.7. Stock Options and Stock Appreciation Rights.
If the Executive incurs a Qualifying Termination, the Executive may exercise
any then outstanding stock options and stock appreciation rights under the GTE
Long-Term Incentive Plan (or any successor thereto) for a period of at least
two years following the date of such Qualifying Termination (but not beyond the
maximum term of the option or stock appreciation right specified by the terms
of the stock option or stock appreciation right).
Section 2.8. Nonduplication. [Applicable to Xxxxxxx X.
Xxxxx ONLY: (a)] Nothing in this Agreement shall require the Company to make
any payment or to provide any benefit or service credit that GTE, the Company,
or any affiliate of either of them (the "GTE Group") is required to provide
with respect to the Executive under any other contract, agreement, policy,
plan, or arrangement, including a separation policy or employment agreement
("Other Agreement"). In order to accomplish the foregoing, if the GTE Group is
required, under any Other Agreement, to make any payment or to provide any
benefit or service credit that also is required to be made or to be provided
under this Agreement, the payment, benefit, or service credit required by this
Agreement shall be reduced by the payment, benefit, or service credit that the
GTE Group is required to make or to provide with respect to the Executive under
the Other Agreement.
[Applicable to Xxxxxxx X. Xxxxx ONLY:
(b) Subsection (a) shall not apply to the benefits provided in
accordance with the second and third sentences of the paragraph entitled
"Pension Agreement" of the letter agreement, dated October 20, 1994, executed
by Xxxxxxx X. Xxx and Xxxxxxx X. Xxxxx, providing for a life annuity pension of
$200,000 per year and the continuation of that annuity to the Executive's wife
after the Executive's death.]
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ARTICLE III
EFFECT ON INVOLUNTARY SEPARATION POLICY
Section 3.1. Involuntary Separation Policy. Nothing in
this Agreement shall cause the Executive to be deprived of any benefits to
which the Executive is entitled under any Company severance or salary
continuation policy (including but not limited to any benefits pursuant to an
involuntary separation program or similar program maintained under a pension
plan sponsored by the Company); provided that, in accordance with Section 2.8
hereof, any such benefits shall reduce any benefits payable under this
Agreement.
ARTICLE IV
TAX MATTERS
Section 4.1. Withholding. The Company may withhold from
any amounts payable to the Executive hereunder all federal, state, city or
other taxes that the Company may reasonably determine are required to be
withheld pursuant to any applicable law or regulation.
ARTICLE V
COLLATERAL MATTERS
Section 5.1. Nature of Payments. All payments to the
Executive under this Agreement shall be considered either payments in
consideration of his continued service to the Company or severance payments in
consideration of his past services thereto.
Section 5.2. Legal Expenses. The Company shall pay all
legal fees and expenses that the Executive may incur as a result of the
Company's contesting the validity, the enforceability or the Executive's
interpretation of, or determinations under, this Agreement; provided, that this
Section 5.2 shall be operative only if and to the extent that (a) the Company
fails to establish a trust that defrays all such legal fees and expenses or (b)
the Company establishes such a trust, but the trust fails to pay all such legal
fees and expenses.
Section 5.3. Mitigation. The Executive shall not be
required to mitigate the amount of any payment provided for in this Agreement
either by seeking other employment or otherwise. Except as provided in Section
2.2 hereof, the amount of any payment provided for herein shall not be reduced
by any
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remuneration that the Executive may earn from employment with another employer
or otherwise following his Qualifying Termination.
Section 5.4. Interest. If the Company fails to make, or
cause to be made, any payment provided for herein within 30 days of the date on
which the payment is due, the Company shall make such payment together with
interest thereon. The interest shall accrue and be compounded monthly. The
interest rate shall be equal to 120 percent of the prime rate as reported by
The Wall Street Journal for the first business day of each month, effective for
the ensuing month. The interest rate shall be adjusted at the beginning of
each month.
Section 5.5. Prior Agreement. Any agreement between the
Company and the Executive that is entitled "Executive Severance Agreement" and
that was executed by the parties before the date hereof is hereby canceled and
shall have no force or effect.
Section 5.6. Authority. The execution of this Agreement
has been authorized by the Board of Directors of the Company and by the Board
of Directors of GTE.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1. Term of Agreement. This Agreement shall
become effective on the date hereof and shall continue in effect until the
earliest of (a) July 1, 2001, if no Change in Control has occurred before that
date; (b) the termination of the Executive's employment with the Company for
any reason prior to a Change in Control; (c) the Company's termination of the
Executive's employment for Cause, or the Executive's resignation for other than
Good Reason, following a Change in Control and the Company's and the
Executive's fulfillment of all of their obligations hereunder; and (d) the
expiration following a Change in Control of two years and six months and the
fulfillment by the Company and the Executive of all of their obligations
hereunder. Notwithstanding the foregoing, commencing on July 1, 2001, and on
July 1 of each year thereafter, the expiration date prescribed by clause (a) of
the preceding sentence shall automatically be extended for an additional year
unless, not later than December 31 of the immediately preceding year, one of
the parties hereto shall have given notice to the other party hereto that it
(or he) does not wish to extend the term of this Agreement. Furthermore,
nothing in this Article VI shall cause this Agreement to terminate before both
the Company and the Executive have fulfilled all of their obligations
hereunder.
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Section 6.2. Governing Law. Except as otherwise expressly
provided herein, this Agreement and the rights and obligations hereunder shall
be construed and enforced in accordance with the laws of the State of New York.
Section 6.3. Successors to the Company. This Agreement
shall inure to the benefit of and shall be binding upon and enforceable by the
Company and any successor thereto, including, without limitation, any
corporation or corporations acquiring directly or indirectly all or
substantially all of the business or assets of the Company, whether by merger,
consolidation, sale or otherwise, but shall not otherwise be assignable by the
Company. Without limitation of the foregoing sentence, the Company shall
require any successor (whether direct or indirect, by merger, consolidation,
sale or otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and to agree to perform this Agreement
in the same manner and to the same extent as the Company would have been
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as heretofore defined and any
successor to all or substantially all of its business or assets that executes
and delivers the agreement provided for in this Section 6.3 or that becomes
bound by this Agreement either pursuant to this Agreement or by operation of
law. As used in this Agreement, "GTE" shall mean GTE as heretofore defined and
any successor to all or substantially all of its business or assets.
Section 6.4. Noncorporate Entities. If any provision of
this Agreement refers to the board of directors of an entity that has no board
of directors, the reference to board of directors shall be deemed to refer to
the body, committee, or person that has duties and responsibilities with
respect to the entity that most closely approximate those of a board of
directors of a corporation.
Section 6.5. Successor to the Executive. This Agreement
shall inure to the benefit of and shall be binding upon and enforceable by the
Executive and his personal and legal representatives, executors,
administrators, heirs, distributees, legatees and, subject to Section 6.6
hereof, his designees ("Successors"). If the Executive should die while
amounts are or may be payable to him under this Agreement, references hereunder
to the "Executive" shall, where appropriate, be deemed to refer to his
Successors; provided, that nothing in this Section 6.5 shall supersede the
terms of any plan or arrangement (other than this Agreement) that is affected
by this Agreement.
Section 6.6. Nonalienability. No right of or amount
payable to the Executive under this Agreement shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, hypothecation,
encumbrance, charge, execution, attachment, levy or similar process or to set
off against any obligations or to assignment by operation of law. Any attempt,
voluntary or
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involuntary, to effect any action specified in the immediately preceding
sentence shall be void. However, this Section 6.6 shall not prohibit the
Executive from designating one or more persons, on a form satisfactory to the
Company, to receive amounts payable to him under this Agreement in the event
that he should die before receiving them.
Section 6.7. Notices. All notices provided for in this
Agreement shall be in writing. Notices to the Company shall be deemed given
when personally delivered or sent by certified or registered mail or overnight
delivery service to GTE Service Corporation, 0000 Xxxxxxxxx Xxxxx, X.X. Xxx
000000, Xxxxxx, XX 00000-0000, Attention: Corporate Secretary. Notices to the
Executive shall be deemed given when personally delivered or sent by certified
or registered mail or overnight delivery service to the last address for the
Executive shown on the records of the Company. Either the Company or the
Executive may, by notice to the other, designate an address other than the
foregoing for the receipt of subsequent notices.
Section 6.8. Amendment. No amendment to this Agreement
shall be effective unless in writing and signed by both the Company and the
Executive; provided that amendments may be made to this Agreement by the
Executive Compensation and Organizational Structure Committee of the Board (or
any successor thereto) in accordance with Section 2.6(f) hereof prior to a
Change in Control.
Section 6.9. Waivers. No waiver of any provision of this
Agreement shall be valid unless approved in writing by the party giving such
waiver. No waiver of a breach under any provision of this Agreement shall be
deemed to be a waiver of such provision or any other provision of this
Agreement or any subsequent breach. No failure on the part of either the
Company or the Executive to exercise, and no delay in exercising, any right or
remedy conferred by law or this Agreement shall operate as a waiver of such
right or remedy, and no exercise or waiver, in whole or in part, of any right
or remedy conferred by law or herein shall operate as a waiver of any other
right or remedy.
Section 6.10. Severability. If any provision of this
Agreement shall be held unlawful or otherwise invalid or unenforceable in whole
or in part, such unlawfulness, invalidity or unenforceability shall not affect
any other provision of this Agreement or part thereof, each of which shall
remain in full force and effect. If the making of any payment or the provision
of any other benefit required under this Agreement shall be held unlawful or
otherwise invalid or unenforceable, such unlawfulness, invalidity or
unenforceability shall not prevent any other payment or benefit from being made
or provided under this Agreement, and if the making of any payment in full or
the provision of any other benefit required under this Agreement in full would
be unlawful or otherwise invalid or unenforceable, then
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such unlawfulness, invalidity or unenforceability shall not prevent such
payment or benefit from being made or provided in part, to the extent that it
would not be unlawful, invalid or unenforceable, and the maximum payment or
benefit that would not be unlawful, invalid or unenforceable shall be made or
provided under this Agreement.
Section 6.11. Agents. The Company may make arrangements to
cause any agent or other party, including an affiliate of the Company, to make
any payment or to provide any benefit that the Company is required to make or
to provide hereunder; provided, that no such arrangement shall relieve or
discharge the Company of its obligations hereunder except to the extent that
such payments or benefits are actually made or provided.
Section 6.12. Captions. The captions to the respective
articles and sections of this Agreement are intended for convenience of
reference only and have no substantive significance.
Section 6.13. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
but all of which together shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
GTE SERVICE CORPORATION
By: /s/ XXXXXXX X. XXX
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Participant
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Date
