1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into effective as of
September 9, 1997 by and between IXC Communications, Inc., a Delaware
corporation ("Company"), and Xxxxxxxx X. Xxxxx ("Employee").
ARTICLE I
EMPLOYMENT
The Company hereby employs Employee and Employee hereby accepts
employment with the Company upon the terms and conditions set forth below.
1.1 TERM.
-----
(a) The Company acknowledges the obligation of Employee to
give thirty-day notice of termination to his prior employer. However,
Employee must commence employment with the Company no later than
October 31, 1997, with the actual date that the Employee commences
employment with the Company to be referred to in this Agreement as the
Employee's "Commencement Date." The term of this Agreement will
continue for five (5) years from the Commencement Date.
(b) This Agreement will terminate prior to the date specified
in Paragraph (a) above, upon the earliest to occur of any of the
following events:
(i) On the six (6) month anniversary of the
Commencement Date if, as of that date, Employee has not
permanently relocated himself and Employee's immediate family
to Austin, Texas or within twenty (20) miles of its city
limits ("Austin Area");
(ii) After having moved to the Austin Area within the
time period specified in Subparagraph (i) above, on the date
that Employee and his immediate family cease to be permanent
residents in the Austin Area. In the event of a personal
hardship, the Board of Directors of the Company ("Board of
Directors") will not unreasonably withhold its consent to a
request by Employee for an exception to this Subparagraph
(ii);
(iii) Upon written notice to Employee that the Board
of Directors has determined that Employee should be terminated
for Cause, as that term is defined in Section 2.4(i) of this
Agreement; or
(iv) Upon the Employee's death, Disability (as that
term is defined in Internal Revenue Code ("Code") Section
22(e)(3)), or voluntary termination of employment by Employee.
2
1.2 DUTIES.
-------
(a) Employee agrees to serve as President and Chief Executive
Officer of the Company as well as of its major subsidiaries or in such
other capacity or capacities as the Board of Directors may reasonably
require that are consistent with his position, provided that the duties
and responsibilities of Employee are not materially diminished and
there is no change in his title or reporting responsibilities.
(b) Employee will report directly to the Board of Directors.
(c) Employee will become the Chairman of the Board of
Directors of the Company no later than thirty (30) days after the 1998
Annual Meeting of Stockholders of the Company. If that does not occur,
Employee may elect, in his sole and absolute discretion, to voluntarily
resign and:
(i) Become fully vested in his Option (issued
pursuant to Section 2.4 of this Agreement);
(ii) Receive two (2) year's base salary, payable at
the regular payroll periods;
(iii) Receive a prorata portion of Employee's
guaranteed bonus of two hundred twenty-five thousand dollars
($225,000), as set forth in Section 2.1(b) of this Agreement;
(iv) Receive the remaining three hundred thousand
dollar ($300,000) installment of his sign-on bonus, payable at
the time set forth in Section of this Agreement; and
(v) The Company agrees, under those circumstances, to
forgive the entire outstanding loan (including any accrued
interest) provided to Employee under Section 2.3(b) of this
Agreement.
ARTICLE II
COMPENSATION AND BENEFITS
2.1 COMPENSATION.
-------------
(a) As compensation for accepting employment with the Company,
Employee will receive the sum of six hundred and fifty thousand dollars
($650,000), three hundred and fifty thousand dollars ($350,000) of
which will be paid on the Commencement Date and three hundred thousand
dollars ($300,000) of which will be paid on January 1, 1999.
- 2 -
3
(i) Employee may elect to defer the receipt of such
amounts no later than two (2) weeks prior to the date such
amounts would otherwise be paid, and any such election shall
be irrevocable.
(ii) Notwithstanding anything in this Agreement to
the contrary, in the event Employee's employment is terminated
for any reason, Employee shall be entitled to the three
hundred thousand dollars ($300,000) installment set forth
above, if not previously paid, on January 1, 1999.
(b) As compensation for the services to be rendered under this
Agreement, Employee will be entitled to receive from the Company an
annual base salary of three hundred fifty thousand dollars ($350,000),
payable bi-weekly, and an annual bonus for the twelve (12) month period
beginning on the Commencement Date ("Employment Year") of two hundred
twenty-five thousand dollars ($225,000) payable on October 31, 1998.
(c) With respect to periods after the end of Employee's first
Employment Year, bonuses, if any, are awarded by, and at the direction
of, the Board of Directors. Employee will have the opportunity to earn
an annual incentive bonus. It is anticipated that such bonus will
approximate fifty percent (50%) of the Employee's base salary if the
Performance Goals (as that term is defined in Section 2.4(i) of this
Agreement) are achieved and Employee's performance under this Agreement
is satisfactory. Such bonus amount could be substantially more if the
Performance Goals are substantially exceeded.
(d) Employee's base salary may be increased from time to time
in accordance with the Company's policies and procedures.
(e) Notwithstanding the preceding provisions of this Section
2.1, to the extent necessary to comply with the million dollar
compensation deduction limitation of Section 162(m) of the Code, the
payment of items of compensation to Employee (including any amounts
described in Section 2.3 of this Agreement that are includible in
Employee's income) that would otherwise be nondeductible because of the
application of that limitation will be nonforfeitable and an absolute
obligation of the Company, but the payment will be deferred until those
amounts will be deductible. Any amounts so deferred will accrue
interest at the rate of nine percent (9%) per annum, compounded
annually.
2.2 BENEFITS. The Company will make available to Employee the
group-term life insurance coverage and medical benefits comparable to those
currently provided to the Chairman of the Company. Other fringe benefits that
Employee will receive will include dental insurance, participation in the
Company's 401(k) Plan, as well as the reimbursement of reasonable and
appropriate business expenses, including the use of a cellular phone, all in
accordance with the Company's stated policies and procedures. Some of the
specific fringe benefits to be provided to Employee include, but are not limited
to, the following:
- 3 -
4
(a) An annual automobile allowance of twelve thousand dollars
($12,000) payable in monthly installments;
(b) Five (5) weeks of vacation with respect to each Employment
Year; and
(c) Disability insurance providing a benefit equal to
seventy-five percent (75%) of Employee's base salary. The Employee
shall be permitted to pay the minimum amount necessary so that any
Disability benefits received by the Employee will not be subject to
federal income tax.
2.3 RELOCATION COSTS.
-----------------
(a) The Company will reimburse Employee for:
(i) The reasonable costs of moving Employee's
household goods from Dallas, Texas to the Austin Area;
(ii) The closing costs of selling Employee's home in
Dallas, Texas, not to exceed the usual and customary costs of
closing to be borne by the seller of a home in Dallas, Texas,
including a reasonable broker's commission; and
(iii) The closing costs of purchasing a home in the
Austin Area, not to exceed the usual and customary costs of
closing to be borne by the buyer of a home in the Austin Area.
(b) The Company will loan Employee up to five hundred thousand
dollars ($500,000) to be applied to the purchase of a home in the
Austin Area that is comparable to Employee's current home in Dallas,
Texas. This amount will become payable by the Company no later than
seven (7) days prior to the closing of the escrow (or at a prior time
when those amounts become payable by Employee). This amount must be
returned to the Company, should the Employee not actually purchase the
home. The amount of the loan will be the difference between (i) the net
purchase price of a comparable home in the Austin, Area, and (ii) the
net selling price of Employee's home in Dallas, Texas. For example, if
the net purchase price of the home in the Austin Area is $1,250,000 and
the net selling price of Employee's home in Dallas, Texas is $750,000,
the loan will be for $500,000. If the net purchase price for a
comparable home is $1,000,000 and the net selling price is $750,000,
the loan will be for $250,000. Such loan will bear interest at the rate
of seven percent (7%) per annum, compounded annually, will be secured
by a junior deed of trust on the house purchased by Employee, and will
be due and payable one hundred twenty (120) days after termination of
Employee's employment with the Company. The loan, including all
interest accrued thereon, will be subject to forgiveness at the time
of, and in accordance with, the following provisions:
- 4 -
5
(i) Twenty percent (20%) of the outstanding balance
of the loan, including all interest accrued thereon, will be
forgiven on each anniversary of the Commencement Date,
provided Employee is still employed by the Company on that
date.
(ii) For purposes of this Agreement, the term "Change
in Control" means any of the following:
(A) A successful tender offer for greater
than forty-five percent (45%) of the outstanding
capital stock of the Company;
(B) A sale of all or substantially all of
the assets of the Company; or
(C) A merger or consolidation of the Company
with any other corporation in which the stockholders
of the Company immediately preceding such merger or
consolidation will not hold at least fifty-one
percent (51%) of the outstanding capital stock of the
surviving corporation (whether or not the Company is
the surviving corporation) immediately after such
merger or consolidation.
(iii) The outstanding balance of the loan, including
all interest accrued thereon, will be forgiven upon the:
(A) Employee's death or Disability during
the term of this Agreement;
(B) Employee's voluntary resignation
pursuant to Section 1.2(c) of this Agreement;
(C) Termination of employment by Employee
upon a Change in Control; or
(D) Company's termination of the employment
of Employee without Cause (as that term is defined in
Section 2.4(i) of this Agreement).
2.4 STOCK OPTION.
-------------
(a) The Company will grant a nonqualified stock option to
Employee allowing Employee to purchase five hundred thousand (500,000)
shares of common stock of the Company ("Option"). The term of the
Option will be for ten (10) years.
- 5 -
6
(b) The exercise price per share under the Option will be
twenty-seven dollars and fifty cents ($27.50), which was the closing
price of the stock on September 9, 1997.
(c) The Option will vest in equal installments over a five (5)
year period on the first, second, third, fourth, and fifth
anniversaries of the Commencement Date. Except as otherwise expressly
provided in this Agreement, in no event will Employee vest upon any
anniversary of the Commencement Date unless Employee is employed by the
Company on such date.
(d) If Employee voluntarily resigns or is terminated for Cause
(as that term is defined in Paragraph (i) below) prior to the
expiration of this Agreement, Employee can exercise the vested portion
of the Option not later than the ninetieth (90th) day following the
effective date of his resignation or termination, at which time the
unexercised portion of the Option (whether vested or not) will be
forfeited.
(e) If Employee is terminated for a reason that does not
constitute Cause prior to the expiration of this Agreement, the entire
Option will become immediately exercisable and remain exercisable for
ninety (90) days following the effective date of his termination, at
which time the unexercised portion of the Option will be forfeited.
(f) Upon the death or Disability of the Employee:
(i) Employee will be entitled to the additional
vesting (if applicable) at the end of the Employment Year
during which the Employee's death or Disability occurs; and
(ii) Employee (or his personal representative or
estate, whichever is applicable) can exercise the vested
portion of the Option not later than one (1) year following
the date of his death or Disability, at which time the
unexercised portion of the Option (whether vested or not) will
be forfeited.
(g) If there is a Change in Control of the Company (as that
term is defined in Section 2.3(b)(ii) of this Agreement), the Option
will become immediately vested, unless the Company desires to use, and
the acceleration of vesting would prevent the Company from using, the
"pooling of interests" accounting method in connection with the Change
in Control. Notwithstanding that acceleration in the vesting of the
Option would be available, Employee may elect not to have the vesting
accelerated.
(h) Although no antidilution rights are granted to Employee,
should any such rights subsequently be granted to the other senior
executive officers of the Company, such rights will be similarly
extended to Employee, provided that Employee remains employed by the
Company at that time.
- 6 -
7
(i) For purposes of this Agreement, the term "Cause" means any
of the following:
(i) Employee's failure or refusal to:
(A) Materially perform his duties and
responsibilities as set forth in Section 1.2 of this
Agreement; or
(B) Devote all of his business time and
attention exclusively to the business and affairs of
the Company in accordance with the terms of this
Agreement;
in each case if such failure or refusal is not cured within
thirty (30) days after written notice thereof to Employee by
the Company;
(ii) The willful misappropriation by Employee of the
funds or property of the Company;
(iii) The use of alcohol or illegal drugs, materially
interfering with the performance of Employee's obligations
under this Agreement, continuing after written warning;
(iv) Conviction of Employee in a court of law of, or
entering a plea of guilty or no contest to, any felony or any
crime involving moral turpitude, dishonesty, or theft;
(v) The commission in bad faith by the Employee of
any act which materially injures or could reasonably be
expected to materially injure the reputation, business, or
business relationships of the Company;
(vi) Any material breach (not covered by any of
Subparagraphs (i) through (v) of this Paragraph (i)) of any
term, provision, or condition of this Agreement, if such
breach is not cured within thirty (30) days after written
notice thereof to Employee by the Company; or
(vii) Material failure to meet the Annual Performance
Goals after Employee is provided with written notice by the
Board of Directors of any such material failure and three (3)
months after such notice Employee fails to meet the Interim
Performance Goals for such three (3) month period.
(A) For purposes of this Agreement, the term
"Annual Performance Goals" shall mean the targeted
performance goals established for the Company by
Employee and adopted by the Board of Directors for
one (1) year, and the term "Interim Performance
Goals"
- 7 -
8
shall mean the reasonable targeted performance goals
established by the Board of Directors for the three
(3) month period following the failure to satisfy the
Annual Performance Goals.
(B) If Employee's employment is terminated
pursuant to this Subparagraph (vii), Employee will be
entitled to receive two (2) year's base salary at his
then current rate (payable at the regular payroll
periods), and will be entitled to additional vesting
of the Option granted pursuant to this Section 2.4 as
if he were employed at the end of the Employment Year
during which the Employee's termination occurs, and
forgiveness of the outstanding balance of the loan
(including all interest accrued thereon) in
accordance with Section 2.3(b)(i) as if he were
employed at the end of the Employment Year during
which the termination of Employee's employment
occurs.
2.5 WITHHOLDING. Any amounts includible in Employee's income as a
result of this Agreement (e.g., payments and forgiveness of debt) will be
subject to all applicable legal requirements with respect to the withholding of
federal, state, and local taxes and other normal withholdings.
2.6 SEVERANCE BENEFITS.
-------------------
(a) In the event Employee is terminated without Cause (as that
term is defined in Section 2.4(i) of this Agreement), Employee shall
receive the greater of:
(i) His then current base salary, as well as health,
life, and disability insurance for the remainder of the term
of the Agreement, his guaranteed bonus (if unpaid) under
Section 2.1(b) of this Agreement, immediate vesting of his
Option granted pursuant to Section 2.4, and forgiveness of the
outstanding balance of the loan (including all interest
accrued thereon) made pursuant to Section 2.3(b) of this
Agreement; or
(ii) Two (2) year's base salary, health, life, and
disability insurance, immediate vesting of his Option, and
forgiveness of the outstanding balance of the loan (including
all interest accrued thereon) made pursuant to Section of this
Agreement.
(b) In the event the term of this Agreement expires and the
Company determines not to continue the employment of Employee as
Chairman on terms and conditions comparable for such position, then the
Company shall pay to Employee as a severance benefit one (1) year's
base salary at the Employee's then current rate. If Company extends
such an offer on comparable terms and conditions and Employee refuses
such offer, no amounts will become payable by Company to Employee by
reason of this Paragraph (b).
- 8 -
9
(c) In the event of a Change in Control of the Company (as
that term is defined in Section 2.3(b)(ii) of this Agreement), Employee
may elect, in his absolute discretion, to voluntarily resign and
receive the following:
(i) Immediate vesting of the Option granted pursuant
to Section of this Agreement;
(ii) Forgiveness of the outstanding balance of his
loan (including interest accrued thereon) under Section 2.3(b)
of this Agreement; and
(iii) One (1) year's base salary at the Employee's
then current rate.
(d) The Employee shall be under no obligation to mitigate his
damages or to seek other employment and if the Employee obtains other
employment, any compensation earned by Employee therefrom shall not
reduce the Company's obligations to make the payments to Employee that
are otherwise required under this Agreement.
(e) Any payments that are required pursuant to the terms of
this Section 2.6 shall become payable at the same time those amounts
would have been paid to Employee had his employment with the Company
continued.
ARTICLE III
FIDELITY
3.1 CONFIDENTIAL INFORMATION.
-------------------------
(a) Employee agrees not to disclose any Confidential
Information (as that term is defined in Paragraph (e) below) of the
Company, including information received in confidence from the Company
or from others, whether before, during, or after Employee's employment
with the Company, except upon the prior written consent of the Company.
(b) Employee acknowledges that the Confidential Information of
the Company includes matters conceived or developed by Employee, as
well as matters learned by Employee from other employees or agents of
the Company.
(c) Any Confidential Information that Employee may prepare,
use, or come into contact with will be and remain the Company's sole
property and will not be removed from the Company's premises without
its written consent, except as required in accordance with Employee's
performance of Employee's duties hereunder, and will be returned to the
Company, together with all copies, summaries, and extracts thereof,
upon termination of this Agreement.
- 9 -
10
(d) Except as the Company may otherwise consent or direct in
writing, Employee will not, sell, use, lecture upon, or publish any
Confidential Information or authorize anyone else to do those things at
any time either before or after the expiration of this Agreement.
(e) For purposes of this Agreement, the term "Confidential
Information" means information (i) disclosed to or known by Employee as
a consequence of or through Employee's employment by the Company, (ii)
not generally known outside the Company, and (iii) that relates to the
Company. Confidential Information will also include the Company's
proprietary information (such as trade secrets).
(f) This Section 3.1 will continue in full force and effect
after the expiration of this Agreement.
3.2 COMPETITION.
------------
(a) The following provisions of this Section 3.2 will apply
from the Commencement Date until the earliest to occur of the following
events:
(i) Two (2) years;
(ii) The remainder of the term of this Agreement; or
(iii) The maximum period during which the provisions
of this Section 3.2 can be enforced under Texas law.
(b) The following provisions of this Section 3.2 will not
apply if the Company terminates the employment of Employee for a reason
that does not constitute "Cause" under Subparagraphs (i) through (vi)
of Section 2.4(i) of this Agreement.
(c) Except in furtherance of the execution of Employee's
duties under this Agreement, Employee expressly covenants and agrees
that Employee will not, without the prior written consent of the Board
of Directors, either acting alone or in conjunction with others,
directly or indirectly:
(i) Engage in any competition with the Company with
respect to those products or services of a type for which
Employee had responsibility for at the Company;
(ii) Solicit business of any type engaged in by the
Company (or by any subsidiary or affiliate of Company) with
respect to those products or services of a type for which
Employee had responsibility for at the Company from any person
or business which is an account, customer, or client of the
Company (or any subsidiary or affiliate of the Company);
- 10 -
11
(iii) Induce or attempt to influence any such
account, customer, or client to curtail or cancel his or its
business with the Company (or any subsidiary or affiliate of
Company); or
(iv) Induce or attempt to influence any employee to
terminate his or her employment with the Company (or with any
subsidiary or affiliate of the Company).
3.3 ENFORCEMENT. Because the remedy at law for any breach of the
provisions of this Article III would be inadequate, Employee hereby consents to
the granting of an injunction or other equitable relief enjoining any breach of
these provisions by any court having jurisdiction without the necessity of
proving actual monetary loss. In addition to such injunctive relief, the Company
may pursue at law any remedies available to it.
ARTICLE IV
MISCELLANEOUS MATTERS
4.1 BINDING ON SUCCESSOR. The Company will not enter into any merger,
acquisition, or other business combination with any other party in which the
Company will not be the surviving entity unless the other party to that
agreement consents to be bound by the terms of this Agreement.
4.2 NO ASSIGNMENT. Except as required by law, Employee may not assign
or alienate (voluntarily or involuntarily) any right to receive payments under
this Agreement.
4.3 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without reference to the conflict
of laws provisions thereof.
4.4 CAPTIONS. The captions of this Agreement are included solely for
convenience of reference and have no force or effect.
4.5 AMENDMENTS. This Agreement may not be amended, modified, or waived
in any manner other than by a written agreement executed by the parties to this
Agreement. The waiver by either party of compliance with any provision of this
Agreement by the other party will not operate or be construed as a waiver of any
other provision of this Agreement, or of any subsequent breach by the other
party of any provision of this Agreement.
4.6 NOTICES. All notices and other communications hereunder will be
sufficient if in writing and either hand-delivered or mailed by registered or
certified mail, return receipt requested, with postage prepaid, to the parties
at the following addresses (or to such other address or addresses as either
party shall have designated in writing to the other party hereto):
- 11 -
12
IF TO THE COMPANY:
------------------
IXC Communications, Inc.
5000 Plaza on the Lake, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx, Chairman
IF TO EMPLOYEE:
---------------
Xxxxxxxx X. Xxxxx
c/o IXC Communications, Inc.
5000 Plaza on the Lake, Xxxxx 000
Xxxxxx, Xxxxx 00000
4.7 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement will not affect the validity or enforceability of any other
provision of this Agreement.
4.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
full and complete understanding and agreement of the parties and supersedes all
prior understandings and agreements between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year indicated above.
XXXXXXXX X. XXXXX, an individual IXC COMMUNICATIONS, INC.
/s/ Xxxxxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
------------------------------------- ------------------------------
Its: Chairman
------------------------------
- 12 -
