EXHIBIT 10.2
AMERILINK CORPORATION
AMENDMENT NO. 2 TO
EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT NO. 2 TO EXECUTIVE EMPLOYMENT AGREEMENT (the
"Amendment") is made in Columbus, Ohio effective as of August 4, 1998, by and
between AMERILINK CORPORATION, an Ohio corporation (the "Company"), and XXXXX X.
XXXXXXX, an individual residing in New Albany, Ohio (the "Executive"), who, for
and in consideration of the mutual promises hereinafter made and other good and
valuable consideration, each of them intending to be bound hereby, agree that
that certain Executive Employment Agreement dated as of August 19, 1994 between
the Company and the Executive, as amended by Amendment No. 1 to Executive
Employment Agreement dated on or about April 29, 1997 (together, the
"Agreement") shall be and hereby is modified and amended as hereinafter
provided:
SECTION 1. DEFINITIONS. As used herein, capitalized terms shall have
the meanings set forth in the Agreement except as expressly otherwise defined
herein. As used in the Agreement, the following terms shall have the following
meanings, and any prior or different definition of any of the following terms
shall be and hereby is amended and restated as set forth below:
"COMMON SHARES" means the common shares, without par value, of
the Company.
"COMPENSATION COMMITTEE" means the Compensation Committee of
the Board of Directors, as constituted from time to time.
"EXTENDED EMPLOYMENT PERIOD" means the period of time
commencing on the first day of the Fiscal Year which began March 31,
1998 and ending on the Employment Termination Date.
"IBT" means, for each Fiscal Year, the dollar amount of the
consolidated net income before income taxes of the Company and its
subsidiaries determined in accordance with generally accepted
accounting principles, consistently applied in accordance with past
practice. The amount of IBT reflected on the Company's annual financial
statements prepared in accordance with generally accepted accounting
principles and audited by Ernst & Young, LLP or such other accounting
firm of national reputation as may be selected as the Company's auditor
from time to time, shall be conclusively binding on the Company and the
Executive for purposes of this Agreement.
"INCENTIVE BONUS COMPENSATION" means the amounts payable to
the Executive pursuant to paragraphs (b), (c), (d) and (e) of Section 5
of the Agreement.
"RESTRICTED STOCK" means awards of Common Shares granted as
"restricted stock awards" pursuant to SECTION.10 of the Company's 1994
Stock Incentive Plan as the same shall be extended and amended from
time to time with the approval of the Executive (which shall be deemed
evidenced by his approval thereof by his vote in favor thereof as a
Director of the Company or his signature thereof on behalf of the
Company in his capacity as President of the Company), or pursuant to
equivalent provisions of a subsequent stock incentive plan adopted
hereafter by the Company with the approval of the Executive (evidenced
as indicated above).
"SCHEDULED EMPLOYMENT TERMINATION DATE" means March 31, 2008.
"TARGET ADJUSTMENT AMOUNT" means, for the first Fiscal Year of
the Extended Employment Period, an amount of Target IBT equal to
$30,000,000, and for each subsequent Fiscal Year of the Extended
Employment Period, an amount of Target IBT equal to 110% of the Target
Adjustment Amount applicable to the previous Fiscal Year.
"TARGET IBT" means, for each Fiscal Year, the forecasted
amount of IBT to be earned by the Company pursuant to a budgetary
forecast or financial plan which shall be prepared annually by the
Executive in consultation with senior executives of the Company and
approved by resolution of the Board of Directors annually prior to the
beginning of such Fiscal Year (or such later date as shall be approved
by the Board of Directors) in order to establish levels of Incentive
Bonus Compensation with respect to such Fiscal Year in accordance with
ss.5(b) of the Agreement.
"TARGET RANGE" means, for each Fiscal Year, a range of amounts
of IBT having a lower limit equal to 95% of Target IBT and an upper
limit equal to 105% of Target IBT, and including all amounts of IBT
equal to and greater than such lower limit and equal to and less than
such upper limit, each of such lower and upper limits of the Target
Range to be in the dollar amounts specified by the Compensation
Committee in connection with its approval of the forecasted amount of
Target IBT for such Fiscal Year.
SECTION 2. COMPENSATION. Section 5 of the Agreement is hereby amended
and supplemented by adding thereto the following paragraphs (c), (d) and (e), as
follows:
(c) ALTERNATE INCENTIVE BONUS COMPENSATION. For each Fiscal
Year during the Extended Employment Period in which IBT equals or is
less than $5,000,000, Incentive Bonus Compensation shall be determined
exclusively in accordance with the provisions of Section 5(b), above.
For each Fiscal Year during the Extended Employment Period in which IBT
exceeds $5,000,000, notwithstanding the provisions of Section 5(b),
above, Incentive Bonus Compensation shall be determined exclusively in
accordance with the provisions of this Section 5(c) and Section 5(d)
and (e), below. For each such Fiscal Year in which IBT exceeds
$5,000,000, the Executive shall be paid "Incentive Bonus Compensation"
in an amount equal to the percentages of IBT for such Fiscal Year
determined as follows:
(i) If IBT for such Fiscal Year exceeds $5,000,000
but does not equal or exceed the lower limit of the Target Range for
such Fiscal Year, the Incentive Bonus Compensation for such Fiscal Year
shall equal 2.5% of total IBT for such Fiscal Year.
(ii) If IBT for such Fiscal Year equals or exceeds
the lower limit of the Target Range for such Fiscal Year, the Incentive
Bonus Compensation for such Fiscal Year shall equal 3.1% of the amount
of total IBT for such Fiscal year up to but not exceeding the upper
limit of the Target Range for such Fiscal Year, plus the sum of the
amounts, if any, calculated pursuant to clause (iii), below.
(iii) If IBT in such Fiscal Year exceeds the upper
limit of the Target Range for such Fiscal Year, the Executive shall be
entitled to additional Incentive Bonus Compensation equal to (A) 3.5%
of the amount of such excess IBT up to, but not exceeding, $1,000,000
plus (B) 3.7% of the amount, if any, by which such excess IBT exceeds
$1,000,000 but does not exceed $2,000,000, plus (C) 4% of the amount,
if any, by which such excess IBT exceeds $2,000,000 but does not exceed
$3,000,000 plus (D) 5% of the amount, if any, by which such excess IBT
exceeds $3,000,000, but does not exceed $4,000,000 plus (E) 2% of the
amount, if any, by which such excess IBT exceeds $4,000,000.
(d) ADJUSTMENT.
(i) For any Fiscal Year, in the event that
Target IBT exceeds the Target Adjustment Amount, the amount of
Incentive Bonus Compensation payable for such Fiscal Year shall be
adjusted by multiplying the amount calculated as set forth in
clauses (i), (ii) and (iii) of Section 5(c) above by a fraction, the
numerator of which is the Target Adjustment Amount and the
denominator of which is the Target IBT less one-half of the amount
by which the Target IBT exceeds the Target Adjustment Amount.
(ii) In the event that the Company or any of its
subsidiaries shall, whether by merger, consolidation, combination,
purchase of assets or other form of acquisition, acquire during any
Fiscal Year another business (an "Acquisition") the financial
operations of which (A) were not taken into account in the
determination of Target IBT for such Fiscal Year and (B) will, in
accordance with generally accepted accounting principles, be reported
for such Fiscal Year on a consolidated basis with the operations of the
Company and its consolidated subsidiaries, whether as a "pooling" or a
"purchase" (as such terms are defined according to generally accepted
accounting principles), the Board of Directors may, in its discretion
after consultation with the Executive, make such adjustment to the
Incentive Bonus Compensation for such Fiscal Year, to the extent based
on IBT directly attributable to such Acquisition, as the Board of
Directors may determine to be equitable to the Executive and the
Company in the circumstances.
(iii) The Board of Directors shall be exclusively
responsible, and is hereby authorized, to make all determinations on
behalf of the Company with respect to the calculation of Incentive
Bonus Compensation. In the event that the Board of Directors and the
Executive shall be unable to resolve any dispute relating to the
calculation of Incentive Bonus Compensation for any Fiscal Year, the
issue may be referred by either party to Ernst & Young, LLP, or such
other accounting firm of national reputation as shall then be the
Company's auditor, and the determination of the issue by such firm
shall be final and binding on all parties.
(e) PAYMENT OF INCENTIVE BONUS COMPENSATION. The Executive's
Incentive Bonus Compensation for each Fiscal Year during the Extended
Employment Period shall be payable within 10 days after the issuance of
the Company's audited financial statements for the related Fiscal Year.
The Incentive Bonus Compensation shall be payable in a combination of
cash, deferred compensation pursuant to a deferred compensation plan as
provided below, and Restricted Stock. That portion of the Incentive
Bonus Compensation for any such Fiscal Year (the "Cash Portion") which
is the greater of (i) 75% of the Base Compensation of the Executive for
such Fiscal Year, or (ii) such larger portion as the Board of Directors
shall determine after consideration of the Company's compensation
policies for other executive officers of the Company and such other
criteria as it shall determine to be relevant, shall be paid to the
Executive in cash or a combination of cash and deferred compensation
allocated as provided in the deferred compensation plan to be adopted
by the Company as provided below. The balance of the Incentive Bonus
Compensation remaining after payment of the Cash Portion (the
"Restricted Stock Portion") shall be paid by the issuance and delivery
of that number of shares of Restricted Stock which equals the dollar
amount of the Restricted Stock Portion divided by the average closing
price per share of the Common Shares on the last 10 trading days of
such Fiscal Year. The Company shall use diligent efforts to adopt a
deferred compensation plan reasonably acceptable to the Executive
pursuant to which receipt by the Executive of a part of the Cash
Portion may be deferred and made payable pursuant to such deferred
compensation plan. In connection with the payment of the Restricted
Stock Portion for any Fiscal Year, the only restrictions which shall
apply to such Restricted Stock grants shall be the requirement of
continued employment hereunder during the three Fiscal Years
immediately following such Fiscal Year, provided, however, that if the
Scheduled Employment Termination Date is less than three years from the
date of grant, the restrictions shall be limited to the time period
which ends on the Scheduled Employment Termination Date.
SECTION 3. EMPLOYEE BENEFITS; VACATIONS.
(a) Section 7(a) of the Agreement is hereby amended and restated in its
entirety as follows:
(a) BENEFIT PLANS. The Executive shall be entitled to
participate in a deferred compensation plan which the Company shall use
reasonable efforts to adopt on terms and conditions reasonably
acceptable to the Executive. The Company shall continue in effect any
perquisite, benefit or compensation plan (in addition to the deferred
compensation provided for above) including its profit-sharing plan and
401K plan, medical insurance plan, life insurance plan, health and
accident plan and disability plan in which the Executive is currently
participating, or shall maintain plans providing substantially similar
or improved benefits (collectively referred to as the "Benefit Plans");
provided, however, that the Company may make modifications to the
Benefit Plans so long as such modifications (i) are generally
applicable either to all salaried employees of the Company, or, in
connection with plans which apply only to executive officers and/or
other so-called highly compensated employees of the Company, are
generally applicable to such executive officers and/or highly
compensated employees, and, in either case, (ii) do not discriminate
adversely against the Executive or other highly-compensated employees
of the Company.
(b) VACATIONS. The Executive shall be entitled in each Fiscal Year to a
vacation of six weeks (30 working days) during the first five Fiscal
Years of the Extended Employment Period, and eight weeks (40 working
days) during the last five Fiscal Years of the Extended Employment
Period, during all of which time his compensation shall be paid in
full, in addition to such holidays and other non-working days as are
consistent with the policies of the Company for its executives
generally. The Executive's unused vacation days for any Fiscal Year
shall not carry forward to any subsequent Fiscal Year. In addition, the
Executive shall be entitled to take a three-month sabbatical leave of
absence during any Fiscal Year of the last five Fiscal Years of the
Extended Employment Period, in lieu of his vacation time for such
Fiscal Year, during all of which time his compensation shall be paid in
full.
SECTION 4. TERMINATION OF EMPLOYMENT Section 11(a)(1) is hereby amended
and restated in its entirety as follows:
(a) NOTICE OF TERMINATION; EMPLOYMENT TERMINATION DATE.
(1) Any termination of the Executive's employment by the
Company or the Executive shall be communicated by written
Notice of Termination to the other party thereto. For
purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination
under the provision so indicated. If the Executive's
employment shall be terminated for any reason, or for no
reason, other than termination for Cause pursuant to
Section 11(b) or voluntary termination of employment by
the Executive other than for Good Reason prior to the
Scheduled Employment Termination Date pursuant to
Section 11(e)(2), all Restricted Stock held by the
Executive immediately, automatically and without any
requirement of any further action on the part of the
Company or the Executive, shall be deemed fully vested
without any applicable restrictions, and shall be promptly
issued to the Executive without legend (except as to
customary restrictions relating to applicable securities
laws); and all Incentive Bonus Compensation then remaining
unpaid, including any part of the Restricted Stock Portion
for which shares of Restricted Stock have not then been
issued to the Executive, and all Incentive Bonus
Compensation for the Fiscal Year in which the Employment
Termination Date shall occur, shall be payable in cash
without reference
to any requirement otherwise applicable hereunder for
payment partially in cash, partially in Restricted Stock
and/or partially pursuant to any deferred compensation
plan adopted by the Company.
SECTION 5. STOCK OPTIONS. As a material part of the consideration to
the Executive for entering into this Amendment, the Company, through the
Compensation Committee or otherwise, shall grant to the Executive options to
purchase 200,000 Common Shares under and subject to the provisions of the
Company's 1994 Stock Incentive Plan, as amended and supplemented as hereinafter
set forth (the "Plan"), at the price per share equal to the value thereof on the
date of the Company's 1998 Annual Meeting of Shareholders, which shall be deemed
for purposes of the Agreement to be the closing price per share of the Common
Shares on the NASDAQ National Market on the immediately preceding trading day;
provided, however, that the maximum number of such options which may be
qualified as Incentive Stock Options under Section 422 of the Internal Revenue
Code of 1986 as amended ("ISO's") shall be granted as such ISO's at a price per
share equal to 110% of the closing price of the Common Shares on the NASDAQ
National Market on such day. The term of such options shall be for ten years
(except that in the case of the ISO's, the term shall be limited to five years)
and such options shall vest and become exercisable ratably over the four
successive years following the date of grant. The Company agrees to adopt and
propose for approval at its 1998 Annual Meeting of Shareholders, an amendment to
the 1994 Stock Incentive Plan which shall increase by 600,000 the number of
shares available for grant thereunder, and the Company shall use its reasonable
best efforts to solicit approval of the Shareholders of the Company of such
amendment at such meeting. Notwithstanding any of the provisions of this
Agreement, this Amendment is and shall be conditioned upon (i) the grant by the
Company of the options described above in this SECTION.5, (ii) the adoption of
an amendment to the Plan conforming to the provisions of this SECTION.5 and
(iii) the approving vote of the Shareholders of the Company at the 1998 Annual
Meeting with respect to said amendment to the Plan.
SECTION 6. RATIFICATION AND CONFIRMATION OF AGREEMENT. The provisions
of the Agreement, as herein above restated and amended, are and remain in full
force and effect, and, as so amended and restated, the Agreement is hereby fully
ratified and confirmed.
IN WITNESS WHEREOF, the Company and the Executive have executed
multiple counterparts of this Agreement.
COMPANY: EXECUTIVE:
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AMERILINK CORPORATION /s/ Xxxxx X. Xxxxxxx
0000 Xxxx Xxxxxx-Xxxxxxxxx Xxxx ----------------------------
Xxxxxxxx, Xxxx 00000 Name: Xxxxx X. Xxxxxxx
Address: 0000 Xxxxxx Xxxx
Xxx Xxxxxx, Xxxx 00000
By: /s/ Xxxxxx X. Govern
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Name: Xxxxxx X. Govern
Title: Senior Vice President - Operations
and by: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
Title: Assistant Secretary
