FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
EFFECTIVE AS OF OCTOBER 17, 1995 ("AGREEMENT")
BETWEEN
IPC INFORMATION SYSTEMS, INC. ("IPC" or the "COMPANY")
AND XXXXXX XXXXXXX XXXXXX
1. Term of Agreement. In accordance with a resolution of the Board of
Directors of the Company unanimously approved at a meeting held August 8, 1996,
Section 2 of the Agreement is modified and amended by deleting therefrom
"through December 2, 1997" and substituting therefor "through December 2, 1998."
2. Compensation. In accordance with a resolution of the Compensation
Committee of the Board of Directors of the Company unanimously approved at a
meeting held November 26, 1996, Section 3.1 of the Agreement is hereby further
modified and amended, effective as of December 3, 1996, by deleting therefrom
"Three Hundred Thousand ($300,000.00)" and substituting therefor "Three Hundred
Thirty Thousand ($330,000.00)."
3. Termination at Will. Section 9.4 of the Agreement is hereby further
modified and amended by the insertion of the following after the second sentence
thereof:
"Notwithstanding any other provision of this Agreement, in the event that Xx.
Xxxxxx'x employment with the Company is terminated (a) during the Term of this
Agreement and at or following a Change in Control (as defined in Section 22 (b)
of this Agreement) of the Company occurring during the period commencing August
1, 1997 and ending July 31, 1998 and (b) either (i) by resignation or discharge
other than for cause, following the failure of the Company to extend the Term to
December 2, 1999 or (ii) other than for death, disability or Due Cause (in which
event, the provisions of Sections 9.1, 9.2 or 9.3, respectively, shall apply),
the Company shall pay to Xx. Xxxxxx, in lieu of payments with respect to
compensation otherwise due hereunder, severance pay in an amount equal to 240%
of Xx. Xxxxxx'x Base Salary. Such amount shall be payable in eighteen (18) equal
monthly installments, without interest, on the last day of each calendar month
in the period of eighteen (18) consecutive calendar months that begins on or
immediately following the date of termination. The Company and Xx. Xxxxxx hereby
stipulate that the damages which may be incurred by Xx. Xxxxxx as a consequence
of any such termination of employment are not capable of accurate measurement as
of the date first above written and that the benefits and payments provided for
in this Agreement constitute a reasonable estimate under the circumstances of
all damages sustained as a consequence of any such termination of employment.
The Company and Xx. Xxxxxx agree that the benefits provided hereunder constitute
reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and without regard to
Xx. Xxxxxx'x efforts, if any, to mitigate damages. The Company and Xx. Xxxxxx
further agree that the Company may condition the payments and benefits (if any)
due under this section on (x) the receipt of Xx. Xxxxxx'x resignation from any
and all positions which he holds as an officer, director or committee member
with respect to the Company or any subsidiary or affiliate of it and (y) Xx.
Xxxxxx'x execution and delivery within twenty-one (21) days after any such
termination of employment, and the non-retraction during any statutory waiting
periods, of a release in favor of the Company, in the form of the attached
Appendix A."
4. New Section. The Agreement is hereby further modified by the addition of a
new Section 22, as follows:
"22. Change in Control Transaction.
(a) So long as Xx. Xxxxxx is not otherwise in breach of this Agreement,
upon the occurrence during the period commencing August 1, 1997 and ending July
31, 1998 of a Change of Control (as defined in Section 22 (b) of this Agreement)
of the Company, Xx. Xxxxxx shall become eligible for and the Company will pay to
Xx. Xxxxxx an incentive payment (the "Incentive Payment") calculated by
multiplying the sum of Two Hundred Eighty Seven Thousand Dollars ($287,000.00)
times an adjustment factor, as specified herein.
The adjustment factor shall be based on the price realized by the Company and/or
the stockholders by virtue of the Change of Control, where "X" equals Eighteen
($18.00) dollars per share.
--------------------------------------------------------------------------------
Change of Control Price Adjustment Factor
--------------------------------------------------------------------------------
Transaction - Less than or equal to "X" 0.70
--------------------------------------------------------------------------------
Transaction - 116.67% "X" 1.25
--------------------------------------------------------------------------------
Transaction - 133.33% "X" 1.75
--------------------------------------------------------------------------------
Transaction - 150.00% "X" 2.50
--------------------------------------------------------------------------------
For amounts which fall between the percentages specified in the foregoing table,
the Company shall use a straight-line interpolation to determine the adjustment
factor hereunder.
The amount, if any, computed under this Paragraph 13 (a) shall be payable in
three (3) annual installments, the first occurring on the fifteenth (15th) day
after the date of the closing of the transaction and the subsequent payments
occurring on the first two anniversaries of the closing date; provided, however,
that if Xx. Xxxxxx'x employment terminates due to death, disability, expiration
of this Agreement or Xx. Xxxxxx'x discharge without cause prior to the second
anniversary of such closing date, any
remaining installments shall be due and payable upon termination of employment.
If on any such payment date, any portion of the Loan remains outstanding, then
in addition to any payments required under Section 8.3 hereof, one-third of the
outstanding principal plus all accrued interest (or, if less, the entire amount
of outstanding principal and all accrued interest) shall be due and payable to
the Company on the payment date for each installment.
(b) For all purposes of this Agreement a "Change in Control" of IPC
shall be deemed to have occurred upon the happening of any of the following
events:
(i) the closing of a transaction that would result in the
reorganization, merger or consolidation of IPC, respectively, with one or more
other persons in which IPC is not the surviving entity;
(ii) the acquisition of substantially all of the assets of IPC or
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 35% or more of the outstanding securities of IPC entitled to
vote generally in the election of directors by any person or by any persons
acting in concert;
(iii) a complete liquidation or dissolution of IPC; or
(iv) the occurrence of any event in connection with an actual or
threatened election contest or other actual or threatened solicitation of
proxies or consents (all within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) if, immediately following such event, at
least fifty percent (50% of the members of the board of directors of IPC are not
individuals who were members of the board of directors of IPC on the date of
this Agreement.
In no event, however, shall a Change of Control of IPC be deemed to have
occurred as a result of any acquisition of securities or assets of IPC or any of
its subsidiaries by IPC or any subsidiary of IPC. For purposes of this section,
the term "person" shall have the meaning assigned to it under sections 13(d)(3)
or 14(d)(2) of the Exchange Act."
5. New Section. The Agreement is hereby further modified by the addition of a
new Section 23, as follows:
"23. Payment in Excess of Basic Amount.
If, in connection with a change in ownership of effective control or a change in
ownership of a substantial portion of the assets of the Company (within the
meaning of section 280G of the Internal Revenue Code of 1986 (the "Code")), Xx.
Xxxxxx would, in the absence of this Section 23, receive payments and benefits
in the nature of compensation (whether pursuant to this Agreement or otherwise)
(the "Total Payments") that constitute "excess parachute payments" (within the
meaning of section 280G of the Code), then:
(a) the Company shall pay to Xx. Xxxxxx the maximum amount of the Total
Payments that may be paid to him without giving rise to an excise tax under
section 280G of the Code (the "Basic Amount"); and
(b) the Company shall pay the amount by which the Total Payments exceed
the Basic Amount (the "Excess Amount"), to whichever of the following parties it
shall select: (i) Xx. Xxxxxx; and (ii) equally among (A) the Children's Cancer
Fund, (B) the Xxxxxxx Fund, Monmouth Medical Center and (C) Share, Inc.,
Atlanta; provided, however, that the Company shall indemnify Xx. Xxxxxx on a net
after-tax basis against liability for any taxes (whether state, federal, local
or foreign, and whether denominated as income, employment, excise or other
taxes) that may be assessed with respect to any payment made pursuant to Section
23 (b)(ii), it being intended that this indemnity place Xx. Xxxxxx in the same
net after-tax financial position that he would have been in if he had not been
liable for any taxes of any nature with respect to such payment. The Company and
Xx. Xxxxxx agree that the Children's Cancer Fund, the Xxxxxxx Fund, Monmouth
Medical Center and Share, Inc., Atlanta shall be deemed third-party
beneficiaries of this Agreement for purposes of enforcing any rights that it may
have to receive the Excess Amount.
Any determination of the Basic Amount and any determination of any tax
indemnification payment shall be made by independent United States tax counsel
selected by the Company or the independent auditors regularly retained to audit
the Company's books and records in the United States, and such determinations
shall be conclusive in the absence of manifest error or a determination to the
contrary in a judicial, administrative or arbitral proceeding. If the Total
Payments shall consist of more than one component, Xx. Xxxxxx, in his sole and
absolute discretion, shall select which components shall be applied to the
payment of the Basic Amount and which shall be applied to the payment of the
Excess Amount.
All other terms and conditions of the Agreement shall remain in full force and
effect.
Accepted and Agreed, as of this 1st day of August, 1997:
IPC INFORMATION SYSTEMS, INC. XXXXXX XXXXXXX XXXXXX
/s/ Xxxxxxx X. Xxxxxxxxxxx /s/ Xxxxxx X. Xxxxxx
----------------------------- -----------------------------
