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EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of May 27,
1999 by and between IXC Communications, Inc., a Delaware corporation
("Company"), and John M. Zrno ("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 term of this Agreement will commence on
May 27, 1999 (the "Commencement Date") and, unless
terminated earlier under the terms hereof, will
terminate on May 27, 2003.
(b) This Agreement will terminate prior to May 27,
2003, upon the earliest to occur of any of the
following events:
(i) 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(h)
of this Agreement; or
(ii) 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.
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 of the Company ("Board of Directors").
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ARTICLE II
COMPENSATION AND BENEFITS
2.1 COMPENSATION.
(a) 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 eighty-five thousand dollars
($385,000), payable bi-weekly.
(b) Bonuses, if any, are awarded by, and at the sole
discretion of, the Board of Directors.
(c) Employee's base salary may be increased from time
to time in accordance with the Company's policies
and procedures.
2.2 BENEFITS. The Company will make available to Employee the
fringe benefits provided to its senior executive officers,
including group-term life insurance coverage, medical
benefits, (including dental insurance), participation in the
Company's 401(k) Plan, reimbursement of reasonable and
appropriate business expenses, an annual car allowance of
Eight Thousand Dollars ($8,000) payable in monthly
installments, and vacations, all in accordance with the
Company's stated policies and procedures.
2.3 RELOCATION COSTS. The Company will reimburse Employee for the
reasonable costs of (i) living accommodations in Austin
(e.g., hotel or apartment accommodations) for a reasonable
period and (ii) transporting such of Employee's household
goods as he may designate from Dallas, Texas to Austin,
Texas.
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.
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(b) The exercise price per share under the Option
will be thirty-three dollars and ninety-three and
three-fourths cents ($33.9375), which was the NASDAQ
closing price of the stock on May 27, 1999.
(c) The Option will vest as follows: (i) the Option
with respect to the right to acquire 350,000 shares
of common stock vests immediately on May 27, 1999;
and (ii) the Option with respect to the right to
acquire the remaining 150,000 shares of common stock
will vest in equal installments over a four (4) year
period on the first, second, third and fourth
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 (h)
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,
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
after May 27, 2000, the Option with respect to the
right to acquire any shares of common stock that
have not vested will become immediately vested.
Notwithstanding that acceleration in the vesting
of the Option would be available, Employee may elect
not to have the vesting accelerated. For purposes of
this Agreement, the term "Change in Control" means
any of the following:
(A) A successful tender offer for greater
than fifty percent (50%) of the outstanding
capital stock of the Company;
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(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.
(h) 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; provided,
however, that Employee may, at his
discretion, continue to serve on the
Boards of Directors of Teleglobe, Inc.,
FaxNet, Inc. and such other boards as the
directors of the Company shall approve;
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 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 other 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; or
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(vi) Any material breach (not covered by any of
Subparagraphs (i) through (v) of this Paragraph
(h)) 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.
2.5 WITHHOLDING. Any amounts includible in Employee's income as a
result of this Agreement will be subject to all applicable
legal requirements with respect to the withholding of federal,
state, and local taxes and other normal withholdings.
ARTICLE III
FIDELITY
For purposes of this Article III, the term "Company" shall
include IXC Communications, Inc. and its subsidiaries and affiliates.
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.
(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.
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(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 provisions of Paragraph (c) below will apply
from the Commencement Date until the earliest to
occur of the following events:
(i) Until May 27, 2003; or
(ii) The maximum period during which the
provisions of this Section 3.2 can be enforced
under Texas law.
(b) The provisions of Paragraph (c) below will not
apply if the Company terminates the employment of
Employee for a reason that does not constitute
"Cause" under Section 2.4(h) 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;
(iii) Induce or attempt to influence any such
account, customer, or client to curtail or
cancel his or its business with the Company; or
(iv) Induce or attempt to influence any employee
to terminate his or her employment with the
Company.
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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 in accordance with the provisions of this Section 4.6):
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IF TO THE COMPANY:
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
Attn: Chairman
IF TO EMPLOYEE:
John M. Zrno
c/o IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
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.
JOHN M. ZRNO, an individual IXC COMMUNICATIONS, INC.
/s/ By: /s/ Jeffrey C. Smith
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Jeffrey C. Smith
Senior Vice President
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