EXHIBIT 10.11
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and between Quanta
Services, Inc., a Delaware corporation, and its affiliates (collectively,
"Employer"), and Gary W. Smith ("Employee"), is hereby entered into this 13th
day of March 2002 ("Execution Date").
R E C I T A L S
A. As of the Execution Date, Employer is engaged primarily in the business
of specialized construction contracting and/or maintenance services to: electric
utilities; telecommunication, cable television and natural gas operators;
governmental entities; the transportation industry; and commercial and
industrial customers.
B. Employee is employed hereunder by Employer in a position that is
critical to the Employer's continued operation.
C. The Special Committee of the Employer's Board of Directors (the
"Board"), has determined that it is in the best interests of the Employer and
its stockholders to assure that the Employer will have the continued dedication
of the Employee, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Employer. The Board believes it is
imperative to diminish the inevitable distraction of the Employee by virtue of
the personal uncertainties and risks created by a pending or threatened Change
of Control and to encourage the Employee's full attention and dedication to the
Employer currently and in the event of any threatened or pending Change of
Control, and to provide the Employee with compensation and benefits arrangements
upon a Change of Control that ensure that the compensation and benefits
expectations of the Employee will be satisfied and that are competitive with
those of other corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Employer to enter into this Agreement.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and conditions
set forth herein and the performance of each, the parties hereto hereby agree as
follows:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(b)) on which a Change of Control
(as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the
Employee's employment with the Employer is terminated prior to the date on
which the Change of Control occurs, and if the Employee reasonably
demonstrates that such termination of employment (i) was at the request of
a third party who has taken steps reasonably calculated to effect a Change
of Control or (ii) otherwise arose in connection with or anticipation of a
Change of Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination
of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the Execution Date hereof and ending on the third anniversary of the
Execution Date; provided, however, that commencing on the date one year
after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof shall be hereinafter referred to
as the "Renewal Date"), unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 60 days prior to the Renewal Date the
Employer shall give notice to the Employee that the Change of Control
Period shall not be so extended.
(c) The "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) The "Earlier Employment Agreement" shall mean any employment,
severance or change in control agreement between the Employer and the
Employee that existed and was effective as of the Execution Date. The
Employee may elect in writing, on or before the Employee's Date of
Termination, to have any term, provision and/or definition under the
Employees' Earlier Employment Agreement apply in lieu of any similar term,
provision and/or definition of this Agreement, except to the extent that
such application would produce duplicate payments or benefits under this
Agreement and such Earlier Employment Agreement.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) Any person or entity, other than the Employer or an employee
benefit plan of the Employer, acquires directly or indirectly the
Beneficial Ownership (as defined in Section 13(d) of the Exchange Act) of
any voting security of the Employer and immediately after such acquisition
such person or entity is, directly or indirectly, the Beneficial Owner of
voting securities representing 50% or more of the total voting power of all
of the then-outstanding voting securities of the Employer; or
(b) Individuals who, as of the date hereof, constitute the Board, and
any new director whose election by the Board or nomination for election by
the Employer's stockholders was approved by a vote of a majority of the
directors then still in office who were directors as of the date hereof or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the members of the
Board; or
(c) The stockholders of the Employer shall approve a merger,
consolidation, recapitalization or reorganization of the Employer, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not obtained, other than
any such transaction that would result in at least 50% of the total voting
power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned by
at least 50% of the holders of outstanding voting securities of the
Employer immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
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(d) The stockholders of the Employer shall approve a plan of complete
liquidation of the Employer or an agreement for the sale or disposition by
the Employer of all or a substantial portion of the Employer's assets
(i.e., 50% or more of the total assets of the Employer).
3. Employment Period. The Employer hereby agrees to continue the Employee
in its employ, and the Employee hereby agrees to remain in the employ of the
Employer subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Employee's
services shall be performed at the location where the Employee was
employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Employer and, to the
extent necessary to discharge the responsibilities assigned to the
Employee hereunder, to use the Employee's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for
the Employee to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments,
so long as such activities do not significantly interfere with the
performance of the Employee's responsibilities as an employee of the
Employer in accordance with this Agreement. It is expressly understood
and agreed that to the extent that any such activities have been
conducted by the Employee prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Employee's responsibilities to the Employer.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Employee shall
receive an annual base salary ("Annual Base Salary"), which shall be
paid at a monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary that has been
earned but deferred, to the
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Employee by the Employer and its affiliated companies in respect of
the 12-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Employee prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation to the Employee
under this Agreement. Annual Base Salary shall not be reduced after
any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" shall include any
company controlled by, controlling or under common control with the
Employer.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Employee shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at
least equal to the Employee's highest bonus under the Employer's
Management Incentive Bonus Plan, or any comparable bonus under any
predecessor or successor plan, for the last three full fiscal years
prior to the Effective Date (annualized in the event that the Employee
was not employed by the Employer for the whole of such fiscal year)
(the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded,
unless the Employee shall elect to defer the receipt of such Annual
Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Employer
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Employee with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than
the most favorable of those provided by the Employer and its
affiliated companies for the Employee under such plans, practices,
policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable
to the Employee, those provided generally at any time after the
Effective Date to other peer executives of the Employer and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Employer and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives
of the Employer and its affiliated companies, but in no event shall
such plans, practices,
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policies and programs provide the Employee with benefits that are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Employee at any
time during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Employee, those provided generally
at any time after the Effective Date to other peer executives of the
Employer and its affiliated companies.
(v) Expenses. During the Employment Period, the Employee shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Employee in accordance with the most favorable
policies, practices and procedures of the Employer and its affiliated
companies in effect for the Employee at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable
to the Employee, as in effect generally at any time thereafter with
respect to other peer executives of the Employer and its affiliated
companies.
(vi) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses, in
accordance with the most favorable plans, practices, programs and
policies of the Employer and its affiliated companies in effect for
the Employee at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as
in effect generally at any time thereafter with respect to other peer
executives of the Employer and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Employee shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Employee by the Employer and its
affiliated companies at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as
provided generally at any time thereafter with respect to other peer
executives of the Employer and its affiliated companies.
(viii) Vacation. During the Employment Period, the Employee shall
be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Employer and its
affiliated companies as in effect for the Employee at any time during
the 120-day period immediately preceding the Effective Date or, if
more favorable to the Employee, as in effect generally at any time
thereafter with respect to other peer executives of the Employer and
its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death during the Employment Period. If
the
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Employer determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Employee written notice in
accordance with Section 14 of this Agreement of its intention to terminate
the Employee's employment. In such event, the Employee's employment with
the Employer shall terminate effective on the 30th day after receipt of
such notice by the Employee (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Employee shall not have
returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the Employee from
the Employee's duties with the Employer on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a
physician selected by the Employer or its insurers and acceptable to the
Employee or the Employee's legal representative.
(b) Cause. The Employer may terminate the Employee's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Employee to perform
substantially the Employee's duties with the Employer or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Employee by the Board or the Chief
Executive Officer of the Employer that specifically identifies the manner
in which the Board or the Chief Executive Officer believes that the
Employee has not substantially performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Employer.
For purposes of this provision, no act or failure to act, on the part of the
Employee, shall be considered "willful" unless it is done, or omitted to be
done, by the Employee in bad faith or without reasonable belief that the
Employee's action or omission was in the best interests of the Employer. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Employer or based upon the advice of counsel for the
Employer shall be conclusively presumed to be done, or omitted to be done, by
the Employee in good faith and in the best interests of the Employer. The
cessation of employment of the Employee shall not be deemed to be for Cause
unless and until there shall have been delivered to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Employee and the
Employee is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Employee is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
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(c) Good Reason. The Employee's employment may be terminated by the
Employee for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Employee of any duties inconsistent in
any respect with the Employee's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Employer that results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and that is remedied by the Employer promptly after receipt
of notice thereof given by the Employee;
(ii) any failure by the Employer to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
that is remedied by the Employer promptly after receipt of notice
thereof given by the Employee;
(iii) the Employer's requiring the Employee to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Employer's requiring the Employee to travel on Employer
business to a substantially greater extent than required immediately
prior to the Effective Date;
(iv) any purported termination by the Employer of the Employee's
employment otherwise than as expressly permitted by this Agreement;
(v) any failure by the Employer to continue in effect any cash or
stock-based incentive or bonus plan, retirement plan, welfare benefit
plan or other compensation, retirement or benefit plan, practice,
policy, and program, unless the aggregate value (as computed by an
independent employee benefits consultant selected by the Employer and
acceptable to the Employee or the Employee's legal representative) of
all such compensation, retirement or benefit plans, practices,
policies and programs provided to the Employee is not materially less
than their aggregate value as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable
to the Employee, those provided generally at any time after the
Effective Date to other peer executives of the Employer and its
affiliated companies ; or
(vi) any failure by the Employer to comply with and satisfy
Section 13(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Employee shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Employee for any reason during
the 30-day period immediately following the six-month anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
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(d) Notice of Termination. Any termination by the Employer for Cause,
or by the Employee for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 14
of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice that (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's employment
under the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after
the giving of such notice). The failure by the Employee or the Employer to
set forth in the Notice of Termination any fact or circumstance that
contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Employer, respectively, hereunder or preclude the
Employee or the Employer, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Employer's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Employee's employment is terminated by the Employer for Cause, or by the
Employee for Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if the
Employee's employment is terminated by the Employer other than for Cause
or Disability, the Date of Termination shall be the date on which the
Employer notifies the Employee of such termination and (iii) if the
Employee's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Employee or the
Disability Effective Date, as the case may be.
6. Obligations of the Employer upon Termination.
(a) Good Reason; Death; Disability; and Other Than for Cause. If,
during the Employment Period, the Employer shall terminate the Employee's
employment other than for Cause, the Employee shall terminate employment
for Good Reason, or the Employee's employment shall terminate due to death
or Disability:
(i) the Employer shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) the Employee's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2)
the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than 12 full
months or during which the Employee was employed for less than 12
full months), for the most recently completed fiscal year during
the Employment Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of
which is 365 and (3) any
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compensation previously deferred by the Employee (together with
any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations");
and
(B) the amount equal to the product of (1) three and (2) the
sum of (x) the Employee's Annual Base Salary and (y) the Highest
Annual Bonus;
(ii) all stock options, restricted stock or other awards made or
granted under the Quanta Services, Inc. 1997 Stock Option Plan, the
Quanta Services, Inc. 2001 Stock Incentive Plan and/or any similar or
successor stock plan or program, will become fully vested immediately
on or prior to the Employee's Date of Termination. The Employer agrees
that for purposes of determining the continued exercisability of
Employee's stock options outstanding on the Date of Termination,
Employee shall be considered to have remained employed by the Employer
until the third anniversary of the Date of Termination. Nothing in
this subparagraph (ii) shall be deemed to extend the expiration date
of any stock option granted under the applicable stock plan(s) or
program(s) past the original expiration date of such stock option as
determined at the time of grant;
(iii) for three years after the Employee's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Employer shall
continue benefits to the Employee and/or the Employee's family at
least equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies described
in Section 4(b)(iv) of this Agreement if the Employee's employment had
not been terminated or, if more favorable to the Employee, as in
effect generally at any time thereafter with respect to other peer
executives of the Employer and its affiliated companies and their
families, provided, however, that if the Employee becomes reemployed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the time
of commencement of benefits) of the Employee for retiree benefits
pursuant to such plans, practices, programs and policies, the Employee
shall be considered to have remained employed until the third
anniversary of the Date of Termination and to have retired on the last
day of such period;
(iv) the Employer shall, at its sole expense as incurred, provide
the Employee with outplacement services the scope and provider of
which shall be selected by the Employee in his sole discretion;
(v) to the extent not theretofore paid or provided, the Employer
shall timely pay or provide to the Employee any other amounts or
benefits required to
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be paid or provided or which the Employee is eligible to receive under
any plan, program, policy or practice or contract or agreement of the
Employer and its affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits"); and
(vi) the covenant of non-competition, and any other restrictive
covenants applicable to the Employee under any employment or other
agreement between the Employer and the Employee shall cease to apply
effective as of the Date of Termination; except that, if the Employee
voluntarily terminates employment during the 30-day period immediately
following the sixth month anniversary of the Effective Date, the
covenant of non-competition, and any other restrictive covenants
applicable to the Employee under any employment or other agreement
between the Employer and the Employee shall continue to apply.
(b) Death. If the Employee's employment is terminated by reason
of the Employee's death during the Employment Period, the Employer
shall pay the amounts and provide the benefits described in Section
6(a), pay the Accrued Obligations to the Employee's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination, and timely pay or provide the Other Benefits.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Employee's estate and/or beneficiaries shall be
entitled to receive, benefits at least equal to the most favorable
benefits provided by the Employer and affiliated companies to the
estates and beneficiaries of peer executives of the Employer and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect
to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if
more favorable to the Employee's estate and/or the Employee's
beneficiaries, as in effect on the date of the Employee's death with
respect to other peer executives of the Employer and its affiliated
companies and their beneficiaries.
(c) Disability. If the Employee's employment is terminated by
reason of the Employee's Disability during the Employment Period, the
Employer shall pay the amounts and provide the benefits described in
Section 6(a), pay the Accrued Obligations to the Employee's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination, and timely pay or provide the Other Benefits.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Employee shall be entitled after the Disability Effective Date to
receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Employer and its
affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating
to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable
to the Employee and/or the Employee's family, as in effect at any time
thereafter generally with respect to other peer executives of the
Employer and its affiliated companies and their families.
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(d) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated for Cause during the Employment Period,
this Agreement shall terminate without further obligations to the
Employee other than the obligation to pay to the Employee (x) his
Annual Base Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Employee, and (z) Other
Benefits, in each case to the extent theretofore unpaid. If the
Employee voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Employee, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any plan, program,
policy or practice provided by the Employer or any of its affiliated companies
and for which the Employee may qualify, nor, subject to Section 12, shall
anything herein limit or otherwise affect such rights as the Employee may have
under any contract or agreement with the Employer or any of its affiliated
companies. Amounts that are vested benefits or that the Employee is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Employer or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement. The Employer's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Employer may have against the Employee or
others. In no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Employee obtains other employment. The
Employer agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Employee may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Employer, the Employee or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Code Section 7872(f)(2)(A).
9. Certain Additional Payments by the Employer.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Employer or its affiliates to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Code Section 4999 or any interest or
penalties are incurred by the Employee with respect to such excise tax
(such excise tax, together with any such
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interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen or such other certified public accounting firm as
may be designated by the Employee (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Employer and the
Employee within 15 business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is requested by the
Employer. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of
Control, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Employer. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Employer to the Employee within five
days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Employer and
the Employee. As a result of the uncertainty in the application of Code
Section 4999 at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments that will not have
been made by the Employer should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Employer exhausts its remedies pursuant to Section 9(c) and
the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Employer
to or for the benefit of the Employee.
(c) The Employee shall notify the Employer in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Employer of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall apprise the
Employer of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such
notice to the Employer (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Employer
notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(i) give the Employer any information reasonably requested by the
Employer relating to such claim,
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(ii) take such action in connection with contesting such claim as
the Employer shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Employer,
(iii) cooperate with the Employer in good faith in order
effectively to contest such claim, and
(iv) permit the Employer to participate in any proceedings
relating to such claim;
provided, however, that the Employer shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the Employer
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Employee to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Employer shall
determine; provided, however, that if the Employer directs the Employee to
pay such claim and sue for a refund, the Employer shall advance the amount
of such payment to the Employee, on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Employer's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Employee shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Employer pursuant to Section 9(c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Employer's complying with the requirements of Section 9(c)) promptly pay to
the Employer the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Employee of an amount advanced by the Employer pursuant to Section
9(c), a determination is made that the Employee shall not be entitled to
any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall
be forgiven and shall not be required to
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be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Employer all secret or confidential information,
knowledge or data relating to the Employer or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Employer or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the Employer,
the Employee shall not, without the prior written consent of the Employer or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Employer and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
11. Insurance and Indemnification. For the period from the Effective Date
through at least the tenth anniversary of the Employee's termination of
employment from the Employer, the Employer shall maintain the Employee as an
insured party on all directors' and officers' insurance maintained by the
Employer for the benefit of its directors and officers on at least the same
basis as all other covered individuals and provide the Employee with at least
the same corporate indemnification as it provides to the peer executives of the
Employer.
12. Earlier Employment Agreement. Except as provided in the following
sentence, from and after the Effective Date, this Agreement shall supersede any
other agreement between the parties with respect to the subject matter hereof.
The Employee may elect in writing to have any term, provision and/or definition
under the Employees' Earlier Employment Agreement apply in lieu of any similar
term, provision and/or definition of this Agreement, except to the extent that
such application would produce duplicate payments or benefits under this
Agreement and such Earlier Employment Agreement. All determinations required to
be made under this Section, including whether and when a term, provision and/or
definition under the Employees' Earlier Employment Agreement would produce
duplicate payments or benefits under this Agreement and such Earlier Employment
Agreement and the assumptions to be utilized in arriving at such determination,
shall be made by the Accounting Firm or such other nationally recognized
compensation and benefits consulting firm as the Employee may designate, which
shall provide detailed supporting calculations both to the Employer and the
Employee within 15 business days of the receipt of written notice from the
Employee, or such earlier time as is requested by the Employer. All fees and
expenses of the Accounting Firm (or such other firm designated) shall be borne
solely by the Employer.
13. Successors.
(a) This Agreement is personal to the Employee and without the prior
written consent of the Employer shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Employee's legal representatives.
-14-
(b) This Agreement shall inure to the benefit of and be binding upon
the Employer and its successors and assigns.
(c) The Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Employer to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Employer would be required to perform it if no such
succession had taken place. As used in this Agreement, "Employer" shall
mean the Employer as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
14. Notice. Any notice required pursuant to this Agreement will be in
writing and will be deemed given upon the earlier of (i) delivery thereof, if by
hand, (ii) three business days after mailing if sent by mail (registered or
certified mail, postage prepaid, return receipt requested), (iii) the next
business day after deposit if sent by a recognized overnight delivery service,
or (iv) upon transmission if sent by facsimile transmission or by electronic
mail, with return notification (provided that any notice sent by facsimile or
electronic mail shall also promptly be sent by one of the means described in
clauses (i) through (iii) of this Section. Any notice or document required to be
given or filed with the Employer is properly given or filed if delivered to the
Employer at 1360 Post Oak Boulevard, Suite 2100, Houston, Texas 77056,
Attention: General Counsel. Any notice or document required to be given or filed
with a Employee is properly given or filed if delivered to the Employee at the
most recent address shown on the Employer's records. A party may change its
address for notice by the giving of notice thereof in the manner hereinabove
provided.
15. Severability, Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement. shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
section headings herein are for reference purposes only and are not intended in
any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. Arbitration. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas, in accordance with the rules of the American Arbitration
Association for the Resolution of Employment Disputes in effect on the date of
the event giving rise to the claim or the controversy; provided, however, that
the evidentiary standards set forth in this Agreement shall apply. Judgment may
be entered on the arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the contrary, the Employee
shall be entitled to seek specific performance of the Employee's right to be
paid until the Employee's Date of Termination during the pendency of any dispute
or controversy arising under or in connection with this Agreement. A decision by
a majority of the arbitration panel shall be final and binding. The direct
expense of any arbitration proceeding shall be borne by Employer.
17. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Texas, without reference to principles of
conflict of laws. The captions
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of this Agreement are not part of the provisions hereof and shall have no force
or effect. This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
18. Withholding. The Employer may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
19. No Waiver. The Employee's or the Employer's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Employee or the Employer may have hereunder, including, without
limitation, the right of the Employee to terminate employment for Good Reason,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
20. Claims. All claims by the Employee for payments or benefits under this
Agreement shall be directed to and determined by the Employer's Board of
Directors (or such committee to which the Board delegates authority under this
Section) and shall be in writing. Any denial by the Board (or such committee) of
a claim for benefits under this Agreement shall be delivered to the Employee in
writing and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board (or committee) shall afford
the Employee a reasonable opportunity for a review of the decision denying a
claim and shall further allow the Employee to appeal the decision within 60 days
after the Board (or committee) gives notice that it has denied Employee's claim.
21. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand and,
pursuant to the authorization from its Board of Directors, the Employer has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
QUANTA SERVICES, INC.
/s/ Gary W. Smith
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By: /s/ John R. Colson
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Its: Chief Executive Officer
----------------------------