SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.17
Execution Copy
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), dated as of January
29, 2008, and effective as of January 1, 2008 (the “Effective Date”), is made by and between
LodgeNet Entertainment Corporation, a Delaware corporation (the “Corporation”), and Xxxxx X.
Xxxxxxxx (“Executive”) with reference to the following circumstances, namely:
RECITALS
| A. | Executive is employed by Corporation as its Chairman of the Board, President and Chief Executive Officer, and as such is, and will be, making an important contribution to the development and operation of Corporation’s business. |
| B. | On July 22, 1998, Executive and the Corporation entered into an Employment Agreement, which was amended and restated by an Amended and Restated Employment Agreement, effective January 1, 2002 (the “Original Employment Agreement”). |
| C. | The Corporation and Executive desire to further amend and restate the Original Employment Agreement. |
AGREEMENT
NOW, THEREFORE, in consideration of the provisions of this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Corporation agrees to continue to employ Executive, and Executive agrees to continue such
employment, upon the following terms and conditions:
1. PERIOD OF EMPLOYMENT. The employment of Executive by the Corporation pursuant to this
Agreement shall be for a period (sometimes referred to herein as the “period of employment”)
beginning on the Effective Date and continuing, unless sooner terminated as provided in Section 6
herein, through December 31, 2010; provided, however, that on each succeeding December 31,
commencing December 31, 2009, such period of employment shall automatically be extended for an
additional year (to result thereafter in a rolling two-year term of employment hereunder) unless
sixty (60) days prior thereto either party hereto has given written notice to the other that such
party does not wish to extend the period of employment.
2. DUTIES. During the period of employment, Executive shall serve as Chairman of the Board,
President and Chief Executive Officer of the Corporation, and in such other additional office or
offices to which he shall be elected by the Board of Directors of the Corporation (“Board”) with
his approval, performing the duties of such office or offices held at the time and such other
duties not inconsistent with his position as such an officer or director as are assigned to him by
the Board or committees of the Board. During the period of employment, Executive shall devote his
full-time attention to the business of the Corporation and the discharge of the aforementioned
duties, except for permitted vacations, absences due to illness, and reasonable time for attention
to personal affairs and charitable activities.
3. OFFICE FACILITIES. During the period of employment, Executive shall have his office where
Corporation’s principal offices are located from time to time, which currently are at 0000 Xxxx
Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx, and the Corporation shall furnish Executive with
office facilities reasonably suitable to his position at such location.
4. COMPENSATION. As compensation for his services performed hereunder, the Corporation shall
pay or provide to Executive the following:
(a) Base Salary. The Corporation shall pay Executive a base salary (the “Base
Salary”), calculated at the rate of Five Hundred Eighty-Five Thousand Dollars ($585,000.00)
per annum (which Base Salary may be increased, but not reduced, by the Board at any time and
from time to time in its discretion), payable monthly, semi-monthly or weekly according to
the Corporation’s general practice for its executives, for the period of employment under
this Agreement. Executive’s Base Salary shall be reviewed by the Board and shall be subject
to increase each year by an amount determined by the Board. Such Base Salary, including any
such annual increases (which shall be considered part of the Base Salary), shall not be
reduced during the period of employment hereunder.
(b) Bonus. For each of the years in the period of employment, Executive shall
be eligible to receive in cash an annual performance bonus (the “Bonus”). The Board shall
develop the Bonus formula, targets and criteria for determining achievement of such targets
in consultation with Executive; provided, however, that any such formula, target and
criteria shall provide Executive with the opportunity to earn at least 70% of Base Salary
upon the achievement of 100% of target. The Bonus targets and criteria for determining
achievement of such targets shall be referred to herein as the “Bonus Plan.”
(c) Other Bonus and Incentive Plans. During the period of employment,
Executive shall be allowed to participate in such bonus and other incentive compensation
programs in accordance with their terms as the Corporation may have in effect from time to
time for its executive personnel, other than any annual cash bonus plan (which is dealt with
in Section 4(b) hereof), and all compensation and other entitlements earned thereunder shall
be in addition to, and shall not in any way reduce, the amount payable as Base Salary and
Bonus.
(d) Health, Welfare and Retirement Plans; Vacation. During the period of
employment, Executive shall be entitled to:
(i) participate in such retirement, deferred compensation, investment, health
(medical, hospital and/or dental) insurance, life insurance, disability insurance,
flexible benefits arrangements and accident insurance plans and programs as are
maintained in effect from time to time by the Corporation for its executive
employees;
(ii) participate in other non-duplicative benefit programs which the
Corporation may from time to time offer generally to executive personnel of the
Corporation;
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(iii) cash payments in addition to Base Salary, Bonus, or any other benefits
hereunder, in an amount to be set by the Board for each year during the period of
employment, and which shall be $36,000 for 2008, to enable the Executive to purchase
such other benefits as Executive deems necessary or advisable; such amount shall be
paid annually in twelve equal monthly installments on or about the 20th day of each
month, and to the extent permitted by law shall be paid on a pre-tax basis; and
(iv) take vacations and be entitled to sick leave in accordance with the
Corporation’s policy for executive personnel of the Corporation.
(e) Equity Incentive Awards. Executive shall receive annual equity awards,
which may consist of time-vested restricted stock; performance-vested restricted stock;
options; or other types of equity-based grants, with the type, number, vesting schedule or
milestones, if any, and exercise price, if appropriate, to be determined by the Board. In
making such determination, the Board shall take into account Executive’s individual
performance and performance of the Corporation as a whole, including Executive’s performance
against the then applicable Bonus Plan targets.
(f) Car Allowance. During the period of employment, the Corporation shall
provide Executive with a monetary allowance in an amount acceptable to Executive which is
approved by the Board for the lease of a suitable automobile and insurance therefore;
provided, that such amount shall not be less than $1,100 per month.
(g) Expenses. Executive shall be reimbursed for reasonable business expenses
incurred in connection with the performance of his duties hereunder consistent with the
Company’s policy regarding reimbursement of such expenses. In addition, Executive shall be
reimbursed by the Corporation for Executive’s reasonable and documented legal and accounting
fees incurred in connection with entering into this Agreement. With respect to any benefits
or payments received or owed to Executive hereunder, Executive shall cooperate in good faith
with the Corporation to structure such benefits or payments in the most tax efficient manner
to the Corporation; provided, that Executive shall have no obligation to take any action
that is reasonably determined by Executive to be adverse to Executive, including without
limitation agreeing to alter Executive’s rights under Section 7(b) (iv) hereof.
5. EFFECT OF DISABILITY AND CERTAIN HAZARDS. Executive shall not be obligated to perform the
services required of him by this Agreement during any period in which he is disabled or his health
is impaired to an extent which would render his performance of such services hazardous to his
health or life, and relief from such obligation shall not in any way affect his rights hereunder
except to the extent that such disability may result in termination of his employment by the
Corporation pursuant to Section 6 herein.
6. TERMINATION OF EMPLOYMENT. The employment of Executive by the Corporation pursuant to this
Agreement may be terminated by the Corporation or the Executive at any time, as follows:
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(a) Death. In the event of Executive’s death prior to the expiration of the
period of employment hereunder, such employment shall terminate on the date of death.
(b) Permanent Disability. Such employment may be terminated by the Corporation
prior to the expiration of the period of employment hereunder due to Executive’s physical or
mental disability which prevents the effective performance by Executive of his duties
hereunder on a full-time basis, with such termination to occur on or after (i) the date on
which Executive becomes entitled to disability compensation benefits under Executive’s
long-term disability benefit policy then in effect, or (ii) in the event that no such policy
is in effect, the date of the determination of an impartial physician in the manner set
forth in the next sentence that Executive is permanently disabled. Any dispute as to
Executive’s physical or mental disability shall be settled by the opinion of an impartial
physician selected by the parties or their representatives or, in the event of failure to
make a joint selection after request therefor by either party to the other, a physician
selected by the Corporation, with the fees and expenses of any such physician to be borne by
the Corporation.
(c) Cause. The Corporation, by giving written notice of termination to
Executive, may terminate Executive’s employment at any time prior to the expiration of the
Term for Cause, with Cause to be determined by the Board after reasonable written notice to
Executive and an opportunity for Executive to be heard at a meeting of the Board and with
reasonable opportunity (of not less than 30 days) in the case of willful neglect of material
duties to cease such neglect. For purposes of this Section 6(c), no act or failure to act
on the Executive’s part shall be considered “willful” unless done or omitted to be done by
Executive not in good faith and without reasonable belief that his action or omission was in
the best interest of the Corporation.
(d) Cause means that such termination must be due to (1) acts committed during the Term
of this Agreement resulting in a felony conviction under any federal or state statute; (2)
willfully engaging in dishonest or fraudulent action or omission resulting or intended to
result in any demonstrable and material financial or economic harm to the Corporation, or
which materially damages the Corporation’s reputation; or (3) willful breach of this
Agreement, willful neglect of the material duties of the Executive under this Agreement,
gross and willful misconduct, or willful and material violation of (x) the Corporation’s
Code of Business Conduct and Ethics or (y) the Corporation’s Employee Handbook (as amended
from time to time) which results in or is reasonably likely to result in any demonstrable
and material financial or economic harm to the Corporation or material damage to the
Corporation’s reputation.
(e) Without Cause. The Corporation may terminate such employment at any time
prior to said date without Cause (which shall be for any reason not covered by preceding
subsections (a) through (c)) upon 60 days prior written notice to Executive.
(f) By Executive. Executive may terminate such employment at any time for an
applicable Good Reason (subject to Section 6(g)) or otherwise upon written notice thereof to
the Corporation.
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(g) Notice of Good Reason. If Executive believes that he is entitled to
terminate his employment with the Corporation for an applicable Good Reason, he may apply in
writing to the Corporation for confirmation of such entitlement prior to the Executive’s
actual separation from employment, by following the claims procedure set forth in Section 11
hereof. The submission of such a request by an Executive shall not constitute “Cause” for
the Corporation to terminate Executive under Section 6(c) hereof; and Executive shall
continue to receive all compensation and benefits he was receiving at the time of such
submission throughout the resolution of the matter pursuant to the procedures set forth in
Section 11 hereof. If the Executive’s request for a termination of employment for Good
Reason is denied under both the request and appeal procedures set forth in Sections 11(a)
and (b) hereof, then the parties shall promptly submit the claim to binding arbitration
pursuant to Section 11(c) and use their best efforts to conclude the arbitration within
ninety (90) days after the claim is submitted.
(h) Notice of Termination. Any termination of the Executive’s employment by
the Corporation or by the Executive (other than termination based on the Executive’s death)
shall be communicated by a written Notice of Termination to the other party hereto. 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 of the Executive’s employment under the provision so indicated. For purposes of
this Agreement, no purported termination shall be effective without the delivery of such
Notice of Termination.
(i) Date of Termination. The date of termination of Executive’s employment
shall mean (i) if the Executive is terminated by his death, the date of his death, (ii) if
the Executive’s employment is terminated due to a permanent disability, thirty (30) days
after the Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties on a full-time basis during such period), (iii) if
the Executive’s employment is terminated pursuant to a termination for Cause, the date
specified in the Notice of Termination, and (iv) if the Executive’s employment is terminated
for any other reason, the date of termination shall be the later of thirty (30) days after
termination as provided by the Notice of Termination or the date of the final resolution of
the arbitration and claims procedures set forth in Section 11 hereof, unless otherwise
agreed by the Executive and Corporation or otherwise provided in this Agreement.
7. PAYMENTS UPON TERMINATION.
(a) Except as otherwise provided in subsection (b) of this Section 7, upon termination
of Executive’s employment by the Corporation, all compensation due Executive under this
Agreement and under each plan or program of the Corporation in which he may be participating
at the time shall cease to accrue as of the date of such termination (except, in the case of
any such plan or program, if and to the extent otherwise provided in the terms of such plan
or program or by applicable law), and all such compensation accrued as of the date of such
termination but not previously paid shall be paid to Executive at the time such payment
otherwise would be due, and in any
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event no later than the Last Payment Date. If the termination of Executive’s
employment is by the Corporation not for Cause, or by the Executive for Good Reason,
Executive shall be entitled to a payment equal to the greater of (i) Executive’s actual
bonus for the preceding year, pro rata based on the portion of the year ended on the date of
the termination, or (ii) the amount which would have been earned by Executive under his then
current Bonus Plan, pro rata based on the portion of the year ended on the date of
termination, and computed based on actual results for such year. Any such payment shall be
paid to the Executive within ten (10) days of the date of termination and in any event no
later than the Last Payment Date.
(b) If Executive’s employment pursuant to this Agreement is terminated pursuant to
subsection (d) of Section 6 herein, the Corporation elects at any time not to renew or
extend this Agreement pursuant to Section 1 or Executive terminates this Agreement for Good
Reason, then, in addition to the payments required by subsection (a) of this Section 7,
Executive shall be entitled to and shall receive:
(i) Severance Payment. Executive shall receive a lump sum cash payment
(the “Severance Payment”) from the Corporation. The amount of the Severance Payment
shall be an amount equal to the sum of Executive’s annual Base Salary and Bonus,
multiplied by the Applicable Multiplier (as hereinafter defined). For purposes of
this Section 7(b),
(A) Executive’s Base Salary shall be the higher of Executive’s annual
Base Salary in effect immediately prior to such termination or Executive’s
annual Base Salary determined pursuant to Section 4(a), and
(B) Executive’s Bonus shall be an amount equal to the greater of (1)
Executive’s bonus for the preceding year or (2) an amount (i) for years
2008, 2009 and 2010, determined assuming that 87.5% of the target for such
Bonus has been met, and (ii) for year 2011 and subsequent years, determined
using a formula that results in a Bonus that is equal to the same percentage
of annual Base Salary determined pursuant to Section 7(b)(i)(B)(2)(i) for
year 2010
The Severance Payment shall be due and payable within ten (10) days after the date
of termination of employment, but no later than the Last Payment Date. The
Severance Payment is subject to required withholding.
(ii) Acceleration of Vesting. All options to purchase the
Corporation’s common stock held by Executive at the time of such termination but
still subject to vesting, shall be fully and immediately vested and shall be
exercisable until the first to occur of (x) the expiration date of the applicable
option or (y) four (4) years following the date of termination. All grants of
restricted stock or other rights related to shares of the Corporation’s common stock
shall be immediately vested (or the risk of forfeiture, as appropriate, shall
terminate and all restrictions or conditions to the receipt of such shares shall be
waived, for 100% of the “target” shares that were to have been delivered to the
Executive under any
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performance-based plan and 100% of the shares subject to a time-based vesting
plan) and shall be delivered to Executive free of all restrictions within ten (10)
days of the date of termination. All other benefits or interests of Executive in
any of the Corporation’s plans or arrangements which are subject to vesting shall be
fully and immediately vested.
(iii) Benefits. During the Severance Period, Executive shall be
entitled to the continuation of the same or equivalent life, health,
hospitalization, dental and disability insurance coverage and other employee
insurance or welfare benefits that he had received (including equivalent coverage
for his spouse and dependent children) immediately prior to termination of
employment, as if he had continued to be an executive employee of the Corporation.
In the event that Executive is ineligible under the terms of such insurance to
continue to be so covered, the Corporation shall provide the Executive with
substantially equivalent coverage through other sources or will provide Executive
with a lump-sum payment equal to the cost of obtaining such coverage for the
Severance Period. If Executive was receiving any cash-in-lieu payments designed to
enable Executive to obtain insurance coverage of his choosing, the Corporation
shall, in addition to any other benefits to be provided under this Section, provide
Executive with a lump-sum payment equal to the amount of such in-lieu payments that
Executive would have been entitled to receive over the Severance Period, no later
than the Last Payment Date. Following the Severance Period, Executive shall be
entitled to receive continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, treating the end of the Severance Period as
a termination of the Executive’s employment.
(iv) Tax Gross-Up. If any payments received by Executive pursuant to
this Agreement will be subject to the excise tax (the “Excise Tax”) imposed by
Section 4999 or Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), or any successor or similar provision of the Code, the Corporation shall
pay to the Executive additional compensation such that the net amount received by
the Executive after deduction of any Excise Tax (and taking into account any
federal, state and local income taxes payable by the Executive as a result of the
receipt of such gross-up compensation), shall be equal to the total payments he
would have received had no such Excise Tax (or any interest or penalties thereon)
been paid or incurred. The Corporation shall pay such additional compensation no
later than the Last Payment Date. The calculation of the tax gross-up payment shall
be approved by the Corporation’s independent certified public accounting firm and
the Executive’s designated financial advisor.
(c) Additional Requirement for Severance Compensation. The amounts payable
pursuant to this Section 7 shall be paid only upon an Executive’s execution and delivery to
the Corporation of an agreement and general release, in such form as is acceptable to the
Corporation, in its sole discretion, under which, among other things, the Executive shall
release and discharge the Corporation and related persons from all claims and liabilities
relating to the Executive’s employment with the Corporation and/or the termination of the
Executive’s employment, including without limitation, claims under
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the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act,
where applicable. Subject to Section 16 hereof, payment of the amounts payable pursuant to
this Section 7 will be paid only after the Release Effective Date and expiration of all
periods of permitted rescission under federal or state
8. CONFIDENTIAL INFORMATION. Executive shall not at any time during the period of employment
and thereafter disclose to others or use any trade secrets or any other confidential information
belonging to the Corporation or any of its subsidiaries, including, without limitation, drawings,
plans, programs, specifications and non-public information relating to customers of the Corporation
or its subsidiaries except as may be required to perform his duties hereunder. The provisions of
this Section 8 shall survive the termination of Executive’s employment with the Corporation,
provided that after the termination of Executive’s employment with the Corporation, the
restrictions contained in this Section 8 shall not apply to any such trade secret or confidential
information which becomes generally known in the trade.
9. PATENTS AND OTHER INTELLECTUAL PROPERTY. The Corporation shall be entitled to any and all
ideas, know-how and inventions, whether patentable or not, which Executive shall conceive, make or
develop during the period of his employment with the Corporation, relating to the business of the
Corporation or any of his subsidiaries. Executive shall, from time to time, at the request of the
Corporation, execute and deliver such instruments or documents, and shall perform or do such acts
or things, as reasonably may be requested in order that the Corporation may have the benefit of
such ideas, know-how and inventions and, in particular, so that patent applications may be prepared
and filed in the United States Patent Office, or in appropriate places in foreign countries,
covering any of the patentable ideas on inventions covered by this Agreement aforesaid, including
appropriate assignments vesting in the Corporation or any of its subsidiaries (or any successor to
the Corporation or any of its subsidiaries) full title to any and all such ideas, inventions and
applications.
Further Executive will cooperate and assist the Corporation in the prosecution of any such
applications in order that patents may issue thereon.
10. NON-COMPETITION; NON-MITIGATION; LITIGATION EXPENSES.
(a) Executive shall not be required to mitigate the amount of any termination benefits
due him under Section 7 herein, by seeking employment with others, or otherwise, nor shall
the amount of such benefits be reduced or offset in any way by any income or benefits earned
by Executive from another employer or other source.
(b) For a period of twenty-four (24) months after Executive’s termination of employment
hereunder, Executive shall not enter into endeavors that involve a Competing Business (as
defined below), and shall not own an interest in, manage, operate, join, control, lend money
or render financial or other assistance to or participate in or be connected with, as an
officer, employee, director, partner, stockholder (except for passive investments of not
more than a one-percent interest in the securities of a publicly-held corporation regularly
traded on a national securities exchange or in an over-the-counter securities market),
consultant or otherwise, any individual, partnership, firm, corporation or other business
organization or entity that engages in a business which is
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involved principally in the provision of video or broadband services to lodging or
healthcare facilities in the United States (a “Competing Business”). For these purposes, an
entity involved in the cable, satellite or other pay television business generally shall not
be deemed to be a Competing Business if (i) the provision of video or broadband services to
lodging or healthcare facilities comprises less than twenty percent (20%) of the revenues of
such entity and (ii) Executive’s principal duties do not involve operation or oversight of
that portion of the enterprise involved in the provision of video or broadband services to
lodging or healthcare facilities). In the event that Executive violates the provisions of
this subparagraph (b), the Corporation shall have the right, in addition to such other
remedies as the Corporation may have available to it, to recover that portion of the amounts
paid to Executive pursuant to the provisions of Section 7 hereof which relate to the period
of time Executive is found to have been in violation of the terms of this subparagraph.
(c) For a period of twenty-four (24) months after Executive’s termination of employment
hereunder, Executive shall not hire or attempt to hire any employee of the Corporation,
assist in such hiring by any person or encourage any employee to terminate his or her
employment relationship with the Corporation; provided, however, that it shall not be a
breach of this Section 10(c) if Executive or Executive’s employer hires persons that are at
the time employees of the Corporation as a result of (i) Executive or Executive’s employer
conducting generalized solicitations by way of advertisements, engaging firms to conduct
searches or by other means that are not focused on employees of the Corporation, or (ii)
Executive or Executive’s employer responding to unsolicited requests or contacts by
employees of the Corporation.
(d) The Corporation shall pay Executive’s out-of-pocket expenses, including attorneys’
fees, but not to exceed a total of $25,000 for any proceeding or group of related
proceedings to enforce, construe or determine the validity of the provisions for termination
benefits in Section 7 herein; provided, however, that if any arbitration or litigation
results in a finding in favor of the Executive, then Executive will be reimbursed for all
reasonable legal and related costs regardless of the limitation set forth above; and further
provided that in no event will Executive be held liable for the legal and related costs of
the Corporation in any event of a finding in favor of the Corporation. Executive
acknowledges that any breach of Sections 8, 9, or 10(b) or (c) would damage the Corporation
irreparably and consequently, the Corporation, in addition to any other remedies available
to it, shall be entitled to preliminary and permanent injunctions, without having to post
any bond or other security.
11. ADMINISTRATOR AND CLAIMS PROCEDURE
(a) The Executive, or other person claiming through the Executive, must file a written
claim with the Board as a prerequisite to the payment of any such claim under this
Agreement. The Board shall make all determinations as to the right of any person to receive
payment of claims under subsections (a) and (b) of this Section 11. Any denial by the Board
of a claim by the Executive, his heir or personal representative (“the claimant”) shall be
stated in writing by the Board and delivered or mailed to the claimant within 10 days after
receipt of the claim, unless special circumstances require an
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extension of time for processing the claim. If such an extension is required, written
notice of the extension shall be furnished to the claimant prior to the termination of the
initial 10-day period. In no event shall such extension exceed a period of 10 days from the
end of the initial period. Any notice of denial shall set forth the specific reasons for
the denial, specific reference to pertinent provisions of this Agreement upon which the
denial is based, a description of any additional material or information necessary for the
claimant to perfect his claim, with an explanation of why such material or information is
necessary, and any explanation of claim review procedures, written to the best of the
Board’s ability in a manner that may be understood without legal or actuarial counsel.
(b) A claimant whose claim has been wholly or partially denied by the Board may
request, within 10 days following the date of such denial, in a writing addressed to the
Board, a review of such denial. The claimant shall be entitled to submit such issues or
comments in writing or otherwise as he shall consider relevant to a determination of his
claim, and he may include a request for a hearing in person before the Board. Prior to
submitting his request, the claimant shall be entitled to review such documents as the Board
shall agree are pertinent to his claim. The claimant may, at all stages of review, be
represented by counsel, legal or otherwise, of his choice, provided that only the first
$25,000 of such fees and expenses shall be borne by the Corporation, unless the claimant is
successful, in which case, all such fees and expenses shall be borne by the Corporation.
All requests for review shall be promptly resolved. The Board’s decision with respect to
any such review shall be set forth in writing and shall be mailed to the claimant not later
than 10 days following the receipt by the Board of the claimant’s request unless special
circumstances, such as the need to hold a hearing, require an extension of time for
processing, in which case the Board’s decision shall be so mailed not later than 20 days
after receipt of such request.
(c) A claimant who has followed the procedure in subsections (a) and (b) of this
section, but who has not obtained full relief on his claim, may submit such claim for
expedited and binding arbitration of his claim before an arbitrator in Minnehaha County,
South Dakota, in accordance with the commercial arbitration rules of the American
Arbitration Association, as then in effect, or pursuant to such other form of alternative
dispute resolution as the parties may agree (collectively, the “arbitration”). The
Corporation shall advance the filing fees, arbitrator fees and other costs required to
conduct the arbitration, as well as up to $25,000 for Executive’s initial attorney fees
(which fees and costs shall not be recoverable by the Corporation). The Corporation shall
reimburse all of Executive’s remaining reasonable fees and expenses if Executive prevails in
his claim, as determined by such arbitrator. The arbitrator’s sole authority shall be to
interpret and apply the provisions of this Agreement; the arbitrator shall not change, add
to, or subtract from, any of its provisions. The arbitrator shall be appointed by mutual
agreement of the Corporation and the claimant pursuant to the applicable commercial
arbitration rules. The arbitrator shall be a professional person with a national reputation
for expertise in employee benefit matters and who is unrelated to the claimant and any
employees of the Corporation. All decisions of the arbitrator shall be final and binding on
the claimant and the Corporation.
12. MISCELLANEOUS.
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(a) This Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Corporation, including any party with which the Corporation
may merge or consolidate or to which it may transfer substantially all of its assets and the
Corporation shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise), by agreement in form and substance reasonably satisfactory to
Executive, to expressly assume and agree to perform the obligations of the corporation under
this Agreement in the same manner and to the same extent that the Corporation would be
required to perform this Agreement if no such succession had taken place. Failure of the
Corporation to obtain such agreement prior to the effective date of any such succession
shall be a breach of this Agreement and shall entitle the Executive to compensation from the
Corporation in the same amount and on the same terms as he would be entitled to receive
hereunder if he terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes effective shall be
deemed the date of termination. As used in this Agreement, “Corporation” shall mean the
Corporation as hereinbefore defined and any successor to its business and/or assets as
aforesaid, which successor executes and delivers the agreement provided for in this Section
12(a) or which otherwise becomes bound by the terms and provisions of this Agreement by
operation of law.
(b) The rights and obligations of Executive under this Agreement are expressly declared
and agreed to be personal, nonassignable and nontransferable during his life, but upon his
death, this Agreement shall inure to the benefit of his heirs, legatees and legal
representatives of his estate.
(c) The waiver by either party hereto of its rights with respect to a breach of any
provision of this Agreement by the other shall not operate or be construed as a waiver of
any rights with respect to any subsequent breach.
(d) No modification, amendment, addition, alteration or waiver of any of the terms,
covenants or conditions hereof shall be effective unless made in writing and duly executed
by the Corporation and Executive.
(e) This Agreement may be executed in any number of counterparts, each of which shall
be deemed an original, but all of which together will constitute but one and the same
agreement.
(f) This Agreement shall be governed by and construed in accordance with the laws of
the State of South Dakota, without regard to the conflicts of law principles thereof.
(g) If any provision of this Agreement is determined to be invalid or unenforceable
under any applicable statute or rule of law, it is to that extent to be deemed omitted and
it shall not affect the validity or enforceability of any other provision.
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(h) Any notice required or permitted to be given under this Agreement shall be in
writing, and shall be deemed given when sent by registered or certified mail, postage
prepaid, addressed as follows:
| If to Executive: | Xxxxx X. Xxxxxxxx | |||
| 00 Xxxxxxxxx Xxxxxxx | ||||
| Xxxxx Xxxxx, XX 00000 | ||||
| If to the Corporation: | LodgeNet Entertainment Corporation | |||
| 0000 Xxxx Xxxxxxxxxx Xxxxxx | ||||
| Xxxxx Xxxxx, XX 00000-0000 | ||||
| Attn: General Counsel |
or mailed to such other person and/or address as the party to be notified may
hereafter have designated by notice given to the other party in a similar manner.
(i) As used in this Agreement, the following terms have the meanings given:
“Applicable Multiplier” shall mean 2, unless Executive’s employment is
terminated by the Corporation, or by Executive for Good Reason, within
twenty-four months of a Change in Control, in which case “Applicable
Multiplier” shall mean 2.5.
“Change in Control” of the Corporation shall mean the occurrence of any of
the following:
(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) in effect on the
Effective Date) or group of other persons acting in concert (other than Corporation
or any subsidiary thereof or any employee benefit plan of Corporation or any
subsidiary thereof, or any underwriter in connection with a firm commitment public
offering of Corporations’ capital stock) becomes the “beneficial owner” (as such
term is defined in Rule 13d-3 of the Exchange Act, except that a person shall also
be deemed the beneficial owner of all securities which such person may have a right
to acquire, whether or not such right is presently exercisable), directly or
indirectly, of securities of Corporation representing thirty percent (30%) or more
of the combined voting power of Corporation’s then outstanding securities ordinarily
having the right to vote in the election of directors (“voting stock”); or
(ii) during any period subsequent to the Effective Date, a majority of the
members of the Board shall for any reason not be (i) the individuals who at
the beginning of such period constitute the Board or (ii) those persons who
are nominated as new directors by a majority of the current directors or
their successors who have been so nominated; or
(iii) there shall be consummated any merger, consolidation (including a
series of mergers or consolidations), or any sale, lease, exchange or other
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transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of Corporation (meaning assets representing
thirty percent (30%) or more of the net tangible assets of Corporation or
generating thirty percent (30%) or more of Corporation’s operating cash
flow, in each case measured over Corporation’s last four full fiscal
quarters), or any other similar business combination or transaction, but
excluding any business combination or transaction which: (i) would result
in the voting stock of Corporation immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
stock of the surviving entity) more than 70% of the combined voting power of
the voting stock of the Corporation (or such surviving entity) outstanding
immediately after giving effect to such business combination or transaction;
or (ii) would be effected to implement a recapitalization (or similar
transaction) of Corporation in which no “person” (as defined in subsection 1
hereof) or group of persons acting in concert becomes the beneficial owner
(as defined in subsection 1 hereof) of thirty percent (30%) or more of the
combined voting power of the then outstanding voting stock of Corporation;
or
(iv) the adoption of any plan or proposal for the liquidation or dissolution of
Corporation; or
(v) the occurrence of any other event that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A of the Exchange Act in
effect on the Effective Date.
“Good Reason”, in the event of a Change in Control, shall mean the occurrence
of any of the following:
(i) the assignment to Executive of any duties inconsistent with Executive’s
positions, duties, responsibilities and status with the Corporation immediately
prior to a Change in Control, or a significant adverse alteration in the nature of
Executive’s reporting responsibilities, titles, or offices as in effect immediately
prior to a Change in Control, or any removal of Executive from, or any failure to
reelect Executive to, any such positions, except in connection with a termination of
the employment of Executive for Cause, permanent disability, or as a result of
Executive’s death or by Executive other than for Good Reason;
(ii) a reduction by Corporation in Executive’s Base Salary in effect
immediately prior to a Change in Control;
(iii) any material breach by Corporation of any provisions of this Agreement;
(iv) failure by Corporation to continue in effect (without substitution of a
substantially equivalent plan) any compensation plan, bonus or incentive plan, stock
purchase plan, stock option plan, life insurance plan, health plan, disability
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plan or other benefit plan or arrangement in which Executive is participating,
or the taking of any action by Corporation which would adversely affect Executive’s
participation in or materially reduce Executive’s benefits under any of such plans;
(v) Executive is excluded (without substitution of a substantially equivalent
plan) from participation in any benefit, incentive, compensation, stock option,
health, dental, insurance, or pension plan generally made available to senior
executives of the Corporation;
(vi) without Executive’s express written consent, the requirement by the
Corporation that Executive’s principal place of employment be relocated more than
fifty (50) miles from Sioux Falls, South Dakota, or travel on the Corporation’s
business to an extent materially greater than Executive’s customary business travel
obligations;
(vii) the Corporation’s failure to obtain a satisfactory agreement from any
successor to assume and agree to perform the Corporation’s obligations under this
Agreement; or
(viii) Executive determines in good faith that a change in circumstances has
occurred following a Change in Control which has rendered Executive substantially
unable to carry out, has substantially hindered Executive’s performance of, or has
caused Executive to suffer a substantial reduction in, any of the authorities,
positions, duties, responsibilities or status attached to the position held by
Executive immediately prior to the Change in Control, excluding the reasonable
sharing of authority with a Chief Operating Officer.
“Good Reason,” in the absence of a Change of Control, shall only mean
subsections (i), (ii), (iii), (iv), (v), (vi) and (vii) of the immediately preceding
definition; provided, however, that with respect to such subsection (iv), a
termination or adverse change in a plan is not Good Reason in the absence of a
Change in Control if such termination or adverse change is applied generally to all
executive officers of the Corporation.
“Last Payment Date” means the date that is two and one-half months after the
close of the taxable year in which executive incurs a separation from service (as
defined in Section 409A of the Code).
“Severance Period” means twenty-four (24) months, unless Executive’s employment
is terminated by the Corporation, or by Executive for Good Reason, within
twenty-four months of a Change of Control in which case “Severance Period” shall
mean thirty (30) months.
(j) Any dispute or controversy arising under or in connection with this Agreement,
other than claims administered under Section 11, shall be settled exclusively by binding
arbitration in the manner set forth in Section 11(c).
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13. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior agreements, if any,
between the parties hereto with respect to the subject matter hereof including any prior employment
agreements, severance agreements, and change-in-control agreements. In addition, the provisions
related to acceleration of options, time to exercise options, termination of risk of forfeiture of
restricted stock, and the like, as well as the definitions of “Cause,” “Good Reason” and “Change in
Control” contained herein supersede and replace any conflicting provisions in any option grant
agreement or any restricted stock agreement between the Executive and the Corporation (in any such
case, an “Equity Agreement”) and the Executive, by executing this Agreement, hereby agrees that all
his or her existing Equity Agreements, and all Equity Agreements to which he or she may become
subject or party to during the Term, are and shall be hereby amended to supersede and replace such
provisions.
14. NO INTERRUPTION OF BENEFITS. This Agreement constitutes an amendment and restatement of
the Employment Agreement, and nothing in this Agreement shall be deemed an interruption of
Executive’s years of service for vesting of the Corporation’s benefit plans, vesting of options to
purchase the Corporation’s common stock, or otherwise.
15. INDEMNIFICATION. The Corporation shall indemnify, defend, and hold Executive harmless, to
the fullest extent allowed by law, from and against any liability, damages, costs, or expenses
(including attorneys’ fees) in connection with any claim, cause of action, investigation,
litigation, or proceeding involving him by reason of having been an officer, director, employee, or
agent of the Corporation or its affiliates, unless it is judicially determined, in a final,
nonappealable order that Executive was guilty of gross negligence or willful misconduct. The
Corporation also agrees to maintain adequate directors and officers’ liability insurance for the
benefit of Executive for the term of this Agreement and for at least three years thereafter.
Notwithstanding the foregoing, the Corporation shall not have an obligation to purchase such
directors and officers liability insurance if the Board determines in good faith that the premiums
for such coverage are prohibitively expensive.
16. Compliance with Section 409A of the Code. The provisions of this Agreement regarding
amounts that are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”) shall be interpreted and administered in accordance with Section 409A of the
code and the regulations and guidance issued thereunder. Notwithstanding anything to the contrary
contained herein, no payment of an amount subject to Section 409A of the Code on account of the
Executive’s “separation from service” (as defined in Section 409A of the Code, including the
regulations and guidance issued thereunder) shall be made to the Executive if the Executive is
determined to be a “specified employee” within the meaning of Section 409A of the Code at the time
of the Executive’s separation from service. Any such amounts to which the Executive would
otherwise be entitled under this Agreement during the first six months following a separation from
service shall be accumulated and paid on the first day of the seventh month following the
Executive’s separation from service.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date and
year first above written.
| LODGENET ENTERTAINMENT CORPORATION | ||||||
| By: | /s/ Xxxxx X. Xxxx | |||||
| Name: Xxxxx X. Xxxx | ||||||
| Title: Senior VP, General Counsel | ||||||
| EXECUTIVE: | ||||||
| /s/ Xxxxx X. Xxxxxxxx | ||||||
| Xxxxx X. Xxxxxxxx | ||||||
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