1
Exhibit 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of the 23rd day of December, 1998
by and between Xxxxx X. Xxxxxxx, an individual residing in the State of Missouri
(the "EMPLOYEE"), and Xxxx X. Xxxxx, an individual residing in the State of
Washington ("XXXXX").
W I T N E S S E T H:
WHEREAS, Xxxxx, Charter Communications, Inc., a Delaware corporation
("CCI"), and certain other parties are entering into a Purchase Agreement (the
"CHARTER PURCHASE AGREEMENT") dated the date hereof providing for the sale (the
"Sale TRANSACTION") to Xxxxx by CCI and certain other parties of their
respective equity interests in CCI and certain subsidiaries and affiliates of
CCI which, directly and indirectly through their respective subsidiaries, own
and operate cable television systems and businesses in respect thereof in
various areas of the United States (the "CHARTER SYSTEMS");
WHEREAS, Xxxxx is the owner, indirectly, through corporations,
partnerships and other entities controlled by him, of the cable television
systems and businesses in respect thereof purchased pursuant to that certain
Purchase Agreement dated as of April 3, 1998 by and among Vulcan Cable, Inc.,
Marcus Cable Properties, Inc. ("MARCUS CABLE") and certain other parties (the
"MARCUS SYSTEMS");
WHEREAS, it is the intention of Xxxxx to operate the Charter Systems
and the Marcus Systems under common management and supervision and potentially
to combine such systems either prior to or following the closing of the Sale
Transaction (the "CLOSING");
WHEREAS, the Employee currently serves as Chairman of the Board and
Director of CCI;
WHEREAS, the Employer (as defined below) desires to have the benefits,
subsequent to the Sale Transaction, of the Employee's knowledge and experience
in the cable television industry by having the Employee serve as Vice Chairman
of the Employer on the terms and conditions set forth herein;
WHEREAS, the Employee desires to serve as Vice Chairman of the Employer
subsequent to the Sale Transaction on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto hereby agree as follows:
2
1. INTERPRETATION.
1.1. DEFINITIONS.
"AFFILIATE" shall mean with respect to any person or entity,
any other person or entity who controls, is controlled by or is under common
control with such person or entity.
"CHANGE OF CONTROL" means a sale of more than 49.9% of the
outstanding capital stock of the Employer, except where Xxxxx and his Affiliates
retain effective voting control of the Employer, the merger or consolidation of
the Employer, with or into any other corporation or entity, other than a
wholly-owned subsidiary of the Employer, except where Xxxxx and his Affiliates
have effective voting control of the surviving entity, or any other transaction,
or event, a result of which is that Xxxxx holds less than 50.1% of the voting
power of the surviving entity, except where Xxxxx and his Affiliates retain
effective voting control of Employment, or a sale of all or substantially all of
the assets of the Employer (other than to an entity majority-owned or controlled
by Xxxxx and his Affiliates).
"EMPLOYER" shall mean CCI, and upon the acquisition by Xxxxx
of control over Marcus Cable, the term "Employer" shall also include Marcus
Cable. Upon the creation of an entity that results from the combination of the
Marcus Systems and the Charter Systems, the term "Employer" shall thereafter
mean such entity.
"FAIR MARKET VALUE" shall mean for all purposes under this
Agreement, (i) if the Employer is privately held at the occurrence of an event
triggering a Fair Market Value calculation hereunder (a "TRIGGER EVENT"), 13.7
times the projected cash flow of the Employer (as established in the budget for
such entity approved by its Board of Directors or, in the event no such budget
has as of the date of the Trigger Event been approved by the Board, as
established by the Board of Directors within thirty (30) days of any such
Trigger Event, taking into account the most recent forecasts for such entity
presented to its Board of Directors) including all future acquisitions by the
Employer to the extent of its interest for its fiscal year following its fiscal
year in which the Trigger Event occurs, and (ii) if the applicable entity is a
public company at the time of a Trigger Event, then a price per share equal to
an average of the closing price of such entity's publicly traded stock on the 20
trading days immediately prior to the Trigger Event.
"INITIAL PUBLIC OFFERING" means the consummation of a firm
commitment underwritten initial public offering pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
covering the offer and sale of shares of Common Stock of the Employer (the
"Common Stock").
"OPTION SPREAD" shall mean an amount equal to (i) the
difference between the exercise price of an option and the Fair Market Value per
share of stock or other underlying equity unit with respect to such option,
times (ii) the number of shares or equity units covered by such option at the
time of the exercise.
-2-
3
2. EMPLOYMENT, DUTIES AND AUTHORITY. The Employer hereby agrees to
employ the Employee, and the Employee agrees to be employed, as an officer, with
the title Vice Chairman of the Employer. The Employee shall report directly to
the President and Chief Executive Officer of the Employer (the "CEO") and shall
be responsible for duties relating to the government and public relations of the
Employer and such other duties as the CEO may reasonably determine from time to
time. The Employee shall serve as the Employer's representative to the National
Cable Television Association (NCTA), and other industry organizations, in his
capacity as a director or such other position consistent with representing the
Employer. In addition, the Employee shall, jointly with Xxxxxx X. Xxxx ("XXXX"),
exercise the duties of the CEO, with respect to the stay bonuses referred to in
Section 2.2 of the Charter Purchase Agreement, if the CEO is unable to exercise
such duties. The Employee shall devote substantially all of his business time,
attention, energies, best efforts and skills to the diligent performance of his
duties hereunder. Notwithstanding the foregoing, it is understood that the
Employee may expend a reasonable amount of time for personal, charitable,
investment and other activities. The expenditure by the Employee of time for
personal, charitable, investment and other activities shall not interfere in any
material respect with the performance by the Employee of his duties and
responsibilities hereunder.
3. TERM. The term of this Agreement shall commence effective upon the
Closing and shall terminate on the first anniversary thereof (the "INITIAL
TERM"); provided, however, that the Initial Term shall be extended and this
Agreement shall automatically be renewed for successive one-year periods
("RENEWAL Terms") unless (i) this Agreement is terminated in accordance with the
provisions of Section 8 hereof, or (ii) the Employee or the Employer provides
written notice to the other of such party's desire not to extend this Agreement
at least sixty (60) days prior to the expiration of the Initial Term or any
Renewal Term, as the case may be, of this Agreement, under this Section 3. If
the Closing does not occur for any reason, this Agreement shall be of no force
or effect and neither the Employee nor Xxxxx shall have any rights, obligations
or liabilities under or arising out of this Agreement or the failure to
consummate the Sale Transaction (except as provided in the Charter Purchase
Agreement).
4. COMPENSATION AND BENEFITS.
4.1. CASH COMPENSATION.
(a) Base Salary. During the Initial Term of this
Agreement , the Employer shall pay the
Employee an annual base salary at the rate
of Six Hundred Twenty-Five Thousand Dollars
($625,000) or such higher rate as may from
time to time be determined by the CEO in his
discretion, which shall be payable in equal
monthly installments on the first day of
each month.
(b) Discretionary Bonus. The Employee shall be
eligible to receive an annual bonus in an
amount to be determined by
-3-
4
the Board of Directors of the Employer in
its discretion, which shall be payable as
determined by the Board.
(c) Special Payment. As a matter of separate
inducement and agreement in connection with
his employment as provided hereunder and not
in lieu of any salary or other compensation
for his services, the Employee shall receive
a one-time payment in the amount of Five
Hundred Eight Thousand Seventy Dollars
($508,070), which amount shall be paid to
the Employee in cash on March 16, 1999.
4.2. BENEFIT PLANS. The Employee shall be entitled to
participate in any disability insurance, pension or other benefit plan of the
Employer now existing or hereafter adopted for the benefit of the employees
generally or the executives of the Employer generally, which benefits shall be
no less generous than those currently enjoyed by the Employee.
4.3. VACATION. The Employee shall be entitled to not less than
one (1) month of compensated vacation in each fiscal year, to be taken at times
which do not unreasonably interfere with the performance of the Employee's
duties hereunder. Unused vacation time shall not be carried over nor paid in
cash in lieu thereof except with the Board's prior approval.
4.4. EXPENSES. The Employee shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred by the Employee
in the performance of his duties hereunder, provided that such expenses are
incurred and accounted for in accordance with the policies and procedures
established by the Employer.
4.5. OTHER BENEFITS. The Employer agrees to make available to
the Employee the airplane currently owned by CCI for personal use by the
Employee, the costs of any such use by the Employee to be in compliance with the
rules and regulations of the Internal Revenue Service.
5. OPTIONS. As a matter of separate inducement and agreement in
connection with his employment hereunder and not in lieu of any salary or other
compensation upon the Closing of the Sale Transaction, the Employer shall grant
to the Employee options (the "EMPLOYEE OPTIONS") to purchase such number of
shares of Common Stock in the Employer (the "COMMON STOCK") as shall be
determined by the Board of Directors in its sole discretion. The terms and
conditions of such options shall be as set forth in the option plan to be
adopted by the Employer within ninety (90) days after the Closing.
6. LOCATION OF THE EXECUTIVE OFFICES OF THE CHARTER ENTITIES SUBSEQUENT TO
CLOSING.
6.1. COVENANT REGARDING RELOCATION OF HEADQUARTERS. Effective
upon the Closing and for a period of three (3) years following the Closing, the
Employer shall
-4-
5
not relocate the existing Headquarters (as defined below) of the Employer
outside the greater St. Louis, Missouri area without the prior written consent
of the CEO, or the Employee and Wood if the CEO is not surviving at the time
such consent is sought. The term "HEADQUARTERS" shall mean (i) the principal
offices of the Employer, (ii) the location of all material managerial functions
currently maintained by CCI at its existing headquarters, including, without
limitation all corporate, finance, accounting, legal, engineering, marketing,
regulatory and administrative functions and (iii) all material employees of CCI
performing such functions.
6.2. EFFECT OF BREACH. In the event of the breach by the
Employer of the covenant set forth in Section 6.1 hereof while the Employee is
employed under this Agreement, or if the Employee was terminated by the Employer
in contemplation of a breach of Section 6.1 hereof, whether during the Initial
Term or any Renewal Term, then if the Employee does not relocate and less than
40% of his Employee Options have vested, then for purposes of this Section 6.2,
40% of the Employee's Options shall be deemed to have vested. With respect to
the Employee Options which have vested or are deemed to have vested pursuant to
this Section 6.2, the Company shall pay, to the Employee, an amount equal to the
greater of (i) the Option Spread or (ii) (A) if the breach occurs within one (1)
year of the Closing, an amount equal to three (3) times the annual base salary
of the Employee, or (B) if the breach occurs after the first anniversary but
within two (2) years of the Closing, an amount equal to two (2) times the annual
base salary of the Employee, or (C) if the breach occurs after the second
anniversary but within three (3) years of the Closing, an amount equal to the
annual base salary of the Employee. If any payment is made to the Employee
pursuant to this Section 6.2, then all Employee Options of the Employee shall be
automatically cancelled. Amounts payable pursuant to this Section 6.2 shall be
in addition to all other amounts accrued for the benefit of the Employee on the
date of the termination of his employment with the Employer but shall otherwise
be in full satisfaction of any other rights of the Employee with respect to his
employment.
7. INDEMNIFICATION. The Employer agrees to indemnify and hold harmless
to the maximum extent permitted by law the Employee from and against any claims,
damages, liabilities, losses, costs or expenses in connection with or arising
out of the performance by the Employee of his duties as an officer, director or
Chairman of the Board and Director of CCI, Marcus Cable or any of their
respective Subsidiaries or Affiliates and any activities engaged in by the
Employee on behalf of CCI or any of their respective Subsidiaries or Affiliates
or as an officer, director or employee of the Employer or any of the foregoing,
which the Employee believed in good faith to be within the scope of such duties
prior to and after the Closing.
8. TERMINATION. This Agreement may be terminated as follows:
8.1. AT WILL. At any time, either the Employer or the Employee
may terminate this Agreement for any reason, by giving thirty (30) days' advance
written notice to the other party.
-5-
6
8.2. BY THE EMPLOYEE FOR GOOD REASON. The Employee may
terminate this Agreement for Good Reason (as defined below) upon thirty (30)
days' advance written notice to the Employer. "GOOD REASON" shall exist if: (a)
there is an assignment to the Employee of any duties materially inconsistent
with, or which constitutes a material reduction of the Employee's position,
duties, responsibilities, status or authority with the Employer and Employer
shall not have rectified same within twenty (20) days' of written notice from
the Employee, or the Employee is required to report, directly or indirectly, to
persons other than Xxxxxx X. Xxxx; or removal of the Employee from the positions
he holds pursuant hereto, except in connection with the termination of the
Employee for Cause (as defined below); (b) the aggregate benefits enjoyed by the
Employee shall be materially diminished and the Employer shall not have
rectified same within thirty (30) days of written notice from the Employee; or
(c) within three years of the Closing, any material function of the Headquarters
or a material number of personnel of the Employer is relocated outside the
greater St. Louis, Missouri area; or (d) there is a Change of Control.
8.3. BY THE EMPLOYER FOR CAUSE. The Employer may terminate
this Agreement for Cause upon thirty (30) days' advance written notice to the
Employee. "CAUSE" shall mean (i) commission of a felony offense, (ii) the
refusal to comply with the lawful directives of the CEO, within ten (10) days'
after written notice thereof from the CEO or (iii) conduct on the part of the
Employee which constitutes gross negligence or willful misconduct which conduct
is not cured within ten (10) days after written notice thereof from the CEO. The
Employer agrees that if the Employee has been terminated for Cause pursuant to
clause (i) above and it is subsequently reasonably demonstrated that there was
no commission of a felony offense, then upon the Employee's written request,
Employer shall immediately reinstate the Employee who shall resume his duties
hereunder with no change in the respective rights and obligations of the parties
set forth herein and with full reinstatement of economic benefits to the
Employee which existed prior to termination as if the Employee had not been
terminated.
8.4. EFFECT OF TERMINATION. In the event of a termination of
this Agreement by the Employee pursuant to Section 8.1 or by the Employer
pursuant to Section 8.3 hereof, the Employer shall pay the Employee the
compensation and any other amounts to which he is entitled pursuant to this
Agreement through the end of the notice period, and thereafter all obligations
of the Employer shall terminate. In the event of a termination of this Agreement
by the Employer pursuant to Section 8.1 or by the Employee pursuant to Section
8.2 hereof or by the Employer without Cause, (a) the Employer shall pay to the
Employee an amount equal to the aggregate base salary due the Employee during
the remainder of the Initial Term, or Renewal Term, as the case may be, of this
Agreement; and (b) Xxxxx, or at his option, the Employer, shall, within sixty
(60) days after such termination, redeem the Employee's vested options by
payment, in cash of an amount equal to the Option Spread. Unvested stock options
held by the Employee at the time of termination shall be treated as set forth in
option plan to be adopted by the Employer as contemplated in Section 5 hereof.
-6-
7
9. ASSIGNMENT OF THIS AGREEMENT. The parties agree that at the Closing,
Xxxxx will (i) assign all of his rights hereunder to the Employer if a
restructuring has occurred or to one or more of the parent entities of the
Marcus Systems and the Charter Systems which in the aggregate shall have the
financial resources to fulfill the Employer's obligations hereunder and (ii)
cause the Employer to assume all of the rights and obligations of the Employer
hereunder. Furthermore the parties acknowledge that this Agreement is being
entered into in reliance on such assignment in order to afford sufficient time
to determine the structure for the functional combination of the Marcus Entities
and the Charter Entities prior to the Closing. It is the intention of the
parties that this Agreement become effective only upon the Closing. In no event
shall Xxxxx have any personal obligations or liabilities hereunder regardless of
whether the Closing occurs.
10. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be sufficiently given if
delivered in person or transmitted by telecopy or similar means of recorded
electronic communication to the relevant party as follows:
(a) in the case of the Employee, to the address
set forth opposite his name on the signature
page hereto, with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000;
(b) in the case of the Employer, to:
000 000xx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Telecopy: (000) 000-0000
with a copy to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Telecopy: (000) 000-0000
Any such notice or other communication shall be deemed to have been
given and received on the day on which it is delivered or telecopied (or, if
such day is not a business
-7-
8
day or if the notice or other communication is not telecopied during business
hours, at the place of receipt, on the next following business day). Any party
may change its address for the purposes of this Section 10 by giving notice to
the other parties in accordance with the foregoing.
11. ASSIGNABILITY AND ENFORCEABILITY. This Agreement shall be binding
on and enforceable by the parties and their respective successors and permitted
assigns. Except as provided in Section 9 hereof, no party may assign any of its
rights or benefits under this Agreement to any person without the prior written
consent of the other party.
12. EXPENSES OF THIS AGREEMENT. All costs and expenses of the Employer
(including, without limitation, legal, accounting and other professional fees)
incurred in connection with this Agreement or the transactions contemplated
hereby shall be paid by the Employer. All costs and expenses (including, without
limitation, legal, accounting and other professional fees) of the Employee
incurred in connection with this Agreement or the transactions contemplated
hereby shall be paid by CCI, but shall be included within the aggregate $10
million cap on such expenses as provided in the Charter Purchase Agreement.
13. CONSULTATION. The parties shall consult with each other before
issuing any press release or making any other public announcement with respect
to this Agreement or the transactions contemplated hereby and, except as
required by any applicable law or regulatory or stock exchange requirement,
neither of them shall issue any such press release or make any such public
announcement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
14. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof.
15. THIRD PARTY BENEFICIARIES. Except for the purposes of Section 2
hereof (with respect to the exercise of authority regarding stay bonuses) and
Section 6 hereof (with respect to the exercise of consent to relocation of the
Headquarters), no person other than the parties hereto shall have any rights
under this Agreement.
16. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which taken together shall
constitute one and the same instrument.
17. CURRENCY. Unless otherwise indicated, all dollar amounts in this
Agreement are expressed in United States dollars.
-8-
9
18. SECTIONS AND HEADINGS. The division of this Agreement into Sections
and the insertion of headings are for reference purposes only and shall not
affect the interpretation of this Agreement.
19. NUMBER AND GENDER. In this Agreement, words importing the singular
number only shall include the plural and vice versa and words importing gender
shall include all genders.
20. ENTIRE AGREEMENT. This Agreement and any agreements or documents
referred to herein or executed contemporaneously herewith, constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether written or oral. There are no conditions, covenants, agreements,
representations, warranties or other provisions, express or implied, collateral,
statutory or otherwise, relating to the subject matter hereof except as herein
provided.
21. SEVERABILITY. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision is hereby
declared to be separate, severable and distinct.
22. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement shall be binding on any party unless consented to in writing by
such party. No waiver of any provision of this Agreement shall be construed as a
waiver of any other provision nor shall any waiver constitute a continuing
waiver unless otherwise expressly provided. No provision of this Agreement shall
be deemed waived by a course of conduct unless such waiver is in writing signed
by all parties and stating specifically that it was intended to modify this
Agreement.
23. SURVIVABILITY. Notwithstanding any contrary provision in this
Agreement, the provisions of Section 7 hereof shall survive the termination of
this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement.
/s/ Xxxx X. Xxxxx by Xxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxx X. Xxxxx
Attorney-In-Fact
XXXXX X. XXXXXXX
/s/ Xxxxx X. Xxxxxxx
-----------------------------------
-----------------------------------
-----------------------------------
-9-
