Exhibit 10.09
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Terms and Conditions of Employment
between
Xxxxxx Xxxxxx ("RC")
and
Adelphia Communications Corporation (the "Company")
The board of directors of the Company (the "Board") seeks to elect and
retain RC as President and Chief Operating Officer ("COO") of the Company
subject to the acceptance by RC of the terms and conditions of employment set
forth in this agreement and approval of this agreement by the U.S. Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court").
1. Position. Upon approval of this agreement by the Bankruptcy Court, RC shall
become President and COO.
2. Term. (a) The initial term of this agreement shall commence upon the approval
set forth in Section 1 above (the "Effective Date") and continue through and
including December 31, 2005. Absent notice by either party prior to June 30,
2005 (and in the case of extensions, prior to each subsequent June 30), this
agreement shall be extended automatically for an additional year, and annually
thereafter.
(b) Notwithstanding any other provisions hereof, for the period between the
date of execution of this Agreement and the Effective Date (the "Common-Law
Employment Period"), RC shall be employed as a common-law employee of the
Company (but shall not serve as either any officer or director). During the
Common-Law Employment Period the Company shall (i) pay to RC a salary of $6,400
per day, and (ii) reimburse RC for all reasonable expenses incurred pursuant to
his employment during such period, including, but not limited to, expenses for
travel and entertainment.
3. Base Salary. RC's salary shall be $850,000, which amount shall not be
decreased except upon mutual consent. The Board shall review the base salary
annually, but shall not have any obligation to increase such amount.
4. Bonus. A bonus equal to 100 percent of base salary will be guaranteed pro
rata for the period between the Effective Date and December 31, 2003, and such
bonus shall be paid in December 2003. For years 2004 and 2005 and during any
subsequent annual extensions of this agreement, there shall not be any minimum
guaranteed bonus. However, RC will have the opportunity to earn a bonus of 100
percent of base salary for performance at target levels based on performance
standards, with smaller or greater bonus opportunities for performance below or
above target levels, all as determined by the Board.
Such performance targets are expected to include criteria such as:
(i) specific increased levels of EBITDA, net income, or other financial
performance measures;
(ii) successfully exiting from bankruptcy protection at the earliest
possible time, consistent with the best interests of the Company and
its stakeholders, and generating sustainable levels of
profitability;
(iii) implementing revised governance and ethical standards; and
(iv) retention of existing customers and revenue base while developing
new business and retention and recruitment of personnel for key
leadership positions.
5. Signing Bonus. RC shall receive a signing bonus of $1,130,000, which amount
shall be payable to RC in ratable monthly installments based on the number of
full and partial calendar months from the month in which the Effective Date
occurs until December, 2005. No portion of the signing bonus shall be payable
after the date upon which RC voluntarily terminates
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employment without Good Reason or is terminated by the Company for Cause and, in
the event of termination for Cause, any portion of the signing bonus previously
paid to RC shall be repaid within ten days of the date of such termination. If
RC does not complete the initial term of employment by reason of termination by
the Company without Cause, resignation by RC for Good Reason, death or
disability, the then remaining unpaid balance of the signing bonus shall be paid
to RC (or his estate) within 30 days after the date of such termination.
6. Benefits. RC will be eligible to participate in all normal Company benefits
for employees and executives.
7. Liability Insurance. RC will be covered under the Company's directors and
officers liability insurance policy, and the Company will indemnify RC as and to
the extent required by the Indemnity Agreement attached hereto as Exhibit A.
8. Termination of Employment.
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(a) If RC's employment is terminated by Company not for Cause or by RC for
Good Reason, in addition to any amounts due under Section 5, RC will receive a
lump sum payment within 30 days after termination of employment equal to three
times the sum of RC's base salary and guaranteed bonus (target bonus during 2004
and thereafter). In any such event, RC also will be entitled to continued health
coverage at employee rates at his sole cost for 18 months following termination
of employment.
(b) "Good Reason" shall mean (i) a demotion or removal from the positions
of President or COO; (ii) a material adverse change by the Company in RC's
duties or responsibilities; (iii) a decrease in Base Salary or failure to
provide an opportunity to earn
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performance bonuses as provided in Sections 4 above and 10(a) below; or (iv) any
other material breach of this agreement by the Company. "Good Reason" does not
include (x) non-renewal of this agreement at the conclusion of its initial term
or upon any extension thereof, (y) the failure to grant any annual equity award
if established performance standards are satisfied, provided equivalent
compensation is provided, (z) implementation of any changes in corporate
governance required by laws, rules or regulations of general applicability, or
(xx) the failure for any reason of the Company and RC to enter into a definitive
employment agreement embodying the terms of this agreement (which until a
definitive agreement is entered into shall be deemed to constitute RC's
employment agreement). Termination by RC or the Company based on an alleged
breach of this agreement, including the alleged existence of Good Reason, shall
require not less than 30 days notice to the other party, which shall have an
opportunity to cure any such breach within said 30-day period, and RC shall be
required to make any assertion of "Good Reason" within 45 days of the events
allegedly giving rise to "Good Reason".
(c) If RC's employment is terminated by Company for Cause or RC not for
Good Reason, RC will receive salary and other amounts earned but not yet paid
(not including any pro-ration for bonuses, which shall not be payable) through
the date of termination of employment (except to the extent subject to
disgorgement under any applicable legal requirement). [The Company shall be
entitled to net the amount of any required repayment of the signing bonus
against any amounts due to RC, without waiving or limiting the Company's rights
to recover any excess amount due to it.]
(d) "Cause" shall mean (i) the commission by RC of (x) a felony or (y) a
misdemeanor (excluding a xxxxx misdemeanor) involving dishonesty, fraud,
financial
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impropriety, or moral turpitude; (ii) any knowing or deliberate violation by RC
of a requirement of the Xxxxxxxx-Xxxxx Act of 2002 or other material provision
of the federal securities laws; (iii) neglect or misconduct in the discharge of
his duties by RC (after receiving written notice from the Board specifying the
manner in which he is alleged to have failed properly to discharge his duties
and after having had the opportunity to cure such failure within 30 days from
receipt of such notice); (iv) any conduct that could reasonably be anticipated
to result in or materially contribute to (whether by act or by omission to act)
a violation by the Company of orders binding on the Company issued by a court of
competent jurisdiction resolving material governmental proceedings or
investigations relating to governance; (v) material breach by RC of this
agreement, including any of the covenants contained herein (e.g.,
non-competition, non-solicitation, cooperation with investigations), subject to
the notice and cure provisions set forth in the last sentence of Section 8(b)
above. "Cause" does not include the non-renewal of this agreement at the
conclusion of its initial term or upon any extension thereof. If, after the
expiration of any applicable cure period, the Company asserts that grounds exist
for termination with Cause, it shall so notify RC and within 15 days shall
afford RC a hearing before the Board regarding any disputed facts. The Board
shall make a final determination regarding the existence of "Cause" upon
completion of any such hearing; provided, however, that any determination that
"Cause" exists shall require an affirmative vote of two-thirds of the
non-employee directors of the Board. If any such determination remains pending
after such 15-day period, the Company shall be entitled to suspend RC's duties
pending determination of the existence of "Cause".
(e) If RC's employment is terminated upon Death or Disability. In the event
of RC's death or disability during the term of this agreement, in addition to
any amounts due under Section 5, his estate or RC shall receive a lump sum
payment in an amount equal to his then
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current years' base salary plus a pro rata portion of RC's target bonus. At the
Company's option, this obligation may be satisfied in whole or in part through
life insurance or disability policies purchased by the Company. Disability shall
be defined as RC's physical or mental incapacity which continues for a period of
not less than six consecutive months or six months in any twelve-month period,
as determined by a doctor mutually agreeable to RC and the Board. RC and/or his
eligible dependents, as applicable, shall be entitled to continued health care
coverage at employee rates at their sole cost for 18 months following death or
disability.
9. Initial Equity Award. Upon the Company's emergence from bankruptcy, RC will
be entitled to receive an initial equity award of restricted shares valued at
$6.8 million at the date of emergence. The fair market value ("FMV") of the
restricted shares at the date of emergence will be determined based on the
average closing price of the Company's common stock determined over the 15
trading days immediately preceding the 90th day following the date of emergence.
All such restricted shares shall vest ratably over a period of three years, such
three-year period to commence on the first anniversary of the Effective Date
(e.g., if the date of emergence occurs on the second anniversary of the
Effective Date, one-third of the restricted shares would be fully vested when
granted, and the remaining two-thirds would have vested by the third and fourth
anniversaries of the Effective Date, respectively). After releasing such number
of shares as shall be necessary to cover taxes due as a result of vesting, 75
percent of the remaining shares shall be restricted as to resale until a date
that shall be 6 months following RC's termination of employment with the
Company. With the prior consent of the Company and RC, awards may be made in the
form of restricted deferred share units rather than restricted shares. For the
avoidance of doubt, any amount of restricted shares vesting prior to the date of
grant shall not be considered vested for tax purposes.
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10. Potential Equity Awards.
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(a) Annual Equity Award. During the tenure of RC's employment, for each
full calendar year following the calendar year in which the Company emerges from
bankruptcy, RC shall be eligible at the targeted performance levels to receive
an annual equity award valued at two times the sum of base salary plus target
annual bonus based upon achievement of performance objectives to be set for each
such year by the Board. Such equity awards shall consist of such mix of
restricted shares or stock options as the Board may determine, and shall vest
ratably over a period to be determined by the Board of not less than three years
from the date of issuance. No such award shall be required if RC fails to
achieve performance levels established by the Board for the applicable year.
(b) Stock Options. During the tenure of RC's employment, commencing at the
time of the Company's emergence from bankruptcy and in each calendar year
thereafter, RC shall be eligible to receive grants of stock options to be
awarded by the Board on an annual basis in such amount as the Board may
determine from shares made available for such purpose in the Company's Plan of
Reorganization or in any plan adopted by a vote of the holders of the Company's
outstanding equity securities. The decision to issue any such future options
shall be discretionary on the part of the Board, which may determine in any
given year whether or not to issue additional options to RC or other executives.
(c) If awarded, any initial grant of options received by RC upon the
Company's emergence from bankruptcy shall vest ratably over a period of three
years, such three-year period to commence on the first anniversary of the
Effective Date (i.e., in the same manner as the initial award of restricted
shares), shall be exercisable for a 10-year term and shall have an exercise
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price equal to the FMV of the shares underlying the options upon emergence (as
determined in accordance with Section 9 above).
(d) Future discretionary grants of options shall be awarded by the Board
reflecting such performance factors as the Board may determine and shall be at
such strike prices (equal to or greater than market value at the date of grant)
and may contain such vesting periods and other terms as the Board may determine.
After providing for sales in amounts necessary to pay income tax on
option-related income and the exercise price of options, (i) no such shares
received upon exercise of options shall be sold until a date which shall be 12
months following the date of option exercise and (ii) 75 percent of the shares
acquired by RC upon exercise of options shall not be sold until the date that is
6 months following the date RC's employment with the Company ceases unless the
Board shall set a different requirement.
(e) Emergence Date Special Award. In addition to the award of restricted
shares provided in Section 9 above, upon the Company's emergence from bankruptcy
RC shall receive an additional grant of restricted shares (subject to the same
terms and conditions applicable to the award provided for in Section 9 above) of
up to $3.4 million if the Board determines that RC's performance during the
pre-emergence period has been exemplary or significantly exceeded the level of
performance that could reasonably have been expected. If the Board fails to make
any such determination, such additional amount of restricted shares shall not be
issued to RC.
11. Treatment of Equity Grants on Termination.
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(a) In the event of termination of RC's employment (1) by the Company
without Cause, or (2) by RC for Good Reason (in each case other than due to
non-renewal of this agreement at the conclusion of its initial term or upon any
extension thereof), all restricted
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shares, restricted deferred share units, or options then held by RC shall vest
and any options granted (i) upon emergence from bankruptcy shall remain
exercisable until the fifth anniversary of RC's termination of employment, and
(ii) subsequent to emergence from bankruptcy (but following the initial grant)
shall remain exercisable until the third anniversary of RC's termination of
employment. In the event that either party shall not extend the term of this
agreement past the initial term, the vesting period of the initial grants of
restricted shares and, if awarded, stock options shall accelerate to the
expiration date of this agreement, and such options shall remain exercisable
until the fifth anniversary of RC's termination of employment.
(b) In the event of termination of RC's employment by RC not for Good
Reason or by the Company for Cause (in each case other than due to non-renewal
of this agreement at the conclusion of its initial term or upon any extension
thereof), any unvested restricted shares, restricted deferred share units, or
options shall be forfeited and the exercise period for any vested stock options
shall be limited to 30 days in the case of a termination by RC other than for
Good Reason and shall immediately expire in the case of a termination by the
Company for Cause. In the event of RC's death or disability, any unvested
restricted shares or restricted deferred share units will be vested ratably in
the proportion that RC's completed months of service bear to the months of
service required for vesting, and options will vest and continue to be
exercisable until the earlier of the original expiration date or one year
following death or disability.
12. Relocation. RC shall be entitled to reimbursement of all reasonable
transaction costs and moving expenses associated with relocation in accordance
with normal Company policies.
13. Non-Competition/Non-Solicitation. In the event RC's employment is terminated
for any reason, other than expiration of this agreement (including any
extensions) without renewal, RC
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shall not, during the one-year period from the date of termination, solicit
customers on behalf of or become an employee, consultant, advisor, director or
assume any other position with any "Competing Enterprise." For purposes of this
Agreement, "Competing Enterprise" shall mean any Direct Broadcast Satellite or
other multi-channel video provider (including, but not limited to, EchoStar
Communications Corp. or DirecTV Broadband, Inc.), any multiple system operator
(including, but not limited to Comcast) or any Digital Subscriber Line provider
in the continental United States and/or Puerto Rico, in each case that has a
service area that overlaps with 10% or more of the service area of the Company.
RC shall also agree to customary confidentiality provisions, which shall
continue in effect following expiration of this agreement or other termination
of employment other than as to information that has independently become a part
of the public domain. RC shall not solicit employees of the Company for one year
following the expiration of this agreement or other termination of employment.
RC shall also agree to customary provisions concerning intellectual property,
including copyrights and trademarks, etc.
14. Parachute Gross-Up. The Company will provide a gross-up for any excise tax
imposed upon RC under Internal Revenue Code Section 4999 or similar provisions
sufficient to put RC in the same after-tax position as if such excise tax were
not due. The amount of such gross-up shall be determined by the Company's
external auditors assuming the highest marginal federal and applicable state tax
rates, and RC shall be entitled to continuing indemnification for any additional
tax imposed by taxing authorities relating to such excise tax or gross-up.
15. Legal Fees. Company shall pay RC's reasonable legal fees at standard hourly
rates (but not to exceed $150,000) directly related to negotiation of this
agreement and of any definitive employment agreement, and shall gross-up RC for
any taxes payable by RC resulting from such payment.
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16. Dispute Resolution. In the event of any dispute under this agreement or a
definitive employment agreement, including without limitation if RC shall assert
the existence of Good Reason or any other breach of this agreement and the
Company shall disagree as to the existence of Good Reason or any other asserted
breach, RC and the Company agree that such dispute shall be resolved by binding
arbitration to be conducted in the Southern District of New York, unless upon
notice the Bankruptcy Court shall determine that any such dispute shall be
resolved by the Bankruptcy Court, in which event the Bankruptcy Court shall
resolve such dispute. In the event of any such proceeding, the losing party
shall reimburse the winning party upon entry of a final award resolving the
subject of the dispute for all reasonable legal expenses incurred, unless the
arbitrator (or the Bankruptcy Court, if applicable) determines that to do so
would be unjust. This agreement shall be governed by the substantive provisions
of the laws of the State of New York.
17. Mutual Cooperation. The parties agree to take reasonable steps (without cost
to RC) to minimize the Company's tax obligations with respect to annual
compensation.
18. Cooperation with Investigations. RC agrees that he will fully cooperate, and
that he will as COO direct the Company and all officers, employees, agents, and
consultants employed by the Company to cooperate fully, with all governmental
investigations of the Company and all orders entered by the Bankruptcy Court.
19. Corporate Aircraft. RC will be permitted use of corporate aircraft in
accordance with the corporate aircraft policy approved by the Board; provided,
however, that personal use of corporate aircraft shall not be permitted.
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AGREED TO AND ACCEPTED: AGREED TO AND ACCEPTED:
/s/ Xxxxxx Xxxxxx /s/ Xxxxx Xxxxxxxxxx
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Xxxxxx Xxxxxx Adelphia Communications Corporation
Name: Xxxxx Xxxxxxxxxx
January 17, 2003 Title: Chairman and Interim
Chief Executive Officer
January 17, 2003
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