EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of
March 1, 2001 is made by and between LodgeNet Entertainment Corporation, a
Delaware corporation (the "Corporation" or "LodgeNet"), and Xxxx X. Xxxxxxxxx
("Executive") with reference to the following circumstances, namely:
A. Executive is to be employed by LodgeNet as its Senior Vice
President and Chief Financial Officer, and as such will be
making an important contribution to the development and
operation of LodgeNet's business.
B. Because of the foregoing, the Corporation desires to
provide for its employment of Executive as hereinafter
provided, and Executive desires such employment, upon the
terms hereinafter provided.
NOW, THEREFORE, the Corporation agrees to employ Executive,
and Executive agrees to 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 date hereof and continuing,
unless sooner terminated as provided in Section 6 or 8 herein, through December
31, 2001; provided, however, that on each December 31, commencing with December
31, 2001, such period of employment shall automatically be extended for an
additional year 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
Senior Vice President and Chief Financial Officer of the Corporation, or in such
other office or
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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 as are assigned to him by the Board or committees of
the Board. During the period of employment, Executive shall devote his full time
and 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.
3. OFFICE FACILITIES. During the period of employment, Executive shall
have his office where the Corporation's principal executive 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.) The Corporation shall pay Executive a salary (the "Base
Salary"), calculated at the rate of Two Hundred Ninety Five Thousand
Dollars ($295,000.00) per annum. On January 1, 2002, Executive's Base
Salary shall be increased to Three Hundred Thirty Thousand Dollars
($330,000.00) per annum. Executive's Base Salary (which may be increased by
the Board at any time and from time to time in its discretion) shall be
payable monthly, semi-monthly or weekly according to the Corporation's
general practice for its executives, for the period of employment under
this Agreement.
(b.) During the period of employment, Executive shall be
allowed to participate in such bonus and other incentive compensation
programs in accordance with
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their terms as the Corporation may have in effect from time to time for its
executive personnel, 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.
(c.) During the period of employment, Executive shall be
entitled to:
(I) participate in such retirement, investment,
health (medical, hospital and/or dental) insurance, life
insurance, disability insurance and accident insurance plans and
programs as are maintained in effect from time to time by the
Corporation for its salaried 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; and
(iii) take vacations and be entitled to sick leave in
accordance with the Corporation's policy for executive personnel
of the Corporation.
(d.) During the period of employment, the Board from time to time in
its discretion may grant to Executive stock options, and other rights
related to shares of the Corporation's common stock.
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.
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6. TERMINATION OF EMPLOYMENT. The employment of Executive by the
Corporation pursuant to this Agreement may be terminated prior to December 31,
2001, or any subsequent December 31 to which the end of the period of employment
may have been extended under Section 1, as follows:
(a) In the event of Executive's death prior to said date, such
employment shall terminate on the date of death.
(b) Such employment may be terminated prior to said date 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 the time which Executive becomes
entitled to disability compensation benefits under the Corporation's long
term disability benefit program then in effect. 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
therefore 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) The Corporation, by giving written notice of termination to
Executive, may terminate such employment at any time prior to said date for
Cause, which means that such termination must be due to (1) acts during the
term of this Agreement (A) involving dishonesty or moral turpitude by
Executive or (B) substantial non-performance of Executive of his employment
duties required by this Agreement or (2) Executive having directly or
indirectly made any material misrepresentation(s) or fail to disclose any
material factors to the Corporation during his pre-employment interviews or
otherwise
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during the hiring process for his employment with the Corporation or (3)
Executive willfully engaging in gross misconduct injurious to the
Corporation during the term of this Agreement, with "Cause" to be
determined in any case 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 clause (1)(B) to cease substantial non-performance.
(d) 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.
(e) In the event that a Termination Event (as that term is defined in
the Executive Severance Agreement, dated March 1, 2001) has occurred, then
the Executive may terminate such employment according to the terms and
conditions set forth in said Executive Severance Agreement, and shall then
be exclusively entitled to any and all payments and benefits provided under
said Agreement to the exclusion of any provisions contained herein.
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), 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
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otherwise would be due. Unless otherwise expressly provided in the terms of
the bonus plan or program of the Corporation in which the Executive is a
participant at the time of his termination, if the termination of
Executive's employment is not for Cause, then a pro rata portion of the
"target" full year's bonus shall be deemed to have accrued for the
Executive under such bonus plan or program for the portion of the year
ended on the date of the termination, which shall be paid to the Executive
at the time bonus payment otherwise would be due.
(b) If Executive's employment pursuant to this Agreement is terminated
without Cause pursuant to subsection (d) of Section 6 herein, then, in
addition to the payments required by subsection (a) of this Section 7,
Executive shall be entitled to the vesting of all options previously
granted but still subject to vesting, and shall receive, subject to the
mitigation provisions of Section 11(a) below, for a period of twenty-four
months (the "Severance Period") a cash severance payment (the "Severance
Payment") from the Corporation. The amount of the Severance Payment shall
be equal to the Executive's then monthly Base Salary increased by a factor
of twenty percent (20%) to account for the Executive's loss of benefits.
The Severance Payment shall be due and payable on the 20th day of each
month and is subject to required withholding. The Executive shall also be
entitled to the benefits under this Section in the event the Corporation
elects at any time not to renew or extend this Agreement pursuant to
Section 1. The Executive shall not be entitled to a Severance Payment in
any event if he is terminated for Cause as permitted by Section 6.
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
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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 Corporation or its subsidiaries, except as may be required to
perform his duties hereunder. The provisions of this Section 9 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 intentions covered by this Agreement as
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.
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10. NON-COMPETITION: NON-MITIGATION: LITIGATION EXPENSES.
(a) For the first eighteen months following termination of his
employment with the Corporation, 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 during
said period; thereafter, said termination benefits shall be reduced by
one-half of the amount Executive may earn from any full time employment
position or occupation. However, if Executive becomes employed, as a full
or part time employee, or as a consultant or advisor, to any enterprise
engaged in competition with the business then being conducted by the
Corporation, any obligation which the Corporation otherwise would have had
under Section 7 shall thereupon terminate and cease to be of any further
force and effect other than to the extent theretofore performed by the
Corporation.
(b) Until the period of employment expires (which for these
purposes shall be calculated without giving effect to early termination
pursuant to Section 6), Executive shall not enter into endeavors that are
competitive with the business or operations of the Corporation in the
lodging pay-per-view/guest services market, 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 (expect 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
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engages in a business which competes with the Company in the lodging
pay-per-view/guest services market. For these purposes, employment with a
vendor of cable television services shall not be treated as competitive
with the business or operations of the Corporation in the lodging
per-view/guest services market.
(c) The Corporation shall pay Executive's out-of-pocket expenses,
including attorneys' fees, but not to exceed a total of $10,000 for any
proceeding or group of related proceedings to enforce, construe or
determine the validity of the provisions for termination benefits in
Section 7 or 8 herein.
11. ARBITRATION. Any dispute or controversy arising under or in connection
with the Agreement shall be settled exclusively by arbitration in the city where
the principal executive offices of the Corporation are then located, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
12. MISCELLANEOUS.
(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.
(b) The rights and obligations of Executive under this Agreement
are expressly declared and agreed to be personal, non-assignable 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.
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(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 construed according to the laws of the
State of South Dakota.
(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.
(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: Xxxx X. Xxxxxxxxx
Xxxxxx Xxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
If to the Corporation: LodgeNet Entertainment Corporation
0000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attn: General Counsel
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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.
13. PRIOR AGREEMENTS SUPERSEDED. This agreement supersedes all prior
agreements between the parties hereto with respect to the subject matter hereof
including any prior employment agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date and year first above written.
LodgeNet Entertainment Corporation
By:_______________________________
President
_______________________________
Xxxx X. Xxxxxxxxx
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