Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This is an Employment Agreement (the "Agreement") between PEGASUS
COMMUNICATIONS CORPORATION, a Delaware corporation ("Pegasus" or the
"Corporation") and Xxx X. Lodge (the "Executive"), a resident of Pennsylvania.
In consideration of the promises and mutual covenants contained in this
Agreement and intending to be legally bound, Pegasus agrees to continue to
employ the Executive, and the Executive hereby agrees to continue his employment
relationship with Pegasus, under the following terms and conditions:
1. Definitions. The following terms, when used in this Agreement and
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initially capitalized, have the meanings assigned below:
1.1 "Base Salary" means the Executive's annual compensation as set by the
Corporation in accordance with its regular compensation review practices
applicable to executive officers. It does not include the value of any incentive
compensation, annual incentive or other bonus, benefit or expense reimbursement.
1.2 "Board" means the Board of Directors of Pegasus Communications Corporation
or, other than for purposes of Section 1.5.3, its delegee.
1.3 "Cause" means:
1.3.1 the willful or gross neglect of the Executive's duties under this
Agreement, including the refusal of the Executive to follow the
written directives of the Board;
1.3.2 the Executive's felony conviction; or
1.3.3 any act of willful or gross misconduct by the Executive which is
materially injurious to the Corporation, monetarily or otherwise.
1.4 "CEO" means the Chief Executive Officer of the Corporation.
1.5 "Change in Control" means:
1.5.1 the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets of
the Corporation and its Subsidiaries taken as a whole to any Person
other than the Principal or his Related Parties;
1.5.2 the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that (a) any
Person (other than the Executive) becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of more of the Voting Stock of the
Corporation (measured by voting power rather than number of shares)
than is at the time beneficially owned (as defined above) by the
Principal and his Related Parties in the aggregate, (b) the
Principal and his Related Parties collectively cease to beneficially
own (as defined above) Voting Stock of the Corporation having at
least thirty percent (30%) of the combined voting power of all
classes of Voting Stock of the Corporation then outstanding, or (c)
the Principal and his Related Parties acquire, in the aggregate,
beneficial ownership (as defined above) of more than sixty-six and
two-thirds percent (66-2/3%) of the shares of Class A Common Stock
at the time outstanding;
1.5.3 the first day on which a majority of the members of the Board of
Directors of the Corporation are not Continuing Directors; or
1.5.4 the adoption of a plan relating to the liquidation or dissolution of
the Corporation.
1.6 "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
enacted at Sections 601, et seq., of the Employee Retirement Income Security Act
of 1974, as amended.
1.7 "Continuing Directors" means, as of any date of determination, any member of
the Board who (a) was a member of such Board on the date of this Agreement or
(b) was nominated for election or elected to such Board with the approval of a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
1.8 "Effective Date" means June 1, 2002.
1.9 "Good Reason" means the occurrence (without the Executive's express written
consent) of any of the following acts by the Corporation within six (6) full
calendar months prior to the effective date of a Change in Control, or within
two (2) years following the effective date of a Change in Control:
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1.9.1 Demotion, reduction in title, substantial reduction of position
responsibilities, or substantial change in reporting
responsibilities or reporting level from the Executive's position
immediately prior to a Change in Control or Potential Change in
Control, or assignment of duties or responsibilities inconsistent
with such position, which remains uncorrected for five (5) days
after the Executive provides written notice to the Corporation of
such event, or which recurs after previous correction;
1.9.2 Failure by the Corporation to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement;
1.9.3 Relocation of the Executive's primary office more than fifty (50)
miles from the Executive's current office location;
1.9.4 Reduction in the Executive's Base Salary; or
1.9.5 Reduction in or modification of the Corporation's long-term
incentive plan for executive employees, or in any short-term or
annual incentive or employee benefit policy or program, which
remains uncorrected for five (5) days after the Executive provides
written notice to the Corporation of such event, or which recurs
after previous correction; provided, however, that a reduction or
modification which is of general application to all other similarly
situated executive employees will constitute Good Reason only if, in
the aggregate, the reduction or modification may reasonably be
expected to reduce the Executive's annual compensation by more than
ten percent (10%).
Notwithstanding the foregoing, the Executive shall not be deemed to have
terminated employment for Good Reason unless he provides the Corporation with
Notice of Termination within ninety (90) days after the act giving rise to Good
Reason for the termination.
1.10 "Intellectual Property" means all inventions, creations, trade secrets,
patents (utility or design) and other intellectual property relating to any
programming, documentation, technology, material, product, service, idea,
process, plan or strategy concerning the business or interests of the
Corporation that the Executive conceives, develops or delivers to the
Corporation, in whole or in part, at any time during his employment with the
Corporation, including without limitation, all copyrights, inventions,
discoveries and improvements, trademarks, designs and all other intellectual
property rights.
1.11 "LTD Plan" means the Pegasus Communications Corporation Long-Term
Disability Plan, or any successor to that plan.
1.12 "Notice of Termination" means a written notice that specifies the
termination provision in this Agreement upon which the party is relying and, if
applicable, the facts, circumstances and reason(s) for terminating the
employment relationship.
1.13 "Person" shall have the meaning defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended.
1.14 "Potential Change in Control" shall be deemed to have occurred if any one
of the conditions set forth in any one of the following paragraphs shall have
been satisfied:
1.14.1 the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
1.14.2 the Corporation or any other Person publicly announces a good faith
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control; or
1.14.3 the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
1.15 "Principal" means Xxxxxxxx X. Xxxxx.
1.16 "Qualifying Termination" means any termination of the Executive's
employment within six (6) full calendar months prior to the effective date of a
Change in Control, or within two (2) years following the effective date of a
Change in Control, other than (a) a termination described in Section 5.1, 5.2 or
5.3, or (b) a termination by the Executive other than for Good Reason.
1.17 "Related Party" with respect to the Principal means (a) any immediate
family member of the Principal, (b) any trust, corporation, partnership or other
entity, more than 50% of the equity or beneficial interests (whether or not
voting) of which are owned directly or indirectly by the Principal and/or such
other Persons referred to in the immediately preceding clause (a), or (c) the
estate of any Person referred to in the preceding clause (a), until such time as
such estate is distributed in accordance with his or her will or applicable
state law. For purposes of this definition, "immediate family member" means (i)
the spouse or any parent of the Principal, (ii) any lineal descendant of a
parent of the Principal, and (iii) the spouse of any such lineal descendant
(parentage and descent in each case to include adoptive and step relationships).
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1.18 "Voting Stock" of the Corporation means capital stock with voting power,
under ordinary circumstances and without regard to the occurrence of any
contingency, to elect the directors or other managers or trustees of the
Corporation.
2. Position and Duties. The Executive shall serve as Pegasus's President and
Chief Operating Officer and shall have such additional titles, duties, authority
and responsibilities at Pegasus and/or its subsidiaries and affiliates as the
Board may reasonably prescribe or request from time to time. The Executive shall
perform all of his duties and responsibilities diligently and competently, and
to the best of his ability, and shall devote his full time, energies and skills
to his employment under this Agreement. Nothing in this Agreement shall prevent
the Executive from engaging in social, community, charitable, political, family
and other similar activities, so long as those activities are not adverse to the
interests of the Corporation and do not interfere with the performance of the
Executive's duties under this Agreement. The Executive shall comply with all
applicable employment policies and procedures of the Corporation as in effect
from time to time.
3. Term. Subject to Section 5 below, the Executive's term of employment under
this Agreement shall begin on the Effective Date and shall expire on May 31,
2005; provided, however, that commencing on the second anniversary of the
Effective Date and on each anniversary thereafter, the term of this Agreement
shall automatically be extended for one additional year (so that the then
remaining term is two (2) years), unless, not later than ninety (90) days prior
to any such anniversary date, either party provides written notice that it does
not wish to extend the Agreement; and provided, further, that the Corporation
may not provide notice of nonrenewal during the pendency of, or within one year
following, a Potential Change in Control.
4. Compensation and Benefits. Subject to Section 5, the Executive shall
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be entitled to the following compensation and benefits:
4.1 Base Salary. During his employment under this Agreement, Pegasus shall pay
to the Executive a Base Salary at an annual rate of no less than the Executive's
current annual base salary with the Corporation, payable in accordance with the
Corporation's policies applicable to the Corporation's officers from time to
time. The Corporation will review at least annually and may increase, but not
decrease, the Executive's Base Salary.
4.2 Incentive Compensation. During the term of this Agreement, the Board shall
have the discretion to award the Executive short-term or annual incentive
compensation under the Corporation's Short-Term Incentive Plan ("STIP"), or any
successor plan, subject to the terms and conditions of such plan. In addition,
the Executive shall be entitled to participate in any long-term incentive plan
("LTIP") available to executive officers of the Corporation, subject to the
terms and conditions of such plan. Nothing in this Agreement shall limit the
Corporation's right to amend or terminate the STIP or LTIP.
4.3 Employee Benefits. In addition to Base Salary, the Executive shall be
entitled to participate in the Corporation's employee benefit plans and
perquisites that are generally available to the Corporation's executive officers
from time to time, which shall include a short-term disability benefit providing
payments to a disabled participant during the LTD Plan elimination period at the
rate of one-hundred percent (100%) of Base Salary. All benefits and perquisites
provided under this Agreement are subject to the terms and conditions of the
applicable benefit plans or programs, and nothing in this Agreement shall limit
the Corporation's right to amend or terminate any employee benefit plan or
program. The Executive shall not be eligible to participate in any severance
program of general applicability maintained for Pegasus employees or officers.
In addition to the Corporation's employee benefit plans and perquisites that are
generally available to the Corporation's executive officers from time to time,
the Executive shall also be entitled to the following benefits:
4.3.1 Supplemental life insurance coverage in an amount determined by the
Compensation Committee of the Board of Directors, which shall be in
the amount of term life insurance that could be purchased for
aggregate premiums and tax gross up of approximately $15,000
annually; and
4.3.2 Supplemental long-term disability coverage of $15,000 per month, the
aggregate premiums and tax gross up for which shall not exceed
$15,000 annually.
4.4 Reimbursement of Expenses. Pegasus will reimburse the Executive for expenses
that he reasonably and properly incurs in performing his duties, as well as
unreimbursed expenses incurred while serving as the director of such business
corporations as the CEO may approve, so long as he incurs and accounts for those
expenses in accordance with the Corporation's expense reimbursement policy in
effect from time to time.
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5. Termination.
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5.1 Death. The Executive's employment under this Agreement shall terminate upon
the Executive's death. If the Executive's employment terminates as a result of
his death, the Executive's estate (or his beneficiary, as may be appropriate)
shall be entitled to receive:
5.1.1 any Base Salary earned to the date of the Executive's termination, to
the extent theretofore unpaid;
5.1.2 any STIP or LTIP award earned to the date of the Executive's
termination, but solely to the extent provided under the terms of
the respective plan;
5.1.3 any expense reimbursement to which the Executive is entitled at the
time of termination under Section 4.4; and
5.1.4 any other benefits payable under any employee benefit plan of the
Corporation in which the Executive participated at the time of his
termination.
5.2 Disability. If the Executive is unable to perform his duties under this
Agreement due to a disability which entitles him to benefits under the Pegasus
Communications Corporation short-term disability plan or LTD Plan, the
Corporation may place the Executive on unpaid leave of absence in accordance
with its normal employment practices. If the Executive becomes eligible for
benefits under the LTD Plan, the Corporation may terminate this Agreement in
accordance with its normal employment practices by giving advance Notice of
Termination to the Executive. Such termination shall be effective as of the date
set forth in the Notice, and the Executive shall be entitled to the payments and
benefits set forth in Section 5.1 as of the date of termination. The Corporation
will not be deemed to have terminated the Executive's employment, or be in
breach of this Agreement, as a result of assigning to another person any duties
or responsibilities of the Executive which the Executive is not capable of
performing due to disability.
5.3 For Cause by Pegasus. Pegasus may terminate the Executive's employment under
this Agreement at any time for Cause by giving Notice of Termination to the
Executive. Such termination will be effective as of the date of such Notice.
Upon termination of employment for Cause, the Executive shall be entitled to the
payments set forth in Section 5.1 as of the date of termination, and the
Corporation shall have no further obligations under this Agreement except as may
be provided under any applicable employee benefit plan of the Corporation.
5.4 Other Than for Cause by Pegasus. Pegasus may terminate the Executive's
employment under this Agreement at any time for reasons other than Cause by
giving advance Notice of Termination to the Executive. Such termination will be
effective as of the date set forth in such Notice. Except as provided in Section
5.6 or 6, and subject to the restrictions below, if the Corporation terminates
the Executive's employment without Cause, the Corporation shall pay the
Executive the following amounts or benefits:
5.4.1 the payments set forth in Section 5.1 as of his date of termination;
5.4.2 an amount equal to two (2) times his annual Base Salary in effect on
the date of the Notice of Termination, payable in twenty-four (24)
equal monthly installments during the twenty-four (24) month period
following such termination (the "Severance Period");
5.4.3 an amount equal to two (2) times the average annual amount of the
Executive's annual award payments under the STIP for the three (3)
year period ending with the calendar year preceding the date of
termination, payable in twenty-four (24) equal monthly installments
during the Severance Period. If, however, the Executive has not
received annual incentive payments for each year in such three (3)
year period, then the average shall be determined based on the
actual number of years for which the Executive has received annual
incentive payments during such lesser period for which annual
incentive payments have been made or credited;
5.4.4 continuation of coverage for health, dental and/or vision benefits
for the Executive and any covered beneficiary during the twenty four
(24) month period following the Executive's termination of
employment (as such coverage may be amended from time to time for
similarly situated executive officers who continue in employment);
provided, however, that, as a condition for such coverage: (a) the
Executive shall elect to continue such coverage (for himself and any
qualified beneficiary) during the applicable COBRA period, and (b)
the Executive shall continue to pay the amount from time to time
payable for such coverage by similarly situated executive officers
who continue in employment, which amount may be withheld from the
payments under Section 5.4.2;
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5.4.5 a lump sum payment equal to (a) the aggregate taxable cost of
coverage provided under Section 5.4.4 not paid by the Executive,
divided by (b) sixty five hundredths (.65). This amount shall be
paid prior to the end of the Severance Period; and
5.4.6 professional outplacement assistance, provided by an executive
outplacement firm acceptable to the Executive, for such level and
duration, as the Corporation reasonably determines to be
commensurate with the Executive's salary and position; provided,
however, that the cost to the Corporation of such outplacement
assistance shall not exceed $25,000.
In addition to the foregoing, if the Participant's termination of employment is,
in the good faith determination of the Corporation, attributable to a reduction
in force, sale or closure of a division or other business unit, corporate
downsizing, or other economic reason, all outstanding stock options held by the
Executive at the time of termination shall become immediately vested and
exercisable. In the case of any termination not described in the preceding
sentence, the Executive shall be vested in his then outstanding stock options in
accordance with the vesting schedule applicable to such options, as though the
Executive terminated employment on the vesting date immediately following such
termination, and any unvested options shall expire in accordance with their
terms. Nothing in this paragraph shall extend the time for exercising any stock
options beyond the period after the date of the Participant's termination of
employment provided in the applicable option agreement.
Notwithstanding the foregoing, no severance payment shall be due or owing under
Sections 5.4.2 to 5.4.6, inclusive, if the Executive declines to sign and return
the Waiver and Release Agreement set forth in Appendix A hereto within the time
specified by the Corporation after termination of employment (but in no event
less than twenty one (21) days), or revokes or attempts to revoke such Waiver
and Release Agreement. Prior to a Change in Control or Potential Change in
Control, the Corporation may amend Appendix A from time to time to address
changes in applicable law, provided that any such amendment is uniformly
applicable to executive officers of the Corporation.
5.5 Voluntary Resignation or Retirement by Executive. The Executive may
terminate his employment under this Agreement at any time and for any reason by
giving the Corporation Notice of Termination at least ninety (90) days before
such termination is to become effective. On or after receipt of written notice
of resignation or retirement by the Executive (whether or not such notice
complies with the requirements for Notice of Termination under this Section
5.5), the Corporation may, in its discretion, terminate the Executive's
employment prior to expiration of the ninety (90) day period, which termination
will be treated as voluntary resignation by the Executive for purposes of this
Agreement. If the Executive voluntarily terminates his employment with the
Corporation or retires, he shall be entitled only to the payments set forth in
Section 5.1. If, however, the Executive resigns for Good Reason in a Qualifying
Termination under Section 6, then the termination provisions set forth in
Section 6 shall apply.
5.6 Nonrenewal. Except as provided in Section 6 below, if the Executive's
employment is terminated concurrent with expiration of the Agreement because the
Corporation declines to renew the Agreement at the expiration of the initial
term or any renewal term prior to the Executive's Normal Retirement Date (as
defined in the Pegasus 401(k) Plan), then the Corporation will pay the Executive
the following amounts:
5.6.1 the payments set forth in Section 5.1 as of his date of termination;
and
5.6.2 an amount equal to one (1) times his annual Base Salary in effect on
the date of termination, payable in twelve (12) equal monthly
installments during the twelve (12) month period following such
termination.
If the parties have not otherwise agreed to the terms of a new agreement, or to
the extension or renewal of this Agreement, before the end of the applicable
term, this Section 5.6 shall not apply if the Corporation has made a written
offer to the Executive, prior to the expiration of the applicable term, to
extend the Executive's employment for a subsequent term upon terms at least as
favorable to the Executive as provided under the Agreement as then in effect,
and such offer remains effective on the last day of the applicable term. Nothing
in this Section 5.6 precludes the Corporation from terminating the Executive's
employment at any time, in which event Section 5.3 or 5.4 (whichever is
applicable) shall apply in lieu of this Section 5.6.
5.7 Effect of Termination on Payments and Benefits. Except as provided in this
Agreement or under any applicable employee benefit plan, all obligations of the
Corporation to the Executive, or to his estate or beneficiary, shall cease when
the employment relationship terminates, regardless of the reason for such
termination.
5.8 Withholding. All payments under this Agreement shall be subject to such
withholding of federal, state, city or other taxes as the Corporation reasonably
determines may be required by law or governmental regulation or ruling. Prior to
a Change in Control, the Corporation may offset severance payments under this
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Agreement for any expense advances or other indebtedness to the Corporation
evidenced in a writing signed by the Executive.
6. Change in Control. The following provisions shall apply if a
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termination otherwise described in Section 5.4, 5.5 or 5.6 constitutes a
Qualifying Termination.
6.1 Amount of Change in Control Severance. If the Executive's employment
terminates in a Qualifying Termination, then in lieu of the severance and other
benefits that would otherwise be payable to the Executive under Section 5.4, 5.5
or 5.6, whichever is applicable, the Executive shall receive the following
amounts in a single lump sum payment (or in the case of the benefits described
in Section 6.1.4 and 6.1.6, such benefits shall commence to be provided) within
thirty (30) days after the effective date of the Waiver and Release Agreement
described below:
6.1.1 the payments set forth in Section 5.1 as of his date of termination,
including any STIP and LTIP amounts earned by the Executive with
respect to the year preceding termination to the extent not
previously paid;
6.1.2 an amount equal to three (3) times his annual Base Salary in effect
at (a) the date of termination, (b) if applicable, immediately prior
to the event identified in the Notice of Termination as Good Reason
for such termination, or (c) immediately prior to the Change in
Control, whichever is greatest;
6.1.3 an amount equal to three (3) times the average annual amount of the
Executive's annual award payments under the STIP for the three (3)
year period ending with the calendar year preceding (i) the date of
termination, (ii) if applicable, the event identified in the Notice
of Termination as Good Reason for such termination, or (iii) the
Change in Control, whichever produces the greatest average annual
incentive. If, however, the Executive has not received annual
incentive payments for each year in such three (3) year period, then
the average shall be determined based on the actual number of years
for which the Executive has received annual incentive payments
during such lesser period for which annual incentive payments have
been made or credited;
6.1.4 continuation of coverage for health, dental and/or vision benefits
for the Executive and any covered beneficiary during the thirty six
(36) month period following the Executive's termination of
employment (as such coverage may be amended from time to time for
similarly situated executive officers who continue in employment);
provided, however, that (a) as a condition for such coverage, the
Corporation may require the Executive to elect to continue such
coverage (for himself and any qualified beneficiary) under COBRA at
any time during the benefit continuation period, but without
liability for premium payments, and (b) coverage hereunder shall
terminate upon the Executive becoming covered under another group
health plan under circumstances permitting termination of coverage
under COBRA;
6.1.5 a lump sum payment equal to (a) the aggregate taxable cost of
coverage provided under Section 6.1.4 not paid by the Executive,
divided by (b) sixty five hundredths (.65); and
6.1.6 professional outplacement assistance, provided by an executive
outplacement firm acceptable to the Executive, for such level and
duration, as the the Corporation reasonably determines to be
commensurate with the Executive's salary and position; provided,
however, that the cost to the Corporation of such outplacement
assistance shall not exceed $25,000.
Notwithstanding the foregoing, no severance payment or benefit shall be due or
owing under Sections 6.1.2 to 6.1.6, inclusive, or Section 6.2, if the Executive
declines to sign and return the Waiver and Release Agreement set forth in
Appendix A hereto within the time specified by the Corporation after termination
of employment (but in no event less than twenty one (21) days), or revokes or
attempts to revoke such Waiver and Release Agreement.
6.2 Employee Benefits. If the Executive's employment terminates in a Qualifying
Termination, the Executive shall become immediately fully vested in all
outstanding option shares. Except as provided herein, the Executive's employment
shall be deemed to have terminated for purposes of all other employee benefit
plans of the Corporation upon his actual date of termination, and the
Executive's right to any benefits thereunder shall be governed by the terms of
the respective employee benefit plans.
6.3 Limitation on Parachute Payments. If any amount or benefit paid or
distributed to the Executive pursuant to this Agreement, taken together with any
amounts or benefits otherwise paid or distributed to the Executive by the
Corporation or any subsidiary (collectively, the "Covered Payments"), would be
an "excess parachute payment" as defined in Section 280G of the Code and would
thereby subject the Executive to the tax (the "Excise Tax") imposed under
Section 4999 of the Code (or any similar tax that may hereafter be imposed), the
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provisions of this Section 6.3 shall apply to determine the amounts payable to
the Executive pursuant to this Agreement. This Section 6.3 shall not apply if
Section 280G of the Code does not apply to payments made by the Corporation.
6.3.1 Immediately following delivery of any Notice of Termination, or
after the date of the Executive's actual date of termination, if
applicable, the Corporation shall notify the Executive of the
aggregate present value of all benefits to which he would be
entitled under this Agreement and any other plan, program or
arrangement as of the projected or actual date of termination,
together with the projected maximum payments, determined as of such
projected or actual date of termination, that could be paid without
the Executive being subject to the Excise Tax.
6.3.2 If the aggregate value of all Covered Payments to be paid or
provided to the Executive under this Agreement and any other plan,
agreement or arrangement with the Corporation exceeds the amount
which can be paid to the Executive without the Executive incurring
an Excise Tax, then the amounts payable to the Executive under
Section 6 shall be reduced (but not below zero) to the maximum
amount which may be paid hereunder without the Executive becoming
subject to such an Excise Tax (such reduced payments to be referred
to as the "Payment Cap"). If the Executive receives reduced benefits
hereunder, the Executive shall have the right to designate which of
the benefits otherwise provided for in this Agreement he will
receive in connection with the application of the Payment Cap.
6.3.3 For purposes of determining whether any of the Covered Payments will
be subject to the Excise Tax and the amount of such Excise Tax:
(i) such Covered Payments will be treated as "parachute
payments" within the meaning of Section 280G of the
Code, and all "parachute payments" in excess of the
"base amount" (as defined under Section 280G(b)(3) of
the Code) shall be treated as subject to the Excise
Tax, unless, and except to the extent that, in the
good faith judgment of the Corporation's independent
certified public accountants appointed prior to the
Change of Control or tax counsel selected by such
accountants (the "Accountants"), the Corporation has
a reasonable basis to conclude that such Covered
Payments (in whole or in part) either do not
constitute "parachute payments" or represent
reasonable compensation for personal services
actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise
not subject to such Excise Tax, and
(ii) the value of any non-cash payments or any deferred
payments shall be determined by the Accountants in
accordance with the principles of Section 280G of the
Code.
6.3.4 If the Executive receives reduced benefits under this Section 6.3
(or this Section 6.3 is determined not to apply to the Executive
because the Accountants conclude that the Executive is not subject
to any Excise Tax) and it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding
(a "Final Determination") that, notwithstanding the good faith of
the Executive and the Corporation in applying the terms of this
Agreement, the aggregate "parachute payments" within the meaning of
Section 280G of the Code paid to the Executive or for the
Executive's benefit are in an amount that would result in the
Executive being subject to an Excise Tax, the Executive will still
be subject to the Payment Cap under the provisions of Section 6.3.2,
and the amount equal to such excess parachute payments shall be
deemed for all purposes to be a loan to the Executive made on the
date of receipt of such excess payments, which the Executive shall
have an obligation to repay to the Corporation on demand, together
with interest on such amount at the applicable Federal rate (as
defined in Section 1274(d) of the Code) from the date of the payment
hereunder to the date of repayment by the Executive. If the
Executive receives reduced benefits by reason of this Section 6.3
and it is established pursuant to a Final Determination either that
the Executive could have received a greater amount without exceeding
the Payment Cap or that the benefits granted to the Executive were
not subject to the provisions of Sections 280G and 4999, then the
Corporation shall promptly thereafter pay the Executive the
aggregate additional amount which could have been paid without
exceeding the payment Cap, together with interest on such amount at
the applicable Federal rate (as defined in Section 1274(d) of the
Code) from the original payment due date to the date of actual
payment by the Corporation.
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7. Confidential Information. Except as required in the performance of his duties
to Pegasus under this Agreement, the Executive shall not, during or after the
term of this Agreement, use for himself or others, or disclose to others, any
confidential information of or about the Corporation or any of its affiliates,
including information and knowledge pertaining to products and services, ideas,
plans, trade secrets, know-how, proprietary information, advertising,
distribution and sales methods and systems, sales figures, customer and account
lists, and the relationships between the Corporation, its affiliates, and their
accounts, clients and suppliers, unless authorized in writing to do so by the
Corporation. The Executive understands that this undertaking applies to
information of either a technical or commercial or other nature and that any
information not made available to the general public is to be considered
confidential. The Executive acknowledges that such confidential information as
is acquired and used by the Corporation or its affiliates is a special, valuable
and unique asset. All records, files, materials and confidential information
obtained by the Executive in the course of his employment with the Corporation
are confidential and proprietary and shall remain the exclusive property of
Pegasus or its affiliates, as the case may be. However, this provision shall not
preclude the Executive from providing truthful information to the extent
required by subpoena, court order, search warrant or other legal process,
provided that the Executive immediately notifies the Corporation of such request
in order to provide the Corporation an opportunity to object to such request in
the appropriate forum and to obtain a ruling on such objection.
8. Return of Documents and Property. Upon the termination of the Executive's
employment (regardless of reason), or at any time upon the request of the
Corporation, the Executive (or his heirs or personal representative) shall
deliver to the Corporation all property belonging to it, including without
limitation, any automobile(s), computer programs or equipment, cellular
telephones, beepers or other property belonging to the Corporation, and
documents, property and data of any nature and in any form, including electronic
or magnetic form, and rolodex files, reflecting any confidential information
described in Section 7.
9. Noncompetition; Nonsolicitation. For one calendar year following termination
of the Executive's employment under Section 5.5 (other than for Good Reason in a
Qualifying Termination), the Executive agrees that he will not, without the
prior written consent of the CEO, directly or indirectly, whether as a
principal, agent, employee, consultant, contractor, advisor, representative,
stockholder (other than as a holder of an interest of five percent (5%) or less
in the equity of a publicly traded corporation), or in any other capacity:
(a) own, have any interest in, or provide services, advice or assistance
to, any business, person or entity which engages directly or
indirectly in the business of providing or selling satellite
television within the United States;
(b) offer employment to or hire any employee of the Corporation; or
(c) intentionally entice, induce or solicit, or attempt to entice,
induce or solicit, any individual or entity having a business
relationship with the Corporation, whether as an employee,
consultant, customer or otherwise, to terminate or cease such
relationship.
By entering into this Agreement, the Executive acknowledges that these
prohibitions are reasonable as to time, geographical area and scope of activity
and do not impose a restriction greater than is necessary to protect the
Corporation's goodwill, proprietary information and business interests. The
Executive agrees that this Agreement provides enhanced protections and benefits
to which he was not otherwise entitled prior to its execution and that such
protections and benefits constitute valuable consideration sufficient to support
the non-competition and non-solicitation obligations described above.
10. Intellectual Property. All Intellectual Property shall be considered work
made for hire by the Executive and owned by the Corporation. The Executive
agrees to perform, upon the request of the Corporation, during or after his
employment, such acts as may be necessary or desirable to transfer, perfect and
defend the Corporation's ownership and any resulting registrations of the
Intellectual Property.
11. Disparagement. The Executive agrees not to make any derogatory, unfavorable,
negative or disparaging statements concerning the Corporation and its
affiliates, officers, directors, managers, employees or agents, or its or their
business affairs or performance. This provision shall not be construed to limit
the Executive's ability to give non-malicious and truthful testimony should you
be subpoenaed to do so by competent authority having jurisdiction.
12. Enforcement. Any claim arising out of or relating to this Agreement or the
Executive's employment with the Corporation or the termination thereof, other
than an action for injunctive relief as provided below, shall be resolved by
confidential, final and binding arbitration conducted before one arbitrator (or,
at the Corporation's election, a panel of three arbitrators) in accordance with
the commercial arbitration rules of the American Arbitration Association ("AAA")
to be held in Philadelphia, Pennsylvania, under the then-existing AAA rules,
rather than by litigation in court, trial by jury, administrative proceeding, or
in any other forum. Judgment upon the award rendered by the arbitrator(s) may be
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entered in any court having jurisdiction thereof. The Corporation shall bear the
arbitrator's fee and costs. In addition, the Corporation shall promptly pay all
costs and expenses, including without limitation reasonable attorneys' fees,
incurred by the Executive or his beneficiaries in resolving any claim hereunder
in which the Executive or his beneficiaries shall prevail. In all other cases
the parties shall bear their own costs and expenses, except that the Executive
shall pay all costs and expenses, including, without limitation, reasonable
attorney's fees incurred by the Corporation in resolving such claim if the
arbitrator(s) determine such claim to have been brought by the Executive in bad
faith or without any reasonable basis. Notwithstanding the foregoing, the
parties agree that any breach of Section 7, 9, 10 or 11 above is likely to cause
irreparable injury to the Corporation and that damages for any breach of Section
7, 9, 10 or 11 are difficult to calculate. Therefore, upon breach of Section 7,
9, 10 or 11 hereof, the Corporation shall, at its election, be entitled to
injunctive and other equitable relief from a court or such other relief or
remedies, including damages, to which it may be entitled, and shall not be
required to submit the matter to arbitration.
Notwithstanding the foregoing, following the occurrence of a Change in Control,
the Corporation shall reimburse the Executive for the attorney and/or accounting
fees and costs reasonably incurred by the Executive (a) in assessing whether the
Excise Tax calculation performed under Section 6.3 was correct and/or (b) in
enforcing his rights under this Agreement; provided, however, that the
Corporation shall not be required to pay any such fees or costs incurred in
connection with a claim pursued by the Executive (or his attorney) in bad faith
or without reasonable basis.
13. Indemnity. Pegasus shall indemnify the Executive and hold the Executive
harmless from and against any claim, loss or cause of action arising from or out
of the Executive's performance as an officer, director or employee of the
Corporation or any of its subsidiaries, or in any other capacity in which the
Executive served at the request of the Corporation, to the greatest extent
permitted under the by-laws of the Corporation at the time such claim, loss or
cause of action is asserted.
14. Notices. All notices and other communications provided for herein that one
party intends to give to the other party shall be in writing and shall be
considered given when mailed, return receipt requested, or couriered by
overnight delivery service, return receipt requested, or personally delivered,
either to the party or at its respective address set forth below (or to such
other address as a party shall designate by notice hereunder):
If to Pegasus:
Pegasus Communications Corporation
000 Xxxx Xxxx Xxx.
Xxxx Xxxxxx, XX 00000
If to the Executive:
Xxx X. Lodge
0000 Xxxxx Xxxx Xxxx
Xxxxxxxxxxxx, XX 00000
15. No Mitigation. Executive shall have no duty to mitigate the Corporation's
obligation with respect to the termination payments set forth herein by seeking
other employment following termination of his or her employment, nor shall such
termination payments be subject to offset or reductions by reason of any
compensation received by Executive from such other employment. The Corporation's
obligations to make any payments hereunder shall not terminate in the event
Executive accepts other full time employment.
16. Amendments. This Agreement may be amended, modified or superseded only
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by a written instrument executed by both of the parties hereto.
17. Binding Effect. This Agreement shall inure to the benefit of and shall
---------------
be binding upon Pegasus and the Executive and their respective heirs, executors,
personal representatives, successors and permitted assigns.
18. Assignability. This Agreement will be binding upon and inure to the benefit
of the Corporation and any successor to the Corporation, including without
limitation any persons acquiring directly or indirectly all or substantially all
of the business or assets of the Corporation whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor will thereafter
be deemed the "Corporation" for the purposes of this Agreement, other than for
purposes of Section 1.5), but will not otherwise be assignable or delegable by
the Corporation. The Corporation will require any such successor, by agreement
in form and substance identical hereto, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent the Corporation would
be required to perform if no such succession had taken place. This Agreement
will inure to the benefit of and be enforceable by, if then applicable,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees, but shall not otherwise be
assignable by the Executive, whether by pledge, creation of a security interest
or otherwise.
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19. Governing Law. This Agreement shall be governed by the laws of the
--------------
Commonwealth of Pennsylvania.
20. Entire Agreement. The parties hereto acknowledge that each has read this
Agreement, understands it, and agrees to be bound by its terms. The parties
further agree that this Agreement constitutes the complete and exclusive
statement of the agreement between the parties and supersedes all proposals
(oral or written), understandings, representations, conditions, covenants, and
all other communications between the parties relating to the subject matter
hereof.
21. Waiver. Any term or provision of this Agreement may be waived in writing at
any time by the party entitled to the benefit thereof. The failure of either
party at any time to require performance of any provision of this Agreement
shall not affect such party's right at a later time to enforce such provision.
No consent or waiver by either party to any default or to any breach of a
condition or term in this Agreement shall be deemed or construed to be a consent
or waiver to any other breach or default.
22. Invalidity of Portion of Agreement. If any provision of this Agreement or
the application thereof to either party shall be invalid or unenforceable to any
extent, the remainder of this Agreement shall not be affected thereby and shall
be enforceable to the fullest extent of the law.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date stated below effective as stated herein.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Xxxx Xxxxx Date: August 14, 2002
EXECUTIVE
By: /s/ Xxx X. Lodge Date: July 21, 2002
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