EXHIBIT 1
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 19th day of August 1996, to be effective
September 1, 1996 (the "Effective Date"), between Associated
Communications, L.L.C. (formerly DMT, L.L.C.), a Delaware limited liability
company (the "Company"), and Xxxx X. Xxxxx (the "Executive"), and, as to
the last sentence of Section 4(d)(I) and Sections 4(d)(II), 4(d)(III),
4(f), 8(a)(ii), 10(c) and 14 hereof only, Microwave Services, Inc., a
Delaware corporation ("MSI"), and Digital Services Corporation, a Virginia
corporation ("DSC", and collectively with MSI, the "Original
Shareholders").
The Board of Directors of the Company (the "Board") desires to
provide for the employment of the Executive as a member of the Company's
management. The Executive is willing to commit himself to serve the
Company, on the terms and conditions herein provided.
In order to effect the foregoing, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set
forth below. Accordingly, in consideration of the premises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to serve the Company, on the terms and
conditions set forth herein.
2. Term. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, for the period commencing on the
Effective Date and ending on the sixth anniversary of the Effective Date,
unless further extended as provided in this Section 2 or sooner terminated
in the event that Executive's employment is terminated pursuant to Section
6 hereof (the "Term of Employment"). On the sixth and each subsequent
anniversary of the Effective Date, the Term of Employment ---- shall
automatically be extended for an additional year unless, not later than 180
days prior to any such anniversary, the Company or the Executive shall have
given notice not to extend the Term of Employment.
3. Position and Duties. Commencing on the Effective Date and
continuing for the remainder of the Term of Employment, the Executive shall
be employed as Chairman of the Board and Chief Executive Officer of the
Company. He shall have such authorities, duties and responsibilities
customarily assigned to a Chairman of the Board and Chief Executive Officer
of an enterprise like the company (including those associated with a public
company if the Company becomes a Public Company, as such term is defined in
Section 4(d)(I) below). The Executive shall be assigned no duties or
responsibilities that are materially inconsistent with, or that materially
impair his ability to discharge, the foregoing duties and responsibilities.
He shall report solely and directly to the Board. Upon any termination of
the Executive's employment with the Company, the Executive shall resign
from the Board. The Executive shall devote substantially all his working
time and efforts to the business and affairs of the Company; provided,
however, that the Executive may also (a) serve on the boards of directors
or trustees of the business enterprises listed on Exhibit A hereof, as well
as any others to which the Board gives its written consent, which shall not
be unreasonably withheld, (b) serve on the boards of directors or trustees
of trade associations and/or charitable organizations or engage in
charitable activities and community affairs, and (c) manage his personal
investments and affairs, provided that such activities do not interfere
with the proper performance of his duties and responsibilities under this
Agreement.
4. Compensation and Related Matters.
(a) Salary. The Company shall pay Executive a base salary ("Base
Salary") during the period of the Executive's employment hereunder, which
shall be at an initial rate of five-hundred-thousand dollars ($500,000) per
annum. The Base Salary may be adjusted from time to time as provided in the
next paragraph and shall be paid in accordance with the Company's standard
payroll procedure.
Prior to the third anniversary of the Effective Date, the Base
Salary shall be reviewed for increase effective on such third anniversary
in the discretion of the Board. Thereafter, the Base Salary shall be
reviewed at least annually for increase in the discretion of the Board. The
Executive's Base Salary may not be decreased at any time during the Term of
Employment.
(b) Annual Bonus. For the Company's fiscal year in which the Term
of Employment begins, the Company shall pay the Executive an amount equal
to the product of five-hundred-thousand dollars ($500,000) multiplied by a
fraction, the numerator of which is the number of calendar days of such
fiscal year during which the Executive is employed hereunder, and the
denominator of which is 366. With respect to each of the first three full
fiscal years of the Company during the period of the Executive's employment
hereunder, the Company shall pay the Executive an annual bonus of
five-hundred-thousand dollars ($500,000). The respective bonus amounts
referred to in the preceding sentences of this on 4(b) shall be paid within
thirty (30) days after the end of the Company's fiscal year in respect of
which such bonus amount is payable. With respect to the fourth and
subsequent full fiscal years of the Company during the period of the
Executive's employment hereunder, the Executive shall be entitled to an
annual bonus in such amount and based upon such criteria as the Board may
determine in its discretion.
(c) Non-Equity-Based Annual Compensation Programs. Beginning on
the third anniversary of the Effective Date, the Executive shall
participate in all annual (but not long-term) executive compensation plans
and programs of the Company which are not equity-based at a level
commensurate with his seniority and position at the Company, provided that
this Section 4(c) shall not duplicate the amount of any benefit provided
pursuant to the last sentence of Section 4(b) hereof.
(d) Company Appreciation Rights.
(I) As of the Effective Date, the Company shall grant the
Executive six separate Company Appreciation Rights ("CARs") which will
expire on the tenth anniversary of the Effective Date and which will vest
on the first through sixth anniversaries of the Effective Date,
respectively, if the Executive shall be employed by the Company on the
respective six anniversaries; provided, however, that, if the Executive's
employment shall be terminated for any reason (other than a termination by
the Company for "Cause," as defined in Section 6(c) hereof), the CAR which
would otherwise have vested on the anniversary of the Effective Date next
following the issuance of a Notice of Termination (as defined in Section
6(e) hereof, except in the case of termination due to death in which event
the date of death shall be deemed to be the issuance of such Notice for
this purpose) in connection with such termination shall vest on the
Executive's Date of Termination (as defined in Section 6(f) hereof). Each
vested CAR will entitle the Executive to receive, as soon as practicable
after its Settlement Date (defined below) in accordance with the terms
hereof, an amount equal to three percent (3%) (subject to adjustment as
described below) of the amount by which the equity value of the Company on
the Settlement Date (calculated based on the Fair Market Value, as defined
below) exceeds the applicable Target Value, as set forth in the table below
(subject to adjustment as described below). If on a Settlement Date the
Company's equity securities which may be paid to the Executive upon
settlement of a CAR are not listed and traded on a national securities
exchange or on the Nasdaq National Market (if such equity securities are so
listed and traded, the Company shall be deemed to be a "Public Company"),
the amount to be paid to the Executive shall be paid as soon as
practicable, and in any event within 120 days, after the Company has
received notice of the final determination of the Company's Fair Market
Value made in accordance with Section 4(d)(VI) hereof. In the discretion of
the Board, the amount to be paid to the Executive may be paid in cash,
equity securities of the Company, or any combination thereof, and/or such
other form of consideration as the Board may determine in good faith;
provided, that, if equity securities of the Company are used and more than
one class of equity securities is outstanding, the Executive shall have the
right to request an appraisal of the fair market value of such equity
securities in accordance with the procedures set forth in Section 4(d)(VI)
hereof for determining the Fair Market Value of the Company; and provided,
further, that a form of consideration other than cash or equity securities
of the Company can be used only with the consent of the Executive, which
shall not be unreasonably withheld. If the Executive gives the Company
notice that he does not consent to payment in such form, the Company shall
pay him promptly in cash and/or equity securities of the Company. If equity
securities of the Company are paid to the Executive, all such securities
shall be of the same type as the securities owned at the time of payment by
the Original Shareholders. If the equity securities of the Company
delivered to the Executive upon the settlement of a CAR are of more than
one class of security, the number of securities of each class so delivered
shall bear the same proportionate relationship as the securities of such
classes then owned by the Original Share holders (including for purposes of
this Section 4(d)(I), their respective successors) bear to each other. If
the Company becomes a Public Company pursuant to an initial public offering
(the "IPO") of equity securities pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or
otherwise, (A) the Company will, if requested in writing by the Executive,
use its reasonable best efforts to cause to be included in any registration
statement with respect to a public offering (including the IPO) of equity
securities of the class or classes issued to the Executive upon settlement
of a CAR or issued or issuable to the Executive upon exercise of an Option
(as defined in Section 4(d)(V) below) an amount of such equity securities
so issued to and owned by, or so issuable to, the Executive, as of the
Conversion Date (as defined in Section 4(d)(V) below) (the total number of
such equity securities, subject to adjustments for splits, combinations and
the like, being referred to as the "Maximum Amount"), proportionate to the
amount of such equity securities then owned by the Original Shareholders
which are included in such registration statement (based on the total
amount of such equity securities then owned by the Original Shareholders,
and the Maximum Amount, respectively), and (B) in each of the four
successive twelve-month periods, the first of which commences on the
Conversion Date and each of the remaining three of which commences on each
of the three respective subsequent anniversaries thereof, the Company will,
if requested in writing by the Executive (which request with respect to the
first such twelve-month period may not be made prior to six months after
consummation of the IPO), use its reasonable best efforts to promptly cause
to be registered under the Securities Act, and registered or qualified
under such state securities laws as the Executive may reasonably request
(provided that the Company shall not be required to consent to general
service of process in any jurisdiction where it is not then so subject),
for public sale by the Executive an amount of such equity securities
constituting at least 25% of the difference between the Maximum Amount and
the number of such equity securities, if any, sold by the Executive in the
IPO (such difference being referred to as the "Maximum Annual Amount");
provided that in no event will the Executive sell publicly more than the
Maximum Annual Amount in any such twelve-month period. Such registration
rights shall not be transferable to any transferee of such equity
securities (except to transferees referred to in clauses (i) and (ii) of
the last sentence of Section 4(d)(IV) or in the last sentence of Section
4(d)(V)). In addition, such registration rights shall be subject to the
Executive entering into underwriting (if applicable), indemnification, and
other customary agreements, and to the Company's right to defer (or require
the Executive to suspend sales pursuant to) any such registration if (but
only for so long as) it determines in good faith that such registration (or
continued sales) would require disclosure which would be materially adverse
to the Company's interests. The Company shall keep any registration
statement filed under clause (B) above effective for at least 90 days
(increased by the number of days, if any, that sales under any such
registration statement are suspended as provided above). If sold in the
public market, shares registered pursuant to this Section 4(d)(I) shall not
be subject to the first refusal rights set forth below in Section
4(d)(III). The Company shall bear all registration expenses (exclusive of
underwriting discounts and commissions) under this Section 4(d)(I) and
shall provide the Executive with indemnification against liabilities under
the securities laws in customary form.
CAR Vesting Target
Date Value
1 1st Anniversary $200 million
2 2nd Anniversary $250 million
3 3rd Anniversary $325 million
4 4th Anniversary $425 million
5 5th Anniversary $500 million
6 6th Anniversary $2.75 billion
The applicable percentage (initially three percent (3%)) shall be
appropriately adjusted downward by the Board in good faith to reflect
equity investments in the Company (whether such investments are made in
cash or in kind and whether made prior to, on or after the Effective Date);
provided, however, that (i) no such adjustment shall be made in respect of
up to $25 million of equity investments in the Company to the extent such
investments were or are made by the Original Shareholders or their
respective affiliates prior to one year after the Effective Date, (ii) if
equity investments in the Company in excess of $25 million up to a total of
$75 million (i.e., $50 million over and above such $25 million) were or are
made by the Original Shareholders or their respective affiliates prior to
one year after the Effective Date, in lieu of adjusting the applicable
percentage, the applicable Target Value of each CAR shall be adjusted
upward by the amount of such excess equity investments and (iii) if equity
invest ments in the Company not covered by clause (i) or (ii) above were or
are made by the Original Shareholders or their respective affiliates, the
appropriate adjustment in the applicable percentage in respect of such
equity investments shall be based on (A) the amount of such equity
investment, and (B) the Fair Market Value of the Company (determined in
accordance with Section 4(d)(VI)) at the time of such equity investment.
For purposes of this Section 4(d), equity investments made by the Original
Sharehold ers or their respective affiliates shall include (and shall be
deemed made at the time of the payment or advancement of), in addition to
actual capital contributions or investments, amounts paid by the Original
Shareholders or their respective affiliates to the Company in xxxx
bursement of costs or expenses incurred by or on behalf of the Company and
the amount of the loan advanced by the Original Shareholders to the
Executive pursuant to Section 4(d), provided that if the "DTS Systems
Transfers" are "con summated" (with such quoted terms having the same
meaning as in the Limited Liability Company Agreement, dated as of March 5,
1996 between the Original Shareholders (the "DMT L.L.C. Agreement")), the
contribution to the Company of "DTS Licenses" (with such quoted term having
the same meaning as in the DMT L.L.C. Agreement) pursuant thereto shall not
be considered an investment for purposes of this Section 4(d).
The applicable Target Value of each CAR shall be appropriately adjusted
downward dollar for dollar by the Board in good faith to reflect
distributions from the Company in respect of equity interests in the
Company (whether such distributions are made in cash or in kind); provided,
however, that no adjustment shall be made with respect to distributions for
tax liabilities attributable to such equity interests. For the thirty-day
period immediately following the Company's notice to the Executive that an
additional non-cash equity investment has been made in the Company (other
than a non-cash equity investment pursuant to the DTS Systems Transfers) ,
or that the Company has made a non-cash distribution in respect of equity
interests in the Company (which notice the Company agrees to provide within
fifteen (15) days following any such investment or distribution) the
Executive shall have a right to request an appraisal of the fair market
value of such equity investment or distribution in accordance with the
procedures set forth in Section 4(d)(VI) hereof. In the event the Company
fails to give notice to the Executive as provided in the preceding
sentence, the thirty-day period during which the Executive may request such
appraisal shall commence on the first date, after the end of the fifteen
(15) day notice period for the Company, on which the Executive knows of the
applicable equity investment or distribution. Any appraisal so requested
shall be made only at the first subsequent Settlement Date, unless the
Company, in its discretion, decides to have the appraisal made earlier;
provided, however, that if the aggregate value of all such non-cash equity
investments or distributions, respectively, would reasonably be estimated
to exceed $50 million, the Executive may include in the foregoing request a
request for a current appraisal (including of the dilutive effect of such
investments) in which event an appraisal thereof in accordance with Section
4(d)(VI) shall be made as promptly as reasonably possible. In the case of
an equity investment in cash whereby equity interests in the Company of a
different class from the equity interests held by the Original Shareholders
are issued, the Executive may request an appraisal of the dilutive effect
of such investment on equity interests and the CARs, in which event an
appraisal in accordance with Section 4(d)(VI) shall be made as promptly as
practicable. It shall be a condition to the Executive's receipt of an
Equity Interest (as defined in Section 4(d)(II) below) that, if requested
by the Company, the Executive becomes a party to the DMT L.L.C. Agreement
as then in effect, or any analogous partnership, stockholders or other
governance agreement (with respect to any successor partnership or
corporate entity) to which the Original Shareholders (or their successors)
are parties (such DMT L.L.C. Agreement or analogous agreement being
sometimes referred to as a "Company Governance Agreement"). The Company
shall give the Executive written notice of any changes (which notice shall
include the full text of such changes) which are made in the Company
Governance Agreement from time to time, such notice to be given within
fifteen (15) days following any such change. It is agreed that if the
Executive becomes a party to a Company Governance Agreement, in the event
of any conflict or inconsistency between the respective rights and
obligations of the Executive, the Company and the Original Shareholders
thereunder and under this Agreement, the provisions of this Agreement shall
control.
(II) If the Original Shareholders (including for purposes of this
Section 4(d)(II) and Section 4(d)(III), their respective successors) shall
sell to a third party any of their equity interests in the Company at a
time (whether or not during the Term of Employment) when the Executive
holds vested CARs or owns any equity interest in the Company as a result of
the settlement of any CAR or otherwise (an "Equity Interest"):
(A) The Original Shareholders shall require the purchaser
of their equity interests to purchase, at the Executive's election, the same
percentage of the aggregate of the Executive's vested CARs (treating such
vested CARs as if the date of purchase were a Settlement Date and the
vested CARs had been converted into an Equity Interest as provided in
Section 4(d)(I) above immediately prior to such purchase) and Equity
Interest as the percentage of the aggregate equity interests of the
Original Shareholders which is being purchased; the purchase from the
Executive shall be made on the same terms and for the same consideration as
the purchase from the Original Shareholders; and
(B) The Original Shareholders, at their election, may require the
purchaser of their equity interests to purchase, and the Executive to sell,
the same percentage of the aggregate of the Executive's vested CARs
(treating such vested CARs as if the date of purchase were a Settlement
Date and the vested CARs had been converted into an Equity Interest as
provided in Section 4(d)(I) immediately prior to such purchase) and Equity
Interest as the percentage of the aggregate equity interests of the
Original Shareholders which is being purchased; the Original Shareholders,
in their discretion, may direct the Company to vest part or all of the
Executive's unvested CARs immediately prior to such date of purchase; any
purchase from the Executive shall be made on the same terms and for the
same consideration as the purchase from the Original Shareholders.
(III) Upon the terms and subject to the conditions of this
Section 4(d)(III), the Executive grants the Original Shareholders a right of
first refusal with respect to any sale or other disposition for value by the
Executive (a "Transfer") of any Equity Interest.
(i) If the Executive desires to effect a Transfer of some
or all of his Equity Interest pursuant to a bona fide offer (an "Offer") from
any person or entity (an "Offeror"), the Executive shall give written notice
of such Offer (a "First Refusal Notice") to each of the Original Shareholders.
The First Refusal Notice shall specify the number or amount of securities
comprising the Equity Interest proposed to be transferred pursuant to such
Offer (the "First Refusal Interest"), the price proposed to be paid by the
Offeror (the "Offer Price"), the identity of the Offeror and the other
terms and conditions of such Offer, and shall be accompanied by a true and
correct copy of the Offer. If any part of the consideration proposed in the
Offer consists of other than cash, the price proposed to be paid pursuant
to such Offer shall be deemed to include the fair market value of such
non-cash consideration, as determined in good faith by the Board. If the
Executive objects to the fair market value, as so determined, the Executive
may require that the Company obtain a determination of the fair market
value of such non-cash consideration pursuant to the procedures set forth
in Section 4(d)(VI) hereof for determining the fair market value of the
Company, and such determination shall be final and binding on all parties.
(ii) Each Original Shareholder shall have the option to
purchase the First Refusal Interest at the Offer Price and on such other terms
as are set forth in the Offer, by giving notice to the Executive within thirty
(30) days of receipt by such Original Shareholder of the First Refusal
Notice (an Original Shareholder which gives such notice being referred to
as an "Accepting Original Shareholder"), and by purchasing such First
Refusal Interest for the Offer Price in cash, against delivery of the First
Refusal Interest (with appropriate transfer documentation) free and clear
of any liens or encumbrances within fifteen (15) days following the
expiration of such thirty (30) day period; provided, however, that if
Accepting Original Shareholders elect in the aggregate to purchase more
than 100% of the First Refusal Interest, then the portion of the First
Refusal Interest which may be purchased by any Accepting Original
Shareholder that has elected to purchase more than such Accepting Original
Shareholder's Pro Rata Share (as defined below) of the First Refusal
Interest shall be reduced (based on each such Accepting Original
Shareholder's Pro Rata Share), but not below such Accepting Original
Shareholder's Pro Rata Share; and provided, further, that the date for such
purchase may be deferred solely to the extent necessary to obtain any
governmental consents or approvals required to complete such purchase or,
if applicable, to the extent necessary to complete the determina tion of
the fair market value of any non-cash consideration proposed to be paid by
the Offeror, as provided in subparagraph (i) above. For purposes of this
paragraph (ii) of this Section 4(d)(III), an Accepting Original
Shareholder's "Pro Rata Share" shall be the percentage which such Accepting
Original Shareholder's ownership interest in the Company represents of the
ownership interest in the Company of all Accepting Original Shareholders.
(iii) If the Original Shareholders do not give timely notice
of their election to purchase the entire First Refusal Interest, or if such
notice is timely given but the Accepting Original Shareholders fail to
purchase the entire First Refusal Interest within the applicable time
period specified in this Section 4(d)(III), then the Executive may, within
the 90-day period immediately following the expiration of the period during
which the Original Shareholders may give no xxxx of such election, or, if
applicable, within the 90-day period immediately following such failure to
purchase the entire First Refusal Interest, transfer the First Refusal
Interest to the Offeror at a price not less than the Offer Price and on the
same terms and subject to the same conditions as were set forth in the
First Refusal Notice. If the Executive does not complete such Transfer
within such 90-day period, no subsequent Transfer of all or any part of his
Equity Interest may be made without again complying with this Section
4(d)(III), it being understood and agreed that the retention by the
Executive of a security interest in some or part of the First Refusal
Interest which is transferred shall not mean that such Transfer has not
been completed.
(iv) If the Executive fails to comply with this Section
4(d)(III) with respect to all or any part of his Equity Interest (including
without limitation any beneficial interest therein), any attempted or
purported Transfer thereof shall be void and of no force or effect.
(IV) Upon any termination of Executive's employment, the
Executive's CARs which have not vested on or before the Date of Termination
shall be forfeited. No Settlement Date shall occur with respect to
forfeited CARs. Except to the extent provided in Section 4(d)(II) hereof,
CARs held by the Executive (whether vested or not) can be transferred (i)
during his lifetime only by gratuitous transfers to immediate family
members or to trusts for their benefit, and (ii) upon his death by his will
or the laws of descent and distribution.
(V) Except to the extent previously settled pursuant to Section
4(d)(II) hereof, the Settlement Date of each vested CAR shall occur, at the
Executive's election, at any time after its vesting and before the tenth
anniversary of the Effective Date, even if the Term of Employment shall
have already ended. Notwithstanding the foregoing, if any vested CAR shall
still be outstanding on the tenth anniversary of the Effective Date, such
anniversary shall be its Settlement Date (and it shall automatically be
settled and thereby expire). If the Company becomes a Public Company, the
Board shall effect as promptly as practicable the conversion (the
"Conversion") of each outstanding CAR (whether or not vested) into a stock
option ("Option"), effective as of the date the Company becomes a Public
Company (such date being referred to as the "Conversion Date"), having the
same vesting schedule, vesting rights (including upon termination of
employment) and term as the CAR being converted, commencing with the
Effective Date. In converting the CARs into Options, the Board shall
proceed in good faith and on an equitable basis so as to preserve the value
and economic opportunities previously represented by the CARs. If on the
Conversion Date there are outstanding equity interests of the Company of a
different class than the shares of common stock for which, as a result of
the Conversion, the Options will be exercisable, the terms of the
Conversion as determined by the Board shall be subject to review, at the
Executive's request, in accordance with the procedures described in Section
4(d)(VI), including, without limitation, determination of the exercise
price and the number of shares subject to the Options. Each Option shall be
exercisable for shares of a class of common stock of the Company that is
listed on a national securities exchange or on the Nasdaq National Market.
Pursuant to the Conversion, each CAR shall become an Option to acquire
shares having an aggregate value (val ued at the average closing price of a
share over the first twenty (20) days of public trading of such class of
shares commencing on the Conversion Date or, if, in accordance with Section
4(d)(I), the Executive is selling shares in the IPO whereby the Company
becomes a Public Company, valued at the price per share to the public of
such shares in the IPO (the "Share Value")) equal to the product of
multiplying (1) the equity value of the Company on the Conversion Date,
which, unless on the Conversion Date there are outstanding equity interests
of the Company of a different class than the shares of common stock for
which, as a result of the Conversion, the Options will be exercisable,
shall be the Share Value times the number of outstanding shares of common
stock of the Company as of the Conversion Date (and in any event the
determination of such equity value shall take the Share Value into account)
by (2) the applicable percentage for the CAR as set forth in Section
4(d)(I), as adjusted in accordance with that Section (the "CAR
Percentage"). Such Option shall have an aggregate exercise price equal to
the product of multiplying (1) the Target Value of the CAR, as adjusted if
applicable, on the Conversion Date by (2) the CAR Percentage. Such Option
shall provide that in the event that any dividend or other distribution
(whether in the form of cash, stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution, or other
similar corporate transaction or event occurs that affects the stock
subject to the Option so that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of the Option holder, then
the Option shall, in such manner as is equitable, be adjusted as to any or
all of (i) the number and kind of shares of stock which may thereafter be
issued in connection with the Option and (ii) the exercise price of the
Option. Any dispute arising under the prior sentence shall be resolved in
accordance with the procedures described in Section 15. Each Option (when
otherwise exercisable) may be exercised in full, or in part, at the
Executive's election. Any part of the exercise price of any Option may, at
the Executive's election, be paid through the withholding of shares subject
to the Option with a value equal to the portion of the exercise price to be
paid in shares. In addition, any part of the exercise price of any Option
and any related tax withholding amount may, at the Executive's election, be
paid through a cashless exercise procedure that affords the Executive the
opportunity to sell immediately some or all of the shares underlying the
exercised portion of the Option in order to generate sufficient cash to pay
the Option exercise price and/or to satisfy tax withholding obligations
relating to the Option (and if such tax withholding obligations are not
satisfied through such cash, the Executive shall, as a condition of such
exercise, pay to the Company, or make arrangements satisfactory to the
Company for the payment of, the full amount of such tax withholding
obligations), provided that such cashless exercise procedure shall be
available only if at the time of such exercise the shares subject to the
Option being exercised are freely transferable without restriction under
the Securities Act, state securities or "blue sky" laws or otherwise. Any
Option held by the Executive (whether vested or not) may be transferred (1)
during his lifetime only by gratuitous transfers to immediate family
members or to trusts for their benefit, and (2) upon his death by his will
or the laws of descent and distribution.
(VI) For purposes of this Agreement, except as otherwise expressly
provided in this Agreement, (A) the "Fair Market Value" of the Company on
any Settlement Date on which the Company is not a Public Company (or on any
other date for which a valuation of the Company is required by this
Agreement), (B) the fair market value of any non-cash consideration or
property the value of which is to be determined under this Section 4(d)
(including, if required by Section 4(d)(V), the terms of the Conversion)
and (C) if required by Section 4(d)(V), the dilutive effect of any equity
investments or distributions on equity, shall be determined in accordance
with the following procedure: The Executive and the Company shall each
select a nationally recognized appraiser, which shall determine the
valuation or other issue in question. If, in the case of a valuation issue,
the higher of the two original appraisal values is not more than ten
percent (10%) above the lower appraisal value, the value in question shall
be the value agreed upon by the two original appraisers or, in the absence
of such an agreement, the value in question shall be the average of the two
original appraisal values. If, in the case of a valuation issue, the higher
of the two original appraisal values is more than ten percent (10%) above
the lower appraisal value, the two appraisers shall select a third
nationally recognized appraiser who shall determine a value which shall be
at least equal to the lower appraisal value and whose determination of the
value in question shall be final and binding on all parties. In the case of
any other issue, if either appraiser concludes that the two appraisers are
not in substantial agreement, the two appraisers shall select a third
nationally recognized appraiser who shall resolve the remaining differences
and whose determination shall be final and binding on all parties. All
costs and expenses relating to any appraisal or review conducted under this
Section 4(d)(VI) shall be borne by the Company.
(VII) For purposes of this Section 4(d), equity securities of the
Company which are identical except for voting rights shall not be deemed to
be equity securities of different classes.
(e) Special Payment. During the Term of Employment, the Company
shall make no distributions to its members (other than for tax liabilities
attributable to their interests in the Company) until the fifth anniversary
of the Effective Date unless the Company first makes a payment to the
Executive in the amount of five million dollars ($5,000,000). Promptly upon
the fifth anniversary of the Effective Date, if the Executive has not
previously received a payment of five million dollars ($5,000,000) pursuant
to either the immediately preceding sentence or clause (iii) of Section
8(a) hereof, the Company shall pay the Executive the following amount, and
the Executive shall have no further rights under this Section 4(e):
(i) If the Executive is employed hereunder on such fifth
anniversary of the Effective Date, the amount of five million dollars
($5,000,000);
(ii) If the Executive's employment has been terminated by the
Company for Cause prior to such fifth anniversary, an amount equal to one
million dollars ($1,000,000) for each completed year of employment
hereunder;
(iii) If the Executive's employment has been terminated by the
Executive without Good Reason prior to such fifth anniversary, an amount
equal to eighty-three thousand three hundred and thirty-three dollars
($83,333) for each completed month of employment hereunder; and
(iv) If the Executive's employment has been terminated for any
other reason prior to such fifth anniversary, the amount of five million
dollars ($5,000,000).
Any payment made pursuant to this Section 4(e) shall not be offset by any
payment received, or to be received, by the Executive pursuant to any other
provision of this Agreement.
(f) Recourse Loan. As of the Effective Date, the Original
Shareholders shall loan the Executive (in proportion to their respective
equity interests in the Company) the aggregate amount of fifteen million
dollars ($15,000,000). The Executive shall be personally liable, subject to
the terms of this Agreement, for the repayment of such loans, which shall
become due and payable in full on the fifth anniversary of the Effective
Date. Interest shall accrue on such loans at the "Applicable Federal Rate",
determined in accordance with section 1274(d) of the Internal Revenue Code
of 1986, as amended from time to time (the "Code"). On each of the first
two anniversaries of the Effective Date, if, and only if, the Executive
shall be employed by the Company on such anniversary date, all interest
then accrued on such loans and one-fifth (1/5) of the principal amount of
such loans shall automatically be forgiven. Upon any termination of the
Executive's employment for Cause prior to the fifth anniversary of the
Effective Date, the entire outstanding principal balance of such loans and
all accrued interest thereon shall become due and payable immediately. Upon
the earlier to occur of the fifth anniversary of the Effective Date (if,
and only if the Executive shall be employed by the Company on such date) or
any termination of the Executive's employment prior to the fifth
anniversary of the Effective Date by the Company (other than for Cause), by
the Executive for Good Reason (as defined in Section 6(d)(i) hereof), or by
reason of the Executive's death or Disability, the entire outstanding
principal balance of such loans and the accrued interest thereon shall
automatically be forgiven. If the Executive's employment is terminated by
the Executive prior to the fifth anniversary of the Effective Date (other
than for Good Reason or by reason of his death or Disability), forgiveness
of outstanding principal and accrued interest of such loans (beyond amounts
required to be forgiven pursuant to the fourth sentence of this Section
4(f)) shall not occur, and the remaining principal and accrued interest of
such loans shall immediately become due and payable. On September 3, 1996,
the Executive shall execute promissory notes evidencing such loans
substantially in the forms attached hereto as Exhibits B-1 and B-2,
respectively. The parties acknowledge that such promissory notes may be
assigned by the Original Shareholders to the Company, in which case the
rights and obligations under such notes shall inure to the benefit of and
be binding upon, and shall be enforceable by, the Company; provided that no
such assignment shall occur prior to the earlier of (i) the second
anniversary of the Effective Date and (ii) the Company having raised an
aggregate of $150 million of equity or debt financing.
(g) Non-Equity-Based Benefit Plans. The Executive shall be
entitled to participate in or receive benefits under any "employee benefit
plan" (as currently defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or employee benefit
arrangement which is not equity-based and is made available by the Company
from time to time during the period of the Executive's employment hereunder
to its executives and key management employees, on terms and conditions
commensurate with his position at the Company, subject to and on a basis
consistent with the terms, conditions and overall administration of such
plans and arrangements; provided, however, that there shall be no
duplication of the benefits or compensation elements created by this
Agreement; and provided, specifically, without limitation, that there shall
be no duplication of amounts paid in respect of the annual bonuses and
annual bonus opportunities provided by Sections 4(b) and 4(c) hereof.
(h) Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable and customary expenses incurred by the
Executive in performing services hereunder during the Term of Employment,
including all expenses of travel and living expenses while away from home
on business or at the request of and in the service of the Company,
provided that such expenses are incurred and accounted for in accordance
with the policies and procedures established by the Company. The Executive
shall be entitled to receive prompt reimbursement for his reasonable legal
and public relations expenses incurred in connection with the execution of
this Agreement.
(i) Place of Employment; Services Furnished. The Executive shall
be based in the Company's principal executive offices, currently located in
the Washington, D.C. area, except for reasonable required travel on Company
business. The Company shall furnish the Executive with appropriate office
space and such other facilities and services as shall be suitable to the
Executive's position and adequate for the performance of his duties as set
forth in Section 3 hereof. If the Company's principal executive offices
shall be moved out of the Washington, D.C. area, the Company shall promptly
reimburse the Executive for the reasonable costs of relocating his family,
and principal residence, to the new location of such offices.
5. Offices. At the reasonable request of the Company, the
Executive agrees to serve without additional compensation as a director of
any of the Company's subsidiaries and in one or more executive offices of
any of the Company's subsidiaries or affiliates.
6. Termination.
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Executive's incapacity due
to physical or mental illness (as determined by a medical doctor chosen by
the Company and reasonably satisfactory to the Executive or his legal
representative), the Executive shall have been absent from his duties
hereunder on a full-time basis for the entire period of one-hundred-eighty
(180) consecutive days, the Executive's employment hereunder shall be
terminated for Disability.
(c) Cause. The Company may terminate the Executive's employment
hereunder for "Cause". For purposes of this Agreement, the Company shall
have "Cause" to terminate the Executive's employment hereunder if (i) the
Executive is convicted of a felony; or (ii) the Executive engages in
conduct that constitutes willful gross neglect or willful gross misconduct
in carrying out his duties under this Agreement, resulting, in either case,
in material harm to the Company, monetarily or otherwise, unless the
Executive reasonably believed in good faith that such act or non-act was in
(or not opposed to) the best interests of the Company). Unless the
Executive has been convicted of a felony, no termination for Cause shall
take effect unless the following provisions of this paragraph shall have
been complied with. The Board shall give the Executive written notice of
its intention to terminate him for Cause, such notice (i) to state in
detail the particular circumstances that constitute the grounds on which
the proposed termination for Cause is based and (ii) to be given within
four (4) months of the Board learning of such circumstances. The Executive
shall have ten (10) days, after receiving such special notice, to cure such
grounds, to the extent such cure is possible. If he fails to cure such
grounds to the Board's satisfaction, the Executive shall then be entitled
to a hearing by the Board, during which he may, at his election, be
represented by counsel. Such hearing shall be held within thirty (30) days
of his receiving such special notice, provided he requests a hearing within
fifteen (15) days of receiving the notice. If the Board gives written
notice to the Executive within five (5) days following such hearing
confirming that, in the good faith judgment of a majority of the Board,
Cause for terminating him on the basis set forth in the original notice
exists, he shall thereupon be terminated for Cause.
(d) Termination by the Executive.
(i) The Executive may terminate his employment hereunder for
"Good Reason", which, for purposes of this Agreement, shall mean any failure
by the Company or the Original Shareholders to comply with any material
provision of this Agreement required by the terms hereof to be complied
with by such entity (including, without limitation, any breach of any of
the Company's obligations under Sections 3, 4(a), 4(b), 4(c), 4(d), 4(e),
4(f), 8(a), 9 or 15) that has not been cured within twenty (20) days after
written notice of such noncompliance (specifying in reasonable detail the
particulars of such noncompliance) has been given by the Executive to the
Company.
(ii) The Executive may terminate his employment hereunder without
Good Reason, upon giving four months notice to the Company (which notice
period shall end earlier if the Company's designated successor to the
Executive commences employment with the Company before the end of such
period).
(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination
pursuant to Section 6(a) hereof) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 17 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, except that in the
case of a termination by the Company without Cause, or a termination by the
Executive without Good Reason, the Notice may merely state that Cause/Good
Reason for termination is not claimed.
(f) Date of Termination. "Date of Termination" shall mean the
following: (i) if the Executive's employment is terminated by his death,
the date of his death; (ii) if the Executive's employment is terminated
pursuant to Section 6(b) hereof, thirty (30) days after the Notice of
Termination is given; (iii) if the Executive's employment is terminated
pursuant to Section 6(c) hereof, the date specified in the Notice of
Termination; (iv) if the Executive's employment is terminated pursuant to
Section 6(d)(i) hereof, thirty (30) days after the Notice of Termination is
given; (v) if the Executive's employment is terminated pursuant to Section
6(d)(ii) hereof, the date determined in accordance with said Section; and
(vi) if the Executive's employment is terminated by the Company without
Cause, thirty (30) days after the Notice of Termination is given.
Notwithstanding the immediately preceding sentence, if within thirty (30)
days after any Notice of Termination is given the party re ceiving such
Notice of Termination notifies the other party in good faith that a dispute
exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties or by a binding and final arbitration award.
Anything herein to the contrary notwithstanding, if the Executive gives
Notice of Termination on the basis of Good Reason, his absence from
employment after the 30th day following such notice shall not constitute a
basis for termination for Cause.
7. Compensation Upon Termination or During Disability.
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), the Executive shall continue to receive his
Base Salary at the rate and frequency then in effect for such period and
all other compensation and benefits provided herein until his employment is
terminated pursuant to Section 6(b) hereof, provided that payments so made
to the Executive shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of any such payment under
disability benefit plans of the Company or under the Social Security
disability insurance program, and which amounts were not previously applied
to reduce any such payment.
(b) If the Executive's employment is terminated (i) by his death,
(ii) for Disability under Section 6(b) hereof, (iii) by the Company for
Cause under Section 6(c) hereof, or (iv) by the Executive without Good
Reason, the Company shall promptly pay the Executive (or the Executive's
legal representative in accordance with Section 15(b) hereof) his (A) Base
Salary through the Date of Termination at the rate in effect on the Date of
Termination (plus, in the case of termination due to death, Base Salary at
that rate through the ninetieth (90th) day after the date of death); (B)
any amounts due the Executive through the Date of Termination pursuant to
Section 4 hereof, provided that the Company's post-termination obligations
with respect to CARs shall be as provided pursuant to Section 4(d) hereof;
and (C) any other or additional benefits to be provided in accordance with
pertinent plans, programs, or obligations of the Company.
(c) If (A) the Company shall terminate the Executive's employment
(other than for Cause), (B) the Executive shall terminate his employment
for Good Reason or (C) the Executive's employment shall be terminated for
Disability, then, subject to the Executive's continuing compliance with
Section 12 hereof (provided that the Company's post-termination obligations
with respect to CARs, which are provided for in Section 4(d) hereof, shall
not be subject to such compliance),
(i) the Company shall promptly pay the Executive his Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, any previously awarded but unpaid bonus for any
fiscal year completed prior to the Date of Termination, all other unpaid
amounts, if any, to which the Executive is entitled as of the Date of
Termination under this Agreement or any compensation plan or program of the
Company, at the time such payments are due, and a pro-rata bonus for the
year of termination based on his prior year's bonus award (or, if the Date
of Termination shall occur prior to the end of the first full fiscal year
of the Company during the Term of Employment, based on an annual bonus of
five-hundred thousand dollars ($500,000));
(ii) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the Date of Termination, the Company
shall pay as severance to the Executive an amount (the "Severance Amount")
equal to two (2) times the sum of (A) the Executive's annual Base Salary
rate in effect as of the Date of Termination (or, if the termination is for
Good Reason based on a reduction in Base Salary, then the rate shall be the
rate in effect immediately prior to such reduction), plus (B) if the Date
of Termination occurs on or before December 31, 1999, a deemed annual bonus
of five-hundred-thousand dollars ($500,000); the Severance Amount shall be
paid in substantially equal installments and in the same manner and over
the same period of time as the Executive's salary payments would have been
made, except that if the Date of Termination occurs within the two-year
period immediately following a "Change in Control" (as defined in Section 8
hereof) the Severance Amount shall be paid in a single lump sum payment
within the ten-day period immediately following such Date of Termination;
(iii) the Company shall maintain in full force and effect, for the
continued benefit of the Executive for two years, each "employee welfare
benefit plan" (as defined in section 3(1) of ERISA) in which the Executive
was entitled to participate immediately prior to the Date of Termination
(with no reduction in benefits), provided that the Executive's continued
participation is possible under the general terms and provisions of such
plans. In the event that the Executive's participation in any such plan is
barred, the Company shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would otherwise have
been entitled to receive under the plan from which his continued
participation is barred (with no reduction in benefits); and
(iv) the Company shall promptly pay to the Executive (A) any
other amounts due and owing to the Executive under Section 4 of this Agreement
and (B) any other or additional benefits to be provided in accordance with
pertinent plans, programs and obligations of the Company.
(d) After completing the payments and providing the benefits
required by this Section 7 and Section 4 hereof, the Company shall have no
further obligations to the Executive under this Agreement except as
expressly set forth in Sections 9, 10, 14 and 15 hereof. Any amounts due
under this Section 7 and Section 4 hereof are in the nature of compensation
or severance payments considered to be reasonable by the Company and are
not in the nature of a penalty.
8. Change in Control of the Company.
(a) Notwithstanding any other provision of this Agreement, if a
"Change in Control" (as defined in Section 8(b) hereof) shall occur while
the Executive is employed by the Company hereunder, (i) all of the
Executive's outstanding CARs shall immediately vest, (ii) the principal
balance remaining of the loans to the Executive pursuant to Section 4(f)
hereof (and all accrued interest thereon) shall automatically be forgiven,
and (iii) if the Company has not previously made a payment in full to the
Executive pursuant to Section 4(e) hereof, the Company shall immediately
pay the Executive the sum of five million dollars ($5,000,000) less any
amounts previously paid the Executive pursuant to Section 4(e), in complete
settlement of the Executive's rights pursuant to such Section 4(e).
(b) For purposes of this Agreement, a Change in Control shall
occur if (i) any person or entity, or group of affiliated persons or
entities, other than the Original Shareholders and/or their respective
affiliates (for this purpose, the Executive shall be deemed to be an
affiliate of the Original Shareholders), acquires membership interests,
stock or other equity interests of the Company representing more than 50%
of the voting power of all such outstanding membership interests, stock or
other equity interests, (ii) the majority of the Board (or comparable
governing group) consists of persons who are designees of any person or
entity or group of affiliated persons or entities which hold membership
interests, stock or other equity interests in the Company, other than the
Original Shareholders and/or their respective affiliates (for this purpose
the Executive shall be deemed a designee of the Original Shareholders),
(iii) the Company adopts a plan of liquidation providing for the
distribution of all or substantially all of its assets, or (iv) all or
substantially all of the business enterprise of the Company is disposed of
pursuant to a sale of assets transaction or a merger, consolidation or
similar transaction in which the Company is not the surviving entity
(unless (A) no person or entity, or group of affiliated persons or
entities, other than the Original Shareholders and/or their respective
affiliates (for this purpose, the Executive shall be deemed to be an
affiliate of the Original Shareholders) owns immediately after such
transaction membership interests, stock or other equity interests of the
entity which succeeds to the business of the Company as a result of such
transaction representing more than 50% of the voting power of all such
outstanding membership interests, stock or other equity interests, (B) a
majority of the board of directors (or comparable governing body) of the
entity which succeeds to the business of the Company as a result of such
transaction consists of persons (or persons designated by such persons) who
constituted a majority of the Board of the Company immediately prior to
such transaction, and (C) such successor entity assumes in writing the
Company's obligations hereunder and, with respect to the CARs, agrees in
writing to substitute for the CARs on an equitable basis equity-based
awards having the same vesting schedule as the CARs, the same period of
time during which the Executive can exercise a right equivalent to the
settlement right associated with the CARs and otherwise providing
substantially equivalent economic opportunity to that afforded by the CARs
determined, if the Executive requests, as provided in Section 4(d)(VI) (it
being understood and agreed that if the common stock of such successor
entity is listed and traded on a national securities exchange or the Nasdaq
National Market, such substitution will be effected through the conversion
of the CARs into stock options for the purchase of such common stock, or
other equity based awards of such entity having the same economic value, in
the manner described in Section 4(d)(V)). For purposes of this Agreement,
"affiliate" (or derivations thereof, i.e., "affiliated") of any person or
entity means any other person or entity directly or indirectly controlling
or controlled by or under direct or indirect common control with such
person or entity; and for purposes of such definition, "control" when used
with respect to any person or entity means the power to direct the
management and policies of such person or entity, directly or indirectly,
whether through the ownership of voting securities or other equity
interests, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
9. Gross-Up Payment. In the event that the aggregate of any
payments or benefits made or provided to the Executive under this Agreement
(other than any payment pursuant to this Section 9) and under any other
plans, programs or arrangements of the Company (the "Aggregate Payment") is
determined to constitute a Parachute Payment, as such term is defined in
Section 280G(b)(2) of the Code, or any successor provision, then, subject
to the last sentence of this Section 9, the Company shall pay to the
Executive, prior to the time any excise tax imposed by Section 4999 of the
Code, or any successor provision ("Excise Tax"), is payable with respect to
such Aggregate Payment, an additional amount which, after the imposition of
all income and excise taxes thereon, is equal to the Excise Tax on the
Aggregate Payment. The determination of whether an Aggregate Payment
constitutes a Parachute Payment and, if so, the amount to be paid to the
Executive and the time of payment shall be made by an independent Tax
Auditor (the "Tax Auditor") jointly selected by the Company and the
Executive and paid by the Company. The Tax Auditor shall be a nationally
recognized United States public accounting firm that has not, during the
two years preceding the date of its selection, acted in any way on behalf
of the Company or any affiliate thereof. If the Executive and the Company
cannot agree on a firm to serve as the Tax Auditor, then the Executive and
the Company shall each select one nationally recognized United States
accounting firm and those two firms shall jointly select the accounting
firm to serve as the Tax Auditor. Notwithstanding the foregoing (but
subject to the last sentence of this Section 9), in the event that the
amount of the Executive's Excise Tax liability is subsequently determined
to be greater than the Excise Tax liability with respect to which an
initial payment to the Executive under this Section 9 has been made, the
Company shall pay to the Executive an additional amount with respect to
such additional Excise Tax (and any interest and penalties thereon) at the
time that the amount of the actual Excise Tax liability is finally
determined, such additional amount to be calculated in the same manner as
such initial payment. The Executive and the Company shall cooperate with
each other in connection with any proceeding or claim relating to the
existence or amount of liability for Excise Tax, and all expenses relating
to any such proceeding or claim (including all reasonable attorney's fees
and other expenses incurred by the Executive in connection therewith) shall
be paid by the Company promptly upon written demand by the Executive.
Notwithstanding any of the foregoing provisions of this Section 9, the
aggregate amounts payable to the Executive pursuant to this Section 9 with
respect to the Excise Tax liability (exclusive of the aforesaid expenses
incurred by the Executive in connection therewith) shall not exceed one
million dollars ($1,000,000).
10. Indemnification.
(a) The Company agrees that (i) if the Executive is made a party,
or is threatened to be made a party, to any proceeding, by reason of the
fact that he is or was a director, officer, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, partnership,
joint venture, trust, person or other entity, including service with
respect to employee benefit plans, whether or not the basis of such
proceeding is the Executive's alleged action in an official capacity while
serving as a director, officer, member, employee or agent, or (ii) if any
claim, demand, request, threat, or request for information, documents or
testimony (collectively, "Claim") is made, or is threatened to be made,
that arises out of or relates to the Executive's service in any of the
foregoing capacities, then the Executive shall promptly be indemnified and
held harmless by the Company to the fullest extent permitted or authorized
by the Company's limited liability company agreement, certificate of
incorporation, bylaws, or other corporate governance documents or, if
greater, by the laws of the State of Delaware, against any and all costs,
expenses, liabilities and losses (including, without limitation, reasonable
attorney's fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) incurred or suffered by the
Executive in connection therewith, and such indemnification shall continue
as to the Executive even if he has ceased to be a director, member,
employee or agent of the Company or other person or entity, and shall inure
to the benefit of the Executive's heirs, beneficiaries, executors,
administrators and other representatives and successors. The Company shall
pay all reasonable out-of-pocket costs and expenses incurred by the
Executive in connection with any such proceeding or Claim within fifteen
(15) days of receiving written notice requesting such payment and provid
ing evidence reasonably satisfactory to the Company of the Executive's
incurrence of such costs and expenses. Such notice shall include an
undertaking by the Executive to repay the amount of such payment if he is
ultimately determined not to be entitled to indemnification against such
costs or expenses. Notwithstanding the foregoing provisions of this Section
10(a), the Company shall not indemnify and hold harmless the Executive, and
shall not pay any costs or expenses incurred by the Executive, in
connection with any action, suit or proceeding by the Executive against the
Company or any of its directors, officers, subsidiaries or affiliates;
provided that this sentence shall not affect the Executive's right to
indemnification and payment of costs and expenses if the Company is made a
party to a third party action, suit or proceeding against the Executive,
but no such right to indemnification or payment shall apply with respect to
any claim (other than a claim for indemnification under this Section 10(a)
to which the Executive is otherwise entitled), counterclaim or cross-claim
by the Executive against the Company or any of its directors, officers,
subsidiaries or affiliates.
(b) Neither (i) the failure of the Company (including its Board,
independent legal counsel or stockholders) to have made a determination, in
connection with any request for payment or reimbursement under Section
10(a), that the Executive has satisfied any applicable standard of conduct,
nor (ii) a determination by the Company (including its Board, independent
legal counsel or stockholders) that the Executive has not satisfied any
applicable standard of conduct, shall create a presumption that the
Executive has not met an applicable standard of conduct.
(c) Until such time as the Company shall obtain officers' and
directors' liability insurance coverage providing protections to the
Executive (as part of a policy covering officers and directors of the
Company, generally) as comprehensive as possible (taking into account
scope, exclusions, deductibles, maximum liability and other factors) for an
annual premium not exceeding $100,000, the guarantee provided in Section 14
hereof shall remain in full force and effect with respect to Section 10(a)
hereof (whether or not it has terminated for all other purposes); it being
understood and agreed that from and after the time such guarantee is no
longer in effect with respect to Section 10(a) hereof until the termination
of the Executive's employment with the Company, the Company will continue
to maintain the aforesaid officers' and directors' liability insurance to
the extent available at an annual premium not exceeding $100,000.
11. No Offset; No Mitigation. If the Executive's employment is
terminated for any reason during the Term of Employment, the Executive
shall not be required to mitigate damages by seeking other employment, and
there shall be no offset against amounts due the Executive under this
Agreement on account of (i) any remuneration or benefits attributable to
any subsequent employment that the Executive may obtain or (ii) any claims
the Company or any of its affiliates may have against the Executive.
12. Confidentiality, Noncompetition and Nonsolicitation.
(a) The Executive will not, during or after the Term of
Employment, disclose to any entity or person any information (including,
but not limited to, information about customers or about the design,
manufacture or marketing of products or services) (i) which is not
generally known to the public (other than through the Executive's own
breach of this Agreement); (ii) which relates to the business of the
Company or any of its subsidiaries; (iii) which is treated as confidential
by the Company; and (iv) to which the Executive gains access by reason of
his position as an employee or director of the Company, except as such
disclosure (i) is required or appropriate in connection with his work as an
employee of the Company, or (ii) is required by a court of law, by any
governmental agency having supervisory authority over the business of the
Company, or by any other person or body with apparent jurisdiction to order
him to disclose such information.
(b) While the Executive continues to be an employee of the Company
and for the two-year period immediately following his Date of Termination
(or if the Executive's employment is terminated by the Company without
Cause or by the Executive with Good Reason, for the one-year period
immediately following his Date of Termination), the Executive shall not,
except as permitted by the Company upon its prior written consent, (i)
enter, directly or indirectly, into the employ of or render or engage in,
directly or indirectly, any services to any person, firm, corporation or
other entity that is in competition (or is actively planning to engage in
competition) with the Company with respect to (x) any local loop business
(if the Company is engaged in such business on the Date of Termination),
(y) any business actively conducted by the Company on the Date of
Termination or (z) any business which, on the Date of Termination, the
Company plans to enter pursuant to a business strategy in the development
of which the Executive actively participated and which was adopted by the
Board before the Executive's termination of employment (any of the
foregoing being referred to herein as a "Competitive Business"), or (ii)
become interested, directly or indirectly, in any such person, firm,
corporation or other entity as an individual, partner, member, shareholder,
creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or in any other relationship or capacity. The ownership
of three percent (3%) of any class of the outstanding securities of any
corporation, even though such corporation may conduct (or be planning to
conduct) a Competitive Business, shall not be deemed as constituting an
interest which violates clause (ii) of the immediately preceding sentence.
Further, the Executive shall not be deemed to have violated the first
sentence of this Section 12(b) solely by reason of the fact that the
Executive is employed by, or rendering services to, a person, firm,
corporation or other entity which conducts or provides services to (or may
be planning to conduct or provide services to) a Competitive Business, so
long as the Executive's employment is, or his services rendered are, solely
in connection with businesses of such person, firm, corporation or other
entity which are not Competitive Businesses and which do not involve the
provision of services to any Competitive Business, and the Executive has no
direct or indirect authority or involvement in connection with any
Competitive Business conducted (or planned to be conducted), or any
services provided (or planned to be provided) to any Competitive Business,
by such person, firm, corporation or other entity.
(c) While the Executive continues to be an employee of the Company
and for the two-year period immediately following his Date of Termination,
the Executive shall not, except as permitted by the Company upon its prior
written consent, attempt, directly or indirectly, to induce any employee
employed by or performing services for the Company, or any subsidiary or
affiliate of the Company ("Another Employee"), to be employed or perform
services elsewhere; provided, however, the Executive shall not be deemed to
have induced Another Employee to be employed or perform services elsewhere
solely as a result of any actions properly taken in the performance of his
duties hereunder. If the Executive engages in discussions with an entity
other than the Company, its subsidiaries or affiliates about his own
subsequent employment or performance of services for such entity or makes
plans to establish an entity by which he will be employed or for which he
will perform services (in either case, the "Subsequent Employer"), the
Executive shall not discuss with Another Employee (or communicate to
Another Employee in any manner) the possibility of the employment of
Another Employee, or the engagement of Another Employee to perform
services, by the Subsequent Employer.
(d) Any violation by the Executive of Section 12 hereof, occurring
after the Date of Termination, shall entitle the Company to cease making
any payments and providing any welfare benefits otherwise required under
Section 7(c) hereof (provided that the Company's post-termination
obligations with respect to CARs which are provided for in Section 4(d)
hereof shall not be subject to this provision). Additionally, the Company
shall have the right and remedy to have the provisions of this Section 12
specifically enforced, including by temporary and/or permanent injunction,
it being acknowledged and agreed that any such violation may cause
irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company. The Company shall in any event have the
right to seek damages for any breach of this Section 12.
13. Independence and Severability of Section 12 Provisions. Each
of the rights and remedies enumerated in Section 12 shall be independent of
the others and shall be severally enforceable and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity. If any of the
covenants contained in Section 12 or if any of the rights or remedies
enumerated in Section 12, or any part of any of them, is hereafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants or rights or remedies which shall be
given full effect without regard to the invalid portions. If any of the
covenants contained in Section 12 is held to be unenforceable because of
the duration of such provision or the area covered thereby, the parties
agree that the court or arbitrator making such determination shall have the
authority to reduce the duration and/or area of such provi sion, and in its
reduced form said provision shall then be enforceable.
14. Guarantee. The Original Shareholders, in proportion to their
respective ownership interests (as such interests may vary from time to
time) in the Company, severally and unconditionally guarantee prompt
payment of all amounts that become due and owing to the Executive from the
Company under this Agreement; provided that at such time, if any, as the
"DTS Systems Transfers" are fully "consummated" (with the quoted terms
having the same meaning as in the DMT, L.L.C. Agreement), such guarantee
shall automatically terminate and be of no further force or effect, except
with respect to the guarantee of the Company's obligations under Section
10(a) hereof, which guarantee shall be governed by the provisions of
Section 10(c) hereof. Each of the Original Shareholders hereby represents
and warrants, as to itself, that it is fully authorized and empowered to
enter into this Agreement to the extent provided in the first paragraph
hereof and that the performance of its obligations under this Agreement
does not violate any law, regulation or order, or any agreement between it
and any other person or entity.
15. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, any amendment of this Agreement, or any breach
of any of the foregoing, shall, at the election of the Company or the
Executive, be settled by confidential arbitration, to be held in Washington
D.C., in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitrator(s) shall apply the provisions of
this Agreement strictly as written (unless doing so violates the clear
intent of this Agreement), and shall explain the reasons and basis of his
(their) award in detail and in writing. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
All costs and expenses relating to any controversy or claim that is
arbitrable under this Section (including reasonable attorney's fees of the
Executive) shall be paid by the Company promptly on written demand, except
that the arbitrator(s) are authorized to require xxxx bursement of the
Company for moneys paid by it pursuant to this sentence if the
arbitrator(s) determine that the substantive positions of the Executive in
the arbitration were entirely without merit. Pending final resolution of
any arbitration or court proceeding, the Company shall continue prompt
payment of all amounts due the Executive under this Agreement or any
amendment thereof and prompt provision of all benefits to which the
Executive or his beneficiaries are entitled. Notwithstanding the foregoing,
nothing contained in this Section 15 shall limit a party's right to seek
equitable relief in any court of competent jurisdiction.
16. Successors; Binding Agreement.
(a) No rights or obligations of the Company under this Agreement
may be assigned or transferred by the Company except that such rights or
obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or in
connection with the sale or liquidation of all or substantially all of the
assets of the Company, or in connection with the disposition of the
business of the Company substantially as an entirety, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company under this Agreement,
either contractually or as a matter of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the
Executive's estate.
17. Notice.
(a) For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be addressed as follows:
If to the Executive:
Xx. Xxxx X. Xxxxx
If to the Company:
Associated Communications, L.L.C.
c/o The Associated Group, Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: 000-000-0000,
with copies to:
The Associated Group, Inc.
Three Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxx, Esq.
Facsimile No.: 000-000-0000;
Skadden, Arps, Slate, Xxxxxxx & Xxxx
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxx
Facsimile No.: 000-000-0000;
and
Digital Services Corporation
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
Attention: General Counsel
Facsimile No.: 000-000-0000
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) Notices and communications given in accordance with the
foregoing shall conclusively be deemed to have been received and to be
effective on the day on which delivered to the designated recipient, or, if
sent by United States certified or registered mail, postage prepaid, on the
fifth business day after the day on which mailed, provided that a telecopy
or cable of identical content has been sent to the relevant address
specified above within two days after the posting date of such mail.
"Business day" shall mean any day not a Saturday, Sunday or a legal holiday
for non-government employees in the District of Columbia.
18. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such officer
of the Company as may be duly authorized by the Board. No waiver by either
party hereto at any time of any prospective or past breach of any condition
or provision of this Agreement by the other party hereto shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time (unless otherwise specified in the waiver). No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. The validity,
interpretation, construction and, performance and enforcement of this
Agreement shall be governed by the laws of the State of Delaware without
regard to its conflicts of law principles. To the extent that the rights
and obligations under this Agreement of the parties hereto and their
successors, as such rights and obligations are described herein, may
require performance after the termination or expiration of this Agreement,
such rights and obligations shall survive the Term of this Agreement and
shall be fully enforceable thereafter. In the event that any portion or
aspect of any provision of this Agreement shall be deemed to be invalid or
unenforceable for any reason, in whole or in part, the remainder of this
Agreement shall remain in full force and effect to the fullest extent
permitted by law so as to achieve the purposes of this Agreement. The
Executive shall be entitled, to the fullest extent permitted by law, to
select and change a beneficiary or beneficiaries to receive any
compensation or benefit hereunder following the Executive's death. In the
event of the Executive's death or a judicial determination of his
incompetence, references in this Agreement to the Executive shall be
deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative. The Executive agrees that he will cooperate with any
application by the Company to obtain insurance to assist in funding its
obligations to him under this Agreement. The Company represents and
warrants that it is fully authorized and empowered to enter into this
Agreement and that the performance of its obligations under this Agreement
does not violate any law, regulation or order, or any agreement between it
and any other person or entity. The Executive represents that there are no
restrictions or limitations of any kind imposed by his current employer
which would affect his ability to execute this Agreement and perform his
obligations hereunder and further represents that such execution and
performance will not create any liabilities to his current employer or
breach the terms of any agreement to which the Executive is a party (except
to the extent of triggering loss of various rights, options, and other
benefits from the Executive's current employer), including without
limitation, any agreement to keep in confidence the confidential or
proprietary information of his current (or any prior) employer. The
Executive shall not, during his employment with the Company or thereafter,
disclose to the Company or otherwise use in an unauthorized manner any
confidential or proprietary information of any third party, including his
current (or any prior) employer. All payments and benefits provided to
Executive hereunder shall be subject to applicable withholding taxes, and
no such payments or benefits shall be made without adequate arrangement,
reasonably acceptable to the Company, for the satisfaction of such
withholding taxes. Notwithstanding any other provision of this Agreement,
wherever this Agreement provides for an action to be taken, or a decision
to be made, by the Company, the action or decision shall be taken or made
by the Company's Board, or by such individual (including, without
limitation, the Executive) or a group of individuals as shall have been
duly authorized by the Company's Board.
19. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
21. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
ASSOCIATED COMMUNICATIONS, L.L.C.
By: /s/Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title:
EXECUTIVE
/s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx
Signed and agreed upon, as to the last
sentence of Section 4(d)(I) and
Sections 4(d)(II), 4(d)(III), 4(f), (8)(a)(ii),
10(c) and 14 hereof only.
MICROWAVE SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President
DIGITAL SERVICES CORPORATION
By: /s/ Xxxxxxxx Xxxxx
------------------------
Name: Xxxxxxxx Xxxxx
Title: President
