Exhibit 10.40
SUCCESSION AGREEMENT
This SUCCESSION AGREEMENT (the "Agreement") is made and entered into as of
December 31, 2001 by and between FAIRPOINT COMMUNICATIONS, INC., a Delaware
corporation (together with its successors and assigns permitted hereunder, the
"Company"), and XXXX X. XXXXXX ("Xxxxxx").
RECITALS:
WHEREAS, Xxxxxx currently serves as the Chief Executive Officer ("CEO") of
the Company and the Chairman of the Company's Board of Directors (the "Board");
WHEREAS, the parties hereto have previously entered into an Employment
Agreement dated January 20, 2000 and desire that such agreement become null and
void and replaced by this Agreement, effective December 31, 2001 (the "Effective
Date"); and
WHEREAS, the parties mutually desire to initiate a succession process under
which Xxxxxx shall resign from his position as CEO, but remain in the Company's
service in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the respective agreements and covenants
set forth herein and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. SUCCESSION PERIOD. Subject to Section 3, the Company agrees to retain
Xxxxxx, and Xxxxxx agrees to be retained by the Company in accordance with the
terms and conditions of this Agreement, for a period commencing on the Effective
Date and ending on December 31, 2003 (the "Succession Period").
2. TERMS OF SUCCESSION.
(a) POSITION AND DUTIES.
(i) On the Effective Date, Xxxxxx shall, and hereby does, resign
from his position as CEO and as an employee of the Company.
(ii) During the Succession Period, Xxxxxx shall, at the will of
the Board, serve as a non-executive Chairman of the Board ("Chairman") and, in
so doing, shall perform normal duties and responsibilities associated with such
position. Notwithstanding the foregoing, the Company reserves the right to
replace Xxxxxx as Chairman at any time during the Succession Period; provided
that if the Company
replaces Xxxxxx as Chairman without Cause (as defined below), the terms of this
Agreement shall otherwise remain in full force and effect.
(iii) During the Succession Period, Xxxxxx shall be an
independent contractor and not an employee of the Company.
(iv) Xxxxxx agrees to observe and comply with the Company's
reasonable and nondiscriminatory rules and policies as adopted by the Company
from time to time.
(b) COMPENSATION.
(i) COMPENSATION. During the Succession Period, Xxxxxx shall
receive annual compensation of $50,000 (the "Annual Compensation"), which shall
be paid not less frequently than bi-monthly.
(ii) BENEFIT PLANS. During the Succession Period, except as
otherwise expressly provided in this Agreement, Xxxxxx shall not be eligible to
participate in any of the Company's employee benefit plans, practices, policies
and programs that are offered to Company employees. During the Succession
Period, Xxxxxx and his spouse shall receive Company-provided medical coverage
and Xxxxxx shall be entitled to reimbursement of supplemental life insurance
premiums in an amount not to exceed $7,000 in the aggregate annually. Such
medical coverage shall, including the self-insured payments and other payments
made by the Company, cover one hundred percent (100%) of the medical and dental
expenses incurred by Xxxxxx and/or his spouse. Such medical coverage shall be
provided through inclusion of Xxxxxx in the group plan(s) provided by the
Company to its employees generally, including that provided through third party
insurers, to the extent that such coverage is permitted under the applicable
policy(ies). Xx. Xxxxxx shall pay, through deductions from his compensation
provided in Paragraph 2(b) hereof and/or directly, such premiums as are
applicable to such coverage in such amount as if he were an employee of the
Company.
(iii) STOCK OPTIONS. Xxxxxx currently has 284,200 fully-vested
options under the Company's 1995 Stock Option Plan (the "95 Plan") and 650,000
fully-vested options under the Company's 1998 Stock Incentive Plan (the "98
Plan"). Unless a longer period of exercise is otherwise provided in the 95 Plan
and 98 Plan, as applicable, and/or in Xxxxxx' respective agreements thereunder,
in which event such longer period for exercise shall apply, Xxxxxx' right to
exercise all of his vested options shall extend until the termination of this
Agreement. Xxxxxx also has been granted 325,000 options which are scheduled to
vest on May 21, 2002 and 325,000 options which are scheduled to vest on May 21,
2003, each of which were granted pursuant to the 98 Plan. On the Effective Date,
325,000 of the unvested options which are scheduled to vest on May 21, 2003
shall be canceled, as shall 125,000 of the unvested options which are scheduled
to vest on May 21, 2002 (collectively the "Canceled Options"), and the other
200,000
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unvested options (the "Unvested Options") shall vest in twenty-four (24) equal
monthly installments of 8,333.34 shares on the last day of each month of the
Succession Period; PROVIDED, HOWEVER, that all Unvested Options shall vest
immediately upon (A) a Change of Control (as defined below) or (B) an earlier
termination of this Agreement without Cause.
3. TERMINATION OF RETENTION.
(a) DEATH OR DISABILITY. Xxxxxx' retention shall terminate
automatically upon Xxxxxx' death during the Succession Period. If a Disability
(as defined below) of Xxxxxx has occurred during the Succession Period, the
Company may give to Xxxxxx written notice in accordance with Section 6(e) hereof
of its intention to terminate Xxxxxx' retention. In such event, Xxxxxx'
retention by the Company shall terminate effective on the ninetieth (90th) day
after receipt of such notice by Xxxxxx (the "Disability Effective Date"), if,
within ninety (90) days after such receipt, Xxxxxx shall not have returned to
perform, with reasonable accommodation, the essential functions of his position.
"Disability" shall mean Xxxxxx' inability to perform, with reasonable
accommodation, the essential functions of his position hereunder for a period of
180 consecutive days due to mental or physical incapacity, as determined by an
independent physician selected by the Company or its insurers and consented to
by Xxxxxx or his power of attorney, such consent not to be unreasonably withheld
or delayed.
(b) CAUSE OR WITHOUT CAUSE. The Company may terminate Xxxxxx'
retention during the Succession Period for Cause or without Cause. For purposes
of this Agreement, "Cause" shall mean (a) misappropriating any funds or any
material property of the Company; (b) obtaining or attempting to obtain any
material personal profit from any transaction in which Xxxxxx has an interest
which is adverse to the interest of the Company unless the Company shall first
give its consent to such transaction; (c) (i) the willful taking of actions
which directly impair Xxxxxx' ability to perform the duties required by the
terms of his retention; or (ii) taking any action detrimental to the Company's
goodwill or damaging to the Company's relationships with its customers,
suppliers or employees; provided that such neglect or refusal, action or breach
shall have continued for a period of twenty (20) days following written notice
thereof; (d) being convicted of or pleading NOLO CONTENDERE to any crime or
offense constituting a felony under applicable law or any crime or offense
involving fraud or moral turpitude; or (e) any material intentional failure to
comply with applicable laws or governmental regulations within the scope of
retention as defined by this Agreement. For purposes of this Agreement, "without
Cause" shall mean a termination by the Company of Xxxxxx' retention during the
Succession Period for any reason other than a termination based upon Cause,
death, Disability or upon a Change of Control, as defined below.
(c) CHANGE OF CONTROL. If a Change of Control (as defined below)
occurs during the Succession Period and the Board determines that it is in the
Company's best interests to terminate Xxxxxx' retention by the Company, the
Company may
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terminate Xxxxxx' retention by giving Xxxxxx written notice in accordance with
Section 6(e) of its intention to terminate Xxxxxx' retention. Any such
termination by the Company as contemplated in this Section 3(c) is referred to
herein as a termination "upon a Change of Control."
For purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if: (a) the stockholders of the Company on the date hereof no
longer own, either directly or indirectly, shares of capital stock of the
Company entitling them to fifty-one percent (51.0%) in the aggregate of the
voting power for the election of the directors of the Company, as a result of a
merger or consolidation of the Company, a transfer of capital stock of the
Company or otherwise, or (b) the Company sells, assigns, conveys, transfers,
leases or otherwise disposes of, in one transaction or a series of related
transactions, all or substantially all of its property or assets to any other
person or entity.
(d) NOTICE OF TERMINATION. Any termination of this Agreement by the
Company for Cause or without Cause or upon a Change of Control, shall be
communicated by a Notice of Termination to Xxxxxx given in accordance with
Section 6(e). For purposes of this Agreement, the term "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Xxxxxx' retention under the provision so indicated and (iii) if
the Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall not be more than
fifteen (15) days after the giving of such notice if Xxxxxx is giving such
notice). The failure by the Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Cause or a
termination upon a Change of Control shall not waive any right of the Company
hereunder or preclude the Company from asserting such fact or circumstance in
enforcing the Company's rights hereunder.
(e) DATE OF TERMINATION. The term "Date of Termination" means (i) if
Xxxxxx' retention is terminated by the Company for Cause or upon a Change of
Control, the date of receipt of the Notice of Termination or any later date
specified therein pursuant to Section 3(d), as the case may be, (ii) if Xxxxxx'
retention is terminated by Xxxxxx, thirty (30) days from the date of receipt of
the Notice of Termination, (iii) if Xxxxxx' retention is terminated by the
Company other than for Cause or upon a Change of Control, the date on which the
Company notifies Xxxxxx of such termination and (iv) if Xxxxxx' retention is
terminated by reason of death or Disability, the date of death of Xxxxxx or the
Disability, as the case may be.
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) If, during the Succession Period, the Company shall terminate
Xxxxxx' retention for Cause, Xxxxxx shall not be entitled to any benefits
pursuant to this Agreement.
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(b) Upon the earliest of (A) expiration of the Succession Period, (B)
termination of Xxxxxx' retention without Cause or (C) a Change of Control,
Xxxxxx shall be entitled to receive from the Company, effective as of the date
of occurrence of such event (the "Termination Event"), unless granted prior to
such date at the discretion of the Board, continued Company-provided medical
coverage for both himself and his spouse until each is sixty-five (65) years of
age.
(i) title to two (2) permanent seat licenses with the Carolina
Panthers; and
(ii) continued Company-provided medical coverage for both Xxxxxx
and Xxxxxx' spouse until each are sixty-five (65) years of age.
5. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable, this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part of
this Agreement, and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
6. MISCELLANEOUS.
(a) COUNTERPARTS. This Agreement may be executed in several
counterparts each of which is an original. This Agreement and any counterpart so
executed shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
(b) CONTENTS OF AGREEMENT; PARTIES-IN-INTEREST, ETC. This Agreement
sets forth the entire understanding of the parties regarding the subject matter
hereof. Any previous agreements or understandings between the parties regarding
the subject matter hereof are merged into and superseded by this Agreement. All
representations, warranties, covenants, terms, conditions and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, legal representatives, successors and permitted assigns
of the Company and Xxxxxx. Neither this Agreement nor any rights, interests or
obligations hereunder may be assigned by any party without the prior written
consent of the other party hereto.
(C) NEW YORK LAW TO GOVERN. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS. Notwithstanding the preceding choice of
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applicable law, this agreement shall be interpreted and enforced according to
the express provisions hereof and the intent of the parties as determined
without regard to any presumptions or rules of construction which would
otherwise be applicable under the laws of any state.
(d) SECTION HEADINGS. The section headings herein have been inserted
for convenience of reference only and shall in no way modify or restrict any of
the terms or provisions hereof.
(e) NOTICES. All notices, requests, demands and other communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered personally or by registered or certified mail, postage
prepaid, or by facsimile transmission (with a copy simultaneously sent by
registered or certified mail, postage prepaid), as follows (or to such other
address as shall be set forth in a notice given in the same manner):
If to the Company to:
FairPoint Communications, Inc.
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
Copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
If to Xxxxxx, to:
Xxxx X. Xxxxxx
00000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
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Copies to:
Xxxxxx X. Xxxxxx, Xx., Esq.
Rosenman & Colin LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
Xxxx X. Xxxxxx
00 Xxxxxx XxXxXxx, Xxxx 0000
Xxxx Xxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
(f) MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by the Company and Xxxxxx. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof nor shall such waiver
constitute a continuing waiver.
(g) THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
(h) TERMINATION OF PRIOR ARRANGEMENTS. The parties hereto acknowledge
and agree that, as of the Effective Date, this Agreement supersedes and
terminates all existing employment, consulting and/or severance agreements or
arrangements between the Company and/or any of its affiliates and Xxxxxx.
However, in the event of the death of Xxxxxx xxxxx to the date on which Xxxxxx'
spouse, Xxxxx Xxxxxx, is 65 years of age, Xxxxx Xxxxxx shall be a third party
beneficiary of the provisions of Paragraphs 2(b)(ii) and 4(b) hereof.
(i) CAROLINAS PANTHERS PERMANENT SEAT LICENSES. Upon execution of this
Agreement, the Company shall transfer to Xxxxxx title to two (2) permanent seat
licenses with the Carolina Panthers.
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IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed as of the date first above written.
/s/ Xxxx X. Xxxxxx
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XXXX X. XXXXXX
FAIRPOINT COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx, Xx.
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Title: Senior Vice President
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