Exhibit 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May __, 1998 (this "Agreement"), between
CUMULUS MEDIA INC., an Illinois corporation (the "Company"), and XXXXX X.
XXXXXX, XX. (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is a radio broadcasting company focused on the
acquisition, operation and development of radio stations in mid-size and smaller
radio markets;
WHEREAS, the Company is preparing an initial public offering of its common
stock;
WHEREAS, it is intended that the Executive will continue to serve the
Company as its Executive Vice Chairman and as a Director of the Company
following the public offering; and
WHEREAS, the Company wishes to assure itself of the continued services of
the Executive so that it will have the benefit of his ability, experience and
services, and the Executive is willing to enter into an agreement to that end,
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to remain in the employ of the Company, on and subject to the terms and
conditions of this Agreement.
2. TERM
The period of this Agreement (the "Agreement Term") shall commence on the
date of consummation of an initial public offering of Company's common stock
during 1998 (the "IPO Date") and shall expire on the third anniversary of the
IPO Date (the "Initial Term"). The Agreement Term shall be automatically
extended for an additional year at the expiration of the Initial Term, or any
succeeding term, unless written notice of non-extension is provided by either
party to the other party at least 180 days prior to the expiration of the
Initial Term or any succeeding term, as the case may be. The period of the
Executive's employment under this Agreement (the "Employment Period") shall
commence as of the IPO Date and shall expire at the end of the Agreement Term,
unless terminated or extended in accordance with the terms and conditions of
this Agreement.
3. POSITION, DUTIES AND RESPONSIBILITIES
(a) The Executive shall serve as, and with the title, office and
authority of, the Executive Vice Chairman of the Company. The Executive shall
also hold similar titles, offices and authority with the Company's subsidiaries
and its successors. The Company shall use its best efforts to cause the
Executive to be nominated and elected to the Board of Directors of the Company
(the "Board") and of its subsidiaries and its successors for the duration of the
Employment Period.
(b) The Executive shall have effective supervision and control over,
and responsibility for, the strategic direction and general and active
day-to-day leadership and management of the business and affairs of the Company
and the subsidiaries of the Company, subject only to the authority of the Board,
and shall have all of the powers, authority, duties and responsibilities usually
incident to the position and office of Executive Vice Chairman of the Company.
The Executive shall report directly to the Board.
(c) The Executive agrees to devote substantially all of his business
time, efforts and skills to the performance of his duties and responsibilities
under this Agreement; PROVIDED, HOWEVER, that nothing in this Agreement shall
preclude the Executive from devoting reasonable periods required for (i)
participating in professional, educational, philanthropic, public interest,
charitable, social or community activities, (ii) serving as a director or member
of an advisory committee of any corporation or other entity that the Executive
is serving on as of the IPO Date or any other corporation or entity that is not
in competition with the Company, (iii) managing his personal investments or (iv)
performing such services as are consistent with his position with Stratford
Research, Inc.; PROVIDED, FURTHER, that any such activities set forth in clauses
(i) through (iv) above do not materially interfere with the Executive's regular
performance of his duties and responsibilities hereunder.
(d) The Executive shall perform his duties at the offices of the
Company located in Atlanta, Georgia, but from time to time the Executive may be
required to travel to other locations in the proper conduct of his
responsibilities under this Agreement.
4. COMPENSATION AND BENEFITS
In consideration of the services rendered by the Executive during the
Employment Period, the Company shall pay or provide the Executive the
compensation and benefits set forth below.
(a) SALARY. The Company shall pay the Executive a base salary (the
"Base Salary") equal to $300,000 per annum during the first 12 months of the
Agreement Term, increased by five percent per annum on each anniversary of the
IPO Date thereafter during the Agreement Term. In its sole discretion, the
Compensation Committee of the Board (the "Compensation Committee") may review
the Base Salary with a view toward consideration of merit increases as the
Compensation Committee
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deems appropriate. The Base Salary shall be paid in arrears in substantially
equal installments at monthly or more frequent intervals, in accordance with the
normal payroll practices of the Company.
(b) INCENTIVE BONUSES. The Company shall provide the Executive with
the opportunity to earn an annual target bonus of up to 50% of his Base Salary
(the "Target Bonus Amount") for each fiscal year of the Company ending during
the Employment Period. An amount up to the Target Bonus Amount will be payable
to the Executive in the event that the annual bonus targets established by the
Compensation Committee (in consultation with the Executive) are met during the
relevant year; PROVIDED, HOWEVER, that the bonus targets shall relate to growth
in budgeted broadcast cash flow(on a same-store basis), and the bonus targets
applicable for 1998 and 1999 are as set forth on Appendix A hereto. Any Target
Bonus Amount shall be paid as promptly as practicable following the calculation
of the broadcast cash flow for the preceding calendar year. The Executive shall
participate in all other short-term and long-term bonus or incentive plans or
arrangements in which other senior executives of the Company are eligible to
participate from time to time (except as provided in Section 5(d) hereof), with
the Executive's short-term and long-term bonus or incentive compensation
opportunities under such plans and arrangements to be determined by the
Compensation Committee.
(c) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in all employee benefit plans, programs, practices or arrangements
of the Company in which other senior executives of the Company are eligible to
participate from time to time, including, without limitation, any qualified or
non-qualified pension, profit sharing and savings plans, any death benefit and
disability benefit plans, any medical, dental, health and welfare plans and any
stock purchase programs that are approved by the Compensation Committee on terms
and conditions at least as favorable as provided to other senior executives of
the Company.
(d) FRINGE BENEFITS AND PERQUISITES. The Executive shall be entitled
to all fringe benefits and perquisites that are generally made available to
senior executives of the Company from time to time that are approved by the
Compensation Committee.
5. EQUITY INCENTIVES
As further consideration for the services rendered by the Executive during
the Employment Period, the Executive shall be granted stock options to purchase
shares of the Company's Class C common stock (the "Common Stock") on the terms
and conditions set forth below. Each such stock option shall be effective upon,
and be subject to, the consummation of an initial public offering of the Common
Stock on the IPO Date. The Company shall register the securities offered under
the stock options provided for in this Section 5 on a Form S-8 or similar
registration statement to be effective as soon as practicable following the IPO
Date, and the Company shall use its best efforts to maintain such registration
statement in effect for the term of the stock options.
(a) TIME-VESTED OPTION. On the IPO Date, the Executive shall be
granted an option (the "Time-Vested Option") under the Company's Executive Stock
Incentive Plan
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to purchase a number of shares of Common Stock (rounded to the nearest whole
share) equal to 2.5 percent of total number of outstanding shares of all classes
of the common stock immediately prior to the IPO Date. The Time-Vested Option
shall vest based on the continued employment of the Executive in equal quarterly
installments of 1/16 of the number of subject shares on the last day of each of
the 16 consecutive calendar quarters ending following the IPO Date. The
exercise price of the Time-Vested Option shall be the price per share to the
public of the Common Stock in the initial public offering (the "IPO Price"). The
Time-Vested Option shall have a 10-year term of exercise and, except as
otherwise provided in this Agreement, shall remain exercisable following vesting
for the full term without regard to the employment status of the Executive. The
Time Vested Option shall be intended to qualify as an "incentive stock option"
to the maximum extent permissible under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
(b) FIRST PREMIUM OPTION. On the IPO Date, the Executive shall be
granted an option (the "First Premium Option") under the Company's Executive
Stock Incentive Plan to purchase a number of shares of Common Stock (rounded to
the nearest whole share) equal to 2.5 percent of total number of outstanding
shares of all classes of the common stock immediately prior to the IPO Date.
The First Premium Option shall vest based on the continued employment of the
Executive in equal annual installments of 25 percent of the number of subject
shares on each of the first, second, third and fourth anniversaries of the IPO
Date. The exercise price of the First Premium Option shall be as follows: (A)
for the shares that vest on the first anniversary of the IPO Date, the exercise
price shall be the IPO Price, (B) for the shares that vest on the second
anniversary of the IPO Date, the exercise price shall be 115% of the IPO Price,
(C) for the shares that vest on the third anniversary of the IPO Date, the
exercise price shall be 132.25% of the IPO Price, and (D) for the shares that
vest on the fourth anniversary of the IPO Date, the exercise price shall be
152.0875% of the IPO Price. The First Premium Option shall have a 10-year term
of exercise and, except as otherwise provided in this Agreement, shall remain
exercisable following vesting for the full term without regard to the employment
status of the Executive.
(c) SECOND PREMIUM OPTION. On the IPO Date, the Executive shall be
granted an option (the "Second Premium Option") under the Company's Executive
Stock Incentive Plan to purchase a number of shares of Common Stock (rounded to
the nearest whole share) equal to 3.0 percent of total number of outstanding
shares of all classes of the common stock immediately prior to the IPO Date.
The Second Premium Option shall vest based on the continued employment of the
Executive in equal annual installments of 25 percent of the number of subject
shares on each of the first, second, third and fourth anniversaries of the IPO
Date. The exercise price of the Second Premium Option shall be as follows: (A)
for the shares that vest on the first anniversary of the IPO Date, the exercise
price shall be the IPO Price, (B) for the shares that vest on the second
anniversary of the IPO Date, the exercise price shall be 120% of the IPO Price,
(C) for the shares that vest on the third anniversary of the IPO Date, the
exercise price shall be 144% of the IPO Price, and (D) for the shares that vest
on the fourth anniversary of the IPO Date, the exercise price shall be 172.80%
of the IPO Price. The Second Premium Option shall have a 10-year term of
exercise and, except as otherwise
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provided in this Agreement, shall remain exercisable following vesting for the
full term without regard to the employment status of the Executive.
(d) OTHER EQUITY INCENTIVES. In addition to the foregoing stock
option grants, the Executive shall be given consideration from time to time by
the Compensation Committee for the grant of stock options or other equity
incentives with respect to the Common Stock under any stock option or
equity-based incentive plan or arrangement of the Company approved by the
Compensation Committee for which senior executives of the Company are eligible
to participate, provided that the Executive shall not be considered eligible for
an award pursuant to the initial allocation of shares reserved for issuance
under the Company's 1998 Stock Incentive Plan as of the IPO Date.
6. TERMINATION OF EMPLOYMENT
The Employment Period will be terminated upon the happening of any of the
following events:
(a) RESIGNATION FOR GOOD REASON. The Executive may voluntarily
terminate his employment hereunder for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent
with the Executive's position (including status, offices, titles or
reporting relationships), authority, duties or responsibilities as
contemplated by Section 3 hereof, any adverse change in the Executive's
reporting responsibilities, or any action by the Company that results in a
diminution in such position, authority, duties or responsibilities, but
excluding for these purposes an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) the failure of the Company to nominate the Executive to the
Board or the failure of the Board to recommend that the Company's
stockholders elect the Executive to the Board;
(iii) any failure by the Company to comply with the compensation and
benefits provisions of Sections 4 or 5 hereof or to comply with any other
material obligation of the Company under this Agreement, including, without
limitation, any failure by the Company to obtain an assumption of this
Agreement by a successor corporation as required under Section 13(a)
hereof;
(iv) a notice of non-extension of the Agreement Term given by the
Company to the Executive as set forth in Section 2 hereof prior to the
expiration of the Initial Term; or
(v) the relocation, without the consent of the Executive, of the
Executive's office to a location more than 40 miles from its current
location in Atlanta, Georgia.
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However, in no event shall the Executive be considered to have terminated his
employment for "Good Reason" unless and until the Company receives written
notice from the Executive identifying in reasonable detail the acts or omissions
constituting "Good Reason" and the provision of this Agreement relied upon, and
such acts or omissions are not cured by the Company to the reasonable
satisfaction of the Executive within 15 days of the Company's receipt of such
notice.
(b) RESIGNATION WITHOUT GOOD REASON. The Executive may voluntarily
terminate his employment hereunder for any reason at any time, including for any
reason that does not constitute Good Reason.
(c) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Executive
shall be considered to be terminated for "Cause" only upon (i) the conviction of
the Executive of a felony under the laws of the United States or any state
thereof, whether or not appeal is taken, (ii) the conviction of the Executive
for a violation of criminal law involving the Company and its business,
(iii) the willful misconduct of the Executive, or the willful or continued
failure by the Executive (except as provided in Section 6(e) hereof) to
substantially perform his duties hereunder, in either case which has a material
adverse effect on the Company; or (iv) the willful fraud or material dishonesty
of the Executive in connection with his performance of duties to the Company.
However, in no event shall the Executive's employment be considered to have been
terminated for "Cause" unless and until the Executive receives a copy of a
resolution adopted by the Board finding that, in the good faith opinion of the
Board, the Executive is guilty of acts or omissions constituting Cause, which
resolution has been duly adopted by an affirmative vote of a majority of the
Board, excluding the Executive and any individual alleged to have participated
in the acts constituting "Cause." Any such vote shall be taken at a meeting of
the Board called and held for such purpose, after reasonable written notice is
provided to the Executive setting forth in reasonable detail the facts and
circumstances claimed to provide a basis of termination for Cause and the
Executive is given an opportunity, together with counsel, to be heard before the
Board. The Executive shall have the opportunity to cure any such acts or
omissions (other than items (i) or (ii) above) within 15 days of the Executive's
receipt of such resolution. The foregoing shall not limit the right of the
Company to suspend the Executive from his day-to-day responsibilities with the
Company pending the completion of such notice and cure procedures.
(d) TERMINATION WITHOUT CAUSE. The Board shall have the right to
terminate the Executive's employment hereunder other than for Cause at any time,
subject to the consequences of such termination as set forth in this Agreement.
(e) DISABILITY. The Executive's employment hereunder shall terminate upon
his Disability. For purposes of this Agreement, "Disability" shall mean the
inability of the Executive to perform his duties to the Company on account of
physical or mental illness or incapacity for a period of four and one-half
consecutive months, or for a period of 135 calendar days, whether or not
consecutive, during any 365 day period, as a result of a condition that is
treated as a total or permanent disability under the long-term
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disability insurance policy of the Company that covers the Executive. The
Executive's employment hereunder shall be deemed terminated by reason of
Disability on the last day of the applicable period; PROVIDED, HOWEVER, in no
event shall the Executive be terminated by reason of Disability unless the
Executive receives written notice from the Company, at least 15 days in advance
of such termination, stating its intention to terminate the Executive for reason
of Disability.
(f) DEATH. The Executive's employment hereunder shall terminate upon his
death.
7. COMPENSATION UPON TERMINATION OF EMPLOYMENT
In the event the Executive's employment by the Company is terminated during
the Agreement Term, the Executive shall be entitled to the severance payments
and benefits specified below:
(a) RESIGNATION FOR GOOD REASON; TERMINATION WITHOUT CAUSE. In the event
the Executive voluntarily terminates his employment hereunder for Good Reason or
is terminated by the Company other than for Cause, death or Disability, the
Company shall pay the Executive and provide him with the following:
(i) ACCRUED RIGHTS. Upon the Executive's termination of
employment, the Company shall pay the Executive a lump-sum amount equal to
the sum of (A) his earned but unpaid Base Salary through the date of
termination, (B) any earned but unpaid Target Bonus Amount for any
completed fiscal year, and (C) any unreimbursed business expenses or other
amounts due to the Executive from the Company as of the date of
termination. The Company shall also pay to the Executive, upon the final
preparation of the Company's audited financial statements for the year in
which termination of employment occurs, an additional lump-sum amount
calculated based on the degrees of achievement of the bonus target
applicable to the Target Bonus Amount for such year, determined in
accordance with the terms of the bonus plan for such year but prorated on a
daily basis to reflect the partial year of service. In addition, the
Company shall provide to the Executive all payments, rights and benefits
due as of the date of termination under the terms of the Company's employee
and fringe benefit plans and programs in which the Executive participated
during the Employment Period (together with the lump-sum payments described
above, the "Accrued Rights").
(ii) SEVERANCE PAYMENT. The Company shall pay the Executive the
greater of (A) the amount equal to the aggregate Base Salary payments (at
the rate in effect at the time of termination) that remain payable to the
Executive from the date of termination until the expiration of the
Agreement Term, or (B) the amount equal to the sum of (1) the annual Base
Salary in effect at the time of termination and (2) the amount of the
annual bonus paid to the Executive pursuant to Section 4(b) hereof for the
fiscal year ended immediately prior to the year of termination. Any amount
payable pursuant to clause (A) or clause (B) above shall be payable
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in four equal consecutive quarterly installments, with the first such
payment to be made within 15 days following the date of termination.
(iii) EQUITY RIGHTS. As of the date of the Executive's termination
under this paragraph (a):
(A) Any unvested portion of the Time-Vested Option shall
become immediately and fully vested and exercisable, and shall remain
exercisable for the full term thereof.
(B) Any unvested portion of the First Premium Option and
the Second Premium Option (together, the "Premium Options") for which
the exercise price per share (as provided in Sections 5(b) and 5(c)
hereof) is less than or equal to the Fair Market Value (as defined
below) per share of the Common Stock as of the date of the Executive's
termination of employment under this paragraph (a) shall become
immediately and fully vested and exercisable. Any shares subject to
the Premium Options that become vested and exercisable in accordance
with the foregoing shall remain exercisable from the date of such
termination of employment until the date that is 90 days following the
date that such shares would otherwise have become vested and
exercisable in accordance with the vesting schedule set forth in
Section 5 hereof in the absence of the foregoing acceleration of
vesting.
For the purposes of this Agreement, the "Fair Market Value" of the Common
Stock as of a given date shall be the average closing sales price for the
Common Stock (or the closing bid, if no sales were reported) as quoted on
the NASDAQ National System for the 15 trading days ending with the
applicable date.
(C) Any unvested portion of the Premium Options for which
the exercise price per share (as provided in Section 5 hereof) is
greater than the Fair Market Value per share of the Common Stock on
the date of the Executive's termination of employment under this
paragraph (a) shall be forfeited; PROVIDED, HOWEVER, that in the event
that the cumulative total return on the Common Stock for the period
beginning on the IPO Date and ending on the date of the Executive's
termination of employment under this paragraph (a) equals or exceeds
the Target Peer Group Return (as defined below), then all of such
unvested portion of the Premium Options that would otherwise have been
forfeited shall instead become immediately and fully vested and
exercisable. Any shares subject to the Premium Options that become
vested and exercisable in accordance with the foregoing shall remain
exercisable from the date of such termination of employment until the
date that is 90 days following the date that such shares would
otherwise have become fully vested in accordance with the vesting
schedule set forth in Section 5 hereof in the absence of the foregoing
acceleration of vesting.
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For the purposes of this Agreement, the "Target Peer Group Return" shall
mean the cumulative total return on common equity (calculated in accordance
with applicable annual proxy disclosure rules) for the bottom quartile of
an index of the eight publicly traded companies most comparable to the
Company, as agreed to by the Executive and the Compensation Committee (and,
if the participants in such index cannot be agreed to, such participants
shall be selected by an independent investment banking firm of national
prominence), assuming the investment of $100 in each vehicle on the IPO
Date and the reinvestment of all dividends.
(iv) CONTINUED BENEFITS. For the 12-month period following the
date of the Executive's termination of employment, the Company shall
continue to provide the Executive and his eligible dependents, at its sole
cost, with the medical, dental, disability and life insurance coverages
that were provided to the Executive immediately prior to termination of
employment, subject to cancellation by the Company in the event that the
Executive obtains coverage under comparable substitute plans of another
employer. Following the expiration of such 12-month period and for the
lifetime of the Executive, the Executive and his eligible dependents shall
be entitled to continue participating (at the Executive's sole expense) in
the Company's group medical, dental, disability and life insurance
coverages, with the Executive's cost to be determined on a basis consistent
with the method for determining employee payments under the health care
continuation requirements of the Consolidated Omnibus Reconciliation Act of
1985 ("COBRA").
(b) RESIGNATION WITHOUT GOOD REASON; TERMINATION FOR CAUSE. In the event
the Executive voluntarily terminates his employment hereunder other than for
Good Reason or is terminated by the Company for Cause, the Company shall pay the
Executive and provide him with any Accrued Rights under Section 7(a)(i). Upon
such termination, (i) the Executive shall not be entitled to receive, and the
Company shall have no obligation to provide, any severance payments under this
Agreement, (ii) the Executive and his dependents shall not be entitled to
receive, the Company shall have no obligation to provide to the Executive or his
dependents, any medical, dental, disability or life insurance coverage except as
required by COBRA or other applicable law or under the terms of the applicable
plans and (iii) all unvested stock options under Section 5 (including, without
limitation, Time-Vested Options and Premium Options) shall terminate immediately
and shall be of no further force or effect.
(c) DISABILITY; DEATH. In the event the Executive's employment hereunder
is terminated by reason of the Executive's Disability or death, the Company
shall pay and provide the Executive (or his legal representative) with the
following:
(i) ACCRUED RIGHTS. The Company shall pay and provide to the
Executive (or his legal representative) any Accrued Rights, including all
disability or life insurance benefits (as applicable).
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(ii) SALARY CONTINUATION. The Company shall provide the Executive
(or his legal representative) with continued payment of the Executive's
then-current Base Salary for a period of 12 months.
(iii) EQUITY RIGHTS. As of the date of the Executive's termination
under this paragraph (c):
(A) Any unvested portion of the Time-Vested Option shall
become immediately and fully vested and exercisable, and shall remain
exercisable for the full term thereof.
(B) Any unvested portion of the Premium Options shall be
forfeited, PROVIDED, HOWEVER, that in the event the Executive's
Disability or death occurs within six months prior to the date that
any portion of the Premium Options are scheduled to vest in accordance
with Section 5 hereof (the "Scheduled Portion") and the Fair Market
Value of the Common Stock as of the date of Disability or death equals
or exceeds the exercise price per share of the shares subject to the
Scheduled Portion, then the Scheduled Portion shall become immediately
and fully vested and exercisable and shall remain exercisable for the
full term thereof.
(iv) CONTINUED BENEFITS. For the 12-month period following the
date of the Executive's Disability or death, the Company shall continue to
provide the Executive and/or his eligible dependents (as applicable), at
its sole cost, with the medical, dental, disability and life insurance
coverages that were provided to the Executive immediately prior to
termination of employment. Following the expiration of such 12-month
period, the Executive shall be entitled to continue group benefit coverages
on the same basis as described in Section 7(a)(iv) hereof.
8. CHANGE OF CONTROL
(a) TERMINATION FOLLOWING CHANGE OF CONTROL. In the event that the
employment of the Executive is terminated during the one-year period immediately
following a Change of Control either (i) by the Executive for Good Reason or
(ii) by the Company other than for Cause, Disability or death, then, in addition
to the payments and benefits provided in Section 7(a)(i), (ii) and (iv) hereof,
any unvested portion of the Time-Vested Options and the Premium Options shall
become immediately and fully vested and exercisable and shall remain exercisable
for the full term thereof. The foregoing rights of the Executive shall apply
whether or not a successor corporation has assumed this Agreement as required
under Section 13(a) hereof.
(b) DEFINITIONS. For purposes of this Section 8, the following terms
shall have the meanings given below:
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (a "Person")
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or group of related Persons (a "Group") (as such terms are used in Section
13(d)(3) of the Securities Exchange Act of 1934) other than a Principal or a
Related Party of a Principal, (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any purchase, sale, acquisition,
disposition, merger or consolidation) the result of which is that any Person or
Group other than a Principal or a Related Party of a Principal becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Securities Exchange Act of 1934) of more than 50% of the aggregate voting
power of all classes of capital stock of the Company having the right to elect
directors under ordinary circumstances, or (iv) the first day on which a
majority of the members of the Board are not Continuing Directors. For purposes
of the foregoing, NationsBanc Capital Corp., State of Wisconsin Pension Board
and their respective affiliates shall be treated as a Group of Related Persons.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board who (i) was a member of the Board on the IPO Date or (ii) was
nominated for election or elected to the Board with the approval of (x)
two-thirds of the Continuing Directors who were members of the Board at the time
of such nomination or election or (y) two-thirds of those Directors who were
previously approved by Continuing Directors.
"PRINCIPAL" means Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxx, Xx.
"RELATED PARTY" with respsect to any Principal means (A) any controlling
stockholder, 80% (or more) owned subsidiary, or spouse or immediate family
member (in the case of an individual) of such principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners owners or Persons benefically holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock, entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such person or of one or more
Subsidiaries of such Person (or any combination thereof).
9. PARACHUTE TAX INDEMNITY
A. (a) If it shall be determined that any amount paid, distributed or
treated as paid or distributed by the Company to or for the Executive's benefit
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such
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excise tax (such excise tax, together with any such interest and penalties,
being hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all federal,
state and local taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under this Section 9, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by a nationally recognized accounting firm (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. The Accounting Firm shall be appointed jointly by two other nationally
recognized accounting firms, one of which is appointed by the Executive and one
of which is appointed by the Company for such purpose. The Accounting Firm
shall not be an accounting firm serving as accountant or auditor for the
individual, entity or group effecting the Change of Control. All fees and
expenses of the Accounting Firm shall be borne by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 9, shall be paid by the Company
to the Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to this Section 9 and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
Executive's benefit.
B. (c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later then ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall: (i) give the Company any information reasonably requested by the Company
relating to such claim; (ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation,
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accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company; (iii) cooperate with the Company in good
faith in order to effectively contest such claim; and (iv) permit the Company
to participate in any proceeding relating to such claim; PROVIDED, HOWEVER, that
the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expense.
Without limitation on the foregoing provisions of this Section 9, the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and xxx for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; PROVIDED, HOWEVER, that if the
Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the Executive's taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority, so long as such action
does not have a material adverse effect on the contest being pursued by the
Company.
C. (d) If, after the Executive's receipt of an amount advanced by the
Company pursuant to this Section 9, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of this Section 9) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the Executive's receipt of
an amount advanced by the Company pursuant to this Section 9, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. NO MITIGATION OR OFFSET
The Executive shall not be required to seek other employment or to reduce
any severance benefit payable to him under Section 7 hereof, and, except as
provided in
13
Section 7(a)(iv) hereof, no such severance benefit shall be reduced on account
of any compensation received by the Executive from other employment. The
Company's obligation to pay severance benefits under this Agreement shall not be
reduced by any amount owed by the Executive to the Company.
11. TAX WITHHOLDING; METHOD OF PAYMENT
All compensation payable pursuant to this Agreement shall be subject to
reduction by all applicable withholding, social security and other federal,
state and local taxes and deductions. Any lump-sum payments provided for in
this Agreement shall be made in a cash payment, net of any required tax
withholding, no later than the fifth business day following the Executive's date
of termination or other payment date. Any payment required to be made to the
Executive under this Agreement that is not made in a timely manner shall bear
interest until the date of payment at an interest rate equal to 120% of the
monthly compounded applicable federal rate as in effect under Section 1274(d) of
the Code for the month in which payment is required to be made.
12. RESTRICTIVE COVENANTS
A. (a) COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. The
Executive acknowledges that during the course of his affiliation with the
Company he has or will have access to and knowledge of certain information and
data which the Company considers confidential and the release of such
information or data to unauthorized persons would be extremely detrimental to
the Company. As a consequence, the Executive hereby agrees and acknowledges
that he owes a duty to the Company not to disclose, and agrees that without the
prior written consent of the Company, at any time, either during or after his
employment with the Company, he will not communicate, publish or disclose, to
any person anywhere or use, any Confidential Information (as hereinafter
defined), except as may be necessary or appropriate to conduct his duties
hereunder, provided the Executive is acting in good faith and in the best
interest of the Company, or as may be required by law or judicial process. The
Executive will use his best efforts at all times to hold in confidence and to
safeguard any Confidential Information from falling into the hands of any
unauthorized person and, in particular, will not permit any Confidential
Information to be read, duplicated or copied. The Executive will return to the
Company all Confidential Information in the Executive's possession or under the
Executive's control whenever the Company shall so request, and in any event will
promptly return all such Confidential Information if the Executive's
relationship with the Company is terminated for any or no reason and will not
retain any copies thereof. For purposes hereof the term "Confidential
Information" shall mean any information or data used by or belonging or relating
to the Company or any of its subsidiaries or Affiliates that is not known
generally to the industry in which the Company is or may be engaged and which
the Company maintains on a confidential basis, including, without limitation,
any and all trade secrets, proprietary data and information relating to the
Company's business and products, price list, customer lists, processes,
procedures or standards, know-how, manuals, business strategies, records,
drawings, specifications, designed, financial information, whether or not
reduced to writing, or information or data which the Company advises the
Executive should be treated as confidential information.
14
B. (b) COVENANT NOT TO COMPETE. The Executive acknowledges that he
has established and will continue to establish favorable relations with the
customers, clients and accounts of the Company and will have access to trade
secrets of the Company. Therefore, in consideration of such relations and to
further protect trade secrets, directly or indirectly, of the Company, the
Executive agrees that during the term of his employment by the Company and for a
period of eighteen months from the date of termination of the Executive, except
that such eighteen month period shall not apply in the event of termination of
employment (i) by the Company other than for Cause, (ii) by the Executive for
Good Reason or (iii) by the Company or the Executive for any reason within one
year following a Change of Control, the Executive will not, directly or
indirectly, without the express written consent of the Company:
(i) own or have any interest in or act as an officer, director,
partner, principal, employee, agent, representative, consultant or
independent contractor of, or in any way assist in, any business located in
or doing business in the United States of America which is engaged,
directly or indirectly, in the radio broadcast properties business in a
market ranked in a Metro Survey Area ("MSA"), below MSA 100 (as listed in
the then-current Arbitron Radio Metro and Television Market Population
Estimates published as of the date of the Executive's termination of
employment) (the "Competitive Businesses");
(ii) solicit clients, customers or accounts of the Company for, on
behalf of or otherwise related to any such Competitive Businesses or any
products related thereto; or
(iii) solicit or in any manner influence or encourage any person who
is or shall be in the employ or service of the Company to leave such employ
or service for any other employment opportunity.
Notwithstanding the foregoing, if any court determines that the covenant not to
compete, or any part thereof, is unenforceable because of the duration of such
provision or the geographic area or scope covered thereby, such court shall have
the power to reduce the duration, area or scope of such provisions and, in its
reduced form, such provision shall then be enforceable and shall be enforced.
C. (c) SPECIFIC PERFORMANCE. Recognizing the irreparable damage will
result to the Company in the event of the breach or threatened breach of any of
the foregoing covenants and assurances by the Executive contained in paragraphs
(a) or (b) hereof, and that the Company's remedies at law for any such breach or
threatened breach will be inadequate, the Company and its successors and
assigns, in addition to such other remedies which may be available to them,
shall be entitled to an injunction, including a mandatory injunction, to be
issued by any court of competent jurisdiction ordering compliance with this
Agreement or enjoining and restraining the Executive, and each and every person,
firm or Company acting in concert or participation with him, from the
continuation of such breach and, in addition thereto, he shall pay to the
Company all ascertainable damages, including costs and reasonable attorneys'
fees sustained by the Company by reason of the breach or threatened breach of
said covenants and assurances.
15
The obligations of the Executive and the rights of the Company, its successors
and assigns under Section 12 of this Agreement shall survive the termination of
this Agreement. The covenants and obligations of the Executive set forth in
Section 12 hereof is in addition to and not in lieu of or exclusive of any other
obligations and duties of the Executive to the Company, whether express or
implied in fact or in law.
D. (d) POTENTIAL UNENFORCEABILITY OF ANY PROVISION. If a final
judicial determination is made that any provision of this Agreement is an
unenforceable restriction against the Executive, the provisions hereof shall be
rendered void only to the extent that such judicial determination finds such
provisions unenforceable, and such unenforceable provisions shall automatically
be reconstituted and become a part of this Agreement, effective as of the date
first written above, to the maximum extent in favor of the Company that is
lawfully enforceable. A judicial determination that any provision of this
Agreement is unenforceable shall in no instance render the entire Agreement
unenforceable, but rather the Agreement will continue in full force and effect
absent any unenforceable provision to the maximum extent permitted by law.
13. SUCCESSORS
(a) This Agreement shall be binding upon and shall inure to the benefit of
the Company, its successors and any person, firm, corporation or other entity
which succeeds to all or substantially all of the business, assets or property
of the Company. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business, assets or property of the Company, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, the "Company" shall mean
the Company as hereinbefore defined and any successor to its business, assets or
property as aforesaid which executes and delivers an agreement provided for in
this Section 13 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law. Notwithstanding the foregoing provisions
of this Section 13(a), this Agreement shall not be assignable by the Company
without the prior written consent of the Executive.
(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 are due
and payable to him hereunder, all such amounts, unless otherwise provided
herein, shall be paid to the Executive's designated beneficiary or, if there be
no such designated beneficiary, to the legal representatives of the Executive's
estate.
14. NO ASSIGNMENT
Except as to withholding of any tax under the laws of the United States or
any other country, state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to
16
alienation, sale, transfer, assignment, pledge, attachment, or other legal
process, or encumbrance of any kind by the Executive or the beneficiaries of the
Executive or by his legal representatives without the Company's prior written
consent, nor shall there be any right of set-off or counterclaim in respect of
any debts or liabilities of the Executive, his beneficiaries or legal
representatives, except in the case of termination of employment for Cause;
PROVIDED, HOWEVER, that nothing in this Section 14 shall preclude the Executive
from designating a beneficiary to receive any benefit payable on his death, or
the legal representatives of the Executive from assigning any rights hereunder
to the person or persons entitled thereto under his will or, in case of
intestacy, to the person or persons entitled thereto under the laws of intestacy
applicable to his estate.
15. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof and, except as specifically provided
herein, cancels and supersedes any and all other agreements between the parties
with respect to the subject matter hereof. Any amendment or modification of
this Agreement shall not be binding unless in writing and signed by the Company
and the Executive. Notwithstanding the foregoing, the parties hereto shall
enter into stock option agreements in respect of the Time-Vested Option and the
Premium Options, setting forth terms and conditions consistent with the
provisions of this Agreement and such other terms and conditions approved by the
Compensation Committee and consistent with the Company's Executive Stock
Incentive Plan.
16. SEVERABILITY
In the event that any provision of this Agreement is determined to be invalid or
unenforceable, the remaining terms and conditions of this Agreement shall be
unaffected and shall remain in full force and effect, and any such determination
of invalidity or unenforceability shall not affect the validity or
enforceability of any other provision of this Agreement.
17. NOTICES
All notices which may be necessary or proper for either the Company or the
Executive to give to the other shall be in writing and shall be delivered by
hand or sent by registered or certified mail, return receipt requested, or by
air courier, to the Executive at:
Xx. Xxxxx X. Xxxxxx, Xx.
000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxx X. Xxxxxx, Esq.
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
17
and shall be sent in the manner described above to the Secretary of the Company
at the Company's principal executives offices at 000 Xxxx Xxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000 or delivered by hand to the Secretary of the Company,
and shall be deemed given when sent, provided that any notice required under
Section 6 hereof or notice given pursuant to Section 2 hereof shall be deemed
given only when received. Any party may by like notice to the other party
change the address at which he or they are to receive notices hereunder.
18. GOVERNING LAW
This Agreement shall be governed by and enforceable in accordance with the
laws of the State of Wisconsin, without giving effect to the principles of
conflict of laws thereof.
19. ARBITRATION
Any controversy or claim arising out of, or related to, this Agreement, or
the breach thereof, shall be settled by binding arbitration in the City of
Milwaukee, Wisconsin, in accordance with the rules then obtaining of the
American Arbitration Association, and the arbitrator's decision shall be binding
and final, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
20. LEGAL FEES AND EXPENSES
To induce the Executive to execute this Agreement and to provide the
Executive with reasonable assurance that the purposes of this Agreement will not
be frustrated by the cost of its enforcement should the Company fail to perform
its obligations hereunder, the Company shall pay and be solely responsible for
any attorneys' fees and expenses and court costs incurred by the Executive as a
result of a claim that the Company has breached or otherwise failed to perform
this Agreement or any provision hereof to be performed by the Company,
regardless of which party, if any, prevails in the contest.
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
EXECUTIVE
-----------------------------
XXXXX X. XXXXXX, XX.
CUMULUS MEDIA INC.
------------------------------
By:
Title:
APPENDIX A
ANNUAL BONUS
1. BCF TARGETS. The Executive's annual bonus under Section 4(b) shall be
based on the Company's "as reported budgeted cash flow" ("BCF") targets for 1998
and 1999. The initial BCF targets shall be as follows:
YEAR BCF TARGET
---- ----------
1998 $23.2 million
1999 $52 million
These targets are based on projections for the broadcast properties operated by
the Company as of the Effective Date and the pending acquisitions of broadcast
properties identified on Schedule A-1 hereto.
2. ADJUSTMENTS. The Compensation Committee, in consultation with the
Executive, shall adjust the BCF targets as appropriate to reflect extraordinary
or non-recurring events beyond the control of the Executive that would
materially impact the calculation of BCF for a year. Such events shall include,
but shall not be limited to, acquisitions or dispositions with respect to a year
that were not anticipated at the time the BCF targets were set, and the
completion of any pending acquisition identified on Schedule A-1 hereto on a
date later than the date set forth in such Schedule.
3. PAYMENT LEVELS. The amount of the Executive's annual bonus payment
shall be determined in accordance with the following schedule, with
interpolation of results for intermediate amounts. The Target Bonus Amount, as
set forth in Section 4(b), is 50% of Base Salary.
ACTUAL BCF BONUS PAYMENT
---------- -------------
85% of BCF target 50% of Target Bonus Amount
100% of BCF target 100% of Target Bonus Amount
115% of BCF target 150% of Target Bonus Amount
4. MEASUREMENT OF RESULTS. All calculations with respect to the actual
BCF achieved for a year shall be made in accordance with generally accepted
accounting principals. Such calculations shall be reviewed and approved by the
Compensation Committee, in consultation with the Executive, and compared to the
applicable BCF target, prior to payment of the bonus amount.
