EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered
into as of December 4, 1998, by and between Hungarian Telephone and Cable Corp.,
a corporation organized under the laws of the State of Delaware, United States
of America (the "Company") and Xxx Xxxxxxx ("Executive").
RECITALS:
A. The Company desires to retain Executive as its President and
Chief Executive Officer.
B. Executive desires to work for the Company as its President and
Chief Executive Officer.
C. The parties desire to set forth the terms and conditions under
which Executive shall serve in the above-stated capacity of
President and Chief Executive Officer.
NOW, THEREFORE, in consideration of the respective covenants and
agreements of the parties set forth herein, it is agreed as follows:
1. Employment and Duties. The Company agrees to employ Executive and
Executive accepts the employment, subject to the terms and conditions herein, to
serve as President and Chief Executive Officer of the Company. Executive shall
report to the Board of Directors of the Company (the "Board"). Executive's
duties and responsibilities shall include the duties and responsibilities as set
forth in the Company's bylaws from time to time in effect and such other duties
and responsibilities as the Board may from time to time reasonably assign
Executive, in all cases consistent with Executive's position. Executive shall
perform faithfully the executive duties assigned to him to the best of his
ability.
2. Place of Employment. Executive shall be employed at the Company's
offices located in Budapest, Hungary.
3. Term. The term of employment under this Agreement shall commence on
January 1, 1999 and continue through December 31, 2000, unless earlier
terminated in accordance with the terms of this Agreement (the "Employment
Period").
4. Effective Date. The effective date of this Agreement is December 4,
1998.
5. Annual Salary. Executive will receive a monthly salary based on an
annualized rate of Two Hundred Ten Thousand Dollars ($210,000). The Company
shall be entitled to deduct or withhold all taxes and charges which the Company
may be required by law to deduct or withhold therefrom. The Compensation - Stock
Option Committee of the Board (the "Compensation Committee") shall annually
review Executive's base salary in light of the performance of Executive and, if
it finds Executive's performance to be satisfactory, the Compensation Committee
shall increase such base salary by an amount it determines to be appropriate.
6. Option Award. In consideration of Executive entering into this
Agreement, the Company hereby agrees to grant to Executive, by a separate stock
option agreement(s), options to purchase 100,000 shares ("First Tranche
Options") of the Company's common stock from the Company's 1992 Incentive Stock
Option Plan, as amended (the "Plan"). Provided that Executive has maintained
continuous service with the Company through January 1, 2000, the Company shall
grant Executive options to purchase an additional 100,000 shares ("Second
Tranche Options") of the Company's common stock from the Plan on January 3,
2000. Executive's rights to the Options will vest according to the following
schedule, provided that if Executive has not maintained continuous service with
the Company from the date hereof until the related vesting date (other than in
circumstances set forth in Paragraphs 19(b) and (c)) all as yet unvested options
shall be forfeited and cancelled:
Vesting Date Options Vested
June 30, 1999 50,000
December 31, 1999 50,000
June 30, 2000 50,000
December 31, 2000 50,000
The options shall have a five-year exercise period. The initial purchase
price per share for the First Tranche Options shall be the fair market value per
share of the Company's common stock as of the date hereof and the initial
purchase price per share for the Second Tranche Options, if granted, shall be
the fair market value per share of the Company's Common Stock on December 31,
1999. The "fair market value" per share of the Company's common stock means the
average of the high and low quoted sales price on the date of grant (or, if
there is no reported sale on such date, on the last preceding date on which any
reported sale occurred) of a share on the American Stock Exchange.
7. Annual Performance Bonus. Executive shall be entitled to receive an
annual target bonus of Ninety Thousand Dollars ($90,000) if the Company achieves
certain pre-determined objectives to be mutually agreed upon by the Executive
and the Compensation Committee. The Company's objectives for 1999 shall be
initially set by January 31, 1999 and shall be finalized upon the approval by
the Board of the Company's 1999 business plan, and such bonus, if any, shall be
payable by April 1, 2000. The Company's objectives for 2000 shall be initially
set by December 31, 1999, and shall be finalized upon the approval by the Board
of the Company's 2000 business plan, and such bonus, if any, shall be payable by
December 31, 2000 subject to an agreement between Executive and Committee on a
final bonus settlement upon the completion of the 2000 audited financial
results. For any year in which the Company's performance reaches at least 95%,
but less than 100.5% of such year's objectives, Executive shall be entitled to
receive the following appropriate bonus:
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95%: $45,000
96%: $54,000
97%: $63,000
98%: $72,000
99%: $81,000
100%: $90,000
For any year in which the Company's performance reaches 100.5% or
more of such year's objectives, Executive shall be entitled to receive the
following appropriate bonus:
101%: $93,000
102%: $96,000
103%: $99,000
104%: $102,000
105%: $105,000
106%: $108,000
107%: $111,000
108%: $114,000
109%: $117,000
110% or
more: $120,000
8. Annual Housing Allowance. Executive will receive an annual housing
allowance (the "Housing Allowance") of Thirty-Six Thousand Dollars ($36,000),
payable in equal monthly installments.
9. Employee Taxes. Executive shall be solely responsible for any and all of
Executive's (i) income and (ii) social security, medicare or any other
miscellaneous taxes applicable to any salary, bonus, option grant, allowance,
severance benefit or any other type of compensation or benefit received by
Executive pursuant to this Agreement which is subject to taxation and payable by
Executive to any governmental taxing authority including, but not limited to,
any governmental taxing authority in the Republic of Hungary, the United States
of America or Denmark.
10. Pension Account. The Company shall make an annual contribution for the
term of this Agreement to the Danish pension account of Executive which account
Executive may not withdraw therefrom until the retirement of Executive.
11. Insurance. If requested by Executive, the Company shall provide
Executive, his spouse and his minor dependents with health insurance
coverage under a fully comprehensive international scheme.
12. Automobile. The Company will provide Executive with the use of a
private Company automobile to be maintained by the Company.
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13. Vacation. Executive will be entitled to thirty (30) business days
annual paid vacation.
14. Work Permits. With the Company's assistance, Executive shall obtain and
keep current any Hungarian work permits, residency permits or other similar
licenses as may be required by Hungarian law as a result of Executive's
employment by the Company.
15. Covenant Not to Compete. Executive hereby agrees that during the term
of this Agreement, he will not, either through any kind of ownership (other than
ownership of securities of a publicly held corporation of which Executive owns
less than five percent (5%) of any class of outstanding securities), or as a
director, officer, principal, agent, employee, employer, advisor, consultant,
co-partner, or in any individual or representative capacity whatever, either for
his own benefit or for the benefit of any other person, firm, or corporation,
without the prior written consent of the Company's Board of Directors, compete
with the Company by engaging in any act, including, but not limited to, any of
the following: (a) canvass, solicit, accept, or perform any type of work
performed by the Company for any "customer" (as hereinafter defined) of the
Company; (b) develop, design, market any services that may be sold by the
Company during the term of this Agreement; (c) request or advise any firm to
withdraw, curtail, or cancel its business with the Company; (d) give or attempt
to give any person, partnership, or corporation the right to solicit or canvass
any customer for the performance of services provided by the Company; and (e)
induce or attempt to influence any employee of the Company or any employee of
any customer to terminate his employment with the view toward competing with the
Company or any customer. As used herein, the term "customer" includes any of the
Company customers at any time during the term of this Agreement.
16. Confidential Information.
(a) Nondisclosure. Executive expressly covenants and agrees that he will
not during the term of this Agreement or at any time after the termination
hereof, irrespective of the time, manner, or cause of termination, reveal,
divulge, disclose, or communicate to any person, firm, or corporation, other
than authorized officers, directors, and employees of the Company, in any manner
whatsoever, any "confidential information" (as hereinafter defined) of the
Company that would be inconsistent with the position held by Executive or the
duties being performed by Executive at the direction of the Company.
(b) Return of Confidential Information and Other Property. Upon termination
of this Agreement, Executive will surrender to the Company all confidential
information including, without limitation, all lists, charts, schedules,
reports, financial statements, books and records, and all copies thereof, of the
Company and all other property belonging to the Company whatsoever. As used
herein, "confidential information" means information disclosed to or known by
Executive as a consequence of or through his employment for the Company, not
generally known in the business in which the Company is or may become engaged,
about the Company, its business, products and processes.
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17. Breach of Covenant Not to Compete and Confidentiality Provision.
Executive agrees that a substantial violation on his part of any covenant
contained in Paragraphs 15 and 16 above will cause such damage to the Company as
will be irreparable and for that reason, Executive further agrees that the
Company shall be entitled as a matter of right, to an injunction out of any
court of competent jurisdiction, restraining any further violation of said
covenants by Executive, his employer, employees, partners, or agents. Such right
to injunction shall be cumulative and in addition to whatever other remedies the
Company may have, including, specifically, recovery of liquidated and additional
damages. Executive expressly acknowledges and agrees that the respective
covenants and agreements shall be construed in such a manner as to be
enforceable under applicable laws if a more limited scope of time is determined
by a court or competent jurisdiction to be required.
18. Indemnification. The Company agrees that if Executive is made a party,
or is threatened to be made a party, to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that he is or was a director, officer or employee of the Company,
Executive shall be indemnified and held harmless by the Company to the fullest
extent legally permitted or authorized by the Company's certificate of
incorporation or bylaws or resolutions of the Board or, if greater, by the laws
of the State of Delaware, against all cost, expense, liability and loss
(including, without limitation, attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by Executive in connection therewith. The Company agrees to
continue to maintain a directors' and officers' liability insurance policy
covering Executive to the extent the Company provides such coverage for any of
its other executive officers.
19. Termination.
(a) Reasons for Termination. The employment of Executive with the Company
shall terminate automatically upon Executive's death and may be terminated by
written notice (i) by the Company, upon Executive's disability which renders him
unable to perform his usual and customary duties for a period of 180 consecutive
days; (ii) by the Company, with or without "cause" (as hereinafter defined);
(iii) by Executive upon 90 days notice; (iv) by Executive, if he suffers a
demotion or a lower status with the Company other than for cause; or (v) by
Executive, in the event of a "change in control" (as hereinafter defined),
whether or not Executive suffers a demotion or a lower status with the Company.
For purposes of this Agreement, "cause" shall mean (i) a failure by Executive to
substantially perform Executive's reasonable and legal duties and as defined by
goals established by the Board and agreed to by Executive, other than a failure
resulting from Executive's complete or partial incapacity due to physical or
mental illness or impairment, (ii) a willful act by Executive that constitutes
gross misconduct and that is injurious to the Company, (iii) a willful breach by
Executive of a material provision of this Agreement, or (iv) a material and
willful violation of a federal or state law or regulation applicable to the
business of the Company. No act, or failure to act, by Executive shall be
considered "willful" unless committed without good faith and without a
reasonable belief that the act or omission was in the Company's best interest.
For purposes of this Agreement, a "change of control" shall be deemed to have
occurred if (1) any "person" (as such term is used in Sections 13(d) and 14(d)
of the U.S. Securities and Exchange Act (the "Exchange Act")), other than (x)
Citizens Utilities Company and/or any one or more direct or indirect
wholly-owned subsidiary of Citizens Utilities Company (together, "Citizens"), or
(y) Tele Danmark A/S and/or any one or more direct or indirect wholly-owned
subsidiary of Tele Danmark A/S (together, Tele Danmark"), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
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or indirectly, of securities of the Company representing thirty-five percent
(35%) or more of the combined voting power (with respect to the election of
directors) of the Company's then outstanding securities; (2) at any time after
the execution of this Agreement, a majority of the Board shall be replaced, over
a two-year period, from the directors who constituted the Board at the beginning
of such period, and such replacement shall not have been approved by either
two-thirds (2/3) of the Board as constituted at the beginning of such period or
Citizens or Tele Danmark; (3) the consummation of a merger or consolidation of
the Company with or into any other corporation (other than with Citizens or Tele
Danmark), other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than sixty-five percent (65%) of the
combined voting power (with respect to the election of directors) of the
securities of the Company or of such surviving entity outstanding immediately
after such merger or consolidation; or (4) the consummation of a plan of
complete liquidation of the Company or of an agreement for the sale or
disposition by the Company of all or substantially all of the Company's business
or assets.
(b) Termination Benefits. If Executive's employment is terminated pursuant
to Section 19(a) prior to the expiration of the term of this Agreement for any
reason noted above other than by the Company for "cause" or by Executive upon 90
days notice as set forth in clause (iii) of Section 19(a), Executive will be
entitled to receive the following benefits as severance (the "Severance
Benefits"):
(i) a lump sum payment equal to six (6) months' salary at Executive's
then-current annual salary level;
(ii) payment of any salary, expenses,
allowances and benefits accrued by Executive up to the date of the
termination; and
(iii)the immediate vesting and release of any unvested unreleased portion of
the options granted as of the date of such termination pursuant to this
agreement, without restriction.
(c) Benefits in the Event of Executive's Death. Except as set forth below,
if Executive's employment terminates automatically in the event of Executive's
death, Executive's estate will be entitled to receive the Severance Benefits.
The Company may, at its option, maintain a life insurance policy for Executive
in an amount deemed to be appropriate by the Board and designating Executive's
estate as the beneficiary. If the Company elects to maintain such life insurance
and the policy amount equals or exceeds the value of the Severance Benefits (as
determined by the Board), Executive's estate shall only be entitled to receive
the proceeds of the insurance policy. If the policy amount is less than the
value of the Severance Benefits, the Company shall pay to Executive's estate an
amount equal to the difference between the value of the Severance Benefits and
the amount to which the estate would be entitled to under the insurance policy.
The Company shall determine the value of the Severance Benefits as soon as
practicable after Executive's death but in no event later than thirty (30) days
thereafter.
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(d) Date of Termination; Provision of Severance Benefits. The date of
termination of Executive's employment by the Company under this Paragraph 19
shall be one (1) month after receipt by Executive of written notice of
termination, provided, however, that if the termination is for cause the date of
termination shall be the date specified in the notice of termination or if no
date is specified then the date on which such notice is received by the
Executive. The date of termination by Executive under this Paragraph 19 shall be
one (1) month after receipt by the Company of written notice of termination
except in the case of termination by Executive as set forth in clause (iii) of
Section 19(a) pursuant to which Executive is required to give the Company 90
days notice. All benefits to which Executive is entitled under subparagraph (b)
hereof shall be provided within thirty (30) days of termination. In the case of
automatic termination in the event of Executive's death, the benefits shall be
provided no later than thirty (30) days from the date of Executive's death.
20. Miscellaneous.
(a) Rights Under Plans and Programs. Notwithstanding anything in this
Agreement to the contrary no provision of this Agreement is intended, nor shall
it be construed, to reduce or in any way restrict any benefit to which Executive
may be entitled under any agreement, plan, arrangement, or program providing
benefits for Executive.
(b) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter of this Agreement.
(c) Notices. Any notice or request to be given hereunder by any party to
the other shall be in writing and shall be deemed to have been duly given on the
next business day after the same is sent, if delivered personally or sent by
telecopy or overnight delivery, or five calendar days after the same is sent, if
sent by registered or certified mail, return receipt requested, postage prepaid,
as set forth below, or to such other persons or addresses as may be designated
in writing in accordance with the terms hereof by the party to receive such
notice.
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If to the Company, to:
Hungarian Telephone and Cable Corp.
000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile No.: 203/348-9128
Attn: General Counsel
If to Executive, to:
the address or facsimile number
for Executive as set forth
in the Company's records
with a required copy to:
(to be provided by Executive)
(d) Governing Law; Forum; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflict of laws thereof. Each of the
parties to this Agreement hereby irrevocably and unconditionally (i) consents to
submit to the exclusive jurisdiction of the courts of the State of New York for
any proceeding arising in connection with this Agreement (and each such party
agrees not to commence any such proceeding, except in such courts), (ii) to the
extent such party is not a resident of the State of New York, agrees to appoint
an agent in the State of New York as such party's agent for acceptance of legal
process in any such proceeding against such party with the same legal force and
validity as if served upon such party personally within the State of New York,
and to notify promptly each other party hereto of the name and address of such
agent, (iii) waives any objection to the laying of venue of any such proceeding
in the courts of the State of New York, and (iv) waives, and agrees not to plead
or to make, any claim that any such proceeding brought in any court of the State
of New York has been brought in an improper or otherwise inconvenient forum.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, and each of such counterparts shall for all purposes be deemed to
be an original, but all such counterparts together shall constitute but one
instrument.
(f) Executive's Successors. This Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
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(g) Assignment. Neither this Agreement, nor the rights and obligations
hereunder, may be assigned by either party without the prior written consent of
the other party.
(h) Parties in Interest. Nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(i) Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
(j) Extension; Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party to this Agreement or (b) waive compliance by the other party with any of
the agreements or conditions contained herein or any breach thereof. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
(k) Severability. The provisions of this Agreement are severable and, if
any provision of this Agreement is determined to be invalid or unenforceable by
any court of competent jurisdiction, such provision (in any other jurisdiction)
and the other provisions hereof (in any jurisdiction) shall not be rendered
otherwise invalid or unenforceable and such provision shall be deemed to be
modified to the extent necessary to render it legal, valid and enforceable, and
if no such modification shall render it legal, valid and enforceable, then this
Agreement shall be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties shall be construed and
enforced accordingly.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HUNGARIAN TELEPHONE AND CABLE CORP.
By: /s/Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Chairman of the Board of Directors
XXX XXXXXXX
/s/Xxx Xxxxxxx
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[SIGNATURE PAGE TO XXXXXXX EMPLOYMENT AGREEMENT
DATED AS OF DECEMBER 4, 1998]
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