EMPLOYMENT AGREEMENTEmployee Retention Agreement |
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Exhibit 10.1
THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is entered into effective as of July 1, 2008 (the “ Effective Date ”) by and between CHARTER COMMUNICATIONS, INC. , a Delaware corporation (together with its successors and assigns, the “ Company ”), and Neil Smit, an individual (“ Executive ”). This Agreement amends and restates that employment agreement originally entered into between the Parties effective as of August 9, 2005, as modified by prior amendments to such original agreement (such agreement, so modified, the “ Prior Employment Agreement ”).
W I T N E S S E T H:
WHEREAS:
NOW, THEREFORE , in consideration of the premises, and the promises and agreements set forth below, the Parties, intending to be legally bound, agree as follows:
1. Employment Terms and Duties
1.1 Employment . The Company hereby agrees to continue to employ Executive in an executive capacity as its Chief Executive Officer and President, and Executive hereby accepts such continued employment upon the terms and conditions set forth in this Agreement.
1.2 Term; Option to Extend . Executive’s employment under this Agreement (the “ Term ”) shall commence as of the Effective Date and shall terminate at 11:59 p.m. on June 30, 2010. If Executive continues in the Company’s employ after the expiration of the Term, his employment shall be on an at-will basis.
1.3 Position and Duties . During the Term, Executive shall serve as the President and Chief Executive Officer of the Company; shall have all authorities, duties and responsibilities customarily exercised by an individual serving in those positions at an entity of the size and nature of the Company (including overseeing the day-to-day management of the Company, having full profit and loss responsibility, developing overall strategy, and having all senior management of the Company report to him); shall be assigned no duties or responsibilities that are materially inconsistent with, or that materially impair his ability to discharge, the foregoing duties and responsibilities; shall have such additional duties and responsibilities (including, subject to such reasonable conditions as he may reasonably establish, service with affiliates of
the Company), consistent with the foregoing, as may from time to time reasonably be assigned to him by the Board of Directors of the Company (the “ Board ”) or the Executive Committee of the Board (the “ Executive Committee ”); shall, in his capacity as President and Chief Executive Officer of the Company, report solely and directly to the Board or the Executive Committee; and shall serve as a member of the Board and the Executive Committee (if there is an Executive Committee).
1.4 Outside Activities. During the Term, Executive shall devote substantially all of his business time and efforts to the business and affairs of the Company. However, nothing in this Agreement shall preclude Executive from: (a) serving on the boards of a reasonable number of business entities, trade associations and charitable organizations, (b) engaging in charitable activities and community affairs, (c) accepting and fulfilling a reasonable number of speaking engagements, and (d) managing his personal investments and affairs; provided that such activities do not either individually or in the aggregate: interfere with the proper performance of his duties and responsibilities hereunder; create a conflict of interest; or violate any provision of this Agreement; and provided further that service on the board of any business entity must be approved in advance by the Board.
1.5 Location . During the Term, Executive’s principal office and principal place of employment shall be at the Company’s headquarters in the St. Louis, Missouri, metropolitan area.
2. Compensation and Benefits.
2.1 Salary . Beginning as of the Effective Date, Executive shall be paid a base salary (the “ Salary ”) in respect of his services hereunder during the Term. The Salary shall be at an annual rate of $1,500,000. The Salary shall be paid in equal periodic installments according to the Company’s customary payroll practices, but no less frequently than monthly. During the Term, the Salary may be increased, but shall not be reduced below the applicable amount set forth in the preceding sentence at any time, or for any purpose (including for the purpose of determining benefits under Section 3 below), without Executive’s prior written consent.
2.2 Performance Bonus. Executive shall be paid an annual cash performance bonus (an “ Annual Bonus ”) in respect of each calendar year that ends during the Term, to the extent earned based on performance against objective performance criteria. The performance criteria for any particular calendar year shall be established by the Compensation Committee of the Board (the “ Compensation Committee ”) no later than 90 days after the commencement of such calendar year. Beginning with calendar year 2008, Executive’s Annual Bonus for a calendar year shall equal 200% of his actual Salary earned for that year (the “ Target Bonus ”) if target levels of performance for that year (as established by the Compensation Committee when the performance criteria for that year are established) are achieved, with greater or lesser amounts (including zero) paid for performance above and below target (such greater and lesser amounts to be determined by a formula established by the Compensation Committee for that year when it established the targets and performance criteria for that year). For the avoidance of doubt, Executive’s Target Bonus for 2008 shall be $2,700,000. For 2008, Executive’s maximum Annual Bonus shall be no greater than 125% of his Target Bonus for the year. Executive’s maximum Annual Bonus for 2009 and 2010 shall be determined by the Compensation Committee, but in no event shall such
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maximum be greater than 200% of Executive’s Target Bonus for the year or less than 125% of Executive’s Target Bonus for the year. Performance criteria shall not include the Company’s stock trading price, and may include revenue, ARPU, RGU, OCF, new product growth, operational improvements, and/or such other metrics as the Compensation Committee shall determine. Executive’s Annual Bonus for a calendar year shall be determined by the Compensation Committee after the end of the calendar year and shall be paid to Executive when annual bonuses for that year are paid to other senior executives of the Company generally, but in no event later than March 15 of the following calendar year. In carrying out its functions under this Section 2.2 and under Section 2.5(b), the Compensation Committee shall at all times act reasonably and in good faith, and shall consult with Executive to the extent appropriate.
2.3 Retention Bonus . Executive shall be entitled to receive an aggregate cash payment equal to $2,000,000, payable in a single lump-sum no later than September 30, 2008 (the “ Retention Bonus ”). In the event that Executive’s employment with the Company terminates at any time on or before December 31, 2009, in a termination by the Company for Cause (determined in accordance with this Agreement) or by Executive other than in a Good Reason Termination or as a result of his death or Disability (all determined in accordance with this Agreement), Executive shall be required to repay to the Company an amount equal to the Retention Bonus. In the event that Executive’s employment with the Company terminates at any time after December 31, 2009, but prior to June 30, 2010, in a termination by the Company for Cause (determined in accordance with this Agreement) or by Executive other than in a Good Reason Termination or as a result of his death or Disability (all determined in accordance with this Agreement), Executive shall be required to repay to the Company an amount equal to one-half (1/2) of the Retention Bonus. Any amount required to be repaid under this Section 2.3 shall be repaid to the Company no later than thirty (30) days following the Termination Date.
2.4 Executive Cash Award Plan . Executive shall continue to participate in the Charter Communications Inc. 2005 Executive Cash Award Plan, as amended (the “ Cash Award Plan ”), during the Term on the same terms as are applicable generally to participants in the Cash Award Plan, and shall receive further book entry credits in 2008 and 2009 under the terms of the Cash Award Plan as in effect on the Effective Date.
2.5 Long-Term Incentive Compensation.
(a) Effective as of the Effective Date, the Restricted Stock, Performance Shares and Performance Cash awards granted to Executive on April 28, 2008 are hereby amended such that any portion of those awards scheduled to vest based (in whole or in part) on Executive’s continuous service with the Company after the expiration of the Term shall instead vest (and hence, for avoidance of doubt, become nonforfeitable) on June 30, 2010, subject only to Executive’s continuous employment by the Company through that date and the degree to which any applicable quantitative performance criteria are ultimately satisfied.
(b) In 2009 and 2010, Executive shall be granted long-term incentive compensation awards (each an “ Annual LTI Grant ”) at the time such awards are granted to senior executives of the Company generally and in no event later than June 30 of the year in question, provided that Executive remains continuously employed by the Company through each such grant date. Each Annual LTI Grant shall be in the form of Restricted Stock, Performance
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Shares and Performance Cash containing substantially the same terms and conditions as those that apply to the corresponding awards granted to Executive on April 28, 2008, except as expressly set forth in this Agreement. Each Annual LTI Grant shall have an aggregate “fair value” (as determined in accordance with Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“FAS 123R”), and using the same assumptions and methodologies for the applicable award that apply for purposes of the Company’s financial statements) on the grant date thereof equal to at least $6,000,000 (with 25% of such value allocated to Restricted Stock, 25% allocated to Performance Shares and 50% allocated to Performance Cash). The Annual LTI Grants shall be subject to the terms and conditions of the Company’s 2001 Stock Incentive Plan (or any successor plan), and to the customary forms of award agreement used thereunder generally from time to time for executives of the Company, the terms and conditions of which shall be substantially similar to those applying to corresponding awards granted to Executive on April 28, 2008 (and, except as specifically provided for herein, no less favorable than the terms and conditions applicable generally to other senior executives of the Company); provided, however, that:
(i) with respect to the Annual LTI Grant made in 2009: (A) 50% of each of the Restricted Stock, Performance Shares and Performance Cash granted thereunder shall vest (and hence, for avoidance of doubt, become nonforfeitable) on the first anniversary of the grant date thereof, subject only to Executive’s continuous employment by the Company through such vesting date and the degree to which any applicable quantitative performance criteria are ultimately satisfied; (B) the remaining 50% of the Restricted Stock and Performance Shares granted thereunder shall vest on June 30, 2010, subject only to Executive’s continuous employment by the Company through such vesting date and the degree to which any applicable quantitative performance criteria are ultimately satisfied; and (C) the remaining 50% of the Performance Cash granted thereunder shall vest in two equal installments, with 25% vesting on June 30, 2010 and 25% vesting on the second anniversary of the grant date thereof, subject in each case only to Executive’s continuous employment by the Company through June 30, 2010 and the degree to which any applicable quantitative performance criteria are ultimately satisfied; and
(ii) with respect to the Annual LTI Grant made in 2010: (A) 50% of the Restricted Stock granted thereunder shall vest on June 30, 2010, subject only to Executive’s continuous employment by the Company through such vesting date; (B) 50% of the Performance Shares granted thereunder shall vest on the first anniversary of the grant date thereof, subject only to Executive’s continuous employment by the Company through June 30, 2010 and the degree to which any applicable quantitative performance criteria are ultimately satisfied; (C) 50% of the Performance Cash granted thereunder shall vest in two equal installments, with 25% vesting on June 30, 2010 and 25% vesting on the first anniversary of the grant date thereof, subject in each case only to Executive’s continuous employment by the Company through June 30, 2010 and the degree to which any applicable quantitative performance criteria are ultimately satisfied; and (D) in the event that Executive is continuously employed by the Company through June 30, 2010, the remaining 50% of the Restricted Stock, Performance Shares and Performance Cash awards made in 2010 shall become fully vested and non-forfeitable if the Company achieves, during the two-year period commencing on July 1, 2008 and ending on June 30, 2010 either (I) 0.5 improvement in the Company’s Leverage Ratio (as defined in Exhibit A ) compared to the target for such performance metric as of June 30, 2010
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as set forth in the Company’s Q3 2008 five year plan or (II) improvement in Adjusted EBITDA of $100 million over the projected Adjusted EBITDA (as defined in Exhibit A ) for such two-year period set forth in the Company’s Q3 2008 five year plan (for the avoidance of doubt, if neither such goal is achieved, the remaining 50% of the Restricted Stock, Performance Shares and Performance Cash awards made in 2010 shall be forfeited as of June 30, 2010). Notwithstanding anything herein or in Exhibit A to the contrary, the calculation of the Company’s Leverage Ratio and Adjusted EBITDA shall be subject to equitable adjustment, the manner of which shall be determined in the reasonable discretion of the Compensation Committee, to exclude the impact of (x) any issuances of additional common stock by the Company from and after July 1, 2008 (and any consideration received by the Company in connection therewith) other than issuances pursuant to equity compensation awards granted to Company employees, (y) any acquisition by the Company of, or merger, consolidation or similar transaction of or by the Company with, any business or entity and (z) any disposition (via sale, spin-off or otherwise) by the Company of any entity or business (each of (x), (y) and (z) a “ Transaction ”), except for a Transaction approved by the Board which has as its primary purpose a strategic transformation of the Company's business (as determined in the reasonable good faith discretion of the Compensation Committee), rather than to achieve a different result, such as to raise additional capital. For the avoidance of doubt, no adjustment to the calculation of the Company’s Leverage Ratio and Adjusted EBITDA will be made to exclude the impact of a Transaction that the Compensation Committee determines to be strategic, as described in the preceding sentence.
2.6 Other Incentives. Executive shall be eligible for other or additional long term incentives in the sole and absolute discretion of the Compensation Committee and/or the Board. Such incentive awards (if any) shall be on terms and conditions that are commensurate with Executive’s positions and responsibilities at the Company and appropriate in light of contemporaneous awards granted to other senior executives of the Company (but without regard to any special or one-time grants to such other senior executives, including any sign-on or special retention grants), as well as the other long-term incentive compensation awards granted to Executive pursuant to the terms of this Agreement. Except as otherwise provided herein, Executive shall not be entitled to participate in any other compensation, bonus, retention or incentive program, except as may be explicitly determined by the Board or the Compensation Committee in its sole and absolute discretion.
2.7 Employee Benefits. During the Term, Executive shall be entitled to participate in all pension, retirement, profit sharing, savings, 401(k), income deferral, life insurance, disability insurance, accidental death and dismemberment protection, travel accident insurance, hospitalization, medical, dental, vision and other employee benefit plans, programs and arrangements that may from time to time be made available generally to other senior executives of the Company, all to the extent Executive is eligible under the terms of such plans, programs and arrangements. Executive’s participation in all such plans, programs and arrangements shall be at a level, and on terms and conditions, that are commensurate with his positions and responsibilities at the Company and that are no less favorable to him than to other senior executives of the Company generally; provided, however, that, as soon as practicable following the Effective Date, the Company shall increase the amount of Executive’s life insurance coverage provided by the Company to the greater of 200% of Executive’s annualized Salary or three million dollars ($3,000,000); provided that if such increased coverage would cost more than $20,000 per year, the Company shall be required to provide only such increased coverage as
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can be obtained for $20,000 per year. Executive shall also be entitled to post-retirement welfare and other benefits on no less favorable a basis than that then applying generally to other senior executives of the Company with the same age and years of service with the Company. In addition, the Company shall, as promptly as reasonably practicable and with Executive’s full cooperation, purchase on behalf of Executive a policy that provides long-term disability coverage that, when combined with other long-term disability coverage provided by the Company, provides (i) coverage to age 65 of 50% of Executive’s Salary, or (ii) if such coverage referred to in (i) would cost more than $20,000 per year, the amount of coverage that can be provided for $20,000 per year. Except for the immediately preceding sentence, nothing in this Section 2.7 shall be construed to require the Company to establish or maintain any particular employee benefit plan, program or arrangement.
2.8 Expenses and Perquisites .
(a) Expenses . The Company shall promptly reimburse Executive for all expenses reasonably incurred by him in connection with the performance of his duties hereunder (including appropriate business entertainment activities, expenses appropriately incurred by Executive in attending conventions, seminars, and other business meetings, and promotional activities), subject to Executive’s furnishing the Company documentation substantiating the expenses in accordance with any reasonable policies concerning substantiation previously communicated to him in writing. When traveling on Company business on commercial airlines, Executive shall be entitled to fly first class when available.
(b) Legal Representation . Executive acknowledges that he has been advised to consult with independent legal counsel before signing this Agreement and has had the opportunity to do so. The Company shall pay, or reimburse Executive for, all fees and expenses of counsel reasonably incurred by him in the negotiation, drafting, execution and implementation of this Agreement, up to a maximum of $60,000.
(c) Financial Counseling and Tax Preparation . Executive specifically understands that the Company has not made, nor does it make, any representation pertaining to financial obligations or tax consequences to Executive that may or may not arise out of this Agreement or Executive’s acceptance of funds or benefits under this Agreement. In addition to the reimbursement provided under this Section 2.8(c), the Company agrees to promptly pay, or reimburse Executive for, professional fees he incurs in connection with financial counseling, estate planning, tax preparation and the like, up to a maximum of $15,000 for each calendar year that begins, or ends, during the Term.
(d) Additional Fringe Benefits and Perquisites. During the Term, Executive shall, in addition to the foregoing, also be entitled to (i) to participate in all fringe benefits and perquisites made available generally to senior executives of the Company, such participation to be at levels, and on terms and conditions, that are commensurate with his positions and responsibilities at the Company and no less favorable to him than those applying generally to other senior executives of the Company, and (ii) to receive such additional fringe benefits and perquisites as the Company may, in its sole and absolute discretion, from time to time provide.
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(e) Timing of Reimbursement. In no event shall any such reimbursements or other payments made pursuant to this Section 2.8 be paid later than the end of the calendar year following the year in which the expense was incurred.
2.9 Facilities and Expenses. During the Term, the Company shall furnish Executive office space, equipment, supplies, and such other facilities and personnel as are reasonably necessary or appropriate for the performance of Executive’s duties under this Agreement, and shall pay Executive’s dues in professional organizations as reasonably appropriate.
2.10 Vacations and Holidays. Executive shall be entitled to paid vacation of at least twenty (20) days per calendar year (or such greater number of vacation days, per calendar year, as may then be permitted for senior executives of the Company generally) during the Term, which vacation days may be carried over from year to year if not used. Executive shall also be entitled to paid holidays as and to the extent set forth in the Company’s policies as the same may change from time to time for senior executives of the Company generally.
2.11 Effect of a “Going Private Event” on Equity Awards. At such time, if ever, as the Common Stock shall no longer be traded on any national securities exchange or national securities market (a “ Going Private Event ”), then the Company, in its sole and absolute discretion, shall either:
(a) (i) accelerate the vesting of, and remove all transfer restrictions on, all of Executive’s outstanding Restricted Stock; (ii) accelerate the vesting and exercisability of all of Executive’s outstanding Stock Options; and (iii) (A) promptly deliver unrestricted, publicly tradeable, securities in respect of each of Executive’s outstanding Performance Share awards (in an amount determined as if all relevant performance goals had been achieved at 100% of target) and (B) promptly pay Executive, with respect to each of Executive’s outstanding Performance Cash awards, an amount equal to the then target payout for that award times a fraction, of which the numerator is the number of days in the pertinent performance period that shall have elapsed through the occurrence of the Going Private Event and the denominator of which is 1095 (3 x 365 days) less the number of days from the beginning of the pertinent performance period to the most recent vesting date occurring prior to the Going Private Event; with vesting/removal/exercisability/ delivery in each case afforded at a time, and in a fashion, that enables Executive to participate, with respect to the securities subject to the awards in clauses (i)-(iii), on no less favorable a basis than other public shareholders holding such securities, in the transactions that give rise to the Going Private Event; or
(b) with respect to each of Executive’s outstanding Stock Options, Restricted Stock awards, and Performance Share awards, make appropriate adjustments (x) in the amount and/or kinds of securities subject to such award (including, as appropriate, substituting securities of any successor entity) and/or (y) in the other terms and conditions of such award, in each case so as to avoid (A) dilution or enlargement, as a result of the Going Private Event, of the rights and value represented by such award and (B) any incremental current tax to Executives; and, with respect to each outstanding Performance Cash award, treat such award as described in Section 2.11(a)(iii)(B); or
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(c) accelerate the vesting/removal/exercisability/delivery with respect to some of Executive’s outstanding Stock Options, Restricted Stock awards and/or Performance Share awards in accordance with Section 2.11(a); treat the remaining awards in accordance with Section 2.11(b); and, with respect to each outstanding Performance Cash award, treat such award as described in Section 2.11(a)(iii)(B).
To the extent that Executive’s Stock Options, Restricted Stock and/or Performance Share awards continue to be outstanding in accordance with Section 2.11(b) following a Going Private Event, then (i) Executive shall have the right, during the period of 180 days following (w) the vesting or removal of transfer restrictions from any Restricted Stock, (x) the delivery of any securities in respect of any Performance Share award, (y) the acquisition of securities upon the exercise of any Stock Option, and/or (z) the termination of his employment with the Company, for any reason, subsequent to or coincident with such vesting/removal/delivery/acquisition, to “put” any or all of such securities to the Company for a prompt cash payment equal to their Fair Market Value, and (ii) the Company shall have the right, during the same period, to “call” any or all of such securities for a prompt cash payment equal to their Fair Market Value. For purposes of this Agreement, the “ Fair Market Value ” of a security, as of a specified date, shall mean the fair market value of such security, as of such date, determined without discount for lack of liquidity, lack of control, minority status, restrictions on transferability, and the like, and assuming an amply-funded strategic buyer for all such securities then outstanding.
2.12 Presence of New Significant Equity Holder During the Term. In the event that during the Term any “ person ,” as such term is used in Section 13(d) of the Securities Exchange Act of 1934, or group of persons, excluding the “Allen Entities” (as defined as of the Effective Date in the Restated Certificate of Incorporation of the Company) becomes (directly or indirectly) a “ beneficial owner ”, as such term is used as of the Effective Date in Rule 13d-3 promulgated under that Act, of more than 30% of the voting power of the Company, then, provided only that Executive remains continuously employed by the Company through June 30, 2010, Executive shall be entitled to the following benefits (whether or not Executive’s employment terminates at that time):
(a) full nonforfeitability and exercisability, as of June 30, 2010, for any outstanding Stock Option;
(b) full vesting, as of June 30, 2010, for any outstanding Restricted Stock, with all restrictions on such Restricted Stock lapsing as of June 30, 2010;
(c) full nonforfeitability, as of June 30, 2010, of any right to receive Performance Shares, with the number (if any), and the timing of the delivery, of such shares determined as if all relevant performance goals had been achieved at 100% of target; and
(d) payment of any outstanding Performance Cash awards, determined as if all relevant performance goals had been achieved at 100% of target.
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3. Termination of Employment.
3.1 Termination Due to Death or Disability.
(a) In the event that Executive’s employment hereunder is terminated during the Term due to his death or “Disability” (as determined pursuant to Section 3.1(b) below), the Term shall expire and he or his estate or beneficiaries (as the case may be) shall be entitled to the following:
(i) a “Pro-Rata Bonus” (as defined in Section 3.1(c) below);
(ii) full nonforfeitability and exercisability, as of the Termination Date, for any outstanding “Stock Option” (as defined in Section 3.1(c) below), with each such Stock Option to remain exercisable for the lesser of two years following the Termination Date and the remainder of its maximum stated term;
(iii) full vesting, as of the Termination Date, for any outstanding “Restricted Stock” (as defined in Section 3.1(c) below), with all restrictions on such Restricted Stock lapsing as of the Termination Date;
(iv) full nonforfeitability, as of the Termination Date, of any right to receive “Performance Shares” (as defined in Section 3.1(c) below), with the number (if any), and the timing of the delivery, of shares determined as if all relevant performance goals had been achieved at 100% of target;
(v) full payment in cash, promptly following the Termination Date, of an amount equal to the sum of all amounts credited to Executive’s account under the Cash Award Plan;
(vi) full vesting, as of the Termination Date, and payment of any outstanding and unpaid “Performance Cash” (as defined in Section 3.1(c) below), determined as if all relevant performance goals had been achieved at 100% of target;
(vii) if the termination is due to Disability, the Company shall pay to Executive promptly following the Termination Date a lump sum cash payment equal to thirty-six (36) times the monthly cost, determined as of the Termination Date, for Executive and his covered dependents to receive coverage under COBRA for health, dental and vision benefits then being provided for Executive and his covered dependents (for the avoidance of doubt this amount will not take into account future increases in costs during the applicable time period), plus an additional amount such that Executive will be in the same position as he would have been had no taxes been imposed upon or incurred as a result of the payment described in this Section 3.1(a)(vii); and
(viii) the benefits described in Section 3.5.
(b) For purposes of this Agreement, Executive shall be deemed to have a “ Disability ” if, due to illness, injury or a physical or medically recognized mental condition, he is unable to perform his duties under this Agreement with reasonable
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accommodation for one hundred twenty (120) consecutive days, or one hundred eighty (180) days during any twelve (12) month period, as determined in accordance with this Section 3.1(b). Whether a Disability exists shall be determined by a medical doctor selected by agreement of the Parties upon the request of either Party by notice to the other. If the Parties cannot agree on the selection of a medical doctor, each of them shall select a medical doctor and the two medical doctors shall select a third medical doctor who shall determine whether a Disability exists. The determination of the medical doctor selected under this Section 3.1(b) shall be binding on both Parties. Executive must submit to a reasonable number of examinations by the medical doctor making the determination of Disability under this Section 3.1(b), and to other specialists designated by such medical doctor, and Executive hereby authorizes the disclosure and release to the Company, in confidence, of such determination and all supporting medical records. No termination for Disability shall be effective until fifteen days after either Party gives written notice of such termination to the other Party.
(c) For purposes of this Agreement:
(i) the term “ Pro-Rata Bonus ” shall mean: an amount equal to 200% of the Salary that Executive earned, through the Termination Date, for the calendar year during which his employment under this Agreement terminated;
(ii) the term “ Stock Option ” shall mean: any compensatory option or warrant to acquire securities of the Company or any of its affiliates; any compensatory stock appreciation right, phantom stock option or analogous right granted by or on behalf of the Company or any of its affiliates; and any securities or rights received in respect of any of the foregoing securities or rights;
(iii) the term “ Restricted Stock ” shall mean: any compensatory restricted stock of the Company or any of its affiliates; any compensatory phantom shares or analogous rights granted by or on behalf of the Company or any of its affiliates (other than Performance Shares); and any securities or rights received in respect of any of the foregoing securities or rights;
(iv) the term “ Performance Cash ” shall mean: any long-term incentive compensation awards payable in cash based (in whole or in part) upon the achievement of performance-based vesting criteria; and any securities or rights received in respect of the foregoing awards;
(v) the term “ Performance Shares ” shall mean: any compensatory performance shares and compensatory performance units of the Company; and any securities or rights received in respect of the foregoing shares or units;
(vi) the term “ Termination Date ” shall mean: the effective date of the termination of Executive’s employment under this Agreement.
(vii) the term “ Person ” shall mean: any individual, corporation, partnership, limited liability company, joint venture, trust, estate, board, committee, agency, body, employee benefit plan, or other person or entity.
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3.2 Termination for Cause; Voluntary Quit.
(a) For purposes of this Agreement, the term “ Cause ” shall mean:
(i) Executive’s willful material breach of an obligation or representation under this Agreement or of any material fiduciary duty to the Company or any of its affiliates, or any willful act of fraud or willful misrepresentation or willful concealment to the Company, the Board or any affiliate, in each case that results or should reasonably be expected to result in material harm to the Company, the Board or any affiliate of the Company;
(ii) Executive’s willful and material failure to adhere to (A) any Code of Conduct in effect from time to time and applicable to officers and/or employees generally or (B) any written policy, in each case that results or should reasonably be expected to result in material harm to the Company, the Board or any affiliate of the Company;
(iii) Executive is convicted of, or pleads guilty or nolo contendere to, any felony or to a misdemeanor involving moral turpitude; or
(iv) conduct by Executive in connection with his employment hereunder that constitutes willful misconduct or willful neglect, and that in each case results (or should reasonably be expected to result) in material harm to the Company or any affiliate.
(b) No termination of Executive’s employment shall be effective as a termination for Cause for purposes of this Agreement or any other “Company Arrangement” (as defined in Section 3.5(d) below) unless the provisions of this Section 3.2(b) shall first have been complied with. Executive shall be given written notice by the Board of its intention to terminate his employment for Cause, such notice (the “ Cause Notice ”) to state in detail the particular circumstances that constitute the grounds on which the proposed termination for Cause is based. Executive shall have ten (10) days after receiving such Cause Notice in which to cure such grounds to the reasonable satisfaction of the Board. If he fails to timely cure such grounds, Executive shall then be entitled to a hearing before such Board. Such hearing shall be held within fifteen (15) days of his receiving such Cause Notice, provided that he requests such hearing within ten (10) days after receiving such Cause Notice. If, within ten (10) days following such hearing (if timely requested), and otherwise within twenty (20) days after such Cause Notice is given to Executive, the Board gives written notice to Executive confirming that, in the judgment of at least a majority of the members of the Board, Cause for terminating his employment on the basis set forth in the original Cause Notice exists, his employment hereunder shall thereupon be terminated for Cause, subject to de novo review, at Executive’s election, through arbitration in accordance with Section 9.5.
(c) In the event that Executive’s employment hereunder is terminated by the Company for Cause in accordance with Section 3.2(b), the Term shall expire and he shall be entitled to (x) the right to exercise any Stock Option, to the extent that such Stock Option is nonforfeitable as of the Termination Date, for at least the lesser of 30 days following the Termination Date and the remainder of its maximum stated term and (y) the benefits described in Section 3.5.
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(d) In the event that Executive’s employment hereunder is terminated by Executive on his own initiative, other than by death, for Disability, in a Good Reason Termination, or by expiration of the Term in accordance with Section 1.2 at 11:59 p.m. on June 30, 2010, the Term shall expire and he shall have the same entitlements as provided in Section 3.2(c) in the case of a termination for Cause. A voluntary termination under this Section 3.2(d) shall not be deemed a breach of this Agreement.
3.3 Termination Without Cause or With Good Reason .
(a) In the event that Executive’s employment hereunder terminates during the Term in a Good Reason Termination, or is terminated by the Company ( other than (x) for Disability in accordance with Section 3.1; (y) for Cause in accordance with Section 3.2, or (z) upon expiration of the Term at 11:59 p.m. on June 30, 2010 in accordance with Section 1.2) the Term shall expire and Executive shall be entitled to:
(i) a cash lump sum equal to three (3) times the sum of (x) his annualized Salary as of the Termination Date plus (y) 200% of his annualized Salary as of the Termination Date, such lump sum to be paid promptly after the requirements of Section 3.3(d) are satisfied;
(ii) full nonforfeitability and exercisability, as of the Termination Date, for any outstanding Stock Option, with each such Stock Option to remain exercisable for the lesser of two years following the Termination Date and the remainder of its maximum stated term;
(iii) full vesting, as of the Termination Date, for any outstanding Restricted Stock, with all restrictions on such Restricted Stock lapsing as of the Termination Date;
(iv) full nonforfeitability, as of the Termination Date, of any right to receive Performance Shares, with the number (if any), and the timing of the delivery, of such shares determined as if all relevant performance goals had been achieved at 100% of target;
(v) full vesting, as of the Termination Date, and payment of any outstanding and unpaid Performance Cash, determined as if all relevant performance goals had been achieved at 100% of target;
(vi) a lump sum cash payment, to be made promptly following the satisfaction of the requirements of Section 3.3(d), equal to thirty-six (36) times the monthly cost, determined as of the Termination Date, for Executive and his covered dependents to receive coverage under COBRA for health, dental and vision benefits then being provided for Executive and his covered dependents (for the avoidance of doubt this amount will not take into account future increases in costs during the applicable time period), plus an additional amount such that Executive will be in the same position as he would have been had no taxes been imposed upon or incurred as a result of the payment described in this Section 3.3(a)(vi); and
(vii) the benefits described in Section 3.5.
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(b) For purposes of this Agreement, the term “ Good Reason Termination ” shall mean a termination by Executive of his employment hereunder following the occurrence of any of the following events without his express written consent:
(i) any failure to continue Executive as President, Chief Executive Officer and a member of the Board, but only if Executive objects in writing within 10 days of learning of such event and the Company fails to cure within 30 days of receipt of such written notice;
(ii) any adverse change in Executive’s reporting relationship, but only with respect to facts of which Executive became aware no more than six months prior to the date Executive gives written notice to the Company thereof and only if the Company fails to cure within 30 days of receipt of such written notice;
(iii) any material diminution in Executive’s responsibilities or authorities, but only with respect to facts of which Executive became aware no more than six months prior to the date Executive gives written notice to the Company thereof and only if the Company fails to cure within 30 days of receipt of such written notice;
(iv) any relocation of Executive’s pri |
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