AGREEMENT
, dated as of the 28th day of March, 2006 (the “ Effective
Date ”), and amended and restated as of the 17th day of
December, 2008, by and between Loral Space & Communications
Inc., a Delaware corporation (the “ Company ”),
Michael B. Targoff (the “ Executive ”) and those
subsidiaries of the Company signatory hereto solely for purposes of
Section 14(m) hereof.
WHEREAS ,
the Company had initially entered into an employment agreement with
the Executive, effective March 28, 2006 (the “ 2006
Agreement ”); and
WHEREAS ,
certain amendments to the 2006 Agreement are required under
Internal Revenue Code (“ Code ”) § 409A and
permitted under Section 13(n) of the 2006 Agreement; and
WHEREAS ,
the Company and the Executive wish to make those changes required
by Code § 409A and to preserve, to the maximum lawful extent,
all the economic benefits to the Executive intended by the 2006
Agreement; and
WHEREAS ,
this Agreement shall supersede the 2006 Agreement.
WHEREAS ,
the Company desires to be assured that all proprietary and
confidential information of the Company will be preserved for the
exclusive benefit of the Company.
NOW,
THEREFORE , in consideration of the Executive’s continued
employment and the mutual covenants herein contained, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Executive agree
as follows:
Section 1.
Employment and Position . The Company hereby employs the
Executive as its Chief Executive Officer and Vice Chairman of the
Board of Directors (the “ Board ”), and the
Executive hereby accepts such employment under and subject to the
terms and conditions hereinafter set forth.
Section 2.
Term . The term of employment under this Agreement shall
begin as of March 1, 2006, and, unless sooner terminated as
provided in Section 6, shall conclude on December 31,
2010 (the “ Term ”).
Section 3.
Duties . The Executive shall perform services in a
managerial capacity in a manner consistent with the
Executive’s position as Chief Executive Officer and Vice
Chairman of the Board, subject to the general supervision of the
Board. The Executive shall have all of the duties, responsibilities
and authority commensurate with his position. The Executive hereby
agrees to devote substantially all his business time to performance
of such duties and to the promotion and forwarding of the business
and
affairs of the
Company for the Term; provided, however, that Executive shall be
permitted to engage, or continue participation, in
(a) charitable, civic, educational, professional, community or
industry affairs, (b) managing the Executive’s and his
family’s personal investments, (c) corporate directorships
and other business activities described in Schedule I
attached hereto with regard to public companies, and as heretofore
disclosed to the Board with regard to private companies, including
any replacements for any such private companies heretofore
disclosed to the Board that does not materially change the time
commitment or violate Section 10 hereof and (d) such
other activities as may hereafter be specifically approved in
writing, which in each case and in the aggregate do not materially
interfere with the performance of his obligations hereunder;
provided, further, however, that Executive may not engage in any
such activities that would result in the Executive being in
Competition (as defined in Section 10(d) below).
Section 4.
Compensation .
(a)
Salary . In consideration of the services rendered by the
Executive under this Agreement, the Company shall pay the Executive
a base salary (the “ Base Salary ”) at the rate
of $950,000 per calendar year. The Base Salary shall be paid in
such installments and at such times as the Company pays its
salaried executives and shall be subject to all necessary
withholding taxes, FICA contributions and similar deductions. The
Board shall review annually the Base Salary payable to Executive
hereunder and may, in its sole discretion, increase but not
decrease, the Executive’s salary rate. Any such increased
salary shall be and become the “ Base Salary ”
for purposes of this Agreement.
(b)
Annual Bonus . The Company shall maintain an annual
Management Incentive Bonus program (“ MIB Program
”) for certain executives, and Executive shall be a
participant in the MIB Program and shall be entitled to an annual
bonus to the extent payable under such program (“ Annual
Bonus ”). The Executive’s target annual bonus
opportunity under the MIB Program shall be not less than 125% of
the Executive’s Base Salary (the “ Target Annual
Bonus ”). With respect to the Annual Bonus for the 2006
fiscal year or any subsequent fiscal year, the Board shall, in its
discretion, establish the terms and conditions of the MIB Program
and may amend the MIB Program (other than by reducing the Target
Annual Bonus percentage set forth above) accordingly. The Annual
Bonus shall be paid on or before March 15 of the year
following the year to which the Annual Bonus relates.
(c)
Equity Grants . In connection with Executive’s service
as Vice Chairman of the Board commencing on November 21, 2005,
the Company, pursuant to an Option Agreement dated December 21,
2005 (the “ Initial Option Agreement ”), on
December 21, 2005, granted to Executive (the “
Initial Option Grant ”) an option to purchase 106,952
shares of its common stock at an exercise prices of $28.441 per
share under the Company’s 2005 Stock Incentive Plan (the
“ Stock Option Plan ”). The Board has amended
and restated the Stock Option Plan to increase the number of shares
of the Company’s common stock, par value per share $0.01 (the
“Common Stock”), available
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for grant
thereunder to a number adequate to cover the Option (as defined
below) and will, prior to the submission of the amended and
restated Stock Option Plan to stockholders for approval, further
amend and restate the Plan to provide for an additional number or
shares adequate to cover the 2008 Equity Award (as defined below),
based on the Company’s best estimate at the time of amendment
and restatement of the number of shares necessary for the 2008
Equity Award, and shall reserve adequate shares, subject to such
best estimate, under the Stock Option Plan for such awards and the
Company agrees to submit the Stock Option Plan as amended to the
Company’s stockholders at the next annual meeting of
stockholders and seek stockholder approval (the “
Approvals ”). In addition to the Initial Option Grant,
in connection with the execution of this Agreement, the Company
grants to the Executive an option to purchase 825,000 shares of
common stock of the Company, with a per-share exercise price equal
to the fair market value of one share of the Company’s common
stock at the date of grant (the “Option” ), such
grant to be subject to obtaining the Approvals. To the extent the
Approvals are not obtained, the Option shall be void. The Option
shall have such other terms and conditions as set forth in the
Option Agreement attached hereto as Exhibit A (the
“Second Option Agreement” and, together with the
Initial Option Agreement, the “ Option Agreements
”). The Option is intended to count as an option award for
both 2006 and 2007, in lieu of any regular annual option award that
the Executive would otherwise be entitled to in 2006 and 2007, and
has been structured as such with one-half of the Option vesting
over three years commencing on the date of Grant and one-half of
the Option vesting over three years commencing on the first
anniversary of the date of grant. In addition, if the Executive has
earned a Target Annual Bonus for both 2006 and 2007, the Company
shall grant to the Executive in 2008 an additional option to
purchase shares of common stock of the Company, or other equity
award under the Stock Option Plan, in either case having a
comparable economic value equal to one-half (1/2) of the value of
the Option (based on a Black-Scholes valuation of such Option) (the
“2008 Equity Award”) and, to the extent the 2008 Equity
Award is a stock option, with terms similar to the Second Option
Agreement; provided , however , that the 2008 Equity
Award shall, whether an Option or other equity award, vest in four
annual installments with twenty-five percent (25%) of the award
vesting on the date of grant, an additional twenty-five percent
(25%) of the award vesting on the first anniversary of the date of
grant, an additional twenty-five percent (25%) of the award vesting
on the second anniversary of the date of grant and the remaining
twenty-five percent (25%) of the award vesting on the third
anniversary of the date of grant (consistent with the provisions of
the Second Option Agreement (and Section 7(h) hereof) relating to
termination of employment and accelerated vesting and exercise
periods); and further provided , however ,
that the 2008 Equity Award shall not be made subject to stockholder
approval. The grant of the 2008 Equity Award shall also be subject
to obtaining the Approvals. The Executive shall be eligible for
participation in the Stock Option Plan during the Term to the same
extent as other senior executives of the Company, taking into
account that the Option is intended to count as the regular option
award for both 2006 and 2007 and the 2008 Equity Award is intended
to count as an the regular equity award for 2008. The Company may
make such other discretionary equity awards to the Executive as it
deems appropriate. Notwithstanding anything herein to the contrary,
(i) the Option shall not become exercisable prior to the date
the Company
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obtains the
Approvals and the 2008 Equity Award shall not become exercisable
prior to the Approvals.
Section 5.
Benefits . In addition to the compensation detailed in
Section 4 of this Agreement, the Executive shall be entitled
to the following additional benefits:
(a) Paid
Vacation . The Executive shall be entitled to 20 days paid
vacation per calendar year in accordance with the Company’s
vacation policy in effect from time to time, such vacation shall
extend for such periods and shall be taken at such intervals as
shall be appropriate and consistent with the proper performance of
the Executive’s duties hereunder.
(b)
Welfare Plans . During the Term, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare
benefit plans, programs, practices and policies provided generally
by the Company to similarly situated executives of the Company
(including, without limitation, any medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs
that may be provided by the Company from time to time). Such
benefits shall be paid to the Executive in accordance with the
written terms of the applicable plan, policy or program. Such
plans, programs, practices and policies are subject to change from
time to time by the Company.
(c) Other
Benefit Plans . During the Term, the Executive shall be
entitled to participate in all equity, savings, retirement and
pension plans (including the Company’s Supplemental Executive
Retirement Plan ( “SERP” )), programs, practices
and policies applicable generally to similarly situated executives
of the Company as determined by the Board from time to time. Such
benefits shall be paid to the Executive in accordance with the
written terms of such other benefit plans, programs, practices and
policies. Such plans, programs, practices and policies are subject
to change from time to time by the Company.
(d)
Perquisites and Other Benefits . During the Term, the
Executive shall be entitled to such additional perquisites and
fringe benefits appertaining to his position in accordance with any
practice established by the Board. During the Term, Executive shall
be entitled to receive all benefits under any individual welfare
benefit arrangements (including life insurance coverage) or other
benefit arrangements currently in effect for other senior
executives of the Company in a manner consistent with past
practice, and such arrangements are listed on
Schedule I attached hereto. Such perquisites and fringe
benefits shall be paid to the Executive in accordance with the
written terms of the applicable arrangement.
(e)
Reimbursement of Expenses . Subject to the terms set forth
in Section 11 below, including, but not limited to,
Section 11(e), the Company shall reimburse the Executive for
all reasonable expenses actually incurred by the Executive directly
in
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connection with
the business affairs of the Company and the performance of his
duties hereunder, upon presentation of proper receipts or other
proof of expenditure and subject to such reasonable guidelines or
limitations provided by the Company from time to time. The
Executive shall comply with such reasonable limitations and
reporting requirements with respect to such expenses as the Board
may establish from time to time.
(f)
Indemnification . In addition to the terms of any
officers’ liability insurance carried by the Company, the
Executive (and his heirs, executors and administrators) shall be
indemnified by the Company and its successors and assigns pursuant
to a separate Indemnification Agreement attached hereto as
Exhibit B , which has heretofore been executed. The
Executive shall be an insured person under or otherwise covered by
directors and officers liability insurance in an amount consistent
with past practice. The obligations of the Company pursuant to this
Section shall survive the expiration of the Term or
Executive’s voluntary or involuntary termination or
resignation for Good Reason.
Section 6.
Termination of Employment . The Executive’s employment
may end earlier than the end of the Term as follows:
(a)
Death . The employment of the Executive shall automatically
terminate upon the death of the Executive.
(b)
Disability . In the event of any physical or mental
disability of the Executive rendering the Executive substantially
unable to perform his duties hereunder for a period of at least one
hundred eighty (180) days out of any three hundred sixty-five
(365)-day period and the further determination that the disability
is permanent with regard to the Executive’s ability to return
to work in his full capacity, the Executive’s employment
shall be terminated on account of the Executive’s disability
upon written notice from the Company; provided ,
however , that upon the occurrence of the Executive’s
incapacity due to physical or mental disability that, based on the
facts and circumstances, would indicate that a separation from
service has occurred within the meaning of Treasury
Regulation Section 1.409A-1(h), the Executive’s
employment shall be terminated immediately on account of disability
pursuant to this Section 6(b) without any further action on the
part of the Executive or the Company. In the event of any dispute
as to the Executive’s disability, the determination binding
on both parties shall be made by a physician or physicians mutually
agreed upon in good faith by the Board and the Executive or his
representative.
(c) By
the Company For Cause . The employment of the Executive may be
terminated by the Company for Cause (as defined below) at any time
effective upon written notice to the Executive; provided, however,
that if such termination is based upon any event set forth in
clause (ii), (iii), (iv), or (v) below, Executive shall be
given not less than ten (10) days prior written notice by the
Board of the intention to terminate him for Cause, such notice to
state in detail the particular act or acts or failure or failures
to act that constitute the grounds on which the proposed
termination for Cause is based, and
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Executive shall
have ten (10) days after the date that such written notice has
been given to Executive in which to address the full Board and
present arguments on his own behalf, with or without legal
representation at the Executive’s election, regarding any
such alleged act or failure to act. If a majority of the members of
the full Board make a determination that Cause exists, the
termination shall be effective on the date immediately following
the expiration of the ten (10) day notice period. Otherwise,
Cause shall not be determined to exist. For purposes hereof, the
term “ Cause ” shall mean that one or more of
the following has occurred:
(i) the Executive
shall have been after the Effective Date convicted of, or shall
have pleaded guilty or nolo contendere to, any
felony;
(ii) the Executive
shall have materially breached any provision of Section 10
hereof;
(iii) the
Executive shall have committed any fraud, embezzlement,
misappropriation of funds, or breach of fiduciary duty against the
Company, in each case of a material nature;
(iv) the Executive
shall have engaged in any willful misconduct with regard to the
Company resulting in or reasonably likely to result in a material
loss to the Company or substantial damage to its reputation;
or
(v) the Executive
shall have willfully breached in any material respect any material
provision of the Company’s Code of Conduct, which breach
would generally result in the termination of a senior executive of
the Company and, to the extent any such breach is curable, the
Executive shall have failed to cure such breach within ten
(10) days after written notice of the alleged breach is
provided to the Executive.
(d) By
the Company without Cause . The Company may terminate the
Executive’s employment at any time without Cause effective
upon written notice to the Executive.
(e) By
the Executive Voluntarily . The Executive may terminate his
employment at any time effective upon at least thirty
(30) days prior written notice to the Company.
(f) By
the Executive for Good Reason . The Executive may terminate his
employment for Good Reason by providing the Company thirty
(30) days’ written notice setting forth in reasonable
specificity the event that constitutes Good Reason, within sixty
(60) days of the occurrence of such event. During such thirty
(30) day notice period, the Company shall have a cure right
(if curable), and, if not cured within such period,
Executive’s termination will be effective upon the expiration
of such cure period. For this purpose, unless agreed to by the
Executive, the term “ Good Reason ” shall
mean:
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(i) the assignment
to the Executive of any duties inconsistent in any substantial
respect with the Executive’s position, authority or
responsibilities or any duties which are illegal or
unethical;
(ii) any reduction
or diminution in the Executive’s then titles or positions
(including removal or failure to be re-elected to the Board or as
Vice Chairman), or a material reduction or diminution in the
Executive’s then authorities, duties or responsibilities or
reporting requirements with the Company; provided, however, that
the sale of all or substantially all of the assets or stock of
Loral Holdings Corporation or Space Systems/Loral, Inc. (each, a
“Subsidiary”) shall not, by itself, constitute Good
Reason;
(iii) a reduction
in Base Salary, the Target Annual Bonus or any of the benefits
described in Section 5 of this Agreement to the extent not
permitted under Section 5;
(iv) the
relocation by the Company of the Executive’s primary place of
employment with the Company to a location outside of New York
County, New York;
(v) other material
breach of this Agreement by the Company;
(vi) the failure
of the Company to obtain the assumption in writing delivered to the
Executive of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Company;
or
(vii) the failure
of the Company to grant the 2008 Equity Award, unless such failure
is due to the failure to obtain the Approvals.
Section 7.
Death and Employment Termination Payments and Benefits
.
(a)
Voluntary Termination, Termination For Cause . Upon any
termination of employment during the Term either (i) by the
Executive without Good Reason under Section 6(e), or
(ii) by the Company for Cause as provided in
Section 6(c), all payments, Base Salary and other benefits
hereunder shall cease at the effective date of termination.
Notwithstanding the foregoing, the Executive shall be entitled to
receive from the Company (i) Base Salary earned or accrued
through the date the Executive’s employment is terminated
payable in accordance with the Company’s general payroll
policies, (ii) reimbursement for any and all monies advanced
in connection with the Executive’s employment for reasonable
business expenses incurred by the Executive through the date the
Executive’s employment is terminated in accordance with the
Company’s reimbursement policies as provided above,
(iii) all other payments and benefits to which the Executive
may be entitled under the terms (including time, form and manner of
payment) of any applicable compensation arrangement or benefit plan
or program of the Company, including any earned and accrued, but
unused vacation pay and benefits under and in accordance with the
terms and provisions of the SERP, but excluding any
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entitlement to
severance under any Company severance policy generally applicable
to the Company’s salaried employees, and (iv) excluding
any accrued and unpaid Annual Bonus for the immediately preceding
year (collectively, the “ Accrued Benefits
”).
(b)
Death . In the event of the Executive’s death during
the Term, the Company shall have no further obligations to the
Executive or his beneficiaries other than to pay to the
Executive’s designated beneficiary or, if no beneficiary has
been designated by the Executive, to his estate (i) all
Accrued Benefits paid in the time, form and manner set forth in
Section 7(a), plus (ii) any Base Salary through the end
of the calendar month in which the Executive’s death
occurred, payable in accordance with the Company’s general
payroll policies, plus (iii) any accrued and unpaid Annual
Bonus for the immediately preceding year payable at the time the
Company pays its executives such bonus in accordance with its
general payroll policies but in no event later than
March 15 th of
the year following the year to which such bonus relates, and
(iv) an amount equal to that portion of the Annual Bonus,
which but for the Executive’s death would have been earned by
the Executive during the year of his death, pro-rated based on a
formula, the denominator of which shall be 365 and the numerator of
which shall be the number of days during the year of his death
during which the Executive was employed by the Company on an active
status, payable at the times the Company pays its executives such
bonus in accordance with its general payroll policies but in no
event later than March 15 th of
the year following the year to which such bonus relates (the
Accrued Benefits and the payment of the amounts set forth in
clauses (iii) and (iv) of this Section 7(b) are
collectively referred to as the “ Enhanced Accrued
Benefits ”). In addition, any unvested stock options
under the Stock Option Plan and any deferred compensation under the
Initial Option Agreement that would have become vested on the next
date of vesting applicable thereto shall become vested and shall
remain exercisable or be paid as provided under the terms of the
applicable plan or agreement as to a portion thereof based on a
formula, the denominator of which shall be 365 and the numerator of
which shall be the number of days during the year of his death
during which the Executive was employed by the Company on an active
status. The Executive’s medical, prescription and dental
coverage shall continue for the benefit of the Executive’s
family through the end of the Term upon the same terms and
conditions applicable generally to active employees and their
families; provided , however , that the Company
portion of the monthly insurance premiums provided pursuant to the
immediately preceding sentence shall be taxable income to the
Executive in the year in which such coverage is
provided.
(c)
Termination without Cause or for Good Reason . In the event
that the Executive’s employment is terminated during the Term
by the Company without Cause or by the Executive for Good Reason,
the Executive shall be entitled to receive as his exclusive right
and remedy in respect of such termination, (i) all Enhanced
Accrued Benefits (except that for purposes of this
Section 7(c), the term “death” in
Section 7(b)(iv) above shall be replaced with the term
“termination”), paid in accordance with the time, form
and manner of payment set forth in Section 7(b), and
(ii) a lump sum severance payment equal to two (2) times
the sum of (A) the Executive’s Base Salary in effect on
the date of termination and (B) the Annual Bonus for the
immediately preceding
8
year (or Target
Annual Bonus if termination occurs during the first year of the
Term or before the Annual Bonus for the prior fiscal year is
declared) ( “Severance Payments” ). In addition,
all unvested stock options, other equity grants and all deferred
compensation under the Initial Option Agreement shall become fully
vested and shall remain exercisable or be paid as provided under
the terms of the applicable plan or agreement. Following the
termination of the Executive’s employment by the Company
without Cause or by the Executive for Good Reason, the Company
shall provide medical, dental and life insurance coverage, upon the
same terms and conditions applicable generally to similarly
situated executives who remain employed with the Company, for a
period of eighteen (18) months; provided ,
however , that for each of the eighteen (18) months
following such termination the Executive shall be responsible for
payment of the regular employee portion of the monthly insurance
premiums for such insurance, applicable to similarly situated
executives who remain employed with the Company, and the Company
shall be responsible for payment of the regular Company portion of
the monthly insurance premiums for such insurance, applicable to
similarly situated executives who remain employed with the Company
(the “Welfare Severance Benefits”); and further
provided, however, that such obligation shall expire if the
Executive commences new employment prior to the expiration of such
eighteen (18)-month period and becomes covered by substantially
similar benefits. Notwithstanding anything herein to the contrary,
the Company portion of the monthly insurance premiums provided
pursuant to the immediately preceding sentence shall be taxable
income to the Executive in the year in which such coverage is
provided. In all instances, subject to the terms set forth in
Section 7(f) and Section 11 below, including, but not limited
to, Section 11(d), the Severance Payments shall be paid to the
Executive in the form of a single lump sum payment sixty
(60) days after the Executive’s termination. For the
avoidance of doubt, in the event that all or substantially all of
the assets or stock of a Subsidiary are acquired by a person or
entity (the “Acquirer”) and the Executive is offered
employment, as the principal executive officer of such Subsidiary
consistent with the terms of this Agreement, by the Acquirer or any
affiliate of the Acquirer that directly or indirectly owns such
Acquirer, or any successor to the Acquirer or any such affiliate
and the Executive accepts such offer and such Acquirer, affiliate
or successor, as applicable, assumes this Agreement, the Executive
shall not be treated as having a termination of employment without
Cause or for Good Reason; provided, however, that the Executive
shall have no obligation to accept any such offer of employment.
Notwithstanding anything herein to the contrary, to the extent that
the Executive willfully commits a material breach of any provision
of Section 10 hereof (a “Material Breach”), the
Company shall be relieved of its obligation to provide the Welfare
Severance Benefits after such Material Breach and the Executive
shall be obligated to pay to the Company, as partial damages
related to the Severance Payments, for such Material Breach an
amount equal to X multiplied by Y, where X is a fraction, the
denominator of which is 365 and the numerator of which is the
number of days remaining in the 365 days immediately following
the Executive’s termination of employment by the Company
without Cause or by the Executive for Good Reason after any such
Material Breach, and Y is the amount of Severance Payments (the
“Severance Mitigation”). For example, if the Executive
commits a Material Breach on the 182 nd day following his termination of
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