Exhibit 10.16
EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT, dated as of
March 22, 2006 by and among Madison River Telephone Company
LLC, a Delaware limited liability company (“Holdings”),
and Bruce J. Becker (“Executive”).
RECITALS
Holdings and Executive entered into
an employment agreement dated as of September 28, 1999 and
such agreement has been amended on one occasion on or about
November 1, 2002 and such agreement with its amendment expire
on December 31, 2005.
Holdings and Executive desire to
renew and amend an employment agreement.
Holdings has acquired and operates
rural telephone companies and other telecommunications
operations.
Holdings has the following classes
of equity: Class A equity, Class B equity, Class C equity and
Class D equity. Class A equity will be entitled to
distributions prior to the Class B, Class C and Class D
equities.
In order to induce Executive to
agree to continue to serve as Managing Director—Chief
Technology Officer of Holdings (hereinafter “Managing
Director”), Holdings desires to provide Executive with
compensation and other benefits on the terms and conditions set
forth in this Agreement.
Executive is willing to enter into
such employment and perform services for Holdings on the terms and
conditions set forth in this Agreement.
It is therefore hereby agreed by the
parties as follows:
1. Employment .
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(a)
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Subject to the
terms and conditions of this Agreement, Holdings agrees to employ
Executive during the term hereof as Managing Director—Chief
Technology Officer. In his capacity as Managing
Director—Chief Technology Officer of Holdings, Executive
shall have the customary powers, responsibilities and authorities
of Managing Director—Chief Technology Officer of corporations
of the size, type and nature of Holdings, as they exist from time
to time. Executive shall also be Managing Director—Chief
Technology Officer of all of Holdings’ subsidiaries unless
otherwise agreed by Executive. Compensation and expenses of
Executive shall be allocated based on the procedures agreed upon by
and between Holdings and subsidiaries.
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(b)
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Subject to the
terms and conditions of this Agreement, Executive hereby accepts
employment as Managing Director—Chief Technology Officer of
Holdings and agrees to devote his full working time and efforts, to
the best of his ability, experience and talent, to the performance
of services, duties and responsibilities in connection therewith.
Nothing in this Agreement shall preclude Executive from engaging,
consistent with his duties and responsibilities hereunder, in
charitable and community affairs, from managing his personal
investments or, except as otherwise provided in Section 12
hereof, from serving as a member of boards of directors or as a
trustee of other companies, associations or entities.
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2. Term of Employment
.
Executive’s term of employment
under this Agreement shall commence on January 1, 2006 (the
“Approval Date”) and, subject to the terms hereof,
shall terminate on March 31, 2009 (unless and until extended
from time to time by mutual written agreement of the parties, the
“Termination Date”).
3. Compensation .
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3.1
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Initial Base
Salary .
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(a)
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Beginning on
the Approval Date and continuing until the Termination Date,
Holdings shall pay Executive a base salary (“Base
Salary”) at the annual rate of $180,000. The Base Salary
shall be payable in accordance with the ordinary payroll practices
of Holdings but in no event less often than monthly in
arrears.
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(b)
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Under
Holding’s Short Term Incentive Compensation Plan,
Executive’s annual target award shall be $90,000.
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(c)
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Executive shall
participate in any compensation plan or program, annual or
long-term, maintained by Holdings and participated in by senior
executives of Holdings generally on terms taking into account
Executive’s title and position with Holdings.
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3.2
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Adjustments
to Compensation . The
compensation components as described in Section 3.1 above and
other Sections herein shall be increased from time to time as the
Board shall determine taking into account the success of Holdings,
the performance of Executive, the size, revenues, and earnings of
the businesses held or operated, or contemplated to be held or
operated, by Holdings and market factors.
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3.3
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Expenses . Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities on behalf
of Holdings under this Agreement, including, without limitation,
expenses for travel and similar items related to such
responsibilities which are consistent with Holdings’ policies
in effect from time to time with respect to travel and other
business expenses. Holdings will reimburse Executive for all such
expenses upon presentation by Executive from time to time of an
itemized account of such expenditures; provided that such expenses
are in compliance with any other Holdings’ policies in effect
from time to time with respect to reporting and documentation of
such expenses; it being understood, furthermore, that the cost of
commuting between Executive’s residence and Holdings’
principal place of business and expenses for lodging in connection
with such commuting shall not be reimbursed other than in the event
the principal offices of Holdings are relocated greater than a 40
miles radius from its current location.
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4. Employee Benefits
.
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4.1
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Employee
Benefit Programs, Plans and Practices . During the term of his employment hereunder,
Holdings shall provide to Executive coverage under any employee
benefit programs, plans and practices (commensurate with his
position in Holdings and to the extent possible under any employee
benefit plan), in accordance with the terms hereof, which Holdings
makes available to its senior executive officers generally,
including but not limited to (i) retirement, pension and
profit-sharing, and (ii) medical, dental, hospitalization,
life insurance, short-and long-term disability, accidental death
and dismemberment and travel accident coverage.
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4.2
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Vacation and
Fringe Benefits .
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(a)
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Executive shall
be entitled to paid vacation each calendar year of no less than 25
working days. Holdings may grant additional vacation time to
Executive.
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(b)
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In addition,
Executive shall be entitled to all of the other perquisites and
fringe benefits accorded the senior officers of Holdings
generally.
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5. Incentive Equity
.
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5.1
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Purchase
Rights; Vesting.
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(a)
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As of the date
hereof, Executive has purchased from Holdings Class C equity of
Holdings equal to 7.70% of the total Class C equity of Holdings for
an aggregate purchase price of $770 (hereafter, “Incentive
Equity”). Executive has been awarded 4% of Class D equity
valued at $400 at the time of the award. Hereafter, Class C and
Class D equity collectively shall be referred to as
“Incentive Equity”. Within 30 days after such purchase
or award of Incentive Equity, the Executive made an election with
the Internal Revenue Service under Section 83(b) of the
Internal Revenue Code and the regulations promulgated thereunder.
The parties agree that purchase price for Incentive Equity at the
time of purchase was at fair market value, specifically for Class C
equity for $770 and Class D equity for $400 and that parties shall
use and have used such value for all Federal income tax
purposes.
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(b)
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As of the date
hereof, one hundred percent (100%) of Executive’s Class
C equity of Holdings is fully vested and nonforfeitable.
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(c)
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Fifty percent
(50%) of Executive’s Class D equity vested on
January 1, 2006 and, provided that (except in the case of
vesting pursuant to Section 5.3(a), 6.2 and 6.3) Executive is
still employed by Holdings, the remaining unvested Class D equity
shall on a daily basis over a two year period beginning with the
Approval Date so that the remainder shall have fully vested by
January 1, 2008. In the event of an Initial Public Offering
(“IPO”), fifty percent (50%) of then unvested
Class D equity shall vest. Any unvested remaining portion of Class
D equity after the Liquidity Event shall vest pro-rata over the
remaining term through 2008 as described earlier herein.
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(d)
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“Liquidity Event” means (i) any
sale of all or substantially all of the assets of Holdings on a
consolidated basis in one transaction or series of related
transactions (but excluding sales to affiliates) for cash or
marketable securities, (ii) any sale of 50% or more of the
Investor Equity (as defined in the LOI) in one transaction or
series of related transactions (but excluding sales to affiliates
and, with respect to individuals, related persons) for cash or
marketable securities or (iii) a merger, share exchange or
similar transaction which accomplishes one of the
foregoing.
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5.2
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Distributions . Executive’s unvested Incentive Equity
outstanding at the time of any dividend or other distribution to
Incentive Equity will be entitled to receive the same distributions
per unit as vested Incentive Equity.
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(a)
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Executive’s unvested
Incentive Equity will be subject to repurchase in whole by
Holdings, at its option (which option to repurchase must be elected
in writing by Holdings within ten days of termination and, subject
to such repurchase option being suspended as provided
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below, consummation of such
repurchase must be effected within 80 days thereafter), at the
lower of its original cost (less all amounts distributed in respect
of Executive’s unvested Incentive Equity) or its Fair Market
Value at the time of termination if Executive ceases to be employed
by Holdings for any reason. Notwithstanding anything in this
agreement to the contrary, in the event that Executive’s
employment is terminated for any reason including due to death or
Disability (but other than by the Executive without Good Reason)
and (i) at or prior to such termination Holdings has entered
into an agreement or agreements regarding a transaction or has
publicly announced its intention to consummate a transaction
(including, but not limited to, a public announcement of an
intention to seek to consummate a transaction), which upon
consummation would trigger a Liquidity Event (as defined in the
LOI), or (ii) at or within six months prior to such
termination is or was in active negotiations regarding a
transaction, which upon consummation would trigger a Liquidity
Event, then in either case Holdings’ repurchase right
pursuant to the foregoing sentence will be suspended and if any
such transaction is consummated then Executive’s unvested
Incentive Equity shall immediately prior to the consummation of
such transaction become fully vested and all distributions that
would have been payable to Executive on account of such unvested
Incentive Equity subsequent to Executive’s termination and
prior to such vesting shall be made to Executive, with interest on
each such distribution at a rate per annum equal to the prime rate
in effect at the time of each such distribution, at such time (and
any repurchase by Holdings of such Incentive Equity in connection
with Executive’s termination of employment shall be governed
by Section 5.3(b)), it being understood and agreed that, upon
exercise of the repurchase option, during such suspension and prior
to any such vesting hereunder, distributions that would have been
payable to Executive on account of such unvested Incentive Equity
shall not be for the account of Executive unless and until such
Incentive Equity shall become vested; provided that if none of such
transactions is consummated within two years after
Executive’s termination of employment, or within such
two-year period another transaction is consummated which
constitutes a Liquidity Event, then Holdings’ above
repurchase rights shall be reinstated. “Fair Market
Value” shall mean, with respect to any security, the amount
that would be paid to the holder thereof with respect to such
security if all of the assets of Holdings were sold for fair value
to a willing buyer in exchange for cash, all of the debt and other
liabilities not assumed by the buyer were paid in full, all of the
convertible debt and other convertible securities were repaid or
converted (whichever yields more cash to the holders), and then
Holdings were completely liquidated.
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(b)
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Executives
vested Incentive Equity will not be subject to repurchase in whole
or in part by Holdings.
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5.4
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Investors’ Agreement
. Holdings has entered into an
investors’ agreement (the “Investors’
Agreement”), registration agreement, and certain other
agreements with Executive and the other members of Holdings
(collectively, the “Investors”).
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5.5
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Restrictions on transfer of
Incentive Equity . Other
than pursuant to Tag-Along Rights, Registration Rights, and other
Exit Rights with respect to his vested Incentive Equity (as such
terms are defined in the LOI and as such concepts may be
incorporated in the agreements referred to in Section 5.4)
Executive may not transfer his Incentive Equity at any time (other
than transfers of Incentive Equity for estate planning purposes to
immediate family members and trusts and/or other vehicles for the
benefit of immediate family members) without the approval of
members of the Board holding a majority of the votes of all members
of the Board who do not have a pecuniary interest in such transfer,
which majority shall include approval by members of the Board
holding a majority of the
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votes of all of the members of
the Board designated by the Institutional Investors. However, after
a Liquidity Event, any and all vested Incentive Equity may be
transferred subject only to the restrictions that are then in place
for securities received by other Class A equity holders in
exchange or in consideration for their Class A
equity.
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6. Termination of Employment
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6.1
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Termination
Not for Cause or Termination for Good Reason
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(a)
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(i)
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Holdings may
terminate Executive’s employment at any time, and Executive
may terminate his employment at any time. If Executive’s
employment is terminated by Holdings other than for Cause (as
defined herein) or due to Executive’s death or Disability (as
defined herein) or Executive terminates his employment for Good
Reason prior to the Termination Date, Executive shall be entitled
to receive from Holdings continued Base Salary (payable in
accordance with the last sentence of Section 3.1 hereof) for
12 months after date of the termination plus, on the sixtieth day
following the end of the fiscal year during which the termination
of Executive’s employment pursuant to this
Section 6.1(a) occurs, an amount in respect of any additional
compensation and plans under Section 3.1 for the period
employed for the fiscal year in which Executive’s employment
is terminated calculated on a pro rata basis using the higher of
target amount under Section 3.1 (b) or the then current
target amount so long as the Short Term Incentive Compensation
(“STIC”) Plan targets are met for such fiscal year;
however, in the event STIC Plan target is not met, then using the
same percentage payout, if any, applicable to the payout of any
bonuses for other senior executives employed by
Holdings.
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(ii)
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In addition,
Executive shall (1) be entitled to receive, within a
reasonable period of time after the date of termination, a cash
lump sum equal to (A) any compensation payments deferred by
Executive, together with any applicable interest or other accruals
thereon so long as it is in compliance with Section 409A of
the Internal Revenue Code; otherwise paid in its original schedule;
and (B) any unpaid amounts, as of the date of such
termination, in respect of any bonus for the fiscal year ending
before the fiscal year in which such termination occurs;
(2) for the period from the date of termination of
Executive’s employment until the eighteen month anniversary
of the Termination Date (as then in effect), continue to be covered
under and participate in Holdings’ employee benefit programs,
plans and practices with respect to medical, dental,
hospitalization, life insurance and disability benefits described
in Section 4.1 hereof or under such other plans of Holdings
which provide for equivalent coverage to the extent and on the
terms in effect on the Executive’s last day of employment;
and (3) have such rights to payments under applicable plans or
programs, accrued to Executive on date of termination including,
without limitation, those described in Section 3.3 hereof as
may be determined pursuant to the terms of such plans or
programs.
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(b)
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For purposes of
this Agreement, “Good Reason
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