Exhibit 10.5
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”) is made and entered into effective as of
April 2, 2004 (the “Effective Date”), by and between
WorldCom, Inc., a Georgia corporation (the “Company”),
and Robert Blakely (the “Executive”). In consideration
of the mutual covenants set forth herein, the Company and the
Executive hereby agree as follows:
1. Position; Duties .
(a) During the Period of Agreement
(as defined in Section 2), the Executive shall be employed as the
Executive Vice President and Chief Financial Officer of the
Company. The Executive shall report directly to President and Chief
Executive Officer. The Executive shall have the duties,
responsibilities, powers, and authority customarily associated with
the position of Executive Vice President and Chief Financial
Officer and shall perform such other and unrelated services and
duties as may be assigned to the Executive from time to time by the
President and Chief Executive Officer consistent with the
Executive’s position as Executive Vice President and Chief
Financial Officer.
(b) The Executive shall diligently,
competently, and faithfully perform all duties, and shall devote
the Executive’s entire business time, energy, attention, and
skill to the performance of duties for the Company and its
subsidiaries and affiliates and will use the Executive’s best
efforts to promote the interests of the Company. It shall not be
considered a violation of the foregoing for the Executive to serve
on industry, civic, religious or charitable boards or committees,
so long as such activities do not individually or in the aggregate
significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in
accordance with this Agreement.
2. Term . The initial term of this
Agreement shall commence on the Effective Date and continue through
December 31, 2006, unless terminated prior to such date as provided
at Section 8 hereof (the “Period of Agreement”). The
Period of Agreement may be extended upon the written agreement of
the parties as approved by the Board of Directors of the Company
(the “Board”). Upon the expiration of the Period of
Agreement, except as provided herein, this Agreement shall
terminate, and any continuation of the Executive’s employment
with the Company thereafter shall be
“at-will.”
3. Base Salary . The Executive’s
annual base salary (the “Base Salary”) shall be
$700,000, which amount shall not be decreased except upon mutual
consent or due to a decrease generally applicable to all senior
executives of the Company. The Board or, if so delegated by the
Board, the Compensation Committee shall review the Base Salary
annually, but shall not have any obligation to increase such
amount. No increase in the Executive’s Base Salary may be
implemented prior to review and approval by the Board or, if so
delegated by the Board, the Compensation Committee. Any increase in
Base Salary shall constitute the Executive’s “Base
Salary” thereafter under this Agreement. The Base Salary
shall be payable in substantially equal installments in accordance
with the Company’s payroll policy in effect from time to time
and shall be subject to any payroll or other deductions as may be
required to be made pursuant to law, government or court order or
by agreement with, or consent of, the Executive.
4. Bonus . The Executive shall be
eligible to receive a bonus equal to 75% of the Executive’s
Base Salary for performance at target levels based upon performance
standards, with smaller or greater bonus opportunities for
performance below or above target levels, all as determined by the
Board.
5. Benefits and Perquisites . The
Executive shall be entitled to participate in such life insurance,
disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from
time to time by the Company for the benefit of executives at the
Executive’s level and its employees generally. The Company
shall provide the Executive with such perquisites as are provided
from time
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to time by the Company to its executives
generally. The Executive shall be entitled to receive such other
compensation, benefits and perquisites as set forth on Appendix
1 to this Agreement.
6. Expenses . The Company shall reimburse
the Executive for all reasonable expenses reasonably incurred by
the Executive in performing services hereunder, which are incurred
and accounted for in accordance with the Company’s policies
and procedures applicable thereto.
7. Liability Insurance; Indemnification .
The Company shall maintain officers’ liability insurance
coverage for Executive in reasonable amounts during the Period of
Agreement and, for any act or omission occurring during the Period
of Agreement, at all times thereafter for the duration of any
period of limitations during which any action may be brought
against the Executive, in the same amount and to the same extent as
the Company covers members of the Board. The Executive shall be
indemnified and held harmless to the fullest extent permitted under
the Company’s Articles of Incorporation, Bylaws, and
applicable law, including the U.S. Bankruptcy Code (11 U.S.C.
§ 101 et seq. ), from any and all claims, lawsuits,
losses, damages, assessments, amounts paid in settlement,
penalties, expenses, costs and liabilities of any kind or nature,
including without limitation, court costs and reasonable
attorneys’ fees, which the Executive may sustain directly as
a result of, or in connection with, any act or omission by the
Company or its employees or any claim, suit or other proceeding
brought or threatened by a third party (including but not limited
to governmental or regulatory agencies or bodies) in connection
with the Executive’s employment with the Company or any
subsidiary or affiliate thereof.
8. Termination of Employment .
(a) Death or Disability . The
Period of Agreement shall terminate automatically upon the
Executive’s death. If the Company determines in good faith
that the Disability of the Executive has occurred (pursuant to the
definition of “Disability” set forth below), it may
give to the Executive written notice of its intention to terminate
the Executive’s employment. In such event, the Period of
Agreement and the Executive’s employment with the Company
shall terminate effective on the thirtieth (30th) day after receipt
by the Executive of such notice given at any time after the date of
the Executive’s Disability, while such Disability is
continuing (“Disability Effective Date”); provided
that, within the thirty (30) days after such receipt, the Executive
shall not have returned to full-time performance of the
Executive’s duties. For purposes of this Agreement,
“Disability” means the completion of a period of the
Executive’s physical or mental incapacity which continues for
not less than six (6) consecutive months or six (6) months in any
twelve (12)-month period, as determined by a doctor mutually
agreeable to the Executive and the Board. Until the Disability
Effective Date, the Executive shall be entitled to all compensation
provided for under this Agreement. It is understood that nothing in
this Section 8(a) shall serve to limit the Company’s
obligations under Section 9(c) hereof.
(b) By the Company for Cause
. The Company may terminate the Executive’s employment and
the Period of Agreement immediately for “Cause.” For
purposes of this Agreement, “Cause” means (i) the
commission of (x) a felony or (y) a misdemeanor (excluding a petty
misdemeanor) involving dishonesty, fraud, financial impropriety, or
moral turpitude; (ii) any knowing or deliberate violation of a
requirement of the Sarbanes-Oxley Act of 2002 or other material
provision of the federal securities laws; (iii) willful neglect or
willful misconduct in the discharge of the Executive’s duties
(after receiving written notice from the Board specifying the
manner in which the Executive is alleged to have willfully failed
properly to discharge the Executive’s duties and after having
had the opportunity to cure such failure within thirty (30) days
from receipt of such notice), (iv) any willful conduct that could
reasonably be anticipated to result in or materially contribute to
(whether by act or by omission to act) a violation by the Company
of the Permanent Injunction dated November 26, 2002 (the
“Permanent Injunction”) or other orders binding on the
Company issued by the Honorable Jed S. Rakoff of the U.S. District
Court of the Southern District of New York (the
“Court”), or (v) material breach by the Executive of
this Agreement, including any of the covenants contained herein. In
the event that the Company asserts that grounds exist for
termination with Cause, prior to such termination, it shall so
notify the Executive and within fifteen (15) days shall afford the
Executive a hearing before the Board regarding any disputed facts.
The Board shall make a final determination regarding the existence
of “Cause” upon completion of any such hearing,
provided, however, that
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any determination that “Cause”
exists shall require an affirmative vote of two-thirds (2/3) of the
non-employee directors of the Company. If any such determination
remains pending after such fifteen (15)-day period, the Company
shall be entitled to suspend the Executive’s duties (with
full pay) pending determination of the existence of
“Cause” ; provided that such period of
suspension shall not exceed thirty (30) days. The Executive’s
acts or omissions shall not be “willful” if conducted
in good faith and with a reasonable belief that such conduct was in
the best interests of the Company.
(c) By Executive for Good
Reason . The Executive may terminate Executive’s
employment and the Period of Agreement for Good Reason upon at
least thirty (30) days’ prior written notice from the
Executive to the President and Chief Executive Officer of the
Company. For purposes of this Agreement, “Good Reason”
means, without the Executive’s prior written consent, the
occurrence of (i) a demotion or removal of the Executive from any
of the Executive’s positions, (ii) a material adverse change
by the Company in the Executive’s duties or responsibilities,
(iii) a decrease in the Executive’s Base Salary or the
Company’s failure to provide an opportunity to earn
performance bonuses and other compensation as provided in Sections
4 and 5, above, and Section 10, below, or (iv) any other material
breach of this Agreement by the Company which is not cured within
thirty (30) days’ prior written notice by the Executive to
the Company specifying such breach. “Good Reason” does
not include (A) any failure to extend the term of this Agreement at
the conclusion of the Period of Agreement, (B) the failure of the
Company to grant any annual equity award if established performance
standards are satisfied, provided equivalent compensation is
provided, (C) implementation of any changes in corporate governance
required as part of the SEC settlement or any other actions by the
Company to comply with the Permanent Injunction or any other order
binding on the Company issued by the Court or to comply with any
provision of law, or (D) any adverse change in compensation or
benefits applicable to all senior executives which is proportionate
to each such executive’s compensation or benefits, as the
case may be, immediately prior to such change. The Executive shall
be required to make any assertion of “Good Reason”
within 45 days of the events allegedly giving rise to “Good
Reason”.
(d) Other than for Cause or Good
Reason . The Executive or the Company may terminate the
Executive’s employment and the Period of Agreement for any
reason other than for Good Reason or other than for Cause,
respectively, upon fifteen (15) days’ prior written notice to
the Company or Executive, as the case may be.
(e) Notice of Termination .
Any termination of employment by the Company or by the Executive
shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 19 of this Agreement (the
“Notice of Termination”). For purposes of this
Agreement, a “Notice of Termination” means a written
notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail,
if necessary, the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the
provision so indicated, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of the basis for
termination shall not waive any right of such party hereunder or
preclude such party from asserting such fact or circumstance in
enforcing his/her or its rights hereunder.
(f) Date of Termination .
“Date of Termination” means the date specified in the
Notice of Termination; provided, however, that if the
Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
9. Obligations of the Company Upon
Termination . The following provisions describe the obligations
of the Company to the Executive upon termination of the
Executive’s employment during the Period of Agreement.
However, except as explicitly provided in this Agreement, nothing
in this Agreement shall limit or otherwise adversely affect any
rights which the Executive may have under applicable law, under any
other written agreement with the Company, or under any compensation
or benefit plan, program, policy or practice of the
Company.
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(a) Termination not for Cause or
for Good Reason . If the Executive’s employment is
terminated during the Period of Agreement by Company not for Cause
(and other than due to death or Disability) or by the Executive for
Good Reason, the Executive shall, in lieu of any other severance
benefits under the Company’s severance plans, be entitled to
the following:
(i) continuation of the
Executive’s then-current Base Salary and then –current
target bonus for a period of two (2) years after the Date of
Termination (the “Salary Continuation Period”), the
Base Salary component to be payable as set forth in Section 3,
above, and the target bonus component to be payable in monthly
installments equal to one-twelfth (1/12) of the Executive’s
then-current annual target bonus opportunity set forth in Section
4, above; provided that the sum of such payments shall not exceed
the maximum amount permitted under the Company’s Articles of
Incorporation;
(ii) continued health coverage for
the Executive and the Executive’s eligible dependents at
active employee rates for the Salary Continuation Period, with
COBRA continuation to begin at the end of such period;
(iii) payment of all accrued but not
yet paid Base Salary, accrued vacation, any earned and unpaid bonus
for the previous year or other performance period, unreimbursed
business expenses (in accordance with Company policy and
procedures), and any accrued unpaid benefits under the
Company’s group benefit plans, payable through the Date of
Termination (collectively, “Accrued Obligations”);
and
(iv) a bonus (based upon actual
performance) for the year (or other performance period) in which
the Executive’s termination occurs, prorated based on the
number of days elapsed during said year (or other performance
period) through the Date of Termination, payable at the time
bonuses are paid to senior executives generally.
The Executive shall be entitled to the amounts
and benefits under this Section 9(a) (other than Accrued
Obligations) only upon the Executive’s execution (without
revocation) of a general release of all claims of the Executive
that may be brought against the Company occurring through and
including the release date in the form of Appendix 2 hereto (with
such changes therein as may be necessary to make it valid and
encompassing under applicable law).
(b) Termination for Cause, for
other than Good Reason or at the Expiration of the Period of
Agreement . If the Executive’s employment is terminated
during the Period of Agreement by the Company for Cause or by the
Executive not for Good Reason, or if the Executive’s
employment is terminated by either party for any reason at the
expiration of the Period of Agreement, the Executive will receive
the Executive’s Accrued Obligations through the Date of
Termination (except to the extent subject to disgorgement under any
applicable legal requirement). The Company shall be entitled to
offset the amount due from the Executive of any repayments of
compensation awarded hereunder against any amounts due to the
Executive, without waiving or limiting the Company’s rights
to recover any excess amount due to it.
(c) Termination Due to Death or
Disability . In the event of the Executive’s death or
termination of employment due to Disability during the Period of
Agreement, the Executive’s estate or the Executive, as the
case may be, shall be entitled to receive the following:
(i) a bonus (based upon actual
performance) for the year (or other performance period) in which
the Executive’s termination occurs, prorated based on the
number of days elapsed during said year (or other performance
period) through the Date of Termination, payable at the time
bonuses are paid to senior executives generally;
(ii) payment of the
Executive’s Accrued Obligations; and
(iii) continued health coverage for
the Executive and/or the Executive’s eligible dependents, as
applicable, at active employee rates for eighteen (18) months
following the Date of Termination, which will run concurrently with
COBRA.
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10. Equity Awards . For each full
calendar year during the Period of Agreement, the Executive shall
be eligible at the targeted performance levels to receive an annual
equity award commensurate with the Executive’s position as
determined by the Board in its discretion.
11. Treatment of Equity Awards on
Termination . Upon the termination of Executive’s
employment, either during, at the expiration of, or after the
Period of Agreement, the vesting of any unvested equity awards
granted during the Period of Agreement shall be determined as
follows:
(a) In the event of termination of
the Executive’s employment (i) by the Company not for Cause
(and other than due to the Executive’s death or Disability),
or (ii) by the Executive for Good Reason, the Executive shall be
deemed to be an active employee of the Company for two (2) years
following the Date of Termination for purposes of determining the
vesting of each such equity award.
(b) In the event of termination of
the Executive’s employment (i) by the Executive not for Good
Reason or (ii) by the Company for Cause, any such equity awards
that are unvested shall be forfeited.
(c) In the event of the
Executive’s death or termination due to Disability, any such
equity awards that are unvested shall immediately fully
vest.
12. Non-Competition .
(a) In the event that the
Executive’s employment is terminated for any reason during
the Period of Agreement, but not at or after the expiration of the
Period of Agreement, for a period of one (1) year after the Date of
Termination, the Executive shall not become an employee,
consultant, advisor, director or assume any other position or
relationship with the following companies or their subsidiaries and
affiliates: AT&T Corporation, SBC Communications, Inc., Sprint
Corporation, Qwest, or Verizon Communications.
(b) The Executive agrees to, and
shall, execute the Company’s Non-Disclosure, Intellectual
Property Assignment and Non-Solicitation Agreement, attached hereto
as Appendix 3 . The terms of the Non-Disclosure,
Intellectual Property Assignment and Non-Solicitation Agreement are
incorporated herein by this reference and shall survive any
termination of the employment relationship created hereunder or the
termination of the Period of Agreement.
(c) The Executive acknowledges that
the Company has no adequate remedy at law and will be irreparably
harmed if the Executive breaches or threatens to breach the
provisions of this Section 12, and, therefore, agrees that the
Company shall be entitled to injunctive relief to prevent any
breach or threatened breach of this Section and that the Company
shall be entitled to specific performance of the terms of this
Section in addition to any other legal or equitable remedy it may
have. Nothing in this Agreement shall be construed as prohibiting
the Company from pursuing any other remedies at law or in equity
that it may have or any other rights that it may have under any
other agreement.
13. Change in Control .
(a) Definition of “Change
in Control .” The definition of Change in Control shall
occur upon the occurrence of any one of the following events during
the Period of Agreement:
(i) the sale, lease or transfer, in
one or a series of related transactions, of all or substantially
all of the assets of the Company and its Restricted Subsidiaries
(as defined in the indentures pursuant to which senior notes of the
Company are to be issued to certain of the Company’s
creditors in accordance with the Company’s Modified Second
Amended Joint Plan of Reorganization under chapter 11 of title 11
of the United States Code, as confirmed on October 31, 2003 by the
United States Bankruptcy Court for the Southern District of New
York) taken as a whole to any other “person” or
“group,” as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), (other than the
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Company or any of its Restricted
Subsidiaries), other than a creation of a holding company that does
not involve a change in the beneficial ownership of the Company as
a result of the transaction and other than a creation of a holding
company that does not involve a change in the beneficial ownership
of the Company as a result of the transaction;
(ii) the adoption of a plan relating
to the liquidation or dissolution of the Company;
(iii) any “person” or
“group” (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as defined in rules 13d-3 and 13d-5 under the
Exchange Act (except that a person shall be deemed to have
beneficial ownership of all shares that such Person has a right to
acquire, whether such right is exercisable immediately or after 60
days), directly or indirectly of more than 50% of the voting power
of the voting stock of the Company by way of purchase, merger or
consolidation or otherwise;
(iv) the merger or consolidation
with or into another Person or merger of another Person into the
Company with the effect that immediately after that transaction the
existing stockholders of the Company immediately before the
transactio
