EXHIBIT 10.67
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”) is a definitive statement of the Terms and
Conditions agreed on December 16, 2002 and is made and entered into
effective as of the
day of
,
2004 (the “Effective Date”), by and between WorldCom,
Inc., a Georgia corporation (the “Company”), and
Michael D. Capellas (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
President, Chief Executive Officer and Chairman of the Board of
Directors of the Company. The Executive shall report directly to
the Board of Directors of the Company (the “Board”).
The Executive shall have the duties, responsibilities, powers, and
authority customarily associated with the positions of President,
Chief Executive Officer and Chairman of the Board and shall perform
such other and unrelated services and duties as may be assigned to
the Executive from time to time by the Board consistent with the
Executive’s positions as President, Chief Executive Officer
and Chairman of the Board.
(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 and including December 31, 2005 (the “Period of
Agreement”). Absent notice by either party prior to June 30,
2005 (and in the case of extensions, prior to each subsequent June
30), the Period of Agreement shall be extended automatically for an
additional year, and annually thereafter.
3. Base Salary . The
Executive’s annual base salary (the “Base
Salary”) shall be $1,500,000, which amount shall not be
decreased except upon mutual consent. 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. In addition, no
increase in the Executive’s Base Salary may be implemented
prior to review and approval by Richard C. Breeden (the
“Corporate Monitor”). 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 earn a bonus equal to 100% 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 or, if so delegated by the Board, the
Compensation Committee and subject to approval of the Corporate
Monitor.
5. Signing Bonus . Upon
commencement of employment with the Company, the Executive received
a signing bonus of $2,000,000 (the “Signing Bonus”).
The Signing Bonus is subject to proportionate refund to the Company
(without interest thereon) (the amount of the Signing Bonus to be
retained by the Executive is based on the number of full calendar
months of elapsed service from December 16, 2002 to the Date of
Termination (defined below), divided by thirty-seven (37) calendar
months) in the event the Executive is not employed by the Company
on December 31, 2005 for any reason other than termination, prior
to such date, of the Executive’s employment by the Company
without Cause (as defined in Section 9(b)), by the Executive for
Good Reason (as
defined in Section 9(c)), or due to the
Executive’s death or Disability (as defined in Section 9(a));
provided, however, that the full Signing Bonus shall be repaid to
the Company within ten (10) days in the event of the
Executive’s termination by the Company for Cause on or before
December 31, 2005.
6. 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 to time by the Company to its
executives generally.
7. 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.
8. 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.
9. 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 9(a) shall serve to limit the Company’s
obligations under Section 10(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” includes,
generally, (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) neglect or 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 failed properly to
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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
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 Hon. Jed S. Rakoff of the U.S.
District Court for the Southern District of New York (the
“Court”), or (v) breach by the Executive of this
Agreement, including any of the covenants contained herein (e.g.,
non-competition, non-solicitation, cooperation with ongoing
investigations). 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 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 pending determination of the existence of
“Cause.”
(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 Board. For purposes of this Agreement, “Good
Reason” includes (i) demotion or removal of the Executive
from the positions of Chief Executive Officer of the Company,
member of the Board or (without the Executive’s consent)
President of the Company; (ii) material adverse change by the
Company in the Executive’s duties or responsibilities; (iii)
decrease in the Executive’s Base Salary or the
Company’s failure to provide an opportunity to earn
performance bonuses as provided in Sections 4, above, and Section
12, 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) non-renewal
of the Agreement at the conclusion of its initial term or upon any
extension thereof, (B) election of a non-executive Chairman of the
Board recommended by the nominating committee of the Board after
non-binding consultation with the Executive and the Corporate
Monitor (i.e., without the Executive’s consent but after
consultation, the Company may elect a non-executive Chairman of the
Board), (C) the failure of the Company to grant any annual equity
award if established performance standards are satisfied, provided
equivalent compensation is provided, or (D) 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.
Termination by the Executive or the Company based on an alleged
breach of this Agreement, including the alleged existence of Good
Reason, shall require not less than thirty (30) days notice to the
other party, which shall have an opportunity to cure any such
breach within said thirty (30) day period, and 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 23 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 or its rights hereunder.
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(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.
10. 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.
(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) a lump sum payment, to be made
within thirty (30) days of the Date of Termination, equal to three
(3) times the sum of the Executive’s then-current Base Salary
and then-current target bonus opportunity set forth in Section 4,
above;
(ii) continued health coverage for
the Executive and the Executive’s eligible dependents at
active employee rates for eighteen (18) months following the Date
of Termination; and
(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”).
(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 (including, without limitation, any
required repayment in full or proportional refund of the Signing
Bonus) 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 lump sum payment in an amount
equal to his then-current Base Salary plus a pro rata portion of
his then-current target bonus opportunity set forth in Section 4,
above. At the Company’s option, this obligation may be
satisfied in whole or in part through life insurance or disability
policies purchased by the Company;
(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.
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11. Initial Equity Awards
.
(a) Upon the Company’s
emergence from bankruptcy, the Executive will be entitled to
receive an initial equity award of restricted stock valued at $12
million at the date of emergence. The value of the restricted stock
will be determined by Lazard LLC, financial advisor to the Company
(or if Lazard LLC shall not at that time continue to be the
Company’s financial advisor such other firm as shall be
mutually acceptable to the Corporate Monitor, the Company and the
Executive) (the “Financial Advisor”) and, absent
manifest error, the Financial Ad
