Exhibit 10.12
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT
(“Agreement”) is made as of the 3rd day of February,
2005 by and between ITC^DeltaCom Inc., a Delaware corporation
(“Employer” or the “Company”), and Randall
E. Curran (“Employee”).
RECITALS
WHEREAS, the Company desires to
employ Employee as provided herein; and
WHEREAS, Employee desires to be
employed by Employer as provided herein;
NOW, THEREFORE, in consideration of
the mutual covenants and agreements contained herein, the parties
agree as follows:
1. EMPLOYMENT . The Company
agrees to employ Employee and Employee hereby agrees to be employed
on a full-time basis by the Company, and by such of its subsidiary
corporations as determined by the Board of Directors of the Company
(the “Board”) in such position with such corporations
as is designated by the Board, for the period and upon the terms
and conditions hereinafter set forth.
2. DUTIES . Employee shall
serve as Chief Executive Officer of the Company and, if and when
appointed or elected to the Board, as a member of the Board. During
his employment, Employee shall perform the duties and bear the
responsibilities commensurate with his position and shall report
directly to the Board. During the Term (as defined below) of the
Agreement, and excluding any periods of vacation, holiday, personal
leave and sick leave to which Employee is entitled, Employee shall
devote Employee’s full business time, attention and ability
to the business and affairs of the Company.
3. COMPENSATION AND BENEFITS
.
(a) Base Salary . The Company
shall pay Employee during the Term of this Agreement a base salary
at an annual rate of five hundred thousand dollars ($500,000),
which shall be payable bi-weekly or otherwise in accordance with
the Company’s regular payroll practices. Employee’s
base salary, as in effect at any time, is hereinafter referred to
as the “Base Salary.” The Base Salary may be increased
from time to time in accordance with normal business practices of
the Company and, if so increased, shall not thereafter be reduced
unless any such reduction occurs on a proportionate
across-the-board basis among all executive employees of the Company
(the “Key Employees”), provided that in no event shall
the Base Salary as a result of any such reduction be reduced to an
annual rate below five hundred thousand dollars ($500,000) without
the consent of Employee. Compensation of Employee by salary
payments shall not be deemed exclusive and shall not prevent
Employee from participating in any other compensation, bonus or
benefit plan of the Company. The salary payments hereunder shall
not in any way limit or reduce any other obligation of the Company
hereunder, and no other compensation, benefit or payment hereunder
shall in any way limit or reduce the obligation of the Company to
pay Employee’s salary hereunder.
(b) Benefits . In addition to
salary as provided above, the Company shall provide Employee,
during the Term of this Agreement, with the benefits of such
insurance plans, benefit plans, hospitalization plans and other
perquisites as shall be generally provided to Key Employees and for
which Employee may be eligible under the terms and conditions
thereof. In the event that Employee is not permitted to commence
participation in the Company’s medical insurance plan as of
the Effective Date as a result of waiting periods imposed under the
terms of such plan, then the Company shall reimburse Employee for
any COBRA (as defined below) premium paid by Employee between the
Effective Date and the time Employee becomes eligible to
participate in any Company medical insurance plan.
(c) Annual Bonus . For each
of the Company’s fiscal years (each, a “Fiscal
Year”) that occurs during the Term of this Agreement,
beginning with the Fiscal Year ending December 31, 2005, Employee
shall be eligible to earn an annual cash bonus (the
“Bonus”) in a maximum amount equal to one hundred
percent (100%) of Base Salary in respect of such Fiscal Year based
upon the achievement by the Company of such performance goals for
such Fiscal Year as are established by the Compensation Committee
of the Board (the “Compensation Committee”), provided
that, for the Fiscal Years ending December 31, 2005 and December
31, 2006, payment of the Bonus shall be based upon the achievement
of the performance goals for such Fiscal Years set forth in Exhibit
A. In addition to the terms and conditions for payment of any Bonus
(including the terms and conditions set forth in Exhibit A), the
Compensation Committee may, in its discretion, approve the payment
of an additional cash Bonus (the “Additional Bonus”)
for any Fiscal Year in a maximum amount equal to twenty-five
percent (25%) of Base Salary in effect in respect of such Fiscal
Year, so that, in the aggregate, the Bonus and the Additional Bonus
in respect of any Fiscal Year shall be in a maximum amount equal to
one hundred twenty-five percent (125%) of Base Salary for such
Fiscal Year. The Bonus and Additional Bonus, if any, payable to
Employee in respect of any Fiscal Year shall be paid at the same
time that bonuses are paid to other Key Employees, but in any event
within seventy-five (75) days after the conclusion of such Fiscal
Year.
(d) Business Expenses .
Throughout the Term of this Agreement, the Company shall promptly
reimburse Employee for all reasonable out-of-pocket expenses
incurred by Employee in connection with the business of the
Company, including, without limitation, expenses incurred in
traveling between Denver, Colorado and the Company’s
headquarters until the Employee is required to relocate to the
State of Georgia in accordance with the terms of Section 3(e)
hereof, and the performance of his duties under this Agreement upon
presentation to the Company by Employee of a reasonably itemized
accounting of such expenses with reasonable supporting
data.
(e) Relocation . The Company
shall pay or reimburse Employee for the reasonable costs and
expenses of relocating from Denver, Colorado to the vicinity of the
Company’s headquarters up to an aggregate amount not to
exceed two hundred fifty thousand dollars ($250,000) (before any
tax gross-up). Such expenses shall include (i) travel,
transportation, meals, temporary lodging and similar related moving
expenses and (ii) closing costs, real estate commissions,
attorney’s fees and other similar costs incurred in
connection with the relocation. All expenses subject to income tax
shall be grossed up such that the state and federal tax effect to
Employee is zero. Employee shall not be required to relocate to the
vicinity
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of the Company’s headquarters
until his home in Denver, Colorado is sold and the Company
consummates a Debt Restructuring (as defined below).
4. TERM . The Term of this
Agreement shall commence on February 3, 2005 (the ”Effective
Date”) and shall continue until the second anniversary of the
Effective Date, unless terminated earlier pursuant to Section 6
hereof (the “Term”), provided, however, that the Term
of this Agreement shall be automatically extended for successive
one-year periods after the second anniversary of the Effective Date
unless either party notifies the other in writing of the notifying
party’s intention not to so extend the Term of this Agreement
(a “Notice of Non-Renewal). Any Notice of Non-Renewal must be
given to the other party not later than the first anniversary of
the Effective Date to terminate the Term of this Agreement as of
the second anniversary of the Effective Date, and after such first
anniversary not later than any subsequent anniversary of the
Effective Date to terminate the Term of this Agreement as of the
immediately succeeding anniversary date.
5. EQUITY PARTICIPATION
.
(a) Restricted Stock . The
Company is contemplating a restructuring of its capital structure
upon terms that will be approved by the Board (the “Debt
Restructuring”) in which Employee is expected to play a
critical role. To induce Employee to accept employment with the
Company, promptly following consummation of the Debt Restructuring
(if any), Employee shall receive a grant of restricted shares (the
“Restricted Shares”) representing five percent (5%) of
each class or series of equity securities of the Company as herein
provided (each such class or series, a “Class”)
outstanding immediately following the completion of the Debt
Restructuring and after giving effect to such grant and to any
other similar grant (a “Parallel Inducement Grant”) to
any other officer of the Company, calculated on a Fully Diluted
Basis, as determined in good faith by the Board or an authorized
committee thereof. For purposes of this Section 5(a), a Class of
Restricted Shares shall include common stock, each class or series
of preferred stock, and each class or series of warrants to
purchase preferred stock, but only if such class or series of
warrants is in-the-money as of the date of determination. To the
extent reasonably practicable, any grant of common stock shall be
made in the form of restricted stock units containing terms
consistent with the terms of this Section 5(a). If the Debt
Restructuring shall be accomplished in more than one transaction,
Employee shall receive a grant of Restricted Shares of each new
Class, if any, authorized and issued in connection with, and
outstanding immediately following the consummation of, such
subsequent transaction promptly following such consummation so
that, immediately following such consummation and after giving
effect to such grant and any Parallel Inducement Grant, the
Restricted Shares of such new Class granted to Employee shall equal
five percent (5%) of such new Class on a Fully Diluted Basis, as
determined in good faith by the Board or an authorized committee
thereof. For purposes of this Section 5(a), “Fully Diluted
Basis” shall mean, with respect to shares of each Class as of
the date of determination, the sum of (x) the number of shares of
such Class outstanding as of such date of determination plus (y)
the number of shares of such Class issuable as of such date of
determination upon the exercise, conversion or exchange of all
then-outstanding options, stock units, indebtedness or other rights
(other than preferred stock or warrants exercisable, convertible or
exchangeable for or into such Class that are separately granted to
Employee hereunder) exercisable for or convertible or exchangeable
into, directly or indirectly, shares of such Class, whether at the
time of issuance or upon the passage of time or upon the occurrence
of vesting or
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other future event, provided that
such options, stock units, indebtedness or other rights are
in-the-money as of such date of determination, but excluding the
number of shares of such Class, if any, issuable as of such date of
determination in payment of accrued and unpaid dividends on such
Class. If the holders of any Class shall agree in any subsequent
transaction involving the Debt Restructuring to exchange such Class
for a new Class, or to accept cancellation of such Class in
consideration for the issuance of a new Class, Employee’s
right hereunder to receive a grant representing five percent (5%)
of such new Class, calculated on a Fully Diluted Basis, promptly
following the consummation of such transaction shall be conditioned
on the concurrent surrender by Employee to the Company of such
Employee’s ownership of the Class so exchanged or canceled
or, as the case may be, the number of shares of common stock that,
upon grant to Employee hereunder, were calculated based on the
Class so exchanged or canceled. Notwithstanding the foregoing, if
the Board determines in good faith, after consulting with Employee,
that it is not practicable to issue a particular Class of
Restricted Shares to Employee, the Board shall grant Restricted
Shares of a different Class (the “Replacement Restricted
Shares”) to Employee in lieu of the Restricted Shares not
granted to Employee. The Replacement Restricted Shares shall be
economically equivalent to the Class of Restricted Shares in
respect of which they are being granted, as determined in good
faith by the Board or an authorized committee thereof. For purposes
of determining economic equivalence, no value shall be ascribed to
the voting rights of the Restricted Shares in respect of which the
Replacement Restricted Shares are being granted. To the extent that
the Debt Restructuring is accomplished by means of a sale of all or
substantially all of the Company’s assets, or a merger or
stock sale as a result of which there are no shares of any Class
outstanding following consummation of the Debt Restructuring, in
lieu of the Restricted Shares, Employee shall receive upon
consummation of the Debt Restructuring consideration equal to five
percent (5%) of the consideration received by all Classes in the
Debt Restructuring (i) to the extent practicable under the terms of
the transaction, in the same form and proportion as received by
each such Class, and (ii) to the extent not practicable under the
terms of the transaction, in cash equal to the fair market value of
such consideration as determined in good faith by the Compensation
Committee, forty percent (40%) of which shall vest immediately and
sixty percent (60%) of which shall vest on the same schedule on
which the Restricted Shares would have vested pursuant to Section
5(b).
(b) Vesting of Restricted
Shares . Subject to the immediately following sentence and
acceleration of vesting as set forth in Section 6(a) hereof, the
Restricted Shares shall vest as follows: (i) sixty percent (60%) of
each Class of the Restricted Shares shall vest ratably over three
(3) years on each anniversary of the Effective Date (collectively,
the “Time Vested Stock”); (ii) twenty percent (20%) of
each Class of the Restricted Shares shall vest on the Performance
Achievement Date (as defined below) upon achievement of $90 million
of EBITDA (as defined below) for any EBITDA Performance Period (as
defined below); and (iii) twenty percent (20%) of each Class of the
Restricted Shares shall vest on the Performance Achievement Date
upon achievement of $105 million of EBITDA for any EBITDA
Performance Period. Notwithstanding the foregoing, if
payment-in-kind dividends in shares of any Class (“PIK
Shares”) shall be payable in respect of such Class, vesting
of the Restricted Shares with respect to such Class shall also be
subject to the following additional principles: (i) shares of such
Class payable as PIK Shares shall not be considered in
calculating
