EXHIBIT 10.3
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT is made
and entered into as of this 7th day of November, 2005, by and
between PAXSON COMMUNICATIONS CORPORATION, a Delaware corporation
(the “ Company ”), and ROY BRANDON BURGESS
(“ Employee ”).
W I T N E S S
E T H :
WHEREAS, the Company desires to
employ Employee and to enter into an agreement embodying the terms
of such employment (this “ Agreement ”) and
Employee desires to enter into this Agreement and to accept such
employment, subject to the terms and provisions of this
Agreement.
NOW, THEREFORE, in consideration of
the promises and mutual covenants contained herein and for other
good and valuable consideration, the receipt and sufficiency of
which are mutually acknowledged, the Company and Employee hereby
agree as follows:
Section 1. Definitions
.
(a) “ Accrued
Obligations ” shall mean (i) all accrued but unpaid
Base Salary through the date of termination of Employee’s
employment; (ii) any unpaid or unreimbursed expenses incurred
in accordance with Company policy, including amounts due under
Section 6 hereof to the extent incurred prior to termination
of employment; (iii) any benefits provided under the
Company’s employee benefit plans upon a termination of
employment, in accordance with the terms therein, including rights
to equity in the Company pursuant to any plan or grant, and
settlement of RSUs and exercise of Options in accordance with the
terms of this Agreement; (iv) any unpaid Annual Bonus in
respect to any completed fiscal year that has ended on or prior to
the date of termination of Employee’s employment; and
(v) rights to indemnification by virtue of Employee’s
position as an officer or director of the Company or its
subsidiaries and the benefits under any directors’ and
officers’ liability insurance policy maintained by the
Company, in accordance with its terms thereof.
(b) “ Affiliate
” shall mean, as to any Person, any other Person that
controls, is controlled by, or is under common control with, such
Person.
(c) “ Annual Bonus
” shall mean the bonus provided for in Section 4(b)
below.
(d) “ Auditor
” shall mean a nationally recognized United States public
accounting firm, jointly selected by the Company and Employee,
which has not, during the two years preceding the date of its
selection, acted in any way on behalf of the Company or its
Affiliates. If Employee and the Company cannot agree on the firm to
serve as the Auditor, then Employee and the Company shall each
select one accounting firm and those two firms shall jointly select
the accounting firm to serve as the Auditor.
(e) “ Base Salary
” shall mean the salary provided for in Section 4(a) or any
increased salary granted to Employee pursuant to Section 4(a)
below.
(f) “ Board
” shall mean the Board of Directors of the Company.
(g) “ Call Option
Holder ” shall mean NBC Palm Beach Investment II, Inc., a
California corporation.
(h) “ Cause
” shall mean (i) act or acts of willful misconduct by
Employee in connection with Employee’s employment duties,
which result in material and demonstrable injury to the Company;
(ii) embezzlement or other financial fraud committed by
Employee; or (iii) Employee’s conviction of, admission
to, or entry of pleas of no contest to, any felony.
(i) “ Change in
Control ” shall mean (i) a sale by the Call Option
Holder of that portion of the preferred stock of the Company owned
by the Call Option Holder that, if converted into shares of common
stock of the Company, would equal a majority of the voting stock of
the Company, and the conversion of such preferred stock into voting
securities then entitled to vote; (ii) a change in ownership
or control of the Company effected through a transaction or series
of transactions whereby any “person” or related
“group” of “persons” (as such terms are
used in Sections 13(d) and 14(d)(2) of the Exchange Act), other
than an Affiliate of the Company, directly or indirectly acquires
“beneficial ownership” (within the meaning of
Rule 13d-3 under the Exchange Act) of voting securities then
entitled to vote of the Company possessing more than fifty percent
(50%) of the total combined voting power of the Company’s
securities outstanding immediately after such acquisition;
(iii) the sale or conveyance of all or substantially all of
the assets of the Company; (iv) during any consecutive
two-year period, individuals who at the beginning of such period
constituted the Board (together with any new directors whose
election by the Board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board then in office; or (v) any
other transaction or event resulting in Lowell Paxson no longer
being the single voting majority shareholder of the Company.
(j) “ Code ”
shall mean the Internal Revenue Code of 1986, as amended.
(k) “ Commencement
Date ” shall mean November 7, 2005.
(l) “ Common Stock
” shall mean the Class A common stock of the Company,
par value $0.001 per share.
(m) “ Company
” except as otherwise expressly set forth herein, shall have
the meaning set forth in the preamble hereto.
(n) “ Competitive
Activities ” shall mean any business activities which are
in direct competition with the Company’s main line of
business, terrestrial television broadcasting in the United States
of America.
(o) “ Confidential
Information ” shall have the meaning set forth in Section
9(a) below.
(p) “ Disability
” shall mean any physical or mental disability or infirmity
that results in Employee being “Disabled” within the
meaning of Section 409A(a)(2)(C)(i) of the Code. Any question
as to the existence, extent or potentiality of Employee’s
Disability upon which Employee and the Company cannot agree shall
be determined by a qualified, independent physician mutually agreed
upon by the Company and Employee. If Employee and the Company
cannot agree on such physician, then Employee and the Company shall
each select one physician and those physicians shall jointly select
the physician to make such determination. The determination of any
such physician shall be final and conclusive for all purposes of
this Agreement.
(q) “ Employee
” shall have the meaning set forth in the preamble
hereto.
(r) “ Exchange Act
” shall mean the Securities Exchange Act of 1934, as
amended.
(s) “ Fair Market
Value ” shall mean the average closing price per share of
Common Stock on the American Stock Exchange during the ten
(10) trading day period immediately preceding the Commencement
Date (for purposes of determining the exercise price of the FMV
Options) or immediately preceding any other date specified, for
Option exercises in Section 4(e), as applicable.
(t) “ FMV Options
” shall have the meaning set forth in Section 4(e) below.
(u) “ Good Reason
” shall mean, without Employee’s consent, (i) any
change in Employee’s titles; (ii) any material
diminution in Employee’s duties, responsibilities, reporting
relationship or authorities, including, without limitation, as a
result of any amendment of the Company’s governing documents,
or resolutions by the Board; (iii) any reduction in Base
Salary or target Annual Bonus opportunity; (iv) the relocation
of Employee’s principal place of employment to a location,
other than to the New York metropolitan area, more than thirty
(30) miles from the location set forth in Section 3(c) below;
or (v) any breach by the Company of any material provision of
this Agreement which the Company fails to fully cure within fifteen
(15) days from receipt of written notice setting forth the
specifics of such breach.
(v) “ New Call
Option ” shall mean the new option to purchase a
controlling interest in the Company granted to the Call Option
Holder pursuant to that certain Call Agreement, dated as of
November 7, 2005, by and among Mr. Lowell W. Paxson,
Second Crystal Diamond Limited Partnership, and Paxson Enterprises,
Inc. and the Call Option Holder.
(w) “ Options
” shall have the meaning set forth in Section 4(e) below.
(x) “ Parachute Excise
Tax ” shall mean any tax imposed under Section 4999
of the Code or any similar tax that may hereafter be imposed.
(y) “ Payment
” shall mean any payment or benefit made or provided to
Employee under this Agreement or under any other plan, program or
agreement of the Company or its Affiliates.
(z) “ Person
” shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust (charitable or non-charitable), unincorporated
organization or other form of business entity.
(aa) “ Restricted
Area ” means any State of the United States of America or
any other jurisdiction in which the Company or its subsidiaries
engage (or has committed plans to engage) in business during the
Term of Employment, or, following termination of Employee’s
employment, was engaged in business (or had committed plans to
engage) at the time of such termination of employment.
(bb) “ Restricted
Period ” shall mean the period commencing on the
Commencement Date and ending on the second anniversary of
Employee’s termination of employment hereunder for any
reason.
(cc) “ RSUs
” shall have the meaning set forth in Section 4(d) below.
(dd) “ Separation
Agreement ” shall mean the Letter Agreement, dated
November 7, 2005, relating to Employee’s separation from
employment with NBC Universal, Inc.
(ee) “ Severance
Amount ” shall mean:
(i) If
Employee’s termination of employment occurs on or prior to
the eighteen (18) month anniversary of the Commencement Date, an
amount equal to the sum of (x) two (2) times Base Salary,
plus (y) $1 million;
(ii) If
Employee’s termination of employment occurs following the
eighteen (18) month anniversary of the Commencement Date
and following exercise of the New Call Option (or comparable
transaction having substantially the same result as exercise of the
New Call Option), an amount equal to two (2) times Base
Salary; and
(iii) If
Employee’s termination of employment occurs following the
eighteen (18) month anniversary of the Commencement Date
but where the New Call Option was not exercised (and no
comparable transaction having substantially the same result as
exercise of the New Call Option has occurred, it being understood
that the purchase of the securities subject to the New Call Option
by the Company is not a comparable transaction), an amount equal to
$1 million.
(ff) “ Severance
Term ” shall mean the two (2) year period following
the date of Employee’s termination of employment
hereunder.
(gg) “ Stockholder
Agreement ” shall mean the Amended and Restated
Stockholder Agreement Dated as of November 7, 2005 among the
Company, NBC Universal, Inc., Mr. Lowell Paxson, Second
Crystal Diamond Limited Partnership and Paxson Enterprises,
Inc.
(hh) “ Target
EBITDA ” shall mean such Earnings before Interest, Taxes,
Depreciation and Amortization, as developed by the management of
the Company in connection with the annual budget process and
reviewed and approved by the Compensation Committee of the Board
annually prior to the commencement of the second fiscal quarter of
the fiscal year to which the Target EBITDA relates.
(ii) “ Term of
Employment ” shall mean the period specified in
Section 2 below.
Section 2. Acceptance and
Term of Employment .
The Company agrees to employ
Employee and Employee agrees to serve the Company on the terms and
conditions set forth herein. The Term of Employment shall commence
on the Commencement Date and shall continue, subject to
Section 7 hereof, through the third (3 rd )
anniversary of the Commencement Date.
Section 3. Position, Duties
and Responsibilities; Place of Performance .
(a) During the Term of
Employment, Employee shall be employed and serve as the Chief
Executive Officer of the Company and shall have such duties
typically associated with such title, including, without
limitation, the sole authority to hire or terminate all other
officers, senior executives and advisors of the Company in
accordance with this Section 3. In addition, Employee shall be
appointed to the Board on the Commencement Date, and shall serve as
a member of the Board during the Term of Employment without
additional compensation. Employee also agrees to serve as an
officer and/or director of the Company or any subsidiary of the
Company, in each case without additional compensation. All
officers, senior executives and advisors of the Company will
report, directly or indirectly, to Employee, and no other officers,
senior executives or advisors of the Company will report directly
to the Board; provided , however , that nothing in
this Section 3 shall preclude (i) the Audit Committee of
the Board from retaining independent accountants that report
directly to it, (ii) the Compensation Committee of the Board
from retaining its own compensation consultants, investigation
firms or legal counsel, or (iii) the Board or any committee
thereof from retaining its own legal counsel. Throughout the Term
of Employment, Employee will have the right, subject to reasonable
prior notice to and consultation with (but explicitly not the prior
consent of) the Board, to terminate the employment of any other
employee of the Company or any of its subsidiaries. Employee will
also have the right to hire employees on behalf of the Company,
provided that the compensation to any such new proposed hires that
are at the senior executive level (defined by cash compensation in
excess of $300,000 per year for each such senior executive) will be
subject to customary approval by the Compensation Committee of the
Board of the appropriateness of such compensation in accordance
with prevailing business practices. Notwithstanding the foregoing
but in no way limiting or reducing Employee’s right to any
and all compensation arising hereunder from and after the
Commencement Date hereof, Employee’s responsibilities as
Chief Executive Officer of the Company as set forth in this Section
3(a) shall automatically commence immediately following the
complete and final filing of the Company’s Form 10-Q for the
fiscal quarter ended September 30, 2005.
(b) Subject to the terms and
conditions set forth in this Agreement, Employee shall devote his
full business time, attention, and efforts to the performance of
his duties under this Agreement and shall not engage in any other
business or occupation during the Term of Employment, including,
without limitation, any activity that (x) conflicts with the
interests of the Company or its subsidiaries, (y) interferes
with the proper and efficient performance of his duties for the
Company, or (z) interferes with the exercise of his judgment
in the Company’s best interests. Notwithstanding the
foregoing, nothing herein shall preclude Employee from
(i) serving, with the prior written consent of the Board, as a
member of the board of directors or advisory boards (or their
equivalents in the case of a non-corporate entity) of non-competing
businesses, (ii) engaging in charitable activities and
community affairs, including serving as a member of the board of
directors or advisory boards of charitable organizations, and
(iii) subject to the terms and conditions set forth in
Section 9 hereof, managing his personal investments and
affairs; provided , however , that the activities set
out in clauses (i), (ii) and (iii) shall be limited by
Employee so as not to materially interfere, individually or in the
aggregate, with the performance of his duties and responsibilities
hereunder.
(c) Employee’s principal
place of employment shall be in West Palm Beach, Florida, although
Employee understands and agrees that he may be required to travel
from time to time for business reasons.
Section 4. Compensation
. During the Term of Employment, Employee shall be entitled to the
following compensation:
(a) Base Salary .
Employee shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of
not less than $1,000,000, subject to increase, if any, as may be
approved in writing by the Compensation Committee of the Board, but
not to decrease from the then current Base Salary.
(b) Annual Bonus .
Employee shall be entitled to an annual incentive bonus award equal
to a maximum amount of one hundred percent (100%) of Base Salary in
respect of each fiscal year during the Term of Employment (the
“ Annual Bonus ”). Sixty-five percent (65%) of
the Annual Bonus shall be payable based upon achievement of Target
EBITDA of the Company for each such fiscal year, and thirty-five
percent (35%) of the Annual Bonus shall be payable based upon
achievement of other Company performance objectives or such other
mix of metrics as may be mutually agreed to by the Compensation
Committee of the Board and Employee from time to time in the
future. The maximum percentage of Base Salary payable as an Annual
Bonus pursuant to this subsection 3(b) (currently 100%) may be
increased in future fiscal years at the discretion of the Board,
but shall not be decreased below 100% of Base Salary.
Notwithstanding anything contained herein to the contrary, Employee
shall not be entitled to an Annual Bonus for the Company’s
fiscal year ending December 31, 2005. The Annual Bonus shall
be paid to Employee at the same time as annual bonuses are
generally payable to other senior executives of the Company, but in
no event later than the date which is two and one-half (2
1/2 ) months following the end
of the fiscal year to which such Annual Bonus relates.
(c) Signing Bonus .
Upon the execution of this Agreement, the Company shall pay
Employee a lump-sum amount equal to $1,500,000.
(d) Restricted Stock
Units . Effective as of the Commencement Date, Employee shall
be granted 8.0 million restricted stock units (the “
RSUs ”), where each RSU notionally represents one
share of Common Stock. Twenty-five percent (25%) of the RSUs shall
vest on each of the eighteenth (18 th ) month,
twenty-fourth (24 th ) month, thirty-sixth (36
th ) month and forty-eighth (48 th ) month
anniversaries of the Commencement Date, subject to Employee’s
continued employment through the applicable vesting date (except as
otherwise provided in Section 7(g) below) and acceleration of
vesting upon termination of employment hereunder as provided in
Section 7 hereof. Vested RSUs shall be settled by delivery of
the number of shares of Common Stock underlying such vested RSUs
upon the earlier to occur of (i) Employee’s termination of
employment hereunder for any reason, or (ii) upon the
forty-eighth (48 th ) month anniversary of the
Commencement Date; provided , however , Employee may
satisfy the minimum statutory tax withholding obligation associated
with the settlement of the RSUs by having the Company withhold
shares of Common Stock otherwise deliverable to him upon such
settlement. Notwithstanding anything contained in this subsection
(d) to the contrary, RSUs that continue to vest following
Employee’s termination of employment upon expiration of the
Term of Employment, as provided in Section 7(g) hereof, shall be
settled upon the forty-eighth (48 th ) month anniversary
of the Commencement Date.
(e) Stock Options .
Effective as of the Commencement Date, Employee shall be granted
options to purchase an aggregate of 16.0 million shares of
Common Stock (the “ Options ”). Options covering
8.0 million shares of Common Stock (the “ FMV
Options ”) shall have an exercise price per share equal
to Fair Market Value, and the remaining Options covering
8.0 million shares of Common Stock shall have an exercise
price equal to $1.25 per share. The Options shall vest in equal
installments on each of the eighteenth (18 th ) month,
twenty-fourth (24 th ) month, thirty-sixth (36
th ) month and forty-eighth (48 th ) month
anniversaries of the Commencement Date, subject to Employee’s
continued employment through the applicable vesting date (except as
otherwise provided in Section 7(g) below) and acceleration of
vesting upon termination of employment hereunder as provided in
Section 7 hereof. Except in the case of any termination
(A) by the Company without Cause, (B) by the Employee
with Good Reason, or (C) by reason of Employee’s death
or Disability, vested Options shall be exercised on the trading day
immediately prior to the date of expiration of the Options as
provided in the following sentence; provided , that a vested
Option shall not be exercised on any such date if, on the date of
such event, the Fair Market Value of a share of Common Stock does
not exceed the exercise price of such Option. The Options shall
expire on the seventh (7 th ) anniversary of the
Commencement Date, subject to earlier expiration upon termination
of Employee’s employment, as follows:
(i) Upon
expiration of the Term of Employment following the Company’s
failure to make a bona fide renewal offer to Employee as described
in Section 7(g), vested Options shall expire on the forty
eight (48) month anniversary of the date of such termination;
and
(ii) Upon
Employee’s termination of employment for any reason not
described in subsection (i) above, vested Options shall expire
six (6) months and one (1) day following the date of such
termination.
In the case of any termination (A) by the Company without
Cause, (B) by Employee with Good Reason, or (C) by reason
of Employee’s death or Disability, the Options shall be
immediately forfeited and cancelled, and Employee shall receive in
consideration for such cancellation, the amounts described in
Section 7(b)(iii) or Section 7(d)(vi) hereof, as
applicable. Employee may satisfy the applicable exercise price and
any minimum statutory tax withholding obligation associated with
the exercise of the Options by having the Company withhold shares
of Common Stock otherwise deliverable to him upon such
exercise.
(f) Restrictions on Common
Stock; Voting Agreement . The RSUs and the Options shall be
documented in award agreements. No provision of any such award
agreement, or of any plan document under which such awards are
made, shall contravene, limit, reduce or otherwise adversely affect
any rights of Employee under this Agreement, and in the event of
any inconsistency between this Agreement and any such award
agreement or plan document, the provisions of this Agreement shall
govern. Notwithstanding the foregoing, each such award agreement
shall provide that shares of Common Stock acquired upon settlement
of RSUs and/or exercise of Options shall be subject to the
transferability and voting restrictions attached hereto as
Schedule A . Employee shall be entitled to the RSU and
Option awards described in this Agreement (subject to the
transferability and voting restrictions described in
Schedule A) notwithstanding any delay or failure to document
such awards in formal award agreements.
In addition, and notwithstanding any
provision set forth in this Agreement or any applicable equity
compensation plan or agreement, in the event that the Call Option
Holder, or its permitted transferee, as applicable, is obligated to
commence or does commence a tender offer for all or any part of the
Company’s equity securities within 18 months of the date
hereof as contemplated under the Stockholder Agreement (a “
Tender Offer ”), Employee hereby agrees (i) not
to participate in and/or to tender any shares of Common Stock
received by Employee upon any prior exercise of Options or
settlement of RSUs into any such Tender Offer, and (ii) prior
to the earlier of (A) the closing of such Tender Offer or
(B) sixty (60) days following the commencement of such
Tender Offer, not to transfer any such shares to any Person, except
pursuant to a testamentary instrument or the laws of descent and
distribution, and then, only to a Person who shall agree to be
bound by the terms hereof to the same extent as Employee was bound.
No amendment to the Stockholder Agreement shall extend the
restriction period described in this paragraph.
Section 5. Employee
Benefits .
(a) General . During
the Term of Employment, Employee shall be entitled to participate
in health insurance, retirement and other perquisites and benefits
on a basis no less favorable than made available to other senior
executives of the Company from time to time. Employee shall also be
entitled to a number of holidays, vacation and sick days on a basis
no less favorable than made available to other senior executives of
the Company, in accordance with the Company policy in effect from
time to time.
(b) Commuting Expenses and
Housing Allowance . During such time that Employee does not own
a residence in Florida, but not longer than 18 months from
Commencement Date, Employee shall be entitled to (i) after-tax
reimbursement for reasonable commuting expenses incurred in
connection with travel between his primary residence in New York
City and Florida, and (ii) a housing allowance for a temporary
residence in Florida of up to $5,000 per month.
(c) Life Insurance .
During the Term of Employment, the Company shall provide Employee
with a term life insurance policy with coverage equal to
$2,000,000, which policy shall be in addition to, and not in lieu
of, any other group life insurance coverage generally provided to
employees of the Company. As soon as practicable following the date
hereof, Employee shall notify the Company of the beneficiary of
this policy.
Section 6. Reimbursement of
Business Expenses .
Employee is authorized to incur
reasonable business expenses in carrying out his duties and
responsibilities under this Agreement and the Company shall
promptly reimburse him for all such reasonable business expenses
incurred in connection with carrying out the business of the
Company, subject to documentation in accordance with the
Company’s policy, as in effect from time to time.
Section 7. Termination of
Employment .
(a) General . The Term
of Employment shall terminate upon the earliest to occur of (i)
Employee’s death, (ii) a termination by reason of a
Disability, (iii) a termination by the Company with or without
Cause, or (iv) a termination by Employee with or without Good
Reason. Upon any termination of Employee’s employment for any
reason, except as may otherwise be requested by the Company in
writing and agreed upon in writing by Employee, Employee shall
resign from any and all directorships, committee memberships or any
other positions Employee holds with the Company or any of its
subsidiaries.
(b) Termination due to
Death or Disability . Employee’s employment shall
terminate automatically upon his death. The Company may terminate
Employee’s employment immediately upon the occurrence of a
Disability, such termination to be effective upon Employee’s
receipt of written notice of such termination. In the event
Employee’s employment is terminated due to his death or
Disability, Employee or his estate or his beneficiaries, as the
case may be, shall be entitled to:
(i) The
Accrued Obligations;
(ii) A pro
rata Annual Bonus (determined based on actual performance for the
year of Employee’s termination in accordance with Section
4(b) hereof) based on the number of days elapsed from the
commencement of such fiscal year through and including the date of
such termination, such amount to be paid at the same time as annual
bonuses f
