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EXHIBIT 10.28
DIGITAL TELEVISION SERVICES, INC.
000 Xxxxxxx Xxxxxx Xxxx, Xxxx. X-000
Xxxxxxx, XX 00000
October 10, 0000
Xxxxxxx X. Xxxxxxxx, Xx.
00 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
RE: LETTER AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT
Dear Xx. Xxxxxxxx:
The purpose of this letter is to effect certain amendments to that
certain employment agreement executed the 19th day of November, 1996, effective
as of April 1, 1996, by and between you and DTS Management, LLC (formerly
Columbia DBS Management, LLC) ("Management") (the "Employment Agreement") as
agreed by the Board of Managers of Management on October 2, 1997. Capitalized
terms used but not otherwise defined herein shall have the meanings specified in
the Employment Agreement.
BACKGROUND
DBS Holdings, L.P. (a Delaware limited partnership) was formed on
January 30, 1996 with Columbia DBS, Inc. as general partner and Columbia DBS
Investors, L.P. as limited partner. On November 19, 1996 DBS Holdings, L.P. was
converted by filing (the "LLC Conversion") into Columbia DBS Holdings, LLC, a
Delaware limited liability company ("Holdings"). In connection with the LLC
Conversion, pursuant to your Employment Agreement and the LLC Agreement, as of
November 19, 1996 you purchased 20,000 "Capital Units" of Holdings for $200,000
(the "Purchased Interest"). In addition to the Purchased Interests, as of
November 19, 1996 you also received certain "Restricted Interests" in Holdings
consisting of 40,111 Residual Units subject to vesting and forfeiture as
provided in the Employment Agreement, and on December 11, 1996 you filed with
the Internal Revenue Service a Section 83(b) Election with respect to such
Restricted Interests. The Employment Agreement also provided you with certain
"Proportionate Preemptive Rights" and "Special Preemptive Rights" to acquire
additional interests in Holdings (the "Preemptive Rights"). Prior to February
10, 1997 you exercised your Preemptive Rights to acquire additional interests in
Holdings (the "Additional Interests").
On January 31, 1997 Columbia DBS Holdings, LLC changed its name to
Digital Television Services, LLC (the "Company"). In connection with the sale of
Class A Units of the Company to certain persons on February 10, 1997, as of the
same date, the Company created four classes of Units of interest: Classes A
through D. The new investors acquired Class A
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Letter Agreement Amendment to Employment Agreement
October 10, 1997
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Units. Your Purchased Interest and Additional Interests became Class B Units.
And your Restricted Interests became Class C Units.
On June 5, 1997 you transferred all of your 46,000 Class B Units and
40,111 Class C Units to Xxxxxxxx Family Limited Partnership (the "HFLP").
On September 12, 1997 the Company awarded 15,000 Class D Units to you
subject to certain vesting and other conditions, and on October 3, 1997 you
filed with the Internal Revenue Service a Section 83(b) Election with respect to
such Units.
As of October 10, 1997 the Class C Units held by HFLP were fully
vested.
On October 10, 1997 the Company converted into a corporation named
Digital Television Services, Inc. (the "Corporation") pursuant to a "Preferred
Stock Corporate Conversion" as defined in the limited liability company
agreement of the Company (the "Corporate Conversion"). Pursuant to the Corporate
Conversion, HFLP's 46,000 Class B Units were converted into 46,000 fully vested
shares of common stock of the Corporation, par value $0.01 per share (the
"Common Stock") and HFLP's 40,111 Class C Units and a nonrecourse noninterest
bearing Promissory Note for $10.00 per share were exchanged for 40,111 fully
vested shares of Common Stock subject to a Stock Pledge Agreement securing the
Promissory Note. Pursuant to the Corporate Conversion your 15,000 Class D Units
were converted into a warrant to purchase 15,000 shares of Common Stock for
$22.50 per share, which pursuant to a warrant agreement ("Warrant Agreement") is
subject to certain vesting and other conditions.
Effective October 10, 1997, you were awarded incentive stock options
("ISOs") to purchase 10,000 shares of the Corporation's Common Stock pursuant to
the Corporation's 1997 Stock Option Plan and related ISO agreement
(collectively, the "ISO Agreement"), which ISOs are subject to certain vesting
and other conditions.
AMENDMENTS TO EMPLOYMENT AGREEMENT
Subject to the approval of stockholders as provided below, the
following amendments shall be made to the Employment Agreement, effective as of
October 10, 1997:
I. GENERAL AMENDMENT.
Effective October 10, 1997, the Executive shall be employed by the
Corporation as its President and Chief Executive Officer, and references in the
Employment Agreement to the "Company" shall mean the Corporation and references
to the "Board" shall mean the board of directors of the Corporation.
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Letter Agreement Amendment to Employment Agreement
October 10, 1997
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II. THE EMPLOYMENT AGREEMENT SHALL BE AMENDED BY ADDING A NEW SECTION 30 THERETO
AS FOLLOWS:
30. Special Severance Arrangements. Notwithstanding any other provision
of this Employment Agreement, and notwithstanding any other agreement or
understanding, the following provisions shall apply:
a. The Corporation may terminate the Executive at any time, with or
without Cause, and the Executive may resign at any time, with or without Good
Reason (as defined below).
b. In the event the Executive dies or becomes disabled (as determined
by the Board in the reasonable exercise of its discretion), the Executive shall
continue to receive his salary and benefits through the end of the Term. In the
event the Executive is terminated for Cause, Section 7(a) shall apply. Except as
provided in the following sentence, if the Executive voluntarily resigns prior
to the end of the Term, the Corporation and the Group shall be relieved of all
further obligations under the Employment Agreement. In the event the Executive
is terminated by the Corporation without Cause, resigns for Good Reason (as
defined below in Section 31(c)), or resigns for any reason within one year
following a Change of Control (as defined below in Section 31(b)), or if the
Corporation gives notice to the Executive of non-renewal of the Executive's
Employment Agreement, as of the effective date of the earliest to occur of any
such event of termination of employment the Executive shall be entitled to
receive severance payments from the Corporation or its successor equal in the
aggregate to 18 months' base salary (defined below) payable no less frequently
than monthly beginning within one month following such termination.
c. Notwithstanding the provisions of Section 30(b) above, if the
effective date of such termination occurs after the date that is the later of
(i) one year following a Change of Control (as defined below in Section 31(b))
and (ii) March 31, 1999, then the aggregate severance payments shall be equal to
12 months' base salary rather than 18 months' base salary.
d. For purposes of this Section 30, "base salary" shall be the
Executive's base salary determined as of the effective date of the applicable
event of termination of employment.
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Letter Agreement Amendment to Employment Agreement
October 10, 1997
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III. THE EMPLOYMENT AGREEMENT SHALL BE AMENDED BY ADDING A NEW SECTION 31
THERETO AS FOLLOWS:
31. Special Warrant and ISO Vesting Provisions. Notwithstanding any
other provision of this Employment Agreement, the Warrant Agreement or the ISO
Agreement and notwithstanding any other agreement or understanding, the
following provisions shall apply:
a. Termination by Corporation Without Cause. In the event of
termination by the Corporation of employment of the Executive without Cause
(including notice by the Corporation of non-renewal of the Executive's
Employment Agreement) the Warrant and the ISOs shall become fully vested.
b. Voluntary Resignation within One Year of Change of Control. In the
event of the voluntary resignation of the Executive within one year following a
"Change of Control" (as defined below), 50% of the portion of the Warrant and
50% of the ISOs that remain unvested at the effective time and date of such
resignation shall become fully vested, and the balance of the unvested portion
shall be forfeited; provided, however, that if such voluntary resignation was
prompted by the fact that Cause existed for the Corporation's termination of the
Executive, then 100% of such unvested portion of each type of the Executive's
equity compensation shall be forfeited. "Change of Control" for purposes of this
Section 31 shall be deemed to occur if any person or group (other than those
persons who, as of October 10, 1997, were existing stockholders, directly or
indirectly, of the Corporation or holders, directly or indirectly, of warrants
or options to purchase stock of the Corporation) becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
as amended) of 50% or more of the total voting power of the outstanding equity
securities of the Corporation.
c. Voluntary Resignation With Good Reason. In the event of a
resignation by the Executive with "Good Reason," the Warrant and the ISOs shall
become fully vested. For this purpose "Good Reason" shall mean a material
reduction in the responsibilities or authority of the Executive with respect to
the Corporation's business from the Executive's responsibilities and authority
as they existed on October 10, 1997, or the requirement that the Executive
perform the material duties and responsibilities for the Corporation from a
location outside the metropolitan Atlanta, Georgia area.
IV. CONTINUED EFFECT OF EMPLOYMENT AGREEMENT; EFFECTIVE DATE.
Except as set forth herein, the Employment Agreement shall continue in
full force and effect. The effective date of this amendment is October 10, 1997.
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Letter Agreement Amendment to Employment Agreement
October 10, 1997
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SHAREHOLDER APPROVAL EXCEPTION TO GOLDEN PARACHUTE PAYMENT
Pursuant to Internal Revenue Code Section 280G(b)(5) and Prop. Treas.
Reg. Section 1.280G-1, Q&A-7, the right to receive or retain compensation
payable or paid pursuant the changes effected by this letter agreement is
contingent upon the approval by a separate vote (or consent without meeting) of
persons who owned more than 75% of the voting power of outstanding stock of the
Corporation; for this purpose, ownership of stock shall be determined
immediately before any change in ownership or control of the Corporation (or
change in the ownership of a substantial portion of the assets of the
Corporation) that could result either in (A) such compensation being
nondeductible for federal income tax purposes as an excess parachute payment
under Code Section 280G or (B) imposition on the person receiving an excess
parachute payment of a 20% tax on such payment under Code Section 4999.
This instrument may be executed (whether by facsimile or in original)
in more than one counterpart, all of which taken together shall constitute one
and the same instrument.
Very truly yours,
DIGITAL TELEVISION SERVICES, INC.
By: ______________________________
Name: _____________________________
Title: ____________________________
DTS MANAGEMENT, LLC
By: ______________________________
Name: _____________________________
Title: ____________________________
ACCEPTED AND AGREED:
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XXXXXXX X. XXXXXXXX, XX.
Date: _____________________________
