Form of Letter Agreement by and between Dex Media, Inc. and each of its Senior Vice Presidents
EXHIBIT 10.5
[Form of Letter Agreement by and between Dex Media, Inc. and each of its Senior Vice Presidents
October 2, 2005
[Name and address of Senior Vice President]
Re: Employment and Option Agreement Amendment
Dear ___:
This Letter Agreement confirms the understanding reached between you and Dex Media, Inc., a
Delaware corporation (together with any successor thereto, the “Company”), regarding the
terms of your continued employment with the Company. This Letter Agreement constitutes an
amendment to that certain Amended and Restated Employment Agreement, dated as of July 15, 2004 (the
“Employment Agreement”), and an amendment to all previously granted stock options (the
“Options”) to you pursuant to the Company’s 2002 Stock Option Plan and the Company’s 2004
Incentive Award Plan (each, the “Plan”) and the Non-Qualified Stock Option Agreements
relating to the Options (the “Option Agreements”). Capitalized terms used in this Letter
Agreement and not defined herein shall have the meaning given such terms in the Employment
Agreement or Option Agreements, as applicable. This Letter Agreement shall be effective
immediately prior to the consummation of the transaction (the “Merger”) evidenced by that
certain Agreement and Plan of Merger dated as of October 3, 2005 by and among the Company, ▇.▇.
▇▇▇▇▇▇▇▇▇ Corporation (“Donnelley”) and Forward Acquisition Corp., a wholly owned
subsidiary of Donnelley (the “Merger Agreement”). In the event that the Merger is not
consummated, this Letter Agreement shall be void ab initio. In the event that the Merger is
consummated, then the Term of the Employment Agreement (as modified herein) will be extended
through the second anniversary of the Effective Time (as defined in the Merger Agreement).
1. Termination of Employment. Notwithstanding anything to the contrary in the
Employment Agreement, if your employment with the Company is terminated by the Company without
“Cause” (as defined in your Employment Agreement) or by you for “Good Reason” (as defined below),
the Company shall (subject to your entering into a waiver and release of claims agreement in the
Company’s customary form):
(a) Pay to you a lump sum cash amount equal to the product of (i) the sum of (A) your
then-current Annual Base Salary, and (B) your then-current target annual bonus and (ii) 2; and
(b) Provide that you will be eligible to continue to receive health care (including medical,
dental and vision) and welfare coverage under the Company’s plans with respect thereto for three
years following your termination of employment (for which you will be solely responsible for paying
all premiums and other amounts payable with respect to such coverage). Following the expiration of
such three year period, you shall be eligible to elect to receive COBRA continuation coverage, at
your own cost, under the Company’s applicable group health plan in accordance with the Company’s
customary terms and procedures.
You will have “Good Reason” to resign your employment upon the occurrence of any of the
following without your prior written consent: (i) a diminution of your current position; (ii) a
material diminution in the nature or scope of your employment responsibilities, duties or authority
or the assignment of duties or responsibilities that are materially and adversely inconsistent with
your position; (iii) a material adverse change to your reporting relationship that results in a
reduction of your status with the Company; (iv) relocation of your principal office to a location
that is more than 25 miles from its current location; (v) failure of the Company to timely make any
material payment or provide any material benefit under this Letter Agreement or the Employment
Agreement or the Company’s material reduction of any compensation, equity or benefits that you are
eligible to receive under this Letter Agreement or the Employment Agreement or (vi) the Company’s
material breach of this Letter Agreement or the Employment Agreement; provided, however, that
notwithstanding the foregoing you may not resign your employment for Good Reason unless: (x) you
provide the Company with at least 30 days prior written notice of your intent to resign for Good
Reason (which notice is provided not later than the 90th day following the occurrence of the event
constituting Good Reason) and (y) the Company does not remedy the alleged violation(s) within such
30-day period.
For the avoidance of doubt, you and the Company acknowledge and agree that the payments and
benefits described in this Paragraph 1 shall be made in lieu of, and not in addition to, the
payments and benefits described in Section 5 of the Employment Agreement.
2. Stock Options. Notwithstanding anything to the contrary in any Option Agreement,
the parties agree as follows:
(a) All time-vesting Options that are scheduled to vest on December 31, 2005 will vest on such
date.
(b) All performance-vesting Options that are first eligible to become vested based on the
Company’s achievement of its 2005 EBITDA targets will vest to the same extent as applicable to the
Company’s other senior executive officers, as determined by the Company’s Compensation Committee;
provided that if any such Options remain outstanding and unvested immediately prior to the
Effective Time, such Options will vest and become fully exercisable prior to the Effective Time,
subject to the consummation of the Merger.
(c) All Options (time-vesting and performance-vesting) that are first eligible to become
vested with respect to the year ending December 31, 2006 will vest and become fully exercisable
immediately prior to the Effective Time, subject to the consummation of the Merger.
(d) All Options (time-vesting and performance-vesting) that are first eligible to become
vested with respect to the year ending December 31, 2007 (the “2007 Options”) will be
converted into time-vesting options and, subject to your continued employment with the Company,
will vest and become fully exercisable on December 31, 2007; provided, that if your employment is
terminated by the Company without Cause or by you for Good Reason, on or prior the second
anniversary of the Effective Time, the 2007 Options shall become vested and fully exercisable as of
the date of termination.
(e) To the extent applicable to you, all Options (time-vesting and performance-vesting) that
are first eligible to become vested with respect to the year ending December 31, 2008 (the
“2008 Options”) will be converted into time-vesting options and, subject to your continued
employment with the Company, will vest and become fully exercisable on December 31, 2008; provided,
that if your employment is terminated by the
Company without Cause or by you for Good Reason, on or prior the second anniversary of the
Effective Time, the 2008 Options shall become vested and fully exercisable as of the date of
termination.
(f) Each Option shall expire on the first to occur of (i) the tenth anniversary of the Grant
Date thereof, (ii) the first anniversary of your termination of employment due to death or
disability, or (iii) the 15th day of the third month following the date of your termination of employment
for any reason other than death or disability (or December 31 of the calendar year in which such
termination of employment occurs, if later).
3. Assignment and Successors. As of the Effective Time, the Company shall assign, and
Donnelley shall assume, all rights and obligations under this Agreement, the Employment Agreement
and the Option Agreements. If Donnelley does not so assume this Agreement, the Employment
Agreement and the Option Agreements, the Company shall provide you with the payments and benefits
described in Paragraph 1 of this Letter Agreement immediately prior to the Effective Time.
4. Section 409A. You and the Company acknowledge and agree that, to the extent
applicable, this Letter Agreement, the Employment Agreement and the Option Agreements shall be
interpreted in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), and Department of Treasury regulations and other interpretive guidance issued
thereunder. Notwithstanding any provision of this Letter Agreement, the Employment Agreement or
the Option Agreements to the contrary, in the event that any amounts payable to you could
reasonably be expected to be immediately taxable to you under Section 409A of the Code and related
Department of Treasury guidance, you and the Company shall cooperate in good faith and shall take
such reasonable actions as may be necessary or appropriate to comply with the requirements of
Section 409A of the Code and related Department of Treasury guidance. You and the Company
acknowledge and agree that, to the extent provided by the Merger Agreement, the conversion of your
Options pursuant to Section 2.4 of the Merger Agreement may be adjusted as necessary or appropriate
to comply with Section 409A of the Code and to preserve the intended tax treatment of the Options.
5. 280G Excise Tax Gross-Up
(a) If it is determined by the nationally recognized United States public accounting firm used
by the Company immediately prior to the Merger (or such other nationally recognized United States
public accounting firm as may be agreed to in writing by the Company and you) (the
“Auditors”) that any payment or benefit made or provided to you in connection with this
Letter Agreement or otherwise (including without limitation any Option or other equity compensation
award vesting) (collectively, a “Payment”), would be subject to the excise tax imposed by
Section 4999 of the Code (the “Parachute Tax”), then the Company shall pay to you, prior to
the time the Parachute Tax is payable with respect to such Payment, an additional payment (a
“Gross-Up Payment”) an amount such that, after you pay all taxes (including any Parachute
Tax) imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the
Parachute Tax imposed upon the Payment. The amount of any Gross-Up Payment shall be determined by
the Auditors, subject to adjustment, as necessary, as a result of any Internal Revenue Service
position. For purposes of making the calculations required by this Letter Agreement, the Auditors
may make reasonable assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the
Code, provided that the Auditors’ determinations must be made with substantial authority (within
the meaning of Section 6662 of the Code). To the extent that the Company obtains a written opinion
from the Auditors with respect to Parachute Tax issues, the Company shall direct the Auditors to
extend such opinion to you (to the extent that such extension is permitted by the Auditors).
(b) The federal tax returns filed by you (and any filing made by a consolidated tax group
which includes the Company) shall be prepared and filed on a basis consistent with the
determination of the Auditors with respect to the Parachute Tax payable by you. You shall make
proper payment of the amount of any Parachute Tax based on such determination, and at the request
of the Company, provide to the Company true and correct copies (with any amendments) of your
federal income tax return as filed with the Internal Revenue Service, and such other documents
reasonably requested by the Company, evidencing such payment, provided that any information
unrelated to the Parachute Tax may be deleted from the copies of the returns and documents
delivered to the Company. If, after the Company’s payment to you of the Gross-Up Payment, the
Auditors determine in good faith that the amount of the Gross-Up Payment should be reduced or
increased, or a determination is made by the Internal Revenue Service that would make the prior
Gross-Up Payment amount not accurate, then within ten (10) business days of such determination, you
shall pay to the Company the amount of any such reduction, or the Company shall pay to you the
amount of any such increase; provided, however, that in no event shall you have any such refund
obligation if it is determined by the Company that to do so would be a violation of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as it may be amended from time to time; and provided, further, that if
you have prior thereto paid such amounts to the Internal Revenue Service, such refund shall be due
only to the extent that a refund of such amount is received by you; and provided, further, that (i)
the fees and expenses of the Auditors (and any other legal and accounting fees) incurred for
services rendered, in connection with the Auditors’ determination of the Parachute Tax or any
challenge by the Internal Revenue Service or other taxing authority relating to such determination
shall be paid by the Company and (ii) the Company shall indemnify and hold you harmless on an
after-tax basis for any interest and penalties imposed upon you to the extent that such interest
and penalties are related to the Auditors’ determination of the Parachute Tax or the Gross-Up
Payment. Notwithstanding anything to the contrary herein, your rights under this Paragraph 5 shall
survive the termination of your employment for any reason and the termination or expiration of this
Letter Agreement for any reason.
7. Employment and Option Agreements. You and the Company acknowledge and agree that,
except as provided by this Letter Agreement, the Employment Agreement and the Option Agreements
shall remain in full force and effect.
8. Further Assurances. You and the Company agree to execute and deliver
such other documents, certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously the terms of this
Letter Agreement.
[signature page follows]
Please indicate your acceptance of the terms and provisions of this Letter Agreement by
signing both copies of this Letter Agreement and returning one copy to me. The other copy is for
your files. By signing below, you acknowledge and agree that you have carefully read this Letter
Agreement in its entirety; fully understand and agree to its terms and provisions; and intend and
agree that it be final and legally binding on you and the Company. This Letter Agreement shall be
governed and construed under the internal laws of the State of Delaware and may be executed in
several counterparts.
| Very truly yours, |
||||
| Name: | ||||
| Title: | ||||
Agreed and Accepted:
Name: