EXHIBIT 10.7
STRICTLY CONFIDENTIAL
ALEC HOLDINGS, INC.
000 X XXXXXX, XXXXX 000
XXXXXXXXX, XX 00000
April 10, 1999
Xx. Xxxxxxx X. Xxxxxxxxx
000 X Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
Re: Employment Agreement
Dear Xx. Xxxxxxxxx:
This letter agreement (this "Agreement") sets forth the terms and
conditions of your employment with ALEC Holdings, Inc. ("Holdings") and its
wholly-owned subsidiary, Alaska Communications Systems Holdings, Inc.
("Subsidiary"), effective as of the first to occur of the date of consummation
of (a) the transactions contemplated by the Purchase Agreement, by and among the
Subsidiary, CenturyTel of the Northwest, Inc. and CenturyTel Wireless, Inc.,
dated as of August 14, 1998 and (b) the transactions contemplated by the Asset
Purchase Agreement, by and among Alaska Communications Systems, Inc. and the
Municipality of Anchorage, dated as of October 20, 1998 (the "Effective Date");
provided that, if neither transaction is consummated, this Agreement shall be
void ab initio. For purposes of this Agreement, and except where the term
"Holdings" or "Subsidiary" is specifically used, Holdings and the Subsidiary
shall be collectively referred to as the "Company" and all obligations of the
Company as set forth herein shall be the joint and several obligations of
Holdings and the Subsidiary.
1. Employment and Services. Holdings hereby employs you as Senior Vice
President and Chief Financial Officer of Holdings and Subsidiary hereby employs
you as Senior Vice President and Chief Financial Officer of Subsidiary, for the
period beginning on the Effective Date and ending upon termination pursuant to
paragraph 4 (the "Employment Period"). During the Employment Period, you shall
render such services to the Company and its affiliates and subsidiaries as the
Boards of Directors of Holdings and the Subsidiary shall reasonably designate
from time to time, and you shall devote your best efforts and full time and
attention to the business of the Company.
2. Compensation. The Company shall pay you an annual base salary ("Annual
Base Salary") of $200,000 during the first year of the Employment Period,
subject to annual review in each year of the Employment Period thereafter (for
any partial year during the Employment Period, the Annual Base Salary shall be
prorated based on the number of days during such year on which you are employed
by the Company). Your Annual Base Salary may be increased in years following the
first year of employment but may not be decreased. As used herein, the term
"Annual Base Salary" refers to the Annual Base Salary as so increased. Such
Annual Base Salary shall be payable in installments in accordance with the
Company's regular
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payroll practices.
In addition, you will be eligible to receive an annual bonus to be
awarded ninety (90) days after the end of each fiscal year, to be paid as soon
as practicable but not later than one hundred twenty (120) days after the end of
the fiscal year. In order to determine the amount of such bonus, the Company,
acting in good faith, shall determine appropriate business targets for each
fiscal year and your annual bonus shall be based upon attainment of such
targets. As a benchmark for such bonuses, the Company agrees that if the Company
attains the mutually determined business targets, you shall receive a bonus
equal to fifty (50%) of your Annual Base Salary as in effect with respect to any
such fiscal year; and in the event that the Company exceeds or does not exceed
the business targets, there shall be appropriate adjustments in the amount of
your annual bonus. The determination of appropriate business targets shall take
place not later than sixty (60) days subsequent to the commencement of the
Company's fiscal year.
3. Benefits. During the Employment Period, you shall be entitled to
participate in the Company's fringe benefit plans, subject to and in accordance
with applicable eligibility requirements, such as life and disability insurance
plans and all other benefit plans (other than severance plans or arrangements)
generally available to the Company's executive officers, including relocation of
personal residence benefits to the extent such relocation request would
otherwise constitute Good Reason within the meaning of Section 4, in accordance
with the terms of any such plans or policies as in effect from time to time
during the Employment Period. In addition, the Company will reimburse your
reasonable out-of-pocket expenses incurred in connection with the performance of
your services hereunder, in each case consistent with Company policy. In
addition, during the Employment Period, you shall be entitled to annual vacation
of not less than two (2) weeks.
4. Termination and Severance. The Employment Period shall terminate on the
first to occur of (i) ninety (90) days following written notice by you to the
Company of your resignation without Good Reason, (it being understood that you
will continue to perform your services hereunder during such ninety (90) day
period), (ii) thirty (30) days following written notice by you to the Company of
your resignation with Good Reason during the Employment Period or following a
Change in Control (it being understood that you will continue to perform your
services hereunder during such thirty (30) day period), (iii) your death or
Disability, (iv) a vote of the Board of Holdings or the Subsidiary directing
such termination for Cause, (v) a vote of the Board of Holdings or the
Subsidiary directing such termination without Cause, or (vi) the second
anniversary of the Effective Date (the "Scheduled Expiration Date"); provided,
however, that the Scheduled Expiration Date shall be automatically extended for
successive one-year periods unless, at least ninety (90) days prior to the
then-current Scheduled Expiration Date, either the Company or you shall give
written notice to the other of an intention not to extend the Employment Period.
In the event of termination of the Employment Period pursuant to clause (ii) or
(v) above, the Company shall concurrently with such termination make a lump-sum
payment to you equal to the sum of (x) one times your Annual Base Salary plus
(y) in the event such termination occurs on or after December 31, 1999, one
times your most recent annual bonus payment, if any, paid pursuant to Section 2
hereof. In addition, you shall be entitled to reimbursement of the cost of
continuing your health insurance coverage under COBRA for the twelve (12) month
period following such a termination. Except as otherwise set forth in this
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paragraph 4 or pursuant to the terms of employee benefit plans in which you
participate pursuant to paragraph 3, you shall not be entitled to any
compensation or other payment from the Company in connection with termination of
your employment hereunder; however, in the event that the Company shall give you
notice of its intention not to extend the Employment Period, you shall receive
twelve (12) months of your Annual Base Salary, as well as reimbursement for the
cost of continuing your health insurance coverage under COBRA for such period,
in a lump sum within thirty (30) days of the expiration of the then Employment
Period.
For purpose of this agreement, the following definitions will apply:
(a) "Good Reason" shall mean: (i) the assignment of you by the Company to any
duties materially inconsistent with, or a material diminution of, your position,
including duties, title, offices, or responsibilities; or (ii) the transfer,
without your concurrence, of your principal place of employment to a geographic
location more than 100 miles from both your current personal residence and from
the location of your current principal place of employment (but shall not
include any transfer to Anchorage, Alaska after December 31, 1999); (b) "Cause"
shall mean: (i) your willful failure to comply with lawful directions of the
Boards of the Company after written notice; (ii) fraud, misappropriation or
embezzlement by you; or (iii) a material breach of this Agreement (other than
due to physical or mental illness) that is not cured within thirty (30) days
after receiving written notice from either the Board of the Company or of the
Subsidiary of your specific failure to perform your duties; (c) "Change in
Control" shall mean: (i) the acquisition by any person or group (as that term is
used in Regulation 13D under the Securities Exchange Act of 1934, as amended),
other than Fox Xxxxx & Company, LLC or any of its affiliates, of beneficial
ownership of a majority or more of the Company's outstanding voting securities;
or (ii) any sale, lease, exchange or other transfer in one transaction or a
series of selected transactions, other than a transfer to an entity which is
majority controlled by Fox Xxxxx & Company, LLC or any affiliate thereof or an
entity with substantially the same equity holders as immediately prior to such
transfer, of all or substantially all of the assets of the Company or its
operating subsidiaries (taken together), or any plan for the liquidation or
dissolution of the Company; and (d) "Disability" shall mean that for a period of
six (6) consecutive months in any twelve (12) month period you are incapable of
substantially fulfilling the duties of your positions as set forth in paragraph
1 because of physical, mental or emotional incapacity resulting from injury,
sickness or disease. Any question as to the existence or extent of the
Disability upon which you and the Company cannot agree shall be determined by a
qualified, independent physician selected by the Company. The determination of
any such physician shall be final and conclusive for all purposes; provided,
however, that you or your legal representatives shall have the right to present
to such physician such information as to such Disability as you or they may deem
appropriate, including the opinion of your personal physician.
5. Confidential Information. You acknowledge that information obtained by
you while employed by the Company or any affiliate thereof (including as a
consultant to Fox Xxxxx & Company, LLC or as an employee of LEC Consulting
Corporation) concerning the business or affairs of (i) the Company, its
affiliates and subsidiaries or (ii) any enterprise which is the subject of an
actual or potential transaction, including, without limitation, the proposed
divestitures by GTE Corp. and US West, Inc. (a "Potential Transaction"),
considered, evaluated, reviewed or otherwise made known to Fox Xxxxx & Company,
LLC, the Company, its affiliates or subsidiaries, or you ("Confidential
Information") is the property of the Company. You shall not, without the
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prior written consent of the Boards of the Company, disclose to any person or
use for your own account any Confidential Information except (i) in the normal
course of performance of your duties hereunder, (ii) to the extent necessary to
comply with applicable laws, or (iii) to the extent that such information
becomes generally known to and available for use by the public other than as a
result of your acts or omissions to act. Upon termination of your employment or
at the request of the Board of the Company or of the Subsidiary at any time, you
shall deliver to the respective Boards all documents containing Confidential
Information or relating to the business or affairs of the Company that you may
then possess or have under your control.
6. Non-Competition; Non-Solicitation.
a. Non-Competition. You acknowledge that you are and will be in
possession of Confidential Information and that your services are of unique and
great value to the Company. Accordingly, from the Effective Date until the
expiration of the period ending twelve (12) months from the effective date of
the termination of your employment with the Company or its affiliated companies
(the "Non-Compete Period"), you shall not directly or indirectly own, invest
(equity or debt) in, manage, control, participate in, consult with, advise,
render services to, or in any manner engage in, or be connected as an employee,
officer, partner, director, consultant or otherwise with, (i) any enterprise
engaged in the provision of local exchange or wireless telecommunications
services in any state in which (A) the Company, or (B) any entity which is a
party to an acquisition agreement with the Company, is engaged in the provision
of local exchange or wireless telecommunications services, or (ii) any
enterprise which is the subject of a Potential Transaction made known to the
Company, or you during or at any time prior to the termination of this
Agreement, is engaged in the provision of local exchange or wireless
telecommunications services, (a "Competitive Business"). Nothing herein shall
prohibit you from being a passive owner of not more than one percent (1%) of any
publicly-traded class of capital stock of any entity engaged in a Competitive
Business.
b. Non-Solicitation. During the Non-Compete Period, you shall not
directly or indirectly induce or attempt to induce any employee of the Company
or its affiliates or subsidiaries to terminate, or in any way interfere with,
the relationship between the Company or its affiliates or subsidiaries and any
employee thereof, nor shall you directly or indirectly solicit or attempt to
solicit business from any customer or supplier of the Company or its affiliates
or subsidiaries.
c. Scope of Restriction. If, at the time of enforcement of this
paragraph 6, a court shall hold that the duration, scope or area restrictions
stated herein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area.
7. Survival. Any termination of your employment or of this Agreement shall
have no effect on the continuing operation of Section 5 or 6 for the periods
specified therein.
8. Indemnification. The Company agrees to indemnify you and hold you
harmless from, any and all claims arising from or relating to your status as an
employee, officer,
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director or agent of the Company, its affiliates, or subsidiaries, to the
fullest extent permitted by Delaware law other than claims arising from your
gross negligence.
9. Waiver of Claims. You agree as a condition to your receipt of any
termination or severance benefits pursuant to Section 4 hereof, you will agree
to waive, discharge and release any and all claims, demands and causes of
action, whether known or unknown, against the Company, its affiliates and
subsidiaries, and their respective current and former directors, officers,
employees, attorneys and agents arising out of, connected with or incidental to
your employment or other dealings with the Company, its affiliates or
subsidiaries, which you or anyone acting on your behalf might otherwise have had
or asserted and any claim to any compensation or benefits from your employment
with the Company or its affiliates (other than pursuant to the terms of this
Agreement or of any employee benefit plans set forth in paragraph 3 hereof).
10. Governing Law. This Agreement and all questions concerning the
construction, validity and interpretation of this Agreement shall be governed by
and determined in accordance with the internal law, and not the law of
conflicts, of the State of Delaware.
11. Notices, All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given, if mailed, by registered or
certified mail, return receipt requested, or, if by other means, when received
by the other party at the address set forth herein, or such other address as may
hereafter be furnished to the other party by like notice. Notice or
communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee if delivered other
than by mail, and in the case of mail, upon the depositing of the same in the
United States mail as above stated (as evidenced, in the case of registered or
certified mail, by the date noted on the return receipt.) Notices shall be
addressed as follows:
If to the Executive: Xx. Xxxxxxx X. Xxxxxxxxx
000 X Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
If to the Company: ALEC Holdings, Inc.
000 X Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Chairman of the Board
with a copy to: Fox Xxxxx & Company, LLC
000 Xxxxx Xxxx
Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: W. Xxxxxx Xxxxx
12. Separability Clause. Any part, provision, representation or warranty
of this Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.
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13. Successors and Assigns; Assignment of Agreement. This Agreement shall
bind and inure to the benefit of and be enforceable by the parties hereto and
the respective successors and assigns of the parties hereto. As used in this
Agreement, "Company," "Holdings" and the "Subsidiary" shall mean the Company,
Holdings and the Subsidiary as hereinbefore defined and any successors to their
businesses and/or assets as aforesaid which assume and agree to perform this
Agreement by operation of law, or otherwise. This Agreement is personal to you
and without the prior written consent of the Company shall not be assignable by
you otherwise than by will or the laws of descent and distribution.
14. Waiver. The failure of any party to insist upon strict performance of
a covenant hereunder or of any obligation hereunder, irrespective of the length
of time for which such failure continues, shall not be a waiver of such party's
right to demand strict compliance in the future. No consent or waiver, express
or implied, to or of any breach or default in the performance of any obligation
hereunder, shall constitute a consent or waiver to or of any other breach or
default in the performance of the same or any other obligation hereunder. No
term or provision of the Agreement may be waived unless such waiver is in
writing and signed by the party against whom such waiver is sought to be
enforced.
15. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto with respect to the subject matter contemplated
herein and supersedes all prior agreements, whether written or oral, between the
parties, relating to the subject matter hereof. This Agreement shall not be
modified except in writing executed by all parties hereto.
16. Captions. Titles or captions of paragraphs contained in this Agreement
are inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provision hereof.
17. Counterparts. For the purpose of facilitating proving this Agreement,
and for other purposes, this Agreement may be executed simultaneously in any
number of counterparts. Each counterpart shall be deemed to be an original, and
all such counterparts shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
date first above written.
Please execute the extra copy of this letter Agreement in the space
below and return it to the undersigned at the address set forth above to confirm
your understanding and acceptance of the agreements contained herein.
Very truly yours,
ALEC HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
ALASKA COMMUNICATIONS SYSTEMS
HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
Accepted and agreed to:
/s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxxx
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ADDENDUM
The letter dated January 14, 1999 to you from Xxxxxx X. Xxxxxx, offering
you employment with Alaska Communications Systems, Inc. (the "Offer Letter"), is
superseded by the Employment Agreement. In order to preserve certain benefits
and obligations that were set forth in the Offer Letter, this Addendum hereby
incorporates the following provisions in the Employment Agreement:
1. You will be eligible to participate in Holdings' stock option grant
program. Subject to closing of the transactions referenced in the Employment
Agreements and approval of the Board of Directors, you will be granted options
for approximately 200,000 shares of stock, assuming a strike price of $6.00.
2. Your relocation benefits will include temporary use of a Company leased
apartment in Anchorage, per diem while in temporary living status, reasonable
travel to and from the Virgin Islands prior to relocation to attend to personal
business, movement of household goods and personal effects, and home purchase
assistance. Further, in the event you are obligated to make lease payments on
housing in the Virgin Islands after June 30, 1999, Holdings will reimburse you
for your actual lease costs to a maximum of $7,500.
3. In connection with the special lump-sum bonus which was paid to you in
the gross amount of $50,000, you agree that if you voluntarily resign from your
position prior to completing 12 months of employment, you will promptly repay
the Company an amount equal to $50,000 less $4,167 for each full month of
employment.
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