Exhibit 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May __, 1998 (this "Agreement"),
between CUMULUS MEDIA INC., an Illinois corporation (the "Company"), and XXXXXXX
X. XXXXXXX (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Company is a radio broadcasting company focused on the
acquisition, operation and development of radio stations in mid-size and smaller
radio markets;
WHEREAS, the Company is preparing an initial public offering of its
common stock;
WHEREAS, it is intended that the Executive will continue to serve the
Company as its Executive Chairman and Treasurer and as a Director of the Company
following the public offering; and
WHEREAS, the Company wishes to assure itself of the continued services
of the Executive so that it will have the benefit of his ability, experience and
services, and the Executive is willing to enter into an agreement to that end,
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Employment
The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to remain in the employ of the Company, on and subject to the
terms and conditions of this Agreement.
2. Term
The period of this Agreement (the "Agreement Term") shall commence on
the date of consummation of an initial public offering of Company's common stock
during 1998 (the "IPO Date") and shall expire on the third anniversary of the
IPO Date (the "Initial Term"). The Agreement Term shall be automatically
extended for an additional year at the expiration of the Initial Term, or any
succeeding term, unless written notice of non-extension is provided by either
party to the other party at least 180 days prior to the expiration of the
Initial Term or any succeeding term, as the case may be. The period of the
Executive's employment under this Agreement (the "Employment Period") shall
commence as of the IPO Date and shall expire at the end of the Agreement Term,
unless terminated or extended in accordance with the terms and conditions of
this Agreement.
3. Position, Duties and Responsibilities
(a) The Executive shall serve as, and with the title, office and
authority of, the Executive Chairman and Treasurer of the Company. The
Executive shall also hold similar titles, offices and authority with the
Company's subsidiaries and its successors. The Company shall use its best
efforts to cause the Executive to be nominated and elected to the Board of
Directors of the Company (the "Board") and of its subsidiaries and its
successors for the duration of the Employment Period.
(b) The Executive shall have effective supervision and control over,
and responsibility for, the strategic direction and general and active
day-to-day leadership and management of the business and affairs of the Company
and the subsidiaries of the Company, subject only to the authority of the
Board, and shall have all of the powers, authority, duties and responsibilities
usually incident to the positions and offices of Executive Chairman and
Treasurer of the Company. The Executive shall report directly to the Board.
(c) The Executive agrees to devote substantially all of his business
time, efforts and skills to the performance of his duties and responsibilities
under this Agreement; provided, however, that nothing in this Agreement shall
preclude the Executive from devoting reasonable periods required for (i)
participating in professional, educational, philanthropic, public interest,
charitable, social or community activities, (ii) serving as a director or
member of an advisory committee of any corporation or other entity that the
Executive is serving on as of the IPO Date or any other corporation or entity
that is not in competition with the Company, (iii) managing his personal
investments or (iv) performing such services as are consistent with his
position with QUAESTUS Management Corporation; provided, further, that any such
activities set forth in clauses (i) through (iv) above do not materially
interfere with the Executive's regular performance of his duties and
responsibilities hereunder.
(d) The Executive shall perform his duties at the principal offices of
the Company located in Milwaukee, Wisconsin, but from time to time the
Executive may be required to travel to other locations in the proper conduct of
his responsibilities under this Agreement.
4. Compensation and Benefits
In consideration of the services rendered by the Executive during the
Employment Period, the Company shall pay or provide the Executive the
compensation and benefits set forth below.
(a) Salary. The Company shall pay the Executive a base salary (the
"Base Salary") equal to $300,000 per annum during the first 12 months of the
Agreement Term, increased by five percent per annum on each anniversary of the
IPO Date
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thereafter during the Agreement Term. In its sole discretion, the Compensation
Committee of the Board (the "Compensation Committee") may review the Base Salary
with a view toward consideration of merit increases as the Compensation
Committee deems appropriate. The Base Salary shall be paid in arrears in
substantially equal installments at monthly or more frequent intervals, in
accordance with the normal payroll practices of the Company.
(b) Incentive Bonuses. The Company shall provide the Executive with the
opportunity to earn an annual target bonus of up to 50% of his Base Salary (the
"Target Bonus Amount") for each fiscal year of the Company ending during the
Employment Period. An amount up to the Target Bonus Amount will be payable to
the Executive in the event that the annual bonus targets established by the
Compensation Committee (in consultation with the Executive) are met during the
relevant year; provided, however, that the bonus targets shall relate to growth
in budgeted broadcast cash flow (on a same-store basis), and the bonus targets
applicable for 1998 and 1999 are as set forth on Appendix A hereto. Any Target
Bonus Amount shall be paid as promptly as practicable following the calculation
of the broadcast cash flow for the preceding calendar year. The Executive shall
participate in all other short-term and long-term bonus or incentive plans or
arrangements in which other senior executives of the Company are eligible to
participate from time to time (except as provided in Section 5(d) hereof), with
the Executive's short-term and long-term bonus or incentive compensation
opportunities under such plans and arrangements to be determined by the
Compensation Committee.
(c) Employee Benefits. The Executive shall be entitled to participate
in all employee benefit plans, programs, practices or arrangements of the
Company in which other senior executives of the Company are eligible to
participate from time to time, including, without limitation, any qualified or
non-qualified pension, profit sharing and savings plans, any death benefit and
disability benefit plans, any medical, dental, health and welfare plans and any
stock purchase programs that are approved by the Compensation Committee on terms
and conditions at least as favorable as provided to other senior executives of
the Company.
(d) Fringe Benefits and Perquisites. The Executive shall be entitled to
all fringe benefits and perquisites that are generally made available to senior
executives of the Company from time to time that are approved by the
Compensation Committee.
5. Equity Incentives
As further consideration for the services rendered by the Executive
during the Employment Period, the Executive shall be granted stock options to
purchase shares of the Company's Class C common stock (the "Common Stock") on
the terms and conditions set forth below. Each such stock option shall be
effective upon, and be subject to, the consummation of an initial public
offering of the Common Stock on the IPO Date. The Company shall register the
securities offered under the stock options provided for in this Section 5 on a
Form S-8 or similar registration statement to be effective as soon as
practicable following the IPO Date, and the Company shall use its best efforts
to maintain such registration statement in effect for the term of the stock
options.
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(a) Time-Vested Option. On the IPO Date, the Executive shall be granted
an option (the "Time-Vested Option") under the Company's Executive Stock
Incentive Plan to purchase a number of shares of Common Stock (rounded to the
nearest whole share) equal to 2.5 percent of total number of outstanding shares
of all classes of the common stock immediately prior to the IPO Date. The
Time-Vested Option shall vest based on the continued employment of the Executive
in equal quarterly installments of 1/16 of the number of subject shares on the
last day of each of the 16 consecutive calendar quarters ending following the
IPO Date. The exercise price of the Time-Vested Option shall be the price per
share to the public of the Common Stock in the initial public offering (the "IPO
Price"). The Time-Vested Option shall have a 10-year term of exercise and,
except as otherwise provided in this Agreement, shall remain exercisable
following vesting for the full term without regard to the employment status of
the Executive. The Time Vested Option shall be intended to qualify as an
"incentive stock option" to the maximum extent permissible under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
(b) First Premium Option. On the IPO Date, the Executive shall be
granted an option (the "First Premium Option") under the Company's Executive
Stock Incentive Plan to purchase a number of shares of Common Stock (rounded to
the nearest whole share) equal to 2.5 percent of total number of outstanding
shares of all classes of the common stock immediately prior to the IPO Date. The
First Premium Option shall vest based on the continued employment of the
Executive in equal annual installments of 25 percent of the number of subject
shares on each of the first, second, third and fourth anniversaries of the IPO
Date. The exercise price of the First Premium Option shall be as follows: (A)
for the shares that vest on the first anniversary of the IPO Date, the exercise
price shall be the IPO Price, (B) for the shares that vest on the second
anniversary of the IPO Date, the exercise price shall be 115% of the IPO Price,
(C) for the shares that vest on the third anniversary of the IPO Date, the
exercise price shall be 132.25% of the IPO Price, and (D) for the shares that
vest on the fourth anniversary of the IPO Date, the exercise price shall be
152.0875% of the IPO Price. The First Premium Option shall have a 10-year term
of exercise and, except as otherwise provided in this Agreement, shall remain
exercisable following vesting for the full term without regard to the employment
status of the Executive.
(c) Second Premium Option. On the IPO Date, the Executive shall be
granted an option (the "Second Premium Option") under the Company's Executive
Stock Incentive Plan to purchase a number of shares of Common Stock (rounded to
the nearest whole share) equal to 3.0 percent of total number of outstanding
shares of all classes of the common stock immediately prior to the IPO Date. The
Second Premium Option shall vest based on the continued employment of the
Executive in equal annual installments of 25 percent of the number of subject
shares on each of the first, second, third and fourth anniversaries of the IPO
Date. The exercise price of the Second Premium Option shall be as follows: (A)
for the shares that vest on the first anniversary of the IPO Date, the exercise
price shall be the IPO Price, (B) for the shares that vest on the second
anniversary of the IPO Date, the exercise price shall be 120% of the IPO Price,
(C) for the shares that vest on the third anniversary of the IPO Date, the
exercise price shall be 144% of the IPO Price, and (D) for the shares that vest
on the fourth
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anniversary of the IPO Date, the exercise price shall be 172.80% of the IPO
Price. The Second Premium Option shall have a 10-year term of exercise and,
except as otherwise provided in this Agreement, shall remain exercisable
following vesting for the full term without regard to the employment status of
the Executive.
(d) Other Equity Incentives. In addition to the foregoing stock option
grants, the Executive shall be given consideration from time to time by the
Compensation Committee for the grant of stock options or other equity incentives
with respect to the Common Stock under any stock option or equity-based
incentive plan or arrangement of the Company approved by the Compensation
Committee for which senior executives of the Company are eligible to
participate, provided that the Executive shall not be considered eligible for an
award pursuant to the initial allocation of shares reserved for issuance under
the Company's 1998 Stock Incentive Plan as of the IPO Date.
6. Termination of Employment
The Employment Period will be terminated upon the happening of any of
the following events:
(a) Resignation for Good Reason. The Executive may voluntarily
terminate his employment hereunder for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent
with the Executive's position (including status, offices, titles or
reporting relationships), authority, duties or responsibilities as
contemplated by Section 3 hereof, any adverse change in the Executive's
reporting responsibilities, or any action by the Company that results
in a diminution in such position, authority, duties or
responsibilities, but excluding for these purposes an isolated and
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(ii) the failure of the Company to nominate the Executive to
the Board or the failure of the Board to recommend that the Company's
stockholders elect the Executive to the Board;
(iii) any failure by the Company to comply with the
compensation and benefits provisions of Sections 4 or 5 hereof or to
comply with any other material obligation of the Company under this
Agreement, including, without limitation, any failure by the Company to
obtain an assumption of this Agreement by a successor corporation as
required under Section 13(a) hereof;
(iv) a notice of non-extension of the Agreement Term given by
the Company to the Executive as set forth in Section 2 hereof prior to
the expiration of the Initial Term; or
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(v) the relocation, without the consent of the Executive, of
the Company's principal executive offices or the offices of the
Executive to a location more than 40 miles from its current location in
Milwaukee, Wisconsin.
However, in no event shall the Executive be considered to have terminated his
employment for "Good Reason" unless and until the Company receives written
notice from the Executive identifying in reasonable detail the acts or omissions
constituting "Good Reason" and the provision of this Agreement relied upon, and
such acts or omissions are not cured by the Company to the reasonable
satisfaction of the Executive within 15 days of the Company's receipt of such
notice.
(b) Resignation without Good Reason. The Executive may voluntarily
terminate his employment hereunder for any reason at any time, including for any
reason that does not constitute Good Reason.
(c) Termination for Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Executive
shall be considered to be terminated for "Cause" only upon (i) the conviction of
the Executive of a felony under the laws of the United States or any state
thereof, whether or not appeal is taken, (ii) the conviction of the Executive
for a violation of criminal law involving the Company and its business, (iii)
the willful misconduct of the Executive, or the willful or continued failure by
the Executive (except as provided in Section 6(e) hereof) to substantially
perform his duties hereunder, in either case which has a material adverse effect
on the Company; or (iv) the willful fraud or material dishonesty of the
Executive in connection with his performance of duties to the Company. However,
in no event shall the Executive's employment be considered to have been
terminated for "Cause" unless and until the Executive receives a copy of a
resolution adopted by the Board finding that, in the good faith opinion of the
Board, the Executive is guilty of acts or omissions constituting Cause, which
resolution has been duly adopted by an affirmative vote of a majority of the
Board, excluding the Executive and any individual alleged to have participated
in the acts constituting "Cause." Any such vote shall be taken at a meeting of
the Board called and held for such purpose, after reasonable written notice is
provided to the Executive setting forth in reasonable detail the facts and
circumstances claimed to provide a basis of termination for Cause and the
Executive is given an opportunity, together with counsel, to be heard before the
Board. The Executive shall have the opportunity to cure any such acts or
omissions (other than items (i) or (ii) above) within 15 days of the Executive's
receipt of such resolution. The foregoing shall not limit the right of the
Company to suspend the Executive from his day-to-day responsibilities with the
Company pending the completion of such notice and cure procedures.
(d) Termination without Cause. The Board shall have the right to
terminate the Executive's employment hereunder other than for Cause at any time,
subject to the consequences of such termination as set forth in this Agreement.
(e) Disability. The Executive's employment hereunder shall terminate
upon his Disability. For purposes of this Agreement, "Disability" shall mean the
inability of
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the Executive to perform his duties to the Company on account of physical or
mental illness or incapacity for a period of four and one-half consecutive
months, or for a period of 135 calendar days, whether or not consecutive, during
any 365 day period, as a result of a condition that is treated as a total or
permanent disability under the long-term disability insurance policy of the
Company that covers the Executive. The Executive's employment hereunder shall be
deemed terminated by reason of Disability on the last day of the applicable
period; provided, however, in no event shall the Executive be terminated by
reason of Disability unless the Executive receives written notice from the
Company, at least 15 days in advance of such termination, stating its intention
to terminate the Executive for reason of Disability.
(f) Death. The Executive's employment hereunder shall terminate upon
his death.
7. Compensation Upon Termination of Employment
In the event the Executive's employment by the Company is terminated
during the Agreement Term, the Executive shall be entitled to the severance
payments and benefits specified below:
(a) Resignation for Good Reason; Termination without Cause. In the
event the Executive voluntarily terminates his employment hereunder for Good
Reason or is terminated by the Company other than for Cause, death or
Disability, the Company shall pay the Executive and provide him with the
following:
(i) Accrued Rights. Upon the Executive's termination of
employment, the Company shall pay the Executive a lump-sum amount equal
to the sum of (A) his earned but unpaid Base Salary through the date of
termination, (B) any earned but unpaid Target Bonus Amount for any
completed fiscal year, and (C) any unreimbursed business expenses or
other amounts due to the Executive from the Company as of the date of
termination. The Company shall also pay to the Executive, upon the
final preparation of the Company's audited financial statements for the
year in which termination of employment occurs, an additional lump-sum
amount calculated based on the degrees of achievement of the bonus
target applicable to the Target Bonus Amount for such year, determined
in accordance with the terms of the bonus plan for such year but
prorated on a daily basis to reflect the partial year of service. In
addition, the Company shall provide to the Executive all payments,
rights and benefits due as of the date of termination under the terms
of the Company's employee and fringe benefit plans and programs in
which the Executive participated during the Employment Period (together
with the lump-sum payments described above, the "Accrued Rights").
(ii) Severance Payment. The Company shall pay the Executive
the greater of (A) the amount equal to the aggregate Base Salary
payments (at the rate in effect at the time of termination) that remain
payable to the Executive from the date of termination until the
expiration of the Agreement Term, or (B) the amount equal to the sum of
(1) the annual Base Salary in effect at the time of termination
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and (2) the amount of the annual bonus paid to the Executive pursuant
to Section 4(b) hereof for the fiscal year ended immediately prior to
the year of termination. Any amount payable pursuant to clause (A) or
clause (B) above shall be payable in four equal consecutive quarterly
installments, with the first such payment to be made within 15 days
following the date of termination.
(iii) Equity Rights. As of the date of the Executive's
termination under this paragraph (a):
(A) Any unvested portion of the Time-Vested Option
shall become immediately and fully vested and exercisable, and
shall remain exercisable for the full term thereof.
(B) Any unvested portion of the First Premium Option
and the Second Premium Option (together, the "Premium
Options") for which the exercise price per share (as provided
in Sections 5(b) and 5(c) hereof) is less than or equal to the
Fair Market Value (as defined below) per share of the Common
Stock as of the date of the Executive's termination of
employment under this paragraph (a) shall become immediately
and fully vested and exercisable. Any shares subject to the
Premium Options that become vested and exercisable in
accordance with the foregoing shall remain exercisable from
the date of such termination of employment until the date that
is 90 days following the date that such shares would otherwise
have become vested and exercisable in accordance with the
vesting schedule set forth in Section 5 hereof in the absence
of the foregoing acceleration of vesting.
For the purposes of this Agreement, the "Fair Market Value" of the
Common Stock as of a given date shall be the average closing sales
price for the Common Stock (or the closing bid, if no sales were
reported) as quoted on the NASDAQ National System for the 15 trading
days ending with the applicable date.
(C) Any unvested portion of the Premium Options for
which the exercise price per share (as provided in Section 5
hereof) is greater than the Fair Market Value per share of the
Common Stock on the date of the Executive's termination of
employment under this paragraph (a) shall be forfeited;
provided, however, that in the event that the cumulative total
return on the Common Stock for the period beginning on the IPO
Date and ending on the date of the Executive's termination of
employment under this paragraph (a) equals or exceeds the
Target Peer Group Return (as defined below), then all of such
unvested portion of the Premium Options that would otherwise
have been forfeited shall instead become immediately and fully
vested and exercisable. Any shares subject to the Premium
Options that become vested and exercisable in accordance with
the foregoing shall remain exercisable from the date of such
termination of employment until the date that is 90 days
following the date that such shares would otherwise have
become fully vested in accordance with the
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vesting schedule set forth in Section 5 hereof in the absence
of the foregoing acceleration of vesting.
For the purposes of this Agreement, the "Target Peer Group Return"
shall mean the cumulative total return on common equity (calculated in
accordance with applicable annual proxy disclosure rules) for the
bottom quartile of an index of the eight publicly traded companies most
comparable to the Company, as agreed to by the Executive and the
Compensation Committee (and, if the participants in such index cannot
be agreed to, such participants shall be selected by an independent
investment banking firm of national prominence), assuming the
investment of $100 in each vehicle on the IPO Date and the reinvestment
of all dividends.
(iv) Continued Benefits. For the 12-month period following the
date of the Executive's termination of employment, the Company shall
continue to provide the Executive and his eligible dependents, at its
sole cost, with the medical, dental, disability and life insurance
coverages that were provided to the Executive immediately prior to
termination of employment, subject to cancellation by the Company in
the event that the Executive obtains coverage under comparable
substitute plans of another employer. Following the expiration of such
12-month period and for the lifetime of the Executive, the Executive
and his eligible dependents shall be entitled to continue participating
(at the Executive's sole expense) in the Company's group medical,
dental, disability and life insurance coverages, with the Executive's
cost to be determined on a basis consistent with the method for
determining employee payments under the health care continuation
requirements of the Consolidated Omnibus Reconciliation Act of 1985
("COBRA").
(b) Resignation without Good Reason; Termination for Cause. In the
event the Executive voluntarily terminates his employment hereunder other than
for Good Reason or is terminated by the Company for Cause, the Company shall pay
the Executive and provide him with any Accrued Rights under Section 7(a)(i).
Upon such termination, (i) the Executive shall not be entitled to receive, and
the Company shall have no obligation to provide, any severance payments under
this Agreement, (ii) the Executive and his dependents shall not be entitled to
receive, the Company shall have no obligation to provide to the Executive or his
dependents, any medical, dental, disability or life insurance coverage except as
required by COBRA or other applicable law or under the terms of the applicable
plans and (iii) all unvested stock options under Section 5 (including, without
limitation, Time-Vested Options and Premium Options) shall terminate immediately
and shall be of no further force or effect.
(c) Disability; Death. In the event the Executive's employment
hereunder is terminated by reason of the Executive's Disability or death, the
Company shall pay and provide the Executive (or his legal representative) with
the following:
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(i) Accrued Rights. The Company shall pay and provide to the
Executive (or his legal representative) any Accrued Rights, including
all disability or life insurance benefits (as applicable).
(ii) Salary Continuation. The Company shall provide the
Executive (or his legal representative) with continued payment of the
Executive's then-current Base Salary for a period of 12 months.
(iii) Equity Rights. As of the date of the Executive's
termination under this paragraph (c):
(A) Any unvested portion of the Time-Vested Option
shall become immediately and fully vested and exercisable, and
shall remain exercisable for the full term thereof.
(B) Any unvested portion of the Premium Options shall
be forfeited, provided, however, that in the event the
Executive's Disability or death occurs within six months prior
to the date that any portion of the Premium Options are
scheduled to vest in accordance with Section 5 hereof (the
"Scheduled Portion") and the Fair Market Value of the Common
Stock as of the date of Disability or death equals or exceeds
the exercise price per share of the shares subject to the
Scheduled Portion, then the Scheduled Portion shall become
immediately and fully vested and exercisable and shall remain
exercisable for the full term thereof.
(iv) Continued Benefits. For the 12-month period following the
date of the Executive's Disability or death, the Company shall continue
to provide the Executive and/or his eligible dependents (as
applicable), at its sole cost, with the medical, dental, disability and
life insurance coverages that were provided to the Executive
immediately prior to termination of employment. Following the
expiration of such 12-month period, the Executive shall be entitled to
continue group benefit coverages on the same basis as described in
Section 7(a)(iv) hereof.
8. Change of Control
(a) Termination Following Change of Control. In the event that the
employment of the Executive is terminated during the one-year period
immediately following a Change of Control either (i) by the Executive for Good
Reason or (ii) by the Company other than for Cause, Disability or death, then,
in addition to the payments and benefits provided in Section 7(a)(i), (ii) and
(iv) hereof, any unvested portion of the Time-Vested Options and the Premium
Options shall become immediately and fully vested and exercisable and shall
remain exercisable for the full term thereof. The foregoing rights of the
Executive shall apply whether or not a successor corporation has assumed this
Agreement as required under Section 13(a) hereof.
(b) Definitions. For purposes of this Section 8, the following terms
shall have the meanings given below:
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"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (a "Person") or group of related Persons (a "Group") (as
such terms are used in Section 13(d)(3) of the Securities Exchange Act of 1934)
other than a Principal or a Related Party of a Principal, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any purchase,
sale, acquisition, disposition, merger or consolidation) the result of which is
that any Person or Group other than a Principal or a Related Party of a
Principal becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Securities Exchange Act of 1934) of more than 50% of
the aggregate voting power of all classes of capital stock of the Company having
the right to elect directors under ordinary circumstances, or (iv) the first day
on which a majority of the members of the Board are not Continuing Directors.
For purposes of the foregoing, NationsBanc Capital Corp., State of Wisconsin
Pension Board and their respective affiliates shall be treated as a Group of
Related Persons.
"Continuing Directors" means, as of any date of determination, any
member of the Board who (i) was a member of the Board on the IPO Date or (ii)
was nominated for election or elected to the Board with the approval of (x)
two-thirds of the Continuing Directors who were members of the Board at the time
of such nomination or election or (y) two-thirds of those Directors who were
previously approved by Continuing Directors.
"Principal" means Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxx, Xx.
"Related Party" with respsect to any Principal means (A) any
controlling stockholder, 80% (or more) owned subsidiary, or spouse or immediate
family member (in the case of an individual) of such principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners owners or Persons benefically holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock, entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such person or of one or more
Subsidiaries of such Person (or any combination thereof).
9. Parachute Tax Indemnity
(a) If it shall be determined that any amount paid, distributed or
treated as paid or distributed by the Company to or for the Executive's benefit
(whether paid or
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payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 9) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) All determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. The Accounting Firm shall be appointed jointly by two
other nationally recognized accounting firms, one of which is appointed by the
Executive and one of which is appointed by the Company for such purpose. The
Accounting Firm shall not be an accounting firm serving as accountant or auditor
for the individual, entity or group effecting the Change of Control. All fees
and expenses of the Accounting Firm shall be borne by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 9, shall be paid by the Company
to the Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to this Section 9 and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the Executive's
benefit.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later then ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration
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of such period that it desires to contest such claim, the Executive shall: (i)
give the Company any information reasonably requested by the Company relating to
such claim; (ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company; (iii) cooperate with the Company
in good faith in order to effectively contest such claim; and (iv) permit the
Company to participate in any proceeding relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expense. Without limitation on the foregoing provisions of this Section 9,
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the Executive's taxable year with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority, so long as such action does not have a material adverse effect
on the contest being pursued by the Company.
(d) If, after the Executive's receipt of an amount advanced by the
Company pursuant to this Section 9, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of this Section 9) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the Executive's receipt of an
amount advanced by the Company pursuant to this Section 9, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
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10. No Mitigation or Offset
The Executive shall not be required to seek other employment or to
reduce any severance benefit payable to him under Section 7 hereof, and, except
as provided in Section 7(a)(iv) hereof, no such severance benefit shall be
reduced on account of any compensation received by the Executive from other
employment. The Company's obligation to pay severance benefits under this
Agreement shall not be reduced by any amount owed by the Executive to the
Company.
11. Tax Withholding; Method of Payment
All compensation payable pursuant to this Agreement shall be subject to
reduction by all applicable withholding, social security and other federal,
state and local taxes and deductions. Any lump-sum payments provided for in this
Agreement shall be made in a cash payment, net of any required tax withholding,
no later than the fifth business day following the Executive's date of
termination or other payment date. Any payment required to be made to the
Executive under this Agreement that is not made in a timely manner shall bear
interest until the date of payment at an interest rate equal to 120% of the
monthly compounded applicable federal rate as in effect under Section 1274(d) of
the Code for the month in which payment is required to be made.
12. Restrictive Covenants
(a) Covenant Not to Disclose Confidential Information. The Executive
acknowledges that during the course of his affiliation with the Company he has
or will have access to and knowledge of certain information and data which the
Company considers confidential and the release of such information or data to
unauthorized persons would be extremely detrimental to the Company. As a
consequence, the Executive hereby agrees and acknowledges that he owes a duty to
the Company not to disclose, and agrees that without the prior written consent
of the Company, at any time, either during or after his employment with the
Company, he will not communicate, publish or disclose, to any person anywhere or
use, any Confidential Information (as hereinafter defined), except as may be
necessary or appropriate to conduct his duties hereunder, provided the Executive
is acting in good faith and in the best interest of the Company, or as may be
required by law or judicial process. The Executive will use his best efforts at
all times to hold in confidence and to safeguard any Confidential Information
from falling into the hands of any unauthorized person and, in particular, will
not permit any Confidential Information to be read, duplicated or copied. The
Executive will return to the Company all Confidential Information in the
Executive's possession or under the Executive's control whenever the Company
shall so request, and in any event will promptly return all such Confidential
Information if the Executive's relationship with the Company is terminated for
any or no reason and will not retain any copies thereof. For purposes hereof the
term "Confidential Information" shall mean any information or data used by or
belonging or relating to the Company or any of its subsidiaries or Affiliates
that is not known generally to the industry in which the Company is or may be
engaged and which the Company maintains on a confidential basis, including,
without limitation, any and all trade secrets, proprietary data and information
relating to the Company's business and
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products, price list, customer lists, processes, procedures or standards,
know-how, manuals, business strategies, records, drawings, specifications,
designed, financial information, whether or not reduced to writing, or
information or data which the Company advises the Executive should be treated as
confidential information.
(b) Covenant Not to Compete. The Executive acknowledges that he has
established and will continue to establish favorable relations with the
customers, clients and accounts of the Company and will have access to trade
secrets of the Company. Therefore, in consideration of such relations and to
further protect trade secrets, directly or indirectly, of the Company, the
Executive agrees that during the term of his employment by the Company and for a
period of eighteen months from the date of termination of the Executive, except
that such eighteen month period shall not apply in the event of termination of
employment (i) by the Company other than for Cause, (ii) by the Executive for
Good Reason or (iii) by the Company or the Executive for any reason within one
year following a Change of Control, the Executive will not, directly or
indirectly, without the express written consent of the Company:
(i) own or have any interest in or act as an officer,
director, partner, principal, employee, agent, representative,
consultant or independent contractor of, or in any way assist in, any
business located in or doing business in the United States of America
which is engaged, directly or indirectly, in the radio broadcast
properties business in a market ranked in a Metro Survey Area ("MSA"),
below MSA 100 (as listed in the then-current Arbitron Radio Metro and
Television Market Population Estimates published as of the date of the
Executive's termination of employment) (the "Competitive Businesses");
(ii) solicit clients, customers or accounts of the Company
for, on behalf of or otherwise related to any such Competitive
Businesses or any products related thereto; or
(iii) solicit or in any manner influence or encourage any
person who is or shall be in the employ or service of the Company to
leave such employ or service for any other employment opportunity.
Notwithstanding the foregoing, if any court determines that the covenant not to
compete, or any part thereof, is unenforceable because of the duration of such
provision or the geographic area or scope covered thereby, such court shall have
the power to reduce the duration, area or scope of such provisions and, in its
reduced form, such provision shall then be enforceable and shall be enforced.
(c) Specific Performance. Recognizing the irreparable damage will
result to the Company in the event of the breach or threatened breach of any of
the foregoing covenants and assurances by the Executive contained in paragraphs
(a) or (b) hereof, and that the Company's remedies at law for any such breach or
threatened breach will be inadequate, the Company and its successors and
assigns, in addition to such other remedies which may be available to them,
shall be entitled to an injunction, including a mandatory injunction, to be
issued by any court of competent jurisdiction ordering
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compliance with this Agreement or enjoining and restraining the Executive, and
each and every person, firm or Company acting in concert or participation with
him, from the continuation of such breach and, in addition thereto, he shall pay
to the Company all ascertainable damages, including costs and reasonable
attorneys' fees sustained by the Company by reason of the breach or threatened
breach of said covenants and assurances. The obligations of the Executive and
the rights of the Company, its successors and assigns under Section 12 of this
Agreement shall survive the termination of this Agreement. The covenants and
obligations of the Executive set forth in Section 12 hereof is in addition to
and not in lieu of or exclusive of any other obligations and duties of the
Executive to the Company, whether express or implied in fact or in law.
(d) Potential Unenforceability of Any Provision. If a final judicial
determination is made that any provision of this Agreement is an unenforceable
restriction against the Executive, the provisions hereof shall be rendered void
only to the extent that such judicial determination finds such provisions
unenforceable, and such unenforceable provisions shall automatically be
reconstituted and become a part of this Agreement, effective as of the date
first written above, to the maximum extent in favor of the Company that is
lawfully enforceable. A judicial determination that any provision of this
Agreement is unenforceable shall in no instance render the entire Agreement
unenforceable, but rather the Agreement will continue in full force and effect
absent any unenforceable provision to the maximum extent permitted by law.
13. Successors
(a) This Agreement shall be binding upon and shall inure to the benefit
of the Company, its successors and any person, firm, corporation or other entity
which succeeds to all or substantially all of the business, assets or property
of the Company. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business, assets or property of the Company, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, the "Company" shall mean
the Company as hereinbefore defined and any successor to its business, assets or
property as aforesaid which executes and delivers an agreement provided for in
this Section 13 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law. Notwithstanding the foregoing provisions
of this Section 13(a), this Agreement shall not be assignable by the Company
without the prior written consent of the Executive.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amounts are due and
payable to him hereunder, all such amounts, unless otherwise provided herein,
shall be paid to the Executive's designated beneficiary or, if there be no such
designated beneficiary, to the legal representatives of the Executive's estate.
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14. No Assignment
Except as to withholding of any tax under the laws of the United States
or any other country, state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by his legal representatives without the
Company's prior written consent, nor shall there be any right of set-off or
counterclaim in respect of any debts or liabilities of the Executive, his
beneficiaries or legal representatives, except in the case of termination of
employment for Cause; provided, however, that nothing in this Section 14 shall
preclude the Executive from designating a beneficiary to receive any benefit
payable on his death, or the legal representatives of the Executive from
assigning any rights hereunder to the person or persons entitled thereto under
his will or, in case of intestacy, to the person or persons entitled thereto
under the laws of intestacy applicable to his estate.
15. Entire Agreement
This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof and, except as specifically provided
herein, cancels and supersedes any and all other agreements between the parties
with respect to the subject matter hereof. Any amendment or modification of this
Agreement shall not be binding unless in writing and signed by the Company and
the Executive. Notwithstanding the foregoing, the parties hereto shall enter
into stock option agreements in respect of the Time-Vested Option and the
Premium Options, setting forth terms and conditions consistent with the
provisions of this Agreement and such other terms and conditions approved by the
Compensation Committee and consistent with the Company's Executive Stock
Incentive Plan.
16. Severability
In the event that any provision of this Agreement is determined to be
invalid or unenforceable, the remaining terms and conditions of this Agreement
shall be unaffected and shall remain in full force and effect, and any such
determination of invalidity or unenforceability shall not affect the validity or
enforceability of any other provision of this Agreement.
17. Notices
All notices which may be necessary or proper for either the Company or
the Executive to give to the other shall be in writing and shall be delivered by
hand or sent by registered or certified mail, return receipt requested, or by
air courier, to the Executive at:
Xx. Xxxxxxx X. Xxxxxxx
0000 Xxxxx Xxx. 00
Xxxxxxxx, Xxxxxxxxx 00000
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with a copy to: Xxxx X. Xxxxxx, Esq.
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
and shall be sent in the manner described above to the Secretary of the Company
at the Company's principal executives offices at 000 Xxxx Xxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000 or delivered by hand to the Secretary of the Company,
and shall be deemed given when sent, provided that any notice required under
Section 6 hereof or notice given pursuant to Section 2 hereof shall be deemed
given only when received. Any party may by like notice to the other party change
the address at which he or they are to receive notices hereunder.
18. Governing Law
This Agreement shall be governed by and enforceable in accordance with
the laws of the State of Wisconsin, without giving effect to the principles of
conflict of laws thereof.
19. Arbitration
Any controversy or claim arising out of, or related to, this Agreement,
or the breach thereof, shall be settled by binding arbitration in the City of
Milwaukee, Wisconsin, in accordance with the rules then obtaining of the
American Arbitration Association, and the arbitrator's decision shall be binding
and final, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
20. Legal Fees and Expenses
To induce the Executive to execute this Agreement and to provide the
Executive with reasonable assurance that the purposes of this Agreement will not
be frustrated by the cost of its enforcement should the Company fail to perform
its obligations hereunder, the Company shall pay and be solely responsible for
any attorneys' fees and expenses and court costs incurred by the Executive as a
result of a claim that the Company has breached or otherwise failed to perform
this Agreement or any provision hereof to be performed by the Company,
regardless of which party, if any, prevails in the contest.
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
EXECUTIVE
--------------------------------
XXXXXXX X. XXXXXXX
CUMULUS MEDIA INC.
-----------------------------
By:
Title:
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