Exhibit 10.7
Execution Copy
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of June 3, 2003 (this
"Agreement"), between SIRIUS SATELLITE RADIO INC., a Delaware
corporation (the "Company"), and David Frear (the "Executive").
In consideration of the mutual covenants and conditions set forth
herein, the Company and the Executive agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement,
the Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company.
2. Duties and Reporting Relationship. (a) The Executive shall be
employed as Executive Vice President and Chief Financial Officer of the Company.
In such capacity, the Executive shall be responsible primarily for supervising
the financial affairs of the Company. During the Term (as defined below), the
Executive shall, on a full-time basis and consistent with the needs of the
Company to achieve the goals of the Company, use his skills and render services
to the best of his ability in supervising the financial affairs of the Company
described above. In addition, the Executive shall perform such other activities
and duties consistent with his position as the Company shall reasonably specify
and direct. The Executive shall not engage in any other business, affairs or
activities that in the opinion of the Company interferes in any respect with his
full-time commitment to the Company. The Executive shall not be required by this
Agreement to perform duties for any entity other than the Company and its
subsidiaries.
(b) The Executive shall generally perform his duties and conduct his
business at the principal offices of the Company in New York, New York.
(c) The Executive shall report to the President and Chief Executive
Officer of the Company.
3. Term. The term of this Agreement shall commence on June 16, 2003
(the "Start Date"), and end on June 15, 2006, unless terminated earlier pursuant
to the provisions of Section 6 (the "Term").
4. Compensation. (a) During the Term, the Executive shall be paid an
annual base salary of $325,000, subject to any increases that the President and
Chief Executive Officer of the Company shall approve. All amounts paid to the
Executive under this Agreement shall be in U.S. dollars. The Executive's base
salary shall be paid at least monthly and, at the option of the Company, may be
paid more frequently. In the event the Executive's employment is terminated
during the Term, the Executive's base salary shall be prorated through the date
of termination.
(b) The Company is in the process of reviewing its equity compensation
for executive officers. As part of this review, the Company expects to issue to
all executive officers of the Company new equity based compensation. As part of
this revised equity compensation plan for
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executive officers, and subject to approval by the Company, the Executive shall
be awarded not less than 1,500,000 option to purchase the common stock of the
Company (the "Stock Options"). The Stock Options shall have an exercise price
equal to the closing price of the Company's common stock on the NASDAQ National
Market on Friday, June 13, 2003. The Stock Options shall be subject to the same
vesting terms as the stock options issued to other Executive Vice Presidents of
the Company, which terms shall include, among other things, provisions relating
to performance based vesting.
(c) The Company is also in the process of developing a bonus program
for the year ending December 31, 2003. This program is expected to include a
variety of objective milestones, such as number of subscriber activations,
subscriber acquisition costs, customer satisfaction, employee satisfaction,
operating expense and stock price appreciation, and is subject to approval by
the Compensation Committee of the Board of Directors of the Company. This
program may also include objectives specifically applicable to the Executive and
his specific areas of responsibility. Such bonus plan is expected to contain
objective milestones that shall permit the Executive to earn up to the following
annual bonus:
Performance Targets Annual Bonus
(to be defined) (as a % of Base Salary)
--------------- -----------------------
Threshold Target 30%
Desired Performance 60%
Outstanding Performance 90%
The Company reserves the right to pay any annual bonus in the form of cash,
restricted stock, other securities of the Company, or any combination of the
foregoing, in its sole discretion.
(d) All compensation paid to the Executive hereunder shall be subject
to any payroll and withholding deductions required by any applicable law,
including, without limitation, federal, New York State and New York City income
tax withholding, federal unemployment tax and social security (FICA).
5. Additional Compensation; Expenses and Benefits. (a) During the Term,
the Company shall reimburse the Executive for all reasonable and necessary
business expenses incurred and advanced by him in carrying out his duties under
this Agreement. The Executive shall present to the Company from time to time an
itemized account of such expenses in such form as may be required by the
Company.
(b) During the Term, the Executive shall be entitled to participate
fully in any bonus grants, benefit plans, programs, policies and fringe benefits
which may be made available to the executive officers of the Company generally,
including, without limitation, medical, dental and life insurance; provided that
the Executive shall participate in any stock option or stock purchase or
compensation plan currently in effect or subsequently established by the Company
to the extent, and only to the extent, authorized by the plan document and by
the Board of Directors of the Company (the "Board") or the compensation
committee thereof.
(c) The Executive shall promptly relocate his home to the New York
metropolitan area. In connection with such relocation, upon presentation of
receipts, the Company shall reimburse the Executive for the reasonable costs and
expenses of relocating his residence to the New York metropolitan area in
accordance with the Company's existing relocation policy; provided that the
Company shall not be required to reimburse the Executive for an amount in excess
of $150,000 in the aggregate.
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6. Termination. The date upon which this Agreement is deemed to be
terminated in accordance with any of the provisions of this Section 6 is
referred to herein as the "Termination Date."
(a) Termination for Cause. The Company has the right and may elect to
terminate this Agreement for Cause at any time. For purposes of this Agreement,
"Cause" means the occurrence or existence of any of the following:
(i) a breach by the Executive of the terms of his employment
or of his duty not to engage in any transaction that represents,
directly or indirectly, self-dealing with the Company or any of its
affiliates (which, for purposes hereof, shall mean any individual,
corporation, partnership, association, limited liability company,
trust, estate, or other entity or organization directly or indirectly
controlling, controlled by, or under direct or indirect common control
with the Company) which has not been approved by a majority of the
disinterested directors of the Board, if in any such case such breach
remains uncured after five days have elapsed following the date on
which the Company gives the Executive written notice of such breach;
(ii) the breach by the Executive of any duty referred to in
clause (i) above with respect to which at least one prior notice was
given under clause (i);
(iii) any act of dishonesty, misappropriation, embezzlement,
intentional fraud, or similar conduct by the Executive involving the
Company or any of its affiliates;
(iv) the conviction or the plea of nolo contendre or the
equivalent in respect of a felony;
(v) any damage of a material nature to any property of the
Company or any of its affiliates caused by the Executive's willful or
grossly negligent conduct;
(vi) the repeated nonprescription use of any controlled
substance, or the repeated use of alcohol or any other non-controlled
substance that the Board reasonably determines renders the Executive
unfit to serve as an officer or employee of the Company or its
affiliates;
(vii) the Executive's failure to comply with the President and
Chief Executive Officer's or the Board's reasonable written
instructions, after written notice; or
(viii) conduct by the Executive that in a good faith written
determination of the Board demonstrates unfitness to serve as an
officer or employee of the Company or its affiliates, including,
without limitation, a finding by the Board or any regulatory authority
that the Executive committed acts of unlawful harassment or violated
any other state, federal or local law or ordinance prohibiting
discrimination in employment applicable to the business of the Company
or any of its affiliates.
Termination of the Executive for Cause pursuant to this Section 6(a) shall be
communicated by a Notice of Termination. For purposes of this Agreement, a
"Notice of Termination" shall mean delivery to the Executive of a copy of a
resolution or resolutions duly adopted by the affirmative vote of not less than
a majority of the directors present and voting at a meeting of the Board called
and held for that purpose after reasonable notice to the Executive and
reasonable opportunity for the Executive, together with the Executive's counsel,
to be heard before the
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Board prior to such vote, finding that in the good faith opinion of the Board,
the Executive was guilty of conduct set forth in one or more of clauses (i)
through (viii) of this Section 6(a) and specifying the particulars thereof in
detail. For purposes of Section 6(a), this Agreement shall terminate on the date
specified by the Board in the Notice of Termination.
(b) Death or Disability. (i) This Agreement and the Executive's
employment hereunder shall terminate upon the death of the Executive. For
purposes of this Section 6(b)(i), this Agreement shall terminate on the date of
the Executive's death.
(ii) If the Executive is unable to perform the essential duties and
functions of his position because of a disability, even with a reasonable
accommodation, for one hundred eighty days within any three hundred sixty-five
day period, and the Company, in its reasonable judgment, determines that the
exigencies created by the Executive's disability are such that termination is
warranted, the Company shall have the right and may elect to terminate the
services of the Executive by a Notice of Disability Termination. For purposes of
this Agreement, a "Notice of Disability Termination" shall mean a written notice
that sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under this Section
6(b)(ii). For purposes of this Agreement, no such purported termination by the
Company shall be effective without such Notice of Disability Termination. This
Agreement shall terminate on the day after such Notice of Disability Termination
is received by the Executive.
(c) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company during the Term, for other than Good Reason (as
defined below), the Executive shall give fourteen days prior written notice to
the Company. Failure to provide such notice shall entitle the Company to
terminate this Agreement effective on the last business day on which the
Executive reported for work at his principal place of employment with the
Company. This Agreement shall terminate on the effective date of the resignation
as defined above, however, the Company may, at its sole discretion, request that
the Executive perform no job responsibilities and cease his active employment
immediately upon receipt of such notice.
(d) Without Cause. The Company shall have the absolute right to
terminate the Executive's employment without Cause at any time. If the Company
elects to terminate the Executive without Cause, the Company shall give seven
days written notice to the Executive. This Agreement shall terminate seven days
following receipt of such notice by the Executive, however, the Company may, at
its sole discretion, request that the Executive cease active employment and
perform no more job duties immediately upon provision of such notice to the
Executive.
(e) For Good Reason. Should the Executive wish to resign from his
position with the Company for Good Reason during the Term, the Executive shall
give seven days prior written notice to the Company. Failure to provide such
notice shall entitle the Company to fix the Termination Date as of the last
business day on which the Executive reported for work at his principal place of
employment with the Company. This Agreement shall terminate on the date
specified in such notice, however the Company may, at its sole discretion,
request the Executive cease active employment and perform no more job duties
immediately upon receipt of such notice.
For purposes of this Agreement, "Good Reason" shall mean the
continuance of any of the following events (without the Executive's express
prior written consent) for a period of seven days (or thirty days in the case of
item (i) below) after delivery to the Company by the Executive
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of a notice of the occurrence of such event:
(i) the assignment to the Executive by the Company of duties
not reasonably consistent with the Executive's positions, duties,
responsibilities, titles or offices at the commencement of the Term or
any unreasonable reduction in his duties or responsibilities or any
removal of the Executive from or any failure to re-elect the Executive
to any of such positions (except in connection with the termination of
the Executive's employment for Cause, disability or as a result of the
Executive's death or by the Executive other than for Good Reason); or
(ii) a relocation of the Company's executive offices to a
location outside of New York City metropolitan area; or
(iii) any reduction in the Executive's annual base salary from
the previous year; or
(iv) any material breach by the Company of any material
provision of this Agreement.
(f) Compensation and Benefits Upon Termination. (i) If the employment
of the Executive is terminated without Cause or the Executive terminates for
Good Reason, then the Executive shall be entitled to receive, and the Company
shall pay to the Executive without setoff, counterclaim or other withholding,
except as set forth in Section 4(d), an amount (in addition to any salary,
benefits or other sums due the Executive through the Termination Date) equal to
the sum of (x) the Executive's annualized base salary then in effect and (y) the
last annual bonus actually paid to the Executive; provided that, until bonuses,
if any, are paid by the Company with respect to the year ending December 31,
2004, such bonus amount shall be not less than $97,500. If the employment of the
Executive is terminated without Cause or the Executive terminates for Good
Reason, then the Executive shall be entitled to a continuation of medical and
life insurance benefits, as if he had remained an active employee, until the
first anniversary of the termination date. The Company's obligation to pay the
Executive in accordance with this Section 6(f)(i) is expressly conditioned upon
the Executive executing and delivering a release of all claims the Executive has
or may have against the Company, including, without limitation, all successors,
assigns, employees, officers, agents, directors, stockholders, agents and
attorneys (the "Release"), in form and substance acceptable to the Company.
Subject to the terms of the preceding sentence, any amount becoming payable
under this Section 6(f)(i) shall be paid in immediately available funds within
ten business days following the effective date of the Release.
(ii) If this Agreement is terminated by the Executive or the Company
for any reason other than those specified in Sections 6(f)(i), including
resignation by the Executive without Good Reason or termination by the Company
with Cause, the Executive shall be entitled to no compensation or other benefits
under this Agreement other than those which are due the Executive through the
Termination Date.
7. Nondisclosure of Confidential Information. (a) The Executive
acknowledges that in the course of his employment he will occupy a position of
trust and confidence. The Executive shall not, except as may be required to
perform his duties or as required by applicable law, disclose to others or use,
directly or indirectly, any Confidential Information.
(b) "Confidential Information" shall mean information about the
Company's business and
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operations that is not disclosed by the Company for financial reporting purposes
and that was learned by the Executive in the course of his employment by the
Company, including, without limitation, any business plans, strategy, budget
information, proprietary knowledge, patents, trade secrets, data, formulae,
sketches, notebooks, blueprints, information and client and customer lists and
all papers and records (including computer records) of the documents containing
such Confidential Information. The term Confidential Information does not
include any information which (i) is or becomes publicly available, other than
as a result of a disclosure by the Executive or one of his agents, (ii) is
already in the Executive's possession, provided that such information is not
known by the Executive to be subject to any legal or contractual obligation of
confidentiality owed to the Company, (iii) is or becomes available to the
Executive on a non-confidential basis from a source other than the Company,
provided that such source is not known by the Executive to be subject to any
legal or contractual obligation to the Company to keep such information
confidential, or (iv) is independently developed by the Executive without any
violation of his obligations hereunder The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, and that such information gives the Company a competitive
advantage. The Confidential Information will be kept confidential in accordance
with the terms hereof by the Executive and will not be disclosed by the
Executive or any of his agents except (i) as maybe consented to by the Company,
and (ii) as required by law, regulation or legal or judicial process, provided
that, where such disclosure is required, the Executive shall provide the Company
with a reasonable opportunity to review the disclosure, to the extent
practicable before it is made, and to seek to limit the disclosure at its own
expense. The Executive agrees to deliver or return to the Company, at the
Company's request at any time or upon termination or expiration of his
employment or as soon as possible thereafter, all documents, computer tapes and
disks, records, lists, data, drawings, prints, notes and written information
(and all copies thereof) furnished by the Company or prepared by the Executive
in the course of his employment by the Company.
(c) The provisions of this Section 7 shall survive any termination of
this Agreement.
8. Covenant Not to Compete. For two years following the end of the Term
or, in the event the Executive has been terminated without Cause or has resigned
for Good Reason, for one year following such termination without Cause or
resignation for Good Reason (the "Restricted Period"), the Executive will not,
directly or indirectly, enter into the employment of, render services to, or
acquire any interest whatsoever in (whether for his own account as an individual
proprietor, or as a partner, associate, stockholder, officer, director,
consultant, trustee or otherwise), or otherwise assist, any person or entity
engaged in any operations in North America involving the transmission of radio
entertainment programming in competition with the Company or that competes, or
is likely to compete, with any other aspect of the business of the Company as
conducted at the end of the Term; provided that nothing in this Agreement shall
prevent the purchase or ownership by the Executive by way of investment of up to
five percent of the shares or equity interest of any corporation or other
entity. Without limiting the generality of the foregoing, the Executive agrees
that during the Restricted Period, the Executive will not call on or otherwise
solicit business or assist others to solicit business from any of the customers
or potential customers of the Company as to any product or service that competes
with any product or service provided or marketed by or actually under
development by the Company at the end of the Term. The Executive agrees that
during the Restricted Period he will not solicit or assist others to solicit the
employment of or hire any employee of the Company without the prior written
consent of the Company.
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9. Gross-Up Provisions. (a) If the Executive is, in the opinion of a
nationally recognized accounting firm selected by the Company, expected to pay
an excise tax on "excess parachute payments" (as defined in Section 280G(b) of
the Internal Revenue Code of 1986, as amended (the "Code")) under Section 4999
of the Code as a result of an acceleration of the vesting of options or for any
other reason, the Company shall pay the Executive in accordance with the terms
of this Section 9 the expected amount of such taxes. In addition, the Company
shall pay the Executive such additional amounts as are necessary to place the
Executive in the exact same financial position that he would have been in if he
had not incurred any expected tax liability under Section 4999 of the Code;
provided that the Company shall in no event pay the Executive any amounts with
respect to any penalties or interest due under any provision of the Code. The
determination of the exact amount, if any, of any expected "excess parachute
payments" and any expected tax liability under Section 4999 of the Code shall be
made by the nationally-recognized independent accounting firm jointly selected
by the Executive and the Company. The fees and expenses of such accounting firm
shall be paid by the Company in advance. The determination of such accounting
firm shall be final and binding on the parties. The Company agrees to pay to the
Executive, in immediately available funds to an account designated in writing by
the Executive, any amounts to be paid under this Section 9 within two days after
receipt by the Company of written notice from the accounting firm which sets
forth such accounting firm's determination. In addition, in the event that such
payments are not sufficient to pay all excise taxes on "excess parachute
payments" under Section 4999 of the Code as a result of an acceleration of the
vesting of options or for any other reason and to place the Executive in the
exact same financial position that he would have been in if he had not incurred
any expected tax liability under Section 4999 of the Code as a result of a
change in control, then the Company shall have an absolute and unconditional
obligation to pay the Executive such additional amounts as may be necessary to
pay such excise taxes and place the Executive in the exact same financial
position that he would have been had he not incurred any tax liability as a
result of a change in control under the Code. Notwithstanding the foregoing, in
the event that a written ruling (whether public or private) of the Internal
Revenue Service ("IRS") is obtained by or on behalf of the Company or the
Executive, which ruling expressly provides that the Executive is not required to
pay, or is entitled to a refund with respect to, all or any portion of such
excise taxes or additional amounts, the Executive shall promptly reimburse the
Company in an amount equal to all amounts paid to the Executive pursuant to this
Section 9 less any excise taxes or additional amounts which remain payable by,
or are not refunded to, the Executive after giving effect to such IRS ruling.
Each of the Company and the Executive agrees to promptly notify the other party
if it receives any such IRS ruling.
(b) The provisions of this Section 9 shall survive any termination of
this Agreement.
10. Remedies. The Executive and Company agree that damages for breach
of any of the covenants under Sections 7 and 8 will be difficult to determine
and inadequate to remedy the harm which may be caused thereby, and therefore
consent that these covenants may be enforced by temporary or permanent
injunction without the necessity of bond. The Executive believes, as of the date
of this Agreement, that the provisions of this Agreement are reasonable and that
the Executive is capable of gainful employment without breaching this Agreement.
However, should any court or arbitrator decline to enforce any provision of
Section 7 or 8 of this Agreement, this Agreement shall, to the extent applicable
in the circumstances before such court or arbitrator, be deemed to be modified
to restrict the Executive's competition with the Company to the maximum extent
of time, scope and geography which the court or arbitrator shall find
enforceable, and such provisions shall be so enforced.
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11. Indemnification. The Company shall indemnify the Executive to the
full extent provided in the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws and the law of the State of
Delaware in connection with his activities as an officer of the Company.
12. Entire Agreement. The provisions contained herein constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede any and all prior agreements, understandings and communications
between the parties, oral or written, with respect to such subject matter.
13. Modification. Any waiver, alteration, amendment or modification of
any provisions of this Agreement shall not be valid unless in writing and signed
by both the Executive and the Company.
14. Severability. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof, which shall
remain in full force and effect.
15. Assignment. The Executive may not assign any of his rights or
delegate any of his duties hereunder without the prior written consent of the
Company. The Company may not assign any of its rights or delegate any of its
obligations hereunder.
16. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the successors in interest of the Executive and the Company.
17. Notices. All notices and other communications required or permitted
hereunder shall be made in writing and shall be deemed effective when initially
transmitted by courier or facsimile transmission and five days after mailing by
registered or certified mail:
if to the Company:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Attention: General Counsel
Telecopier: (212) 584-5353
if to the Executive:
David Frear
Address on file at the
offices of the Company
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.
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19. Non-Mitigation. The Executive shall not be required to mitigate
damages or seek other employment in order to receive compensation or benefits
under Section 6 of this Agreement; nor shall the amount of any benefit or
payment provided for under Section 6 of this Agreement be reduced by any
compensation earned by the Executive as the result of employment by another
employer.
20. Arbitration. (a) The Executive and the Company agree that if a
dispute arises concerning or relating to the Executive's employment with the
Company, or the termination of the Executive's employment, such dispute shall be
submitted to binding arbitration under the rules of the American Arbitration
Association for Resolution of Employment Disputes in effect at the time such
dispute arises. The arbitration shall take place in New York, New York, and both
the Executive and the Company agrees to submit to the jurisdiction of the
arbitrator selected in accordance with the American Arbitration Association
rules and procedures. Except as provided below, the Executive and the Company
agree that this arbitration procedure will be the exclusive means of redress for
any disputes relating to or arising from the Executive's employment with the
Company or his termination, including disputes over rights provided by federal,
state, or local statutes, regulations, ordinances, and common law, including all
laws that prohibit discrimination based on any protected classification. The
parties expressly waive the right to a jury trial, and agree that the
arbitrator's award shall be final and binding on both parties. The arbitrator
shall have discretion to award monetary and other damages, and any other relief
that the arbitrator deems appropriate and is allowed by law. The arbitrator
shall have the discretion to award the prevailing party reasonable costs and
attorneys' fees incurred in bringing or defending an action, and shall award
such costs and fees to the Executive in the event the Executive prevails on the
merits of any action brought hereunder.
(b) The Company and the Executive agree that the sole dispute that is
excepted from Section 20(a) is an action seeking injunctive relief from a court
of competent jurisdiction regarding enforcement and application of Section 7 or
8 of this Agreement, which action may be brought in addition to, or in place of,
an arbitration proceeding in accordance with Section 20(a).
21. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
22. Executive's Representations. The Executive hereby represents and
warrants to Company that he (a) is not now under any contractual or other
obligation that is inconsistent with or in conflict with this Agreement or that
would prevent, limit, or impair the Executive's performance of his obligations
under this Agreement; (b) has been provided the opportunity to be, or has been,
represented by legal counsel in preparing, negotiating, executing and delivering
this Agreement; and (c) fully understands the terms and provisions of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SIRIUS SATELLITE RADIO INC.
By: /s/ John H. Schultz
-------------------
John H. Schultz
Senior Vice President,
Human Resources
/s/ David Frear
---------------
David Frear