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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
AGREEMENT by and between LEXENT INC., a Delaware corporation
(the "Company"), and ALF T. HANSEN (the "Executive"), dated as of the 9th day of
January, 2000.
1. Employment Period.
(a) The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to remain in the employ of the Company, pursuant to the
terms and conditions set forth in this Agreement, for the period commencing
February 1, 2000 (the "Commencement Date") and ending on the third anniversary
of the Commencement Date, unless the Executive's employment terminates earlier
pursuant to Section 4 of this Agreement (the "Employment Period").
(b) The Contract shall be automatically extended for successive one
year periods unless either party gives one hundred and twenty (120) days advance
written notice prior to the end of the original Employment Period or any
extension thereof.
2. Position and Duties.
(a) During the Employment Period, the Executive shall be employed as
the President and Chief Executive Officer ("CEO") of the Company. In addition,
the Executive shall be nominated to the Board of Directors of the Company. The
Executive shall have such powers and perform such duties as are customary for a
CEO at the Company and from the Commencement Date shall report solely to the
Chairman and the Board of Directors. Executive's job description is attached
hereto as Exhibit A together with a list of employees who will report to
Executive.
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(b) During the Employment Period, and excluding any periods of
vacation, holiday, personal leave and sick leave to which the Executive is
entitled, the Executive shall devote the Executive's full business time,
attention and ability to the business and affairs of the Company and shall use
the Executive"s best efforts to carry out the Executive"s responsibilities
faithfully and efficiently in a professional manner. It shall not be considered
a violation of the foregoing for the Executive to (a) serve on corporate or
civic boards approved in writing by the Company (which approval shall not be
unreasonably withheld) or on charitable boards or committees (b) deliver
lectures or fulfill speaking engagements and (c) manage personal investments, so
long as the activities referred to in clauses (a) through (c) above do not
substantially interfere with the performance of the Executive's responsibilities
as CEO of the Company in accordance with this Agreement.
(c) The Executive's primary office shall be located in New York;
provided, that the Executive's primary office may be relocated in connection
with the relocation of the Company's headquarters within Connecticut, New
Jersey, or New York, subject to reimbursement for all of Executive's reasonable
expenses in connection with any move he is required to make. In addition, the
Executive shall be reimbursed for all reasonable moving expenses, approved in
writing, in connection with any relocation from New Jersey to New York. Unless
and until Executive relocates the Company shall provide at its expense suitable
living accommodations in Manhattan and shall reimburse Executive for meals and
related expenses.
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3. Compensation.
(a) Base Salary. During the first year of the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of
$300,000, payable pursuant to the Company's normal payroll practices. Effective
as of the first anniversary date of Employment and each succeeding anniversary
date, the Annual Base Salary then in effect shall be reviewed by the
Compensation Committee of the Board of Directors of the Company ("Compensation
Committee") and increased (but not decreased) in its sole discretion based upon
the performance of the Executive and the Company and the base salary (and
raises) paid by comparable companies to the CEO (the "peer executives"). In any
event Executive"s base salary shall be increased as of any anniversary date by a
minimum of 5% per annum.
(b) Annual Bonus. For each fiscal year or part thereof of the Company
during the Employment Period, if the target performance goals communicated in
writing by the Chairman to the Executive for the Company's fiscal year are met,
the Executive's annual target bonus shall be equal to 100% of the Annual Base
Salary paid during such fiscal year (the "Target Bonus") and shall be reduced
and increased in accordance with an appropriate payout curve (established
annually by the Compensation Committee after consultation with the Executive) if
such target performance goals are not met or are exceeded. After the first full
fiscal year of the Company during the Employment Period, the Executive's Target
Bonus shall be reviewed and set by the Compensation Committee in light of
performance goals determined in good faith by the Compensation Committee,
communicated in writing by the Committee to the Executive and in accordance with
the principals set forth in Section 3 (a) above for salary increases.
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The Executive shall receive on the Commencement Date a sign on bonus of
$300,000. This bonus shall be returned to the Company on a ratable basis if the
Executive's employment is terminated by him without Good Reason, or by the
Company for Cause as those latter terms are hereinafter defined, within the
first twelve (12) months of the Employment Term.
(c) Benefit Plans. The Executive shall be treated in the same manner
as, and shall be entitled to such benefits and other perquisites and terms and
conditions of employment no less favorable than those provided to the peer
senior executives as determined by the Compensation Committee.
(d) Long-Term Incentives.
(i) The Executive shall receive an initial grant of a Company stock
option to purchase 830,000 shares of Company common stock, subject to Rule 144
of the Securities and Exchange Act, as amended (the "Act") on the Commencement
Date ("Initial Option Grant"). The exercise price shall be equal to $10.00 per
share. Such Initial Option Grant shall vest as follows:
A. 315,416 shares of such grant shall vest immediately,
B. The remaining shares of such grant shall vest 21,441 shares
per month for 24 months commencing on the month coterminous with the
first anniversary of the Commencement Date.
(ii) On the first and second anniversaries of the Commencement
Date, the Company shall make additional option grants commensurate with that of
the other peer senior executives as determined by the Compensation Committee
("Additional Option Grants"), provided, however, that each such grant shall be
for not less than 200,000 shares if the Fair
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Market Value of the Company's common stock is then less than $30 per share
(adjusted equitably for stock splits, combinations and the like), shall be
restricted by Rule 144 of the Act, and shall be at a purchase price equal to the
then Fair Market Value of the Company's common stock on the date of grant. Such
Additional Option Grants shall vest in the same time manner as provided above
for the Initial Option Grant unless the Compensation Committee shall provide a
shorter vesting period.
Each grant of stock options shall be designated as incentive stock
options to the maximum extent permitted by the Internal Revenue Code of 1986, as
amended, and the Company's 1998 Stock Option Plan, as amended, and the remainder
shall be designated as non-qualified stock option.
For purposes of this Agreement, "Fair Market Value" means as of any
date the value of the Common Stock determined as follows:
A. If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of Common Stock
shall be the average of the opening and closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such system or exchange
(or the exchange with the greatest volume of trading in Common Stock) on the
last market trading day prior to the day of grant of the particular Additional
Option Grants and as reported in the Wall Street Journal or such other source as
the Compensation Committee deems reliable;
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B. If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the average between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
grant of the particular Additional Option Grants and as reported in the Wall
Street Journal or such other source as the Compensation Committee deems
reliable; or
C. In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Compensation
Committee, based upon the advice of a neutral appraiser if the Executive so
requests.
(e) Expenses. During the Employment Period, the Executive shall be
entitled to receive reimbursement for all reasonable business expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement in
accordance with the policies of the Company, provided that the Executive
complies with the policies of the Company for submission of expense reports,
receipts, or similar documentation of such expenses as promulgated from time to
time by the Company.
(f) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation equal to that of peer senior executives as set by the
Compensation Committee from time to time but in no event less than five (5)
weeks.
4. Termination of Employment.
(a) Death or Disability. The Executive"s employment shall terminate
automatically upon the Executive"s death during the Employment Period. The
Executive"s
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employment under this Agreement shall terminate for "Disability" if,
during the Employment Term Executive, in the reasonable and good faith judgment
of the Compensation Committee, has failed to perform all his duties under this
Agreement on account of illness or physical or mental incapacity, and such
illness or incapacity continues for a period of more than six (6) consecutive
months.
(b) By the Company. The Company may terminate the Executive"s
employment during the Employment Period for Cause or without Cause. For purposes
of this Agreement, "Cause" shall mean the Executive's (i) conviction of or plea
of nolo contendere to a felony; (ii) willful misconduct that is materially
injurious to the Company; (iii) failure to undertake communicated directives on
material business matters despite written instruction to do so by the Board of
Directors or the Chairman of the Company; or (iv) any willful material breach of
this Agreement which has resulted in material injury to the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause without (a) no less than ten (10) days prior
written notice to the Executive setting forth the reasons for the Company"s
intention to terminate for Cause, (b) an opportunity for the Executive to be
heard (together with comments of counsel) before the Board of Directors of the
Company and (c) delivery to the Executive of a notice of termination from the
Board of Directors of the Company stating its opinion that the Executive was
guilty of the conduct set forth above and specifying the particulars thereof.
(c) Good Reason. The Executive may terminate employment for Good
Reason. "Good Reason" means, without the Executive's written consent: (i) a
material adverse change in the Executive's title or the assignment of duties to
the Executive materially and
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adversely inconsistent with the Executive's position; (ii) any material failure
by the Company to comply with Section 3 or other material provisions of this
Agreement; or (iii) any requirement by the Company that the Executive's primary
office location be other than in the states of New York, New Jersey, or
Connecticut. In the event the Executive determines that Good Reason exists, the
Executive must notify the Company of such determination in writing, within sixty
(60) days following the Executive's actual knowledge of the event which the
Executive determines constitutes Good Reason, or such event shall not constitute
Good Reason under this Agreement. Following receipt of such notice, if the
Company remedies such event within twenty (20) days following notice, the
Executive may not terminate employment for Good Reason as a result of such
event.
(d) Executive Management Stockholder Block. The Executive may terminate
employment because the Company, solely due to an Executive Management
Stockholder Block, fails to consummate an initial public offering of its common
stock within one (1) year of the Commencement Date.
For purposes of this Agreement, an "Executive Management Stockholder
Block" means the decision by the Company"s Executive Management Stockholders (as
that term is defined in the Stockholders Agreement, dated as of July 23, 1998,
among the Company and the stockholders party thereto, as the same may be amended
or modified from time to time) to not consent to an initial public offering by
the Company of its Common Stock; provided, however, that an Executive Management
Stockholder Block shall not be deemed to have occurred if a decision or action
by the Board of Directors or the holders of the Company"s Series A
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Convertible Preferred Stock, $.001 par value, prevents the consummation of such
an initial public offering.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company or by the Executive (other
than for death or Disability), the tenth (10th) day after the mailing of the
Notice of Termination or any later date specified therein, or (ii) if the
Executive's employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the date of the
determination of Disability as set forth heretofore, as the case may be.
5. Obligations of the Company upon Termination.
(a) Other Than for Cause, Death or Disability, Good Reason or Executive
Management Stockholder Block. If, during the Employment Period, the Company
terminates the Executive"s employment, other than for Cause, death or
Disability, or if the Executive terminates employment for Good Reason:
(i) the Company shall pay the Executive, in one lump cash sum the
sum of 100% of the Executive"s Annual Base Salary;
ii) within thirty (30) days following the Date of Termination, the
Company shall pay the Executive his Annual Base Salary through the Date of
Termination, or any earned bonus to the extent not yet paid;
iii) at the time annual bonuses for the fiscal year in which the
Date of Termination occurs are paid, the Company shall pay the Executive a pro
rata annual bonus based upon actual performance under the annual bonus plan for
such fiscal year, to the extent not otherwise paid;
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iv) any unvested Company stock options or other stock grants held
by the Executive as of the Date of Termination will vest as if Executive had
remained employed by the Company;
v) to the extent vested and exercisable, any Company stock option
will remain exercisable in accordance with their original term;
vi) the Executive shall continue to receive employee benefits for a
period of six (6) months following the Date of Termination and the Executive"s
eligible dependents will continue to be eligible to participate in the Company"s
medical dental, life and other welfare insurance plans (subject to the Executive
continuing to make any required contributions to such plans) for a period of six
(6) months following the Date of Termination (or the Company shall provide
equivalent benefits for such period); provided, that such continued benefits
shall cease upon the Executive becoming eligible for comparable benefits from a
subsequent employer; and
vii) other benefits, if applicable, shall be paid to the Executive
in accordance with applicable plans and programs of the Company.
(b) Death or Disability. If the Executive"s employment is terminated by
reason of the Executive"s death or Disability during the Employment Period:
(i) the Company shall pay the Executive (or the Executive"s
survivors, if applicable) the Executive"s Annual Base Salary through the Date of
Termination, to the extent not yet paid; and
(ii) all Company stock options and stock awards will vest, and such
stock options shall remain exercisable until the original term of the stock
option.
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(c) Cause; Other than Good Reason. If the Executive"s employment is
terminated by the Company for Cause during the Employment Period or the
Executive terminates employment during the Employment Period (other than for
Good Reason), the Company shall pay to the Executive the Executive's Annual Base
Salary through the Date of Termination and any earned bonus to the extent not
yet paid, and any vested Company stock options will remain exercisable in
accordance with the original term of the stock option. The Company shall have no
further obligations under this Agreement.
(d) Executive Management Stockholder Block. In the event that the
Executive's employment is terminated by the Executive pursuant to clause (d) of
Section 4 above during the ninety (90) day period following the date of such
Executive Management Stockholder Block, then:
i) the Company shall pay the Executive the sum of 100% of the
Executive's Annual Base Salary in twelve equal monthly installments; and
ii) all Company stock options and stock awards will vest and such
stock options shall remain exercisable until the original term of the stock
option.
6. Change of Control. If there is a Change of Control of the Company
(as defined below) all unvested stock options or stock awards shall become 100%
vested. In addition, the Executive may elect within six (6) months following
such Change of Control to terminate his employment and such termination shall be
treated as a termination for Good Reason and the Executive shall receive the
benefits provided in Section 5 (a) above for such Termination. As used
hereinafter, "Change of Control" means the occurrence of any of the following:
(i) the Company consolidates with or merges with or into another person pursuant
to the transaction in
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which the outstanding securities of the Company are converted into or exchanged
for cash or other property or for securities possessing less than 50% of the
voting power of the outstanding securities of the person surviving such merger
or consolidation; (ii) the Company sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person; or
(iii) any "person" or "group" (as such terms are used in Sections 13(d) and 14
(d) of the Act), other than the holders of the securities of the Company as of
the date hereof shall, by virtue of ownership of securities or by agreement or
otherwise, be entitled to elect a majority of the directors of the Company.
7. Right to Purchase Shares. During the first 90 days of the Employment
Period the Executive shall have the right to purchase common shares of the
Company up to a maximum of 215,000 shares at the fair market value of the common
stock, which the Compensation Committee has determined is $10.00 as of the date
of this Agreement. The Executive shall pay for any such purchase in cash. The
Executive agrees to make such representations and agree to such restrictions on
transfer of such shares as the Company may reasonably request to ensure
compliance with all applicable securities laws or agreements with equity
investors.
8. Right to Require Purchase. If for any reason the Company is not a
public company, after the Executive"s employment ends the Executive, in his sole
discretion, may require the Company to purchase the stock acquired by the
Executive in accordance with Sections 3, 4 or Section 7 hereof at its fair
market value as determined by an independent appraiser selected by the parties;
provided, however, that if at the time the Company is required to purchase stock
pursuant to this Section 8, the Board determines in good faith that purchasing
the shares for cash would be
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a material financial hardship for the Company, the Company may
pay for the stock over three years with interest accruing on any unpaid amounts
at the prime rate of a national bank selected by the Compensation Committee.
9. Non-Competition. The Executive hereby agrees that for a period of
three (3) years after the date hereof, such Executive will not, singly, jointly,
or as an employee, agent or partner of any partnership or as an officer, agent,
employee, director, stockholder (except of not more than one percent (1%) of the
outstanding stock of any company listed on a national securities exchange or
actively traded in the over-the-counter market) or investor in any other
corporation or entity, or as a consultant, advisor, or independent contractor to
any such partnership, corporation or entity, or in any other capacity, directly,
indirectly or beneficially, own, manage, operate, join, control, or participate
in the ownership, management, operation, or control of, or work for (as an
employee, agent, consultant, advisor or independent contractor), or permit the
use of his name by, or provide financial or other assistance to, any person,
partnership, corporation, or entity which is in competition with the business as
conducted by the Company on the date hereof.
10. Confidential Information. The Executive agrees that he will not at
any time during or after the Executive's employment with the Company for any
reason, directly or indirectly, disclose to any person any confidential
information of the Company, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Company or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Executive agrees to return to the Company any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether
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electronic or otherwise) embodying any confidential information of the Company
which are in the possession or control of the Executive.
11. Intangible Assets and Non-Solicitation.
(a) The Executive shall not at any time have or claim any right, title
or interest in any trade name, trademark, copyright, or other similar rights
belonging to or used by the Company and shall not have or claim any rights,
title or interest in any material or matter of any sort prepared for or used in
connection with the business of the Company or promotion of the Company, whether
produced, prepared or published in whole or in part by the Executive.
(b) Hire or attempt to hire for employment any person who is employed
by the Company or attempt to influence any such person to terminate employment
with the Company, except to the extent the Executive is acting on behalf of the
Company in good faith; provided, however, that nothing herein shall prohibit the
Executive from general advertising for personnel not specifically targeting any
employee or other personnel of the Company.
12. Release. Effective upon the Date of Termination pursuant to the
provisions of Sections 4(a), (b), (c) or (d) of this Agreement in consideration
of the payments to be made to the Executive pursuant to Sections 5(a), (b), (c)
or (d) of this Agreement and as a condition to the payment thereof, the
Executive acknowledges that all such payments, if made in accordance with the
terms of this Agreement shall constitute complete satisfaction of all
obligations owed by the Company to the Executive and shall further constitute
the Executive"s sole remedy against the Company.
13. Arbitration. Any dispute, controversy, or question arising under,
out of, or relating to this Agreement (or the breach thereof) or, Executive"s
employment with the Company
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or termination thereof, shall be referred for arbitration in the State of New
York to a neutral arbitrator selected by the Executive and the Company and this
shall be the exclusive and sole means for resolving such dispute. The
arbitration proceeding shall be governed by the Employment Rules of the American
Arbitration Association then in effect or such rules last in effect (in the
event such Association is no longer in existence) and shall be governed by the
rule of law. Such right to submit a dispute arising hereunder to arbitration and
the decision of the neutral arbitrator shall be final, conclusive and binding on
all parties and interested persons and no action at law or in equity shall be
instituted or, if instituted, further prosecuted by either party other than to
compel arbitration or enforce the award of the neutral arbitrator. The
arbitrator shall take submissions and hear testimony, if necessary, and shall
render a written decision as promptly as possible. The arbitrator may require
any form of discovery (e.g., depositions) in making his decision. In connection
with any arbitration, the Company will reimburse the Executive for all
reasonable attorneys' fees and disbursements as incurred in connection therewith
following the receipt of invoices for such fees and disbursements. If the
Company prevails on all substantial claims in the dispute submitted for
arbitration then the Executive will reimburse the Company for such legal fees.
The arbitrator may determine and may award costs and attorneys' fees as part of
his decision.
14. Assignment; Successors.
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, executors and administrators.
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(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns, provided that the Company may not
assign this Agreement except in connection with the assignment or disposition of
all or substantially all of the assets or stock of the Company, or by law as a
result of a merger or consolidation. In the event of such assignment a failure
by the successor to specifically assume in writing, delivered to the Executive,
the obligations and liabilities of the Company hereunder shall be deemed a
material breach of this Agreement.
(c) The Company shall require any successor or assignee to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would have been required to perform it if no such assignment had
taken place.
15. Indemnification. In addition to any rights to indemnification to
which Executive is entitled to under the Corporation's Articles of Incorporation
and Bylaws, Company shall indemnify Executive at all times during and after the
term of this Agreement to the maximum extent permitted under Delaware Business
Corporation Act or any successor provision thereof and any other applicable
state law, and shall pay Executive's expenses in defending any civil action
suit, or proceeding in advance of the final disposition of such action, suit or
proceeding, to the maximum extent permitted under such applicable state laws for
Executive's action or inaction on behalf of the Company under the terms of this
Agreement. In connection herewith, if the Company has or obtains directors or
officers insurance, so-called, Executive shall be covered by such policy to the
same extent as the peer senior executives.
16. Miscellaneous.
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(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without reference to its conflict of
law rules.
(b) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(d) All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Alf T. Hansen
1 Greenbrier Court
Skillman, New Jersey 08558
If to the Company:
Lexent Inc.
Three New York Plaza, 11th Floor
New York, New York 10003
Attention: Chairman
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee or three (3) days after the initiation
of delivery.
(e) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such
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provision, together with all other provisions of this Agreement, shall remain
valid and enforceable and continue in full force and effect to the fullest
extent consistent with law.
(f) Notwithstanding any other provision of this Agreement, the Company
may withhold from amounts payable under this Agreement all federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
(g) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(h) Except as provided herein, the Executive and the Company
acknowledge that this Agreement constitutes the entire agreement between the
parties and supersedes any prior agreement between the Executive and the Company
concerning the subject matter hereof.
(i) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
(j) The parties hereto shall execute and deliver all documents, provide
all information and take or forbear from all such action as may be necessary or
appropriate to achieve the purposes of the Agreement.
(k) If any provision of this Agreement, or the application of such
provision to any person or circumstance, shall be held invalid, the remainder of
this Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid, shall not be affected thereby.
(l) If any excise tax is imposed upon the Executive under the Internal
Revenue
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Code by reason of payments or vesting made on a Change of Control the
Company shall gross up the payments to make the Executive whole for such excise
tax.
(m) The Company shall reimburse Executive for all reasonable fees and
expenses of Executive's attorneys and accountants incurred in connection with
the negotiation and preparation of this Agreement.
(n) The Executive affirms and represents to the best of his knowledge
and belief that as of the commencement of his employment by the Company on the
Commencement Date, he will be under no obligation to any former employer or
other party which imposes any restriction upon, the Executive's acceptance of
the employment hereunder with the Company, the employment of the Executive by
the Company, or the Executive's undertakings under this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
LEXENT INC.
By /s/ Hugh O'Kane, Jr.
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Hugh O'Kane, Jr.
Chairman
By /s/ Alf T. Hansen
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Alf T. Hansen
CEO and President
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