EXHIBIT 10.5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
600 TELEPHONE AVENUE
ANCHORAGE, AK 99503
October 17, 2003
Mr. David C. Eisenberg
10804 West 128th Terrace
Overland Park, KS 66213
Re: Employment Agreement
Dear Mr. Eisenberg:
This letter agreement ("Agreement") sets forth the terms and
conditions of your employment with Alaska Communications Systems Holdings, Inc.
(hereinafter "ACS" or the "Company"), effective as of October 31, 2003
(hereinafter, the "Effective Date" or "the commencement of your employment with
ACS").
1. Employment and Services. ACS hereby employs you as Sr. Vice
President, Corporate Strategy and Development (hereinafter "Executive" or "you")
for the period beginning on the Effective Date and ending upon termination
pursuant to paragraph 4 (the "Employment Period"). During the Employment Period,
you shall render such services to the Company and its affiliates and
subsidiaries as the Boards of Directors of Alaska Communications Systems Group,
Inc. and Alaska Communications Systems Holdings, Inc. and its subsidiaries
(hereinafter "Boards of Directors") shall reasonably designate from time to
time, and you shall devote your best efforts and full time and attention as an
Executive Officer to the business of the Company. "Executive Officer" for the
purpose of this Agreement is defined as a controlling officer with the authority
and responsibility to direct areas of the Company's business under the direction
of and as assigned by the CEO, Boards of Directors, or both. Authority extends
to operational decision making and goal setting for assigned responsibilities
and accountabilities of the business as required by and to support the company
strategy and achievement of corporate goals. Your primary responsibilities and
accountabilities are outlined in Appendix A to this agreement.
2. Compensation. The Company shall pay you an annual base salary
("Annual Base Salary") of $250,000 during the first year of the Employment
Period, subject to annual review in each year of the Employment Period
thereafter (for any partial year during the Employment Period, the Annual Base
Salary shall be prorated based on the number of days during such year on which
you are employed by the Company). Your Annual Base Salary may be increased in
years following the first year of employment but may not be decreased. As used
herein, the term
-1-
"Annual Base Salary" refers to the Annual Base Salary as so increased. Such
Annual Base Salary shall be payable in installments in accordance with the
Company's regular payroll practices.
In addition, you will be eligible to receive an annual bonus to be
awarded ninety (90) days after the end of each fiscal year, to be paid as soon
as practicable but not later than one hundred twenty (120) days after the end of
the fiscal year. In order to determine the amount of such bonus, the Company,
acting in good faith, shall determine appropriate Company business targets for
each fiscal year and your annual bonus shall be based upon 100% attainment of
such targets. As a benchmark for such bonuses, the Company agrees that if the
Company attains the mutually determined business targets, you shall receive a
bonus equal to one hundred percent (100%) of your Annual Base Salary as in
effect with respect to any such fiscal year, and in the event that the Company
exceeds or does not exceed the business targets, there shall be appropriate
adjustments in the amount of your annual bonus. The determination of appropriate
business targets shall take place not later than sixty (60) days subsequent to
the commencement of the Company's fiscal year, and all Business targets shall be
provided in writing to you within thirty (30) days of the Company's
determination of said business targets.
Hiring Bonus. Within thirty (30) days of the commencement of your
employment with ACS you shall receive a hiring bonus of $100,000. In the event
of voluntary termination within twelve consecutive months of the commencement of
your employment with ACS, you will be required to repay a pro-rated amount of
the hiring bonus equivalent to one-twelfth of the total for each month not
served in the first twelve-month period of employment.
Equity Package. You will receive a total of 200,000 ACS stock
options with an exercise price equal to the fair market value of ACS stock on
the commencement date of your employment and having a term of 10 years. Options
shall vest at 20% or 40,000 shares per twelve-month period for the five-year
period starting with the commencement of your employment with ACS or on a Change
in Control, whichever is earlier. Vesting ceases and the term of unvested
options lapse upon termination of employment for any reason. Upon termination of
employment, vested options may be exercised for the applicable period provided
for in the applicable plan.
3. Benefits. During the Employment Period, you shall be entitled to
participate in the Company's fringe benefit plans, subject to and in accordance
with applicable eligibility requirements, such as life and disability insurance
plans and all other benefit plans (other than severance plans or arrangements)
generally available to the Company's Executive Officers, including vehicle
allowance and relocation of personal residence benefits except as with respect
to relocation of personal residence benefits upon termination of Executive's
employment, in which case, Section 4 herein will govern Relocation of personal
residence benefits will be provided in the event that your work location is
moved more than forty (40) miles from the ACS Headquarters, as in place on the
Effective Date of this Agreement, and you elect to move within three (3) months
of assignment of a new work location.
4. Termination and Severance. The Employment Period shall terminate on
the first to occur of:
-2-
a. ninety (90) days following written notice by you to the
Company of your resignation without Good Reason, (it being
understood that you will continue to perform your services
hereunder during such ninety (90) day period),
b. thirty (30) days following written notice by you to the
Company of your resignation with Good Reason during the
Employment Period, or ninety (90) days following a Change in
Control (it being understood that you will continue to perform
your services hereunder during such ninety (90) day period),
c. your death or Disability,
d. a vote of the Boards of Directors of Alaska Communications
Systems Group, Inc., or Alaska Communications Systems
Holdings, Inc. or in the event the Agreement is assigned to a
subsidiary, the applicable Board of Directors, directing such
termination for Cause,
e. a vote of the Boards of Directors of Alaska Communications
Systems Group, Inc., or Alaska Communications Systems
Holdings, Inc. or in the event the Agreement is assigned to a
subsidiary, the applicable Board of Directors, directing such
termination without Cause,
f. the fifth anniversary of the Effective Date (the "Scheduled
Expiration Date"); provided, however, that the Scheduled
Expiration Date shall be automatically extended for successive
one-year periods unless, at least ninety (90) days prior to
the then-current Scheduled Expiration Date, either the Company
or you shall give written notice to the other of an intention
not to extend the Employment Period, or
g. the termination of Alaska Communications Systems Group, Inc.,
Alaska Communications Systems Holdings, Inc. or in the event
the Agreement is assigned to a subsidiary, the applicable
company's business operations.
In the event of termination of the Employment Period pursuant to the
above defined clause (b.), (e.), (g.), or pursuant to clause (f.) as a result of
the Company's notice to you of an intention not to extend the Employment Period,
the Company shall concurrently with such termination make a lump-sum payment to
you equal to the sum of one times your Annual Base Salary plus one times your
target annual bonus payment, established pursuant to Section 2 hereof. You shall
also be reimbursed for the cost of continuing your health insurance coverage
under COBRA for the twelve (12) month period following such a termination.
In the event of termination of employment pursuant to the above
defined clause (b.), (c.), (g.), or pursuant to clause f. as a result of either
the Company's or the Executive's notice of intention not to extend the
employment agreement, or termination of the Executive by the Company without
Cause, the Company shall provide personal travel for you, your spouse and
dependent family members and transport of household belongings to a maximum of
$50,000, if you or, in the event of your death, your spouse or dependent family
members, elect to relocate to the lower 48 states within three (3) months of
such termination. In the event of Executive's death, the relocation benefit
contained in this paragraph will be provided to Executive's spouse and dependent
family members.
Except as otherwise set forth in this paragraph 4 or pursuant to the
terms of employee benefit plans in which you participate pursuant to paragraph
3, you shall not be entitled to any
-3-
compensation or other payment from the Company in connection with termination of
your employment hereunder.
ACS may repurchase any ACS stock acquired through the exercise of stock options
or otherwise received by Executive at the lower of the price paid by Executive,
the price on the date of grant (in the case of any stock grant) or the then fair
market value of the stock, only if Executive is in material breach of the
provisions of Appendix A or Executive has been terminated for Cause. Material
breach is defined as a substantial failure on the part of the Executive to
perform, consistent with the definition of Executive Officer as provided in
Section 1 of this Agreement, the responsibilities as defined at Appendix A or as
assigned by the CEO, Boards of Directors, or both consistent with this
Agreement.
For purpose of this agreement, the following definitions will apply:
(a) "Good Reason" shall mean: (i) the assignment of you by the Company
to a position with a title and duties that are materially inconsistent
with the position of an Executive Officer, it being understood that a
reassignment of you to a different Executive Officer position, with
different accountabilities and responsibilities, shall not, in and of
itself, constitute Good Reason for purposes of this paragraph; or (ii)
the transfer, without your concurrence, of your principal place of
employment to a geographic location more than 100 miles from both your
current personal residence and from the location of your current
principal place of employment;
(b) "Cause" shall mean: (i) your willful failure to comply with lawful
directions of the Boards of the Company that is not cured within thirty
(30) days of Executive's receipt of written notice from either the
Board of the Company or of its subsidiaries, of Executive's specific
failure to perform lawful directions; (ii) a willful or knowing
material misrepresentation to the Boards of the Company or a conviction
or guilty plea to a felony or a misdemeanor involving fraud,
dishonesty, or moral turpitude; or (iii) a material breach of this
Agreement (other than due to physical or mental illness) that is not
cured within thirty (30) days after receiving written notice from
either the Boards of the Company or of the Subsidiary of your specific
failure to perform your duties;
(c) "Change in Control" shall mean: (i) the acquisition by any person
or group (as that term is used in Regulation 13D under the Securities
Exchange Act of 1934, as amended), other than Fox Paine & Company, LLC
or any of its affiliates, of beneficial ownership of a majority or more
of the Company's outstanding voting securities; or (ii) any sale,
lease, exchange or other transfer in one transaction or a series of
selected transactions, other than a transfer to an entity which is
majority controlled by Fox Paine & Company, LLC or any affiliate
thereof or an entity with substantially the same equity holders as
immediately prior to such transfer, of all or substantially all of the
assets of the Company or its operating subsidiaries (taken together),
or any plan for the liquidation or dissolution of the Company; and
-4-
(d) "Disability" shall mean that, for a period of six (6) consecutive
months in any twelve (12) month period, you are incapable of
substantially fulfilling the duties of your positions as set forth in
paragraph 1 because of physical, mental or emotional incapacity
resulting from injury, sickness or disease. Any question as to the
existence or extent of the Disability upon which you and the Company
cannot agree shall be determined by a qualified, independent physician
selected by the Company. The determination of any such physician shall
be final and conclusive for all purposes; provided, however, that you
or your legal representatives shall have the right to present to such
physician such information as to such Disability as you or they may
deem appropriate, including the opinion of your personal physician.
5. Confidential Information. You acknowledge that information obtained
by you while employed by the Company concerning the business or affairs of (i)
the Company, its affiliates and subsidiaries or (ii) any enterprise which is the
subject of an actual or potential transaction, considered, evaluated, reviewed
or otherwise made known to Fox Paine & Company, LLC, the Company, its affiliates
or subsidiaries, or you ("Confidential Information") is the property of the
Company. You shall not, without the prior written consent of the Company,
disclose to any person or use for your own account any Confidential Information
except (i) in the normal course of performance of your duties hereunder, (ii) to
the extent necessary to comply with applicable laws, or (iii) to the extent that
such information becomes generally known to and available for use by the public
other than as a result of your acts or omissions to act. Upon termination of
your employment or at the request of the Company at any time, you shall deliver
to the Company all documents containing Confidential Information as relating to
the business or affairs of the Company that you may then possess or have under
your control.
6. Non-Competition; Non-Solicitation.
a. Non-Competition. You acknowledge that you are and will be in
possession of Confidential Information and that your services are of unique and
great value to the Company. Accordingly, from the Effective Date until the
expiration of the period ending twelve (12) months from the date of the
termination of your employment with the Company or its affiliated companies (the
"Non-Compete Period"), you shall not directly or indirectly own, invest (equity
or debt) in, manage, control, participate in, consult with, advise, render
services to, or in any manner engage in, or be connected as an employee,
officer, partner, director, consultant or otherwise with, (i) any enterprise
engaged in the provision of telecommunications services in the state of Alaska,
or (ii) any enterprise which is the subject of a Potential Transaction in which
you are directly involved or have knowledge of during or at any time prior to
the termination of this Agreement, and that is engaged in the provision of
telecommunications services, (a "Competitive Business"). Nothing herein shall
prohibit you from being a passive owner of not more than one percent (1 %) of
any publicly traded class of capital stock of any entity engaged in a
Competitive Business.
b. Non-Solicitation. During the Non-Compete Period, you shall not
directly or indirectly induce or attempt to induce any employee of the Company
or its affiliates or subsidiaries to terminate, or in any way interfere with,
the relationship between the Company or its affiliates or subsidiaries and any
employee thereof, nor shall you directly or indirectly solicit
-5-
or attempt to solicit business from any customer or supplier of the Company or
its affiliates or subsidiaries.
c. Scope of Restriction. If, at the time of enforcement of this
paragraph 6, a court shall hold that the duration, scope or area restrictions
stated herein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area.
7. Survival. Any termination of your employment or of this Agreement
shall have no effect on the continuing operation of Section 5 or 6 for the
periods specified therein.
8. Indemnification. The Company agrees to indemnify you and hold you
harmless from any and all claims arising from or relating to your status as an
employee, officer, Executive Officer, director or agent of the Company, its
affiliates, or subsidiaries, to the fullest extent permitted by Delaware law
other than claims arising from your gross negligence.
9. Waiver of Claims. You agree as a condition to your receipt of any
termination or severance benefits pursuant to Section 4 hereof, you will agree
to waive, discharge and release any and all claims, demands and causes of
action, whether know or unknown, against the Company, its affiliates and
subsidiaries, and their respective current and former directors, officers,
employees, attorneys and agents arising out of, connected with or incidental to
your employment or other dealings with the Company, its affiliates or
subsidiaries, which you or anyone acting on your behalf might otherwise have had
or asserted and any claim to any compensation or benefits from your employment
with the Company or its affiliates (other than pursuant to the terms of this
Agreement or of any employee benefit plans set forth in paragraph 3 hereof).
10. Governing Law. This Agreement and all questions concerning the
construction, validity and interpretation of this Agreement shall be governed by
and determined in accordance with the internal law, and not the law of
conflicts, of the State of Delaware. All disputes between ACS and Executive
(whether contractual or otherwise, including, without limitation, disputes
relating to or arising under or by reason of this Agreement or the other
agreements referred to herein) must be resolved by binding confidential
arbitration held within thirty (30) miles of Executive's place of employment,
specific location to be selected by the Board of Directors of Alaska
Communications Systems Holdings, Inc. Such arbitration shall be conducted in
accordance with the rules of the National Rules for Resolution of Employment
Disputes of the American Arbitration Association (the AAA) and judgment on the
award rendered in such arbitration may be entered in any court having
jurisdiction. Nothing in this Agreement shall restrict the right of ACS or its
affiliates to seek injunctive relief arising out of any violation by the
Executive of this Agreement. This Agreement is intended by ACS and Executive to
be a binding and completely integrated agreement superseding all prior and
contemporaneous promises, representations, offers, contracts and agreements
between ACS and Executive. This Agreement may not be amended except in writing
executed by Executive and the Chairman of the Boards of ACS (or other Boards'
authorized designee). This Agreement shall only be binding on ACS and Executive
if and when both parties have executed the Agreement in counterparts.
-6-
11. Notices. All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given, if mailed, by registered
or certified mail, return receipt requested, or, if by other means, when
received by the other party at the address set forth herein, or such other
address as may hereafter be furnished to the other party by like notice.
Notice or communication hereunder shall be deemed to have been received on the
date delivered to or received at the premises of the addressee if delivered
other than by mail, and in the case of mail, upon the depositing of the same in
the United States mail as above stated (as evidenced, in the case of registered
or certified mail, by the date noted on the return receipt.) Notices shall be
addressed as follows:
If to the Executive: Mr. David C. Eisenberg
10804 West 128th Terrace
Overland Park, KS 66213
If to the Company: Alaska Communications Systems Group, Inc.
600 Telephone Avenue
Anchorage, Alaska 99503
Attention: President & CEO
with a copy to: Fox Paine & Company, LLC
950 Tower Lane
Suite 1950
Foster City, CA 94404
Attention: W. Dexter Paine
12. Separability Clause. Any part, provision, representation or
warranty of this Agreement, which is prohibited, or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.
13. Successors and Assigns; Assignment of Agreement. This Agreement
shall bind and inure to the benefit of and be enforceable by the parties hereto
and the respective successors and assigns of the parties hereto. As used in this
Agreement, "Company," and "ACS" shall mean the Company, and ACS as hereinbefore
defined and any subsidiaries and successors to their businesses and/or assets
which assume this Agreement by operation of law, or otherwise. This Agreement is
personal to you and without the prior written consent of the Company shall not
be assignable by you otherwise than by will or the laws of descent and
distribution.
14. Waiver. The failure of any party to insist upon strict performance
of a covenant hereunder or of any obligation hereunder, irrespective of the
length of time for which such failure continues, shall not be a waiver of such
party's right to demand strict compliance in the future. No consent or waiver,
express or implied, to or of any breach or default in the performance of any
obligation hereunder, shall constitute a consent or waiver to or of any other
breach or default in the performance of the same or any other obligation
hereunder. No term or
-7-
provision of the Agreement may be waived unless such waiver is in writing and
signed by the party against whom such waiver is sought to be enforced.
15. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto with respect to the subject matter contemplated
herein and supersedes all prior agreements, whether written or oral, between the
parties, relating to the subject matter hereof. This Agreement shall not be
modified except in writing executed by all parties hereto.
16. Captions. Titles or captions of paragraphs contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
17. Counterparts. For the purpose of facilitating the execution of this
Agreement, and for other purposes, this Agreement may be executed in any number
of counterparts. Each counterpart shall be deemed to be an original, and all
such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
date first above written.
Please execute the extra copy of this letter Agreement in the space
below and return it to the undersigned at the address set forth above to confirm
your understanding and acceptance of the agreements contained herein.
Very truly yours,
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
BY: /s/ Liane Pelletier
----------------------------
Name: Liane Pelletier
Title: President & CEO
Accepted and agreed to:
/s/ David C. Eisenberg
- -----------------------
David C. Eisenberg
-8-
APPENDIX A
Performance Obligations: Sr. Vice President, Corporate Strategy and Development
During the Employment Period, you shall render such services to the Company and
its affiliates and subsidiaries as the Boards of Directors of ACS shall
reasonably designate from time to time, and you shall devote your best efforts
and full time and attention to the business of the Company. The Boards of
Directors of ACS reserve the sole and exclusive right to assign Executive
responsibilities at its discretion; however, such assignment shall not have the
effect of involuntarily reducing Executive's pay or benefits.
Primary responsibilities upon hire shall include:
a. Strategic Planning;
b. Business Development;
c. Market and Competitive Analysis;
d. Market Research;
e. Brand Management;
f. Regulatory Strategy;
g. Community Relations;
h. Corporate Communications; and
i. Legislative / Lobbying Activities.
-9-