EXHIBIT 10.8
STRICTLY CONFIDENTIAL
ALEC ACQUISITION CORPORATION
100 W. 11Th STREET
VANCOUVER, WA 98660
February 6, 1999
Mr. Michael L. Schuh
215 NE 299th Street
Ridgefield, Washington 98642
Re: Employment Agreement
Dear Mr. Schuh:
This letter agreement (this "Agreement") sets forth the terms and
conditions of your employment with ALEC Acquisition Corporation ("ALEC" or the
"Company"), effective as of the first to occur of the date of consummation of
(a) the transactions contemplated by the Purchase Agreement, by and among ALEC
Acquisition Sub Corp, which is a subsidiary of ALEC, CenturyTel of the
Northwest, Inc. and CenturyTel Wireless, Inc., dated as of August 14, 1998 and
(b) the transactions contemplated by the Asset Purchase Agreement, by and among
Alaska Communications Systems, Inc. ("ACS") and the Municipality of Anchorage,
dated as of October 20, 1998 (the "Effective Date"); provided that, if neither
transaction is consummated, this Agreement shall be void ab initio
1. Employment and Services. ALEC hereby employs you as Vice President of
Information Technology and Chief Information Officer, 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 ALEC shall reasonably designate from time to time, and you shall
devote your best efforts and full time and attention to the business of the
Company.
2. Compensation. The Company shall pay you an annual base salary ("Annual
Base Salary") of $130,000 during the first year of the Employment Period,
subject to annual review in each year of the Employment Period thereafter (for
any partial year during the Employment Period, the Annual Base Salary shall be
prorated based on the number of days during such year on which you are employed
by the Company). Your Annual Base Salary may be increased in years following the
first year of employment but may not be decreased. As used herein, the term
"Annual Base Salary" refers to the Annual Base Salary as so increased. Such
Annual Base Salary shall be payable in installments in accordance with the
Company's regular payroll practices.
In addition, you will be eligible to receive an annual bonus to be
awarded ninety (90) days after the end of each fiscal year, to be paid as soon
as practicable but not later than one hundred twenty (120) days after the end of
the fiscal year. In order to determine the amount of such bonus, the Company,
acting in good faith, shall determine appropriate business targets for each
fiscal year and your annual bonus shall be based upon attainment of such
targets. As a
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benchmark for such bonuses, the Company agrees that if the Company attains the
mutually determined business targets, you shall receive a bonus equal to forty
percent (40%) 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.
The Company, acting in good faith, shall also establish a special bonus
program for you based upon milestones and timeframes ("Implementation
Timelines") for the scheduled installation of the information technology systems
set forth on Schedule A, attached hereto. You will be paid the bonus amount
established for each milestone after satisfying the acceptance criteria
associated with the Implementation Timelines, within thirty (30) days following
acceptance by the Company.
3. Benefits. During the Employment Period, you shall be entitled to
participate in the Company's fringe benefit plans, subject to and in accordance
with applicable eligibility requirements, such as life and disability insurance
plans and all other benefit plans (other than severance plans or arrangements)
generally available to the Company's executive officers, including relocation of
personal residence benefits and stock options plan, in accordance with the terms
of any such plans or policies as in effect from time to time during the
Employment Period. In addition, the Company will reimburse your reasonable
out-of-pocket expenses incurred in connection with the performance of your
services hereunder, in each case consistent with Company policy. In addition,
during the Employment Period, you shall be entitled to annual vacation of not
less than two (2) weeks.
In lieu of relocation benefits under the applicable policy, you may
elect to have company-paid housing provided in Anchorage, Alaska during the
Employment Period. The selection of such housing shall be subject to Company
approval and will be consistent with housing provided to others similarly
situated.
4. Termination and Severance. The Employment Period shall terminate on the
first to occur of (i) ninety (90) days following written notice by you to the
Company of your resignation without Good Reason, (it being understood that you
will continue to perform your services hereunder during such ninety (90) day
period), (ii) thirty (30) days following written notice by you to the Company of
your resignation with Goad Reason during the Employment Period or following a
Change in Control (it being understood that you will continue to perform your
services hereunder during such thirty (30) day period), (iii) your death or
Disability, (iv) a vote of the Board of ALEC directing such termination for
Cause, (v) a vote of the Board of ALEC directing such termination without Cause,
or (vi) the second anniversary of the Effective Date (the "Scheduled Expiration
Date"); provided, however, that if termination of employment has not been
effected on or before the Scheduled Expiration Date, employment shall thereafter
continue at will ("At-will Period").
In the event of termination of the Employment Period pursuant to
clause (ii) or (v) above, the Company shall concurrently with such termination
make a lump-sum payment to you equal to the sum of (x) one times your Annual
Base Salary plus (y) in the event such termination
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occurs on or after December 31, 1999, one times your most recent annual bonus
payment, if any, paid pursuant to paragraph 2 hereof. In addition, you shall be
entitled to reimbursement of the cost of continuing your health insurance
coverage under COBRA for the twelve (12) month period following such a
termination. Except as otherwise set forth in this paragraph 4 or pursuant to
the terms of employee benefit plans in which you participate pursuant to
paragraph 3, you shall not be entitled to any compensation or other payment from
the Company in connection with termination of your employment hereunder.
However, in the event you elect to resign effective as of the Scheduled
Expiration Date, after having given not less than thirty (30) days written
notice, or, if after you successfully meet the Implementation Timelines set
forth in Schedule A you resign upon ninety (90) days written notice, you shall
receive six (6) months of your Annual Base Salary, as well as reimbursement for
the cost of continuing your health insurance coverage under COBRA for such
period, in a lump sum within thirty (30) days after your termination from
employment. If you elect to relocate to the lower 48 states in connection with
such voluntary resignation, or following a termination of employment pursuant to
clause (ii) or (v), the Company will also provide for relocation of personal and
household goods, subject to applicable limits set forth in the Company's
relocation policy, and travel for you and your household to your new residence
in the lower 48 states.
For purpose of this agreement, the following definitions will apply:
(a) "Good Reason" shall mean: (i) the assignment of you by the Company to any
duties materially inconsistent with, or a material diminution of, your position,
including duties, title, offices, or responsibilities; or (ii) the transfer,
without your concurrence, of your principal place of employment to a geographic
location more than 100 miles from both your current personal residence and from
the location of your current principal place of employment (but shall not
include any transfer to Anchorage, Alaska); (b) "Cause" shall mean: (i) your
willful failure to comply with lawful directions of the Boards of the Company
after written notice; (ii) fraud, misappropriation or embezzlement by you; or
(iii) a material breach of this Agreement (other than due to physical or mental
illness) that is not cured within thirty (30) days after receiving written
notice from either the Board of the Company or of the Subsidiary of your
specific failure to perform your duties; (c) "Change in Control" shall mean: (i)
the acquisition by any person or group (as that term is used in Regulation 13D
under the Securities Exchange Act of 1934, as amended), other than Fox 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 (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
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such information as to such Disability as you or they may deem appropriate,
including the opinion of your personal physician.
5. Confidential Information. You acknowledge that information obtained by
you while employed by the Company or any affiliate thereof (including as a
consultant to Fox Paine & Company, LLC or as an employee of LEC Consulting
Corporation) concerning the business or affairs of (i) the Company, its
affiliates and subsidiaries or (ii) any enterprise which is the subject of an
actual or potential transaction (e.g., merger, acquisition, joint venture),
including, without limitation, the proposed divestitures by GTE Corp. and US
West, Inc. (a "Potential Transaction"), considered, evaluated, reviewed or
otherwise made known to Fox 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 Boards of the
Company, disclose to any person or use for your own account any Confidential
Information except (i) in the normal course of performance of your duties
hereunder, (ii) to the extent necessary to comply with applicable laws, or (iii)
to the extent that such information becomes generally known to and available for
use by the public other than as a result of your acts or omissions to act. Upon
termination of your employment or at the request of the Board of the Company or
of the Subsidiary at any time, you shall deliver to the respective Boards all
documents containing Confidential Information or relating to the business or
affairs of the Company that you may then possess or have under your control.
6. Non-Competition; Non-Solicitation.
a. Non-Competition. You acknowledge that you are and will be in
possession of Confidential Information and that your services are of unique and
great value to the Company. Accordingly, from the Effective Date until the
expiration of the period ending twelve (12) months form the effective date of
the termination of your employment with the Company or its affiliated companies
(the "Non-Compete Period"), you shall not, without the prior written consent of
the Company, 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 Alasks, or (ii) any entity which is
engaged in the provision of local exchange or wireless telecommunications
services in competition with the Company in any of the Company's service
territories (a "Competitive Business"). Nothing herein shall prohibit you from
being a passive owner of not more than one percent (1%) of any publicly-traded
class of capital stock of any entity engaged in a Competitive Business.
b. Non-Solicitation. During the Non-Compete Period, you shall not
directly or indirectly induce or attempt to induce any employee of the Company
or its affiliates or subsidiaries to terminate, or in any way interfere with,
the relationship between the Company or its affiliates or subsidiaries and any
employee thereof, nor shall you directly or indirectly solicit or attempt to
solicit business from any customer of the Company or its affiliates or
subsidiaries. For purposes of this paragraph, a "customer" shall mean an entity
to which the Company provides products or services in the State of Alaska or in
any other service territory of the Company, and
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"business" is limited to the provision of products and services within Alaska or
such other service territory of the Company.
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, 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. If any action at law or in equity is
commenced to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover reasonable attorney's fees, costs and
disbursements from the non-prevailing party, in addition to any other relief to
which the prevailing party may be entitled, as determined by the court.
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:
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If to the Executive: Mr. Michael L. Schuh
215 NE 299th Street
Ridgefield, Washington 98642
If to the Company: ALEC Acquisition Corporation
100 W. 11th Street
Vancouver, WA 98660
Attention: Vice President, Human
Resources
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," shall mean the Company, its parent corporation ALEC
Holdings, Inc., and its subsidiaries, and any successors to their businesses
and/or assets as aforesaid which assume and agree to perform this Agreement by
operation of law, or otherwise. This Agreement is personal to you and without
the prior written consent of the Company shall not be assignable by you
otherwise than by will or the laws of descent and distribution.
14. Waiver. The failure of any party to insist upon strict performance of
a covenant hereunder or of any obligation hereunder, irrespective of the length
of time for which such failure continues, shall not be a waiver of such party's
right to demand strict compliance in the future. No consent or waiver, express
or implied, to or of any breach or default in the performance of any obligation
hereunder, shall constitute a consent or waiver to or of any other breach or
default in the performance of the same or any other obligation hereunder. No
term or provision of the Agreement may be waived unless such waiver is in
writing and signed by the party against whom such waiver is sought to be
enforced.
15. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto with respect to the subject matter contemplated
herein and supersedes all prior agreements, whether written or oral, between the
parties, relating to the subject matter hereof. This Agreement shall not be
modified except in writing executed by all parties hereto.
16. Captions. Titles or captions of paragraphs contained in this Agreement
are inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provision hereof.
17. Counterparts. For the purpose of facilitating proving this Agreement,
and for other purposes, this Agreement may be executed simultaneously in any
number of counterparts. Each counterpart shall be deemed to be an original, and
all such counterparts shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
date first above written.
Please execute the extra copy of this letter Agreement in the space
below and return it to the undersigned at the address set forth above to confirm
your understanding and acceptance of the agreements contained herein.
Very truly yours,
ALEC ACQUISITION CORPORATION
By: /s/ Wesley E. Carson
-------------------------------------
Name: Wesley E. Carson
Title: Executive Vice President
Accepted and agreed to:
/s/ Michael L. Schuh
- -----------------------
Michael L. Schuh
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SCHEDULE A
Implementation Timelines
Systems to Be Installed & Conditions for Acceptance Deadline Bonus Amount
- --------------------------------------------------- -------- ------------
1. SAP Financial Suite for ATU 03/31/99 $50,000
o Complete transition of Financial Systems support from legacy ATU
environment (FMS) to SAP. FMS system is used only for backup, parallel
processing verifications, and/or incidental functionality.
2. Saville Billing Platform for ATU 06/30/99 $50,000
o Implemented in production such that customer service order processing is
performed, end user customer bills are rendered and payments are supplied
to the new system.
3. Platinum Financial Suite for PTI Alaska Properties 06/30/99 $25,000
o Complete transition of financial systems support from legacy CenturyTel
environment to Platinum SQL. CenturyTel systems are used only for backup,
parallel processing verifications, and/or incidental functionality.
4. Saville Billing Platform for PTI Alaska Properties 08/31/99 $25,000
o Implemented in production such that customer service order processing is
performed, end user customer bills are rendered and payments are supplied
to the new system.
5. New AMA Processing Platform for PTI and ATU 08/31/99 $25,000
o Existing PTI and ATU AMA processing environments are replaced with a
common, Year 2000 compliant solution.
6. New Carrier Access Billing Platform for PTI and ATU 08/31/99 $25,000
o Existing PTI and ATU CABS processing environments are replaced with a
common, Year 2000 compliant solution.
7. Convert MARTENS for PTI to ATU Platform 08/31/99 $25,000
o MARTENS processing for PTI has been transitioned to the ATU operating
platform such that PTI no longer requires CenturyTel transition services.
8. Special Completion Bonus 08/31/99 $100,000
o Successful and timely completion of deliverables set forth in 1 through 7
above.
9. Consolidation of PTI and ATU Financial Systems 123/31/99 $75,000
o Complete transition of ATU and PTI accounting and finance functions to a
common system.
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(a) The Company agrees to work with you in good faith to modify the dates
and/or description of the deliverables set forth above in the event your ability
to meet such dates and/or deliverables is significantly compromised as a result
of (i) conditions imposed by the Alaska Public Utilities Commission in
connection with required approvals to close the transactions, (ii) delayed
closing of one or both of the transactions, or (iii) a failure on the part of
the Company to provide reasonable resources.
(b) Notwithstanding anything in paragraph 4 of this Employment Agreement
to the contrary, if prior to August 31, 1999 or such other date as may be
established for the Special Completion Bonus pursuant to paragraph (a) above,
you resign with Good Reason pursuant to clause (ii) or your employment is
terminated by a vote of the Board of ALEC directing such termination without
Cause pursuant to clause (v), then you shall received, in addition to any
severance due you under paragraph 4, a lump-sum payment in the gross amount of
$75,000. Such payment shall be made within thirty (30) days following your
separation from employment.
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SCHEDULE B
Employment Letter
This shall confirm the Company's commitment with regard to the level of
your participation in regard to the stock options plan, as set forth in your
offer letter.
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[LETTERHEAD OF LEC CONSULTING CORPORATION]
November 19, 1998
Michael L. Schuh
215 NE 299th Street
Ridgefield, WA 98642
Dear Michael:
I am pleased to offer you the position of Vice President, Information Technology
& Chief Information Officer with LEC Consulting Corporation ("LEC Consulting")
at an annual salary of $130,000. As a LEC Consulting employee you will also have
a target annual bonus equal to 40 percent of your annual base salary. Your bonus
for 1998 performance will be prorated based on 1998 service. In this position,
you will report directly to James H. Huesgen. The effective date of your
employment is November 1, 1998.
As you are aware, your primary work location will be in Anchorage, Alaska. The
Company will provide you with temporary accommodations in Anchorage and cover
reasonable expenses until such time as you relocate. You will be eligible for
the Company's executive relocation benefits in connection with your move to
Alaska.
At this time, you are eligible to participate in LEC Consulting's medical,
dental, vision, life and AD&D insurance and disability income replacement plans.
You will also be considered eligible for future benefits as adopted in
accordance with the provisions of the respective plans.
A subsidiary of ALEC Aquisition Corporation ("ALEC") has entered into an
agreement to purchase the Alaska Operations of Century Telephone and an
affiliated subsidiary was recently selected as the successful bidder for
Anchorage Telephone Utility. It is anticipated that one or both of these
transactions will close during the first quarter of 1999. Your employment will
be transferred to ALEC upon closing of the first transaction. At that time,
elements of your compensation and benefits package that are subject to ALEC
Board of Director's approval may be reviewed and, if appropriate, amended to
coincide with ALEC programs. While compensation and benefits programs do change
from time to time, ALEC will strive to give you reasonable notice of any
impending change.
As an officer of ALEC, you will be eligible to participate in a stock option
program, which is being presented to the board of directors for approval.
Although certain features of the plan are still being finalized, you can assume
that at a strike price of $6.06 per share, your grant of options will be not
less than 50,000 shares. In addition, in recognition of the strategic importance
to the company of developing the information technology infrastructure, we will
ask the board to approve a special bonus plan to reward you for the completion
of key project milestones. We will communicate to you with regard to both the
stock options and the special bonus plan as soon as we have final board
approval.
As you know, there are always uncertainties associated with starting a business
and, though we have confidence in our ability to succeed, there are no
guarantees with respect to your employment, e.g. business falters, performance
is not satisfactory, etc. As a result, I feel a responsibility to advise you
that both LEC Consulting and ALEC are "at will" employers. This means either you
or the company may terminate the employment relationship, with or without cause.
Michael L. Schuh
November 19, 1998 Offer Letter
Page 2
All that being said, we appreciate your willingness to embark on this business
venture with us. Our business plans are challenging and exciting, and the next
several months will be especially demanding on all of us. We need your
creativity, energy and professionalism to help us build this business. We look
forward to having you join the team!
Please indicate your acceptance of these terms by signing below and returning
one copy of this letter to me. I may be reached at (360) 993-5150 if you have
any questions.
Sincerely,
/s/ Priscilla B. Andres
Priscilla B. Andres
Director, Human Resources
Cc: J. H. Huesgen
W. E. Carson
Employee File
Accepted: /s/ Michael Schuh Date: 11/18/98
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