EXHIBIT 10.46
EXECUTION COPY
VALOR TELECOMMUNICATIONS, LLC
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
April 9, 2004
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Chief Executive Officer
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇:
Reference is made to the Employment Agreement, dated as of April 9, 2004
(the "Employment Agreement"), between you ("you" or the "Employee") and Valor
Telecommunications, LLC, a Delaware limited liability company (the "Company").
As used herein "consummation" shall mean the closing of the sale of the IDS
Unites (as defined below) to underwriters participating in the IPO (as defined
below) pursuant to an underwriting agreement.
Upon the consummation of the initial public offering (the "IPO") of income
deposit securities ("IDS Units") by a newly formed direct or indirect parent of
the Company ("Newco"), the Company agrees to pay Employee a one-time cash bonus
equal to $1 million (the "IPO Bonus"). In addition:
(a) all of your unvested common and preferred equity interests in Valor
Management Holding Company, LLC ("Valor Management") and any unvested
options that you hold at Valor Telecommunications Southwest, LLC shall
vest immediately prior to consummation the IPO and all of your equity
interests shall be exchanged at the time of the consummation of the IPO
for IDS Units, at the IPO IDS valuation;
(b) certain existing investors of the Company (the "Existing Investors")
will transfer to you at the time of consummation of the IPO, IDS Units
with a value of $1.5 million. In addition, the Existing Investors will
deposit at the time of consummation of the IPO registered 'restricted' IDS
Units ("Restricted IDS Units") with a value of $5.5 million in an escrow
account (the "IDS Escrow Account" and the date of such deposit, the "Grant
Date") for your benefit. Such Restricted IDS Units shall be subject to
vesting and Restricted IDS Units that represent $1.5 million of the
initial deposit into the IDS Escrow Account shall vest on the six-month
anniversary of the Grant Date, $0.5 million on the first anniversary of
the Grant Date, $1.5 million on the eighteen-month anniversary of the
Grant Date and $2.0 million on the thirty-month anniversary of the Grant
Date so long as the Employee remains continuously employed by Newco from
the Grant Date until the applicable vesting date. Additional terms
applicable to the Restricted IDS Units are set forth in Exhibit A attached
hereto;
(c) the Company confirms that your 2004 annual performance target for
achieving 100% of your target bonus is the Company's budgeted 2004 EBITDA
as reflected in the
Company's approved 2004 operating budget. In addition, the Company
confirms that the IPO Bonus, payments made by the Company to its former
Chief Executive Officer in connection with his resignation and the IPO and
any other bonuses paid by the Company or its subsidiaries to its employees
in connection with the IPO shall be disregarded in determining the
achievement of performance targets in relation to your fiscal year 2004
bonus; and
(e) you will be eligible to participate in Newco's newly-created long term
incentive plan (the "LTIP") upon consummation of the offering. The Company
is currently working with ▇▇▇▇▇▇ ▇▇▇▇▇ to design the LTIP and your
participation in the LTIP pool will be structured to ensure a specified
minimum annual cash payment out of the LTIP pool of at least $500,000
subject to satisfaction of achievable over-performance targets and other
customary conditions.
Upon receipt by the Employee of the IPO Bonus and the grant to Employee of
the Restricted IDS Units upon substantially the terms set forth in Exhibit A,
Employee agrees to the assignment by the Company of the Employment Agreement and
all of its rights and obligations thereunder to Newco. In addition, Employee and
the Company agree that the Employment Agreement shall be automatically amended
on the Amendment Date without any further action by any of the parties as
follows:
1. All references to the "Company" in the Employment Agreement (other
than references in the recitals) shall mean Newco. References to the
"Company" in the recitals shall mean Valor Telecommunications, LLC.
2. The last sentence of Section 3.1 of the Employment Agreement shall
be deleted in its entirety and replaced with the following:
The Employee shall report directly to the Board of Directors and/or
the Chairman of the Board of Directors and so long as Employee
serves as the Chief Executive Officer of the Company, Employee shall
be nominated by the Company for election to its Board of Directors.
3. Section 9 of the Employment Agreement shall be deleted in its
entirety and replaced with the provisions set forth in Exhibit B
attached hereto.
The Employee acknowledges that the restrictions contained in Exhibit B are
reasonable and represents that he has consulted with independent legal counsel
regarding his rights and duties under the Employment Agreement and this letter
agreement. The Employee and the Company agree to take all further action as may
be reasonably requested by the other party to implement the revisions set forth
in this letter agreement.
This letter agreement may be executed in one or more counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one agreement. The parties hereto acknowledge and agree that money
damages may not be an adequate remedy for any breach of the provisions of this
letter agreement and that any party hereto will have the right to injunctive
relief or specific performance, in addition to all of its other rights and
remedies at law
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or in equity, to enforce the provisions of this letter
agreement. This letter agreement may not be amended or any provision hereof
waived or modified except by an instrument in writing signed by each of the
parties. Delivery of an executed counterpart of a signature page of this letter
agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart of this letter agreement. This letter agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
* * * * *
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Kindly sign your name at the end of this letter to signify your
acknowledgement and agreement of the above.
Very truly yours,
VALOR TELECOMMUNICATIONS, LLC
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Its: DIRECTOR AND AUTHORIZED SIGNATORY
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Acknowledged and Agreed
as of the date first written above
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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EXHIBIT A
SUMMARY OF PRINCIPAL TERMS
OF THE RESTRICTED IDS PROGRAM
The following is a summary of the principal terms of the Restricted IDS
Program to be established for the benefit of certain members of management
including ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Executive") immediately upon the consummation of
Valor Telecommunications, Inc.'s ("Newco") initial public offering of IDS Units
(the "IPO").
ESTABLISHMENT OF Immediately upon consummation of the IPO,
RESTRICTED IDS ACCOUNT: Newco, certain existing investors of Valor (the
"Existing Investors"), Executive and a mutually
acceptable escrow agent shall enter into an
escrow agreement (the "IDS Escrow Agreement")
which shall provide for the establishment of an
escrow account (the "IDS Escrow Account") for
the benefit of Executive.
FUNDING OF IDS ESCROW Immediately upon consummation of the IPO, the
ACCOUNT; INITIAL GRANT: Existing Investors shall deposit registered IDS
Units with a value of $5.5 million in the IDS
Escrow Account. In addition, the Existing
Investors will transfer to Executive at the time
of closing the IPOIDS Units with a value of $1.5
million. The IDS Units shall be valued at the
IPO price. The IDS Units deposited in the IDS
Escrow Account are referred to herein as the
"Restricted IDS Units" and the date on which
such deposit is made as the "Grant Date").
VESTING OF RESTRICTED IDS Restricted IDS Units that represent $1.5
UNITS: million of the initial deposit into the IDS
Escrow Account shall vest on December 31, 2004,
$0.5 million on the first anniversary of the
Grant Date, $1.5 million on December 31, 2005
and $2.0 million on December 31, 2006 (the
"Final Vesting Date") so long as the Executive
remains continuously employed by Newco from the
Grant Date until the applicable vesting date.
The vesting dates specified above have been
determined assuming a closing date of June 30,
2004 for the IPO. In the event the closing date
of the IPO is delayed beyond June 30, 2004, such
dates will be adjusted to reflect such delay.
Upon vesting, the vested portion of the
Restricted IDS Units shall be distributed to the
Executive.
In the event Executive's employment with Newco
is terminated prior to the Final Vesting Date,
all unvested Restricted IDS Units shall be
returned to the Existing Investors in proportion
to their original contribution of the
Restricted IDS Units to the IDS Escrow Account.
OWNERSHIP OF RESTRICTED Ownership of the Restricted IDS Units shall
IDS UNITS; DISTRIBUTIONS: remain with the Existing Investors (in
proportion to their contribution) until the
Restricted IDS Units have vested as specified
above. Upon vesting, ownership of the vested
portion of the Restricted Units shall be
transferred to Executive.
All distributions on account of the Restricted
IDS Units (in the nature of interest, dividends
or otherwise) shall be paid to the Existing
Investors (in proportion to their original
contribution) until the Restricted IDS Units
vest as specified above. Executive (or the
subsequent transferee) shall be entitled to
distributions on the vested portion of the
Restricted IDS Units.
TAX CONSEQUENCES: The following discussion assumes that Executive
will not make a Section 83(b) election under Section
83(b) of the Internal Revenue Code with respect
to the Restricted IDS Units. Neither the
funding of the Restricted IDS Units into the
IDS Escrow Account nor the payment of
distributions by Newco on unvested Restricted
IDS Units is expected to create any federal
income tax liability for the Executive. Upon
vesting, the Executive will recognize
compensation income equal to the fair market
value of the vested Restricted IDS Units at
such time (and the vested Restricted IDS Units
will be distributed to the Executive). The
Executive's tax basis in the vested Restricted
IDS Units will be equal to such fair market
value, and will be allocated between the common
stock and the subordinated note comprising the
Restricted IDS Unit based on their relative
fair market values; this may result in original
issue discount on the subordinated note.
DEFINITIVE AGREEMENTS: The terms of Restricted IDS Escrow Agreement
and any related documents will be structured to
exempt the transactions contemplated herein
from Section 16(b) of the Securities Exchange
Act of 1934 (including pursuant to Rule 16b-3
thereof).
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EXHIBIT B
9. RESTRICTIVE COVENANTS.
9.1. COMPETITION. During the Employment Term and in the event the
Employee's employment is terminated for any reason (whether by the Company, the
Employee or by expiration), other than pursuant to Section 7.1(d) following a
change of control of the Company or a sale of all or substantially all of the
assets of the Company, during the Initial Restriction Period (as defined below)
and the Extended Restriction Period (as defined below), if applicable, the
Employee, in consideration of compensation to be paid to Employee hereunder,
will not directly or indirectly (as a director, officer, executive employee,
manager, consultant, independent contractor, advisor or otherwise) engage in
competition with, or own any interest in, manage, control, perform any services
for, participate in or be connected with any business or organization which
engages in competition with any of the Companies within the meaning of Section
9.5, provided, however, that the provisions of this Section 9.1 shall not be
deemed to prohibit (A) the Employee's ownership of not more than two percent
(2%) of the total shares of all classes of stock outstanding of any publicly
held company, or ownership, whether through direct or indirect stock holdings so
long as Employee has no active participation in such company or (B) any of the
current activities permitted by the second last sentence of Section 3.3. In the
event the Employee's employment is terminated by the Company pursuant to Section
7.1(d) following a change of control of the Company or a sale of all or
substantially all of the assets of the Company, Sections 9.1 and 9.5 shall be
deemed substituted and replaced in their entirety by the provisions set forth in
Annex A attached hereto.
9.2. NON-SOLICITATION. During the Employment Term and in the event the
Employee's employment is terminated for any reason (whether by the Company, the
Employee or by expiration), during the Initial Restriction Period and the
Extended Restriction Period, if applicable, the Employee, in consideration of
compensation to be paid to Employee hereunder, will not directly or indirectly
induce or attempt to induce any employee of any of the Companies to leave the
employ of the Company or such subsidiary or affiliate, or in any way interfere
with the relationship between any of the Companies and any employee thereof.
9.3. NON-INTERFERENCE. During the Employment Term and, in the event the
Employee's employment is terminated for any reason (whether by the Company, the
Employee or by expiration), during the Restriction Period, the Employee, in
consideration of compensation to be paid to Employee hereunder, will not
directly or indirectly hire, engage, send any work to, place orders with, or in
any manner be associated with any supplier, contractor, subcontractor or other
business relation of any of the Companies if such action by him would have an
adverse effect on the business, assets or financial condition of any of the
Companies, or materially interfere with the relationship between any such person
or entity and any of the Companies (including, without limitation, make any
negative or disparaging statement or communication regarding any of the
Companies either publicly or to any such person or entity).
9.4. RESTRICTION PERIODS; SEVERANCE COMPENSATION DURING EXTENDED
RESTRICTION PERIOD. The restrictions set forth in Sections 9.1, 9.2 and 9.3
shall initially apply for a period of twelve (12) months subsequent to the
termination of Employee's employment for any reason (the "Initial Restriction
Period") and, in the event the Employee's employment is terminated within two
years of the Effective Date, then the Company may, at its option, extend the
Initial Restriction Period by an additional twelve (12) month period (such
additional twelve (12) month period, the
"Extended Restriction Period"). During the Extended Restriction Period, subject
to continued compliance by Employee with Section 6 and Section 9 hereof and in
consideration of Employee's continuing obligations during the Extended
Restriction Period, the Company shall pay Employee the same amounts and provide
the same benefits that were provided to Employee during the Initial Restriction
Period pursuant to Section 7.2 at such times and subject to such restrictions as
provided in Section 7.2.
9.5. COMPETITIVE ACTIVITIES. For purposes of this Section 9, a person or
entity (including, without limitation, the Employee (shall be deemed to be a
competitor of one or more of the Companies, or a person or entity (including,
without limitation, the Employee) shall be deemed to be engaging in competition
with one or more of the Companies, if such person or entity conducts or plans to
conduct (i) any activity with any private equity firm or firms, investment bank
or banks or any other similar entity relating to the evaluation, acquisition or
operation of any telecommunications business in the United States, or (ii) any
activities that compete with or owns or manages any business that competes with
the local telecommunications businesses of any of the Companies in any of the
markets that are served by any of the Companies at the time of determination.
9.6. CERTAIN REPRESENTATIONS OF THE EMPLOYEE. In connection with the
foregoing provisions of this Section 9, the Employee represents that his
experience, capabilities and circumstances are such that such provisions will
not prevent him from earning a livelihood. The Employee further agrees that the
limitations set forth in this Section 9 (including, without limitation, time and
territorial limitation) are reasonable and properly required for the adequate
protection of the current and future businesses of the Companies. It is
understood and agreed that the covenants made by the Employee in this Section 9
(and in Section 6 hereof) shall survive the expiration or termination of this
Agreement.
9.7. INJUNCTIVE RELIEF. The Employee acknowledges and agrees that a remedy
at law for any breach or threatened breach of the provisions of Section 9 hereof
would be inadequate and, therefore agrees that the Company and any of its
subsidiaries or affiliates shall be entitled to seek injunctive relief in
addition to any other available rights and remedies in cases of any such breach
or threatened breach; provided, however, that nothing contained herein shall be
construed as prohibiting the Company or any of its affiliates from pursuing any
other rights and remedies available for any such breach or threatened breach.
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ANNEX A
9.1 COMPETITION In the event the Employee's employment is terminated by
the Company pursuant to Section 7.1(d) following a change of control of the
Company or a sale of all or substantially all of the assets of the Company,
during the Initial Restriction Period (as defined below) and the Extended
Restriction Period (as defined below), if applicable, the Employee, in
consideration of compensation to be paid to Employee hereunder, will not
directly or indirectly (as a director, officer, executive employee, manager,
consultant, independent contractor, advisor or other-wise) engage in competition
with, or own any interest in, perform any services for, participate in or be
connected with any business or organization which engages in competition with
any of the Companies in a manner described in Section 9.5 below, provided,
however, that the provisions of this Section 9.1 shall not be deemed to prohibit
(A) the Employee's ownership of not more than two percent (2%) of the total
shares of all classes of stock outstanding of any publicly held company, whether
through direct or indirect stock holdings so long as Employee has no active
participation in such company or (B) any of the current activities permitted by
the second last sentence of Section 3.3.
9.5 COMPETITIVE ACTIVITIES For purposes of this Section 9, a person or
entity (including, without limitation, the Employee) shall be deemed to be a
competitor of one or more of the Companies, or a person or entity (including.
without limitation, the Employee) shall be deemed to be engaging in competition
with one or more of the Companies, if such person or entity conducts, or, to the
knowledge of the Employee, plans to conduct, the Specified Business (as
hereinafter defined) as a significant portion of its business in any of the
local telephone exchange markets served by the Companies. For purposes of this
Agreement, "Specified Business" means (A) providing local telephone service or
engaging in business conducted by the Company at the time of termination of the
Employee's employment with the Company or (B) conducting, operating, carrying
out or engaging in the business of managing any entity described in clause (A).