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Exhibit 10.42 EMPLOYMENT AGREEMENT

This Employment Agreement (this " Employment Agreement "), dated as of September 1, 2004, is between Ascent Assurance, Inc. , a Delaware corporation (the Company "), and Mr. Ben Cutler (the " Employee ").

Whereas , the Company desires to enter into an employment relationship with the Employee and the Employee wishes to accept such employment, under the terms and conditions set forth in this Employment Agreement.

Now, therefore , in consideration of and in reliance upon the foregoing and the covenants, obligations and agreements contained herein, the Company and the Employee hereby agree as follows: 1 Employment Period The Company will employ the Employee, and the Employee will serve the Company, under the terms of this Employment Agreement for a term of five years commencing on September 1, 2004 (hereinafter, the " Start Date" ). Notwithstanding the foregoing, this Employment Agreement and the Employee' s employment hereunder may be earlier terminated, as provided in Section 4 hereof. The period of time between the commencement and the termination of the Employee' s employment hereunder shall be referred to herein as the " Employment Period ."
2 Duties and Status During the Employment Period, the Employee shall serve as the President and Chief Executive Officer (" CEO" ) of the Company and be responsible and report to the Board of Directors of the Company (the " Board" ). Further, so long as he shall be a director of the Company, the Employee shall be appointed as Chairman of the Board. During the Employment Period, the Employee shall have such authority and perform such duties which are consistent with the Employee' s title and position as the President and CEO of the Company, as well as such other duties as may be assigned by the Board from time to time. The Employee' s duties shall include, without limitation, responsibilities with respect to strategic development and all business operations of the Company and hiring and firing authority within guidelines as may be set by the Board or with the advice and consent of the Board or otherwise as the Board may from time to time prescribe. The Employee agrees to devote all of his time, efforts and skills exclusively to the performance of his duties and responsibilities under this Employment Agreement and will not provide his services to any other person or entity without the prior consent of the Board; provided, however , that nothing in this Employment Agreement shall preclude the Employee from devoting reasonable periods required for participating in professional and appropriate industry associations, educational, philanthropic, public interest, charitable, social or community activities so long as such activities do not interfere in any material respect with the Employee' s duties hereunder or involve any manner of activity that is competitive with or adverse to the best interests of the Company; provided, further , that if during any regular business day these activities require the Employee to be off-premises more than four hours during normal business hours, that day shall be allocated to vacation time.
3 Compensation 3.1 Base Salary During the Employment Period, the Company shall pay the Employee an annualized base salary of $250,000 payable twice monthly in arrears and in accordance with the standard payroll practices of the Company; provided, however, that such amount shall be reviewed by the Board annually, and may, in the sole discretion of the Board, be increased. The base salary paid to the Employee by the Company shall be referred to herein as the " Base Salary" .
3.2 Performance Bonus In addition to the compensation otherwise payable pursuant to this Employment Agreement, the Employee shall be eligible to receive an annual performance bonus (" Annual Bonus" ) for each fiscal year based upon the attainment of performance criteria hereinafter described. For each fiscal year during the Employment Period, annual performance criteria shall be developed by management and presented to the Board (or a designated committee thereof) for approval and/or modification pursuant to or in connection with the development of a five-year strategic plan. The Employee' s minimum Annual Bonus in the event the target performance is attained shall be 200% of the Base Salary in effect on the last day of the applicable fiscal year. Any Annual Bonus of less than 200% of such Base Salary (upon partial attainment of targeted performance criteria) or in excess of 200% of such Base Salary (upon exceeding targeted performance criteria) shall be as set forth in the annual performance criteria. Notwithstanding the foregoing, a minimum Annual Bonus for the partial calendar year 2004 period shall be paid in an amount equal to $166,666 and a minimum Annual Bonus for an entire calendar year 2005 period shall be paid in an amount equal to $500,000, regardless of the attainment of the targeted performance criteria; provided, however , that such minimum Annual Bonus shall be payable only if (a) the Employment Period continues in effect through the last day of 2004 and 2005, respectively, or (b) the Employee is terminated by the Company other than for Cause.
3.3 Equity Award The Employee shall receive options (the " Initial Options" ) to purchase 9.9% of the common stock of the Company (on a fully-diluted basis as of the Start Date), at an exercise price equal to the fair market value of such shares on the Early Exercise Date (as defined below), as determined by the Board in good faith based on generally accepted industry valuation methodologies. The Initial Options shall vest in five equal installments on each of the first five anniversaries of the Start Date, provided the Employee is still an employee of the Company on each applicable vesting date. Notwithstanding the foregoing, the Initial Options shall be exercisable before the applicable vesting dates, on or after June 30, 2005, or such earlier date as the Company may specify (in either case the " Early Exercise Date" ), in which case the shares issuable upon any such earlier exercise shall be restricted shares which shall be subject to the same vesting schedule as applicable under the Initial Options and shall not be transferable unless and until such shares become vested. The parties agree that the obligation to grant the Initial Options may be partially satisfied by an option granted with respect to up to 10% of the fully-diluted shares of common stock of the Company beneficially owned by Credit Suisse Boston Management LLC and its affiliates (excluding such affiliation solely by virtue of ownership and involvement with the Company or its subsidiaries, the " CSFB Entities" ), with the remainder being granted with respect to reserved shares of the Company; provided, however, that any Initial Option granted by the CSFB Entities shall also be honorable by the Company. Upon exercise of any Initial Options within one week of the Early Exercise Date, the Company shall pay to the Employee an amount equal to 57.36% of the excess, if any, of the fair market value of the shares on the exercise date, as determined for federal income tax purposes, over the exercise price. An additional equity pool of 20.1% (subject to adjustment to 20% in the event of certain transactions) of the fully-diluted shares of the Company as of the Start Date shall be reserved for options and/or other equity awards to be granted to other employees as recommended by management and approved by the Board (or a designated committee thereof). In the event that such additional pool is not entirely allocated to grants made to other employees, the Employee shall be eligible to receive additional options and/or other equity awards with respect to such unallocated shares available in such pool, up to a maximum level of 15% (including the shares subject to the Initial Options) of the fully-diluted shares of common stock of the Company as of the Start Date. If such additional pool is allocated to grants made to other employees, then the Employee shall not receive any options or other equity awards in addition to the Initial Options.
The Initial Options and any other stock options granted to the Employee (collectively, with the Initial Options, hereinafter referred to as the " Options" ) shall have a duration of ten years, except that (i) if the Employee' s employment with the Company terminates for any reason other than for Cause (as defined in Section 4.1 hereof), Disability (as defined in Section 4.2 hereof) or death, any then vested but unexercised Options shall be exercisable for three months following such termination, (ii) if the Employee' s employment with the Company terminates due to Disability or death, any then vested but unexercised Options shall be exercisable for six months following such termination, and (iii) if the Employee' s employment with the Company terminates for Cause, all unexercised Options (including any vested Options) shall terminate immediately upon such termination. In no event shall any Options continue to be exercisable for a period of more than ten years following the date of grant. The exercise price payable for the purchase of shares under all Options shall be paid in cash, at the time of exercise of the respective Option. All shares issued pursuant to the exercise of any Options shall be subject to a right of first refusal from and after such time as they become transferable, and to repurchase rights (but not obligations) in the event of a termination of the Employee' s employment with the Company. The purchase price payable to repurchase shares from the Employee shall be (i) with respect to vested shares, the greater of the fair market value (as determined by the Board in good faith based on generally accepted industry valuation methodologies) of the shares on the date of repurchase or the purchase price paid by the Employee, or (ii) with respect to non-vested shares, the purchase price paid by the Employee. Repurchase rights shall extend for the longer of (i) seven months after the issuance of the applicable shares, (ii) seven months after the Employee is terminated by the Company other than for Cause or (iii) three months after a termination of the Employee' s employment with the Company due to any other reason. The right of first refusal shall extend until the shares of the Company' s common stock issued under such Options are publicly traded. All Options and any other equity awards granted to the Employee shall be evidenced by a separate agreement entered into with the Employee, in such form as shall be provided by the Company or the CSFB Entities, as applicable.
3.4 Liquidity Performance Bonus In the event of the consummation of a Qualifying Liquidity Event (as defined below) while the Employee is still employed by the Company, the Employee shall be eligible to receive a one-time liquidity performance bonus, calculated as the sum of the following: (i) 10% of the dollar amount of consideration allocable to the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in the Qualifying Liquidity Event in excess of the amount required for the CSFB Entities to achieve a 25% Rate of Return (as defined below) up to a 32.5% Rate of Return; (ii) 25% of the dollar amount of consideration allocable to the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in the Qualifying Liquidity Event in excess of the amount required for the CSFB Entities to achieve a 32.5% Rate of Return up to a 40% Rate of Return; and (iii) 50% of the dollar amount of consideration allocable to the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in a Qualifying Liquidity Event in excess of the amount required for the CSFB Entities to achieve a 40% Rate of Return. Any liquidity performance bonus payable hereunder shall be paid in-kind, in the same form of consideration as received by the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in the Qualifying Liquidity Event, and shall be paid at the same time as such consideration is received by the CSFB Entities; provided, however, that any portion of such liquidity performance bonus may be payable in cash, in the sole discretion of the Board. In the event (i) that the Rate of Return achieved by the CSFB Entities does not exceed 25%, or (ii) if as of the date of the consummation of a Qualifying Liquidity Event the Employee is not employed by the Company due to either (a) the Employee having been terminated by the Company for Cause or (b) the Employee having terminated his employment on his own initiative, then no liquidity performance bonus shall be payable to the Employee hereunder. Notwithstanding the foregoing, in the event that the Employee is terminated by the Company other than for Cause, the right of the Employee to receive such liquidity performance bon
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