Exhibit 10.1

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), effective as of September 11, 2012
(the “Effective Date”), is made by and between LodgeNet Interactive Corporation,
a Delaware corporation (the “Corporation”), and Richard L. Battista
(“Executive”) with reference to the following circumstances, namely:

 

RECITALS

 

The Corporation desires to retain Executive as its President and Chief Executive
Officer, on the terms and conditions set forth herein, and Executive desires to
accept such positions on the terms and conditions set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the provisions of this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Corporation agrees to continue to employ Executive, and
Executive agrees to continue such employment, upon the following terms and
conditions:

 

1.                                      PERIOD OF EMPLOYMENT.  The employment of
Executive by the Corporation pursuant to this Agreement shall be for a period
(sometimes referred to herein as the “period of employment”) beginning on the
Effective Date and continuing, unless sooner terminated as provided in Section 6
herein, through December 31, 2014.

 

2.                                      DUTIES.  During the period of
employment, Executive shall serve as President and Chief Executive Officer of
the Corporation, and in such other additional office or offices to which he
shall be elected by the Board of Directors of the Corporation (“Board”) with his
written approval, performing the duties of such office or offices held at the
time and such other duties not inconsistent with his position as such an officer
or director as are reasonably assigned to him by the Board or committees of the
Board.  During the period of employment, Executive shall report directly to the
Board and there shall be no other officers of the Corporation who are equal or
senior to Executive.  All employees of the Corporation shall report directly or
indirectly to Executive.  During the period of employment, Executive shall
devote his full-time attention to the business of the Corporation; provided,
however, that Executive shall be permitted to engage in the activities described
on Exhibit A attached hereto together with any charitable or civic activities
(the “Outside Activities”), so long as the Outside Activities do not materially
interfere with Executive’s duties or obligations to the Corporation and the
Corporation has approved such Outside Activity in writing, it being understood
that the activities set forth in Exhibit A have been pre-approved by the Board. 
During the period of employment, the Board shall nominate Executive to be
elected to serve as a director on the Board, and shall re-nominate Executive to
serve as a director on the Board whenever Executive’s term as director comes
before the shareholders of the Corporation for re-election.

 

3.                                      OFFICE FACILITIES.  During the period of
employment, the Corporation shall provide Executive with a mutually agreeable
office in the Los Angeles metropolitan area, suitable to his position and with
appropriate staff.  Executive’s office in the Los Angeles metropolitan area
shall be his principal place of employment, except for business travel required

 

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from time to time.  In addition, Executive acknowledges that he will need to be
physically present at the Corporation’s principal offices, currently located at
3900 West Innovation Street, Sioux Falls, South Dakota, on a periodic basis as
the exigencies of the Corporation’s business require, provided that Executive’s
principal place of employment shall remain in the Los Angeles metropolitan area.

 

4.                                      COMPENSATION.  As compensation for his
services performed hereunder, the Corporation shall pay or provide to Executive
the following:

 

(a)                                 Base Salary.  The Corporation shall pay
Executive a base salary (the “Base Salary”), calculated at the rate of Eight
Hundred Thousand Dollars ($800,000.00) per annum, payable bi-weekly, for the
period of employment under this Agreement.  The Corporation’s Board of Directors
(the “Board”) will consider increases to the Base Salary at each annual
anniversary of the Effective Date.  Such Base Salary, including any such
increases (which shall be considered part of the Base Salary), shall not be
reduced during the period of employment hereunder.

 

(b)                                 Bonus.   For each of the full years in the
period of employment, Executive shall be eligible to receive in cash a target
bonus opportunity equal to Fifty percent (50%) of the Base Salary in such year,
with a maximum bonus opportunity equal to Two Hundred Percent (200%) of the Base
Salary in such year (the “Bonus”).  The Board shall develop the Bonus formula,
targets and criteria for determining achievement of such targets, and Executive
recognizes and acknowledges that to obtain the maximum bonus opportunity,
achievement of objectives well in excess of what is likely to be achieved in the
normal course of business operations will be required.  The Bonus targets and
criteria for determining achievement of such targets shall be referred to herein
as the “Bonus Plan.”  Notwithstanding the foregoing, the Corporation shall pay
Executive, and the Bonus Plan shall reflect, a guaranteed minimum Bonus (the
“Guaranteed Minimum Bonus”) to Executive equal to Four Hundred Thousand Dollars
($400,000) for the first full calendar year of the period of employment as well
as a pro-rated target bonus for the balance of 2012.  The Bonus for each year
shall accrue as of the end of such year and shall be paid no later than
March 15th of the year following the year with respect to which the Bonus was
determined.

 

(c)                                  Health and Welfare Plans; Vacation.  During
the period of employment, Executive shall be entitled to participate in such
401(k), retirement, deferred compensation, investment, health (medical,
hospital, dental and vision) insurance, life insurance, disability insurance,
flexible benefits arrangements and accident insurance plans, all as are
maintained in effect from time to time by the Corporation for the benefit of,
and subject to no less favorable terms (including with respect to eligibility
and participation) as any of its executive employees.  Executive shall be
entitled to take vacations and sick leave in accordance with the Corporation’s
policy for executive personnel of the Corporation.

 

(d)                                 Equity Incentive Awards.  Concurrently with
the execution of this Agreement, and as a material inducement to enter into this
Agreement, the Corporation shall grant Executive under the LodgeNet Interactive
Corporation 2012 CEO Equity

 

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Incentive Plan (the “Plan”) the following Awards, each as defined under the
Plan: (i) Options to purchase 550,000 shares of the Corporation’s common stock
(“Common Stock”) and  (ii) 550,000 shares of common stock that is Restricted
Stock, without a purchase price (collectively, the “Equity-Based Compensation”),
not to exceed in the aggregate Awards for 1,100,000 shares of Common Stock.  The
stock options shall be granted at an exercise price equal to the Fair Market
Value, as defined under the Plan, of a share of the Common Stock on the date of
grant, shall all be NSOs (as defined in the Plan) and shall all have a maximum
term of ten (10) years from the grant date, which term shall end earlier as
provided in this Agreement in the event of a termination of Executive’s
employment with the Corporation.  Any Equity-Based Compensation granted under
this Section 4(d) shall vest (or the risk of forfeiture shall lapse, as
applicable) as follows, in each case provided the Executive remains employed by
the Corporation on the last day of such year and each month (as applicable),
except as otherwise provided in this Agreement:

 

(i)                                     Shares of Restricted Stock.  With
respect to 366,667 shares of the Restricted Stock, the risk of forfeiture shall
terminate on September 11, 2013.  With respect to the balance of 183,333 shares
of Restricted Stock:

 

(A)                               the risk of forfeiture shall terminate monthly
on 30,555 shares of Restricted Stock, on the last day of the months of
October 2013 through February 2014, inclusive; and

 

(B)                               the risk of forfeiture shall terminate with
respect to 30,558 shares of Restricted Stock on the last day of March 2014.

 

(ii)                                  Options.  The options shall vest in
eighteen (18) equal monthly installments commencing on the nineteen (19) month
anniversary of the Effective Date (i.e. 30,555 shares/month for 17 months and
30,565 at the end of the eighteen month period).

 

All Equity Based Compensation shall be consistent with the terms of this
Agreement and subject to the terms and conditions of the Plan, a copy of which
is attached as Exhibit B, and the respective grant agreements issued under the
Plan.  In the event of any inconsistencies between the terms of this Agreement
and the Plan and the respective grant agreements, this Agreement shall control.

 

(e)                                  S-8 Registration.  The Corporation
covenants and agrees that all shares issuable upon the exercise of the options
held by Executive and any other Equity-Based Compensation shall be registered
with the Securities and Exchange Commission on a Form S-8 Registration Statement
(or any successor form), and that such Form S-8 Registration Statement shall be
filed with the Securities and Exchange Commission no later than 30 days after
the Effective Date.

 

(f)                                   Other Bonus and Incentive Plans.  During
the period of employment, Executive shall be eligible to participate in such
bonus and other incentive compensation programs in accordance with their terms
as the Corporation may have in effect from time

 

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to time for its executive personnel, including but not limited to additional and
annual equity grants, and all compensation and other entitlements earned or
granted thereunder shall be in addition to, and shall not in any way reduce, the
grant of the options and the amount payable to Executive as Bonus and Base
Salary.

 

(g)                                  Potential Adjustments.  Executive is aware
that the Corporation is engaged in discussions with a number of third parties
which could result in a significant corporate transaction such as (for
illustrative purposes only) a restructuring, a sale of equity securities, an
issuance of debt securities, a joint venture, or a combination of the
foregoing.  It is the intent of the Corporation that the economic benefit of the
Equity-Based Compensation to the Executive be maintained.  Accordingly, in the
event such a significant corporate transaction occurs during the twelve (12)
month period commencing on the Effective Date, and subject to compliance with
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and
the Corporation’s determination that any proposed action would not result in any
option held by Executive becoming a variable price option, the Corporation will
make such adjustments to the Equity-Based Compensation (and/or grant a new
option and/or other equity-based incentives) as are appropriate and reasonably
achievable to maintain the demonstrable economic benefit of the Equity-Based
Compensation to the Executive prior to any such transaction.

 

(h)                                 Expenses.  Executive shall be reimbursed for
reasonable business expenses incurred in connection with the performance of his
duties hereunder consistent with the Corporation’s policy regarding
reimbursement of such expenses.  In addition, Executive shall be reimbursed by
the Corporation for Executive’s reasonable and documented legal and accounting
fees incurred in connection with entering into this Agreement, up to a maximum
of $25,000.  During the period of employment Executive also shall be entitled to
receive a car allowance equal to $1,100/month, payable with the first payroll of
each month.

 

5.                                      EFFECT OF DISABILITY AND CERTAIN
HAZARDS.  Executive shall not be obligated to perform the services required of
him by this Agreement during any period in which he is disabled or his health is
impaired to an extent which would render his performance of such services
hazardous to his health or life, and relief from such obligation shall not in
any way affect his rights hereunder except to the extent that such disability
may result in termination of his employment by the Corporation pursuant to
Section 6 herein.

 

6.                                      TERMINATION OF EMPLOYMENT.  The
employment of Executive by the Corporation pursuant to this Agreement may be
terminated by the Corporation or the Executive at any time, as follows:

 

(a)                                 Death.  In the event of Executive’s death
prior to the expiration of the period of employment hereunder, such employment
and this Agreement shall terminate on the date of death.

 

(b)                                 Permanent Disability.  Such employment and
this Agreement may be terminated by the Corporation prior to the expiration of
the period of employment hereunder due to Executive’s medically-determined
physical or mental disability which

 

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prevents the effective performance by Executive of his duties hereunder for at
least 120 consecutive days or 180 days in the aggregate during any consecutive
12-month period, with reasonable accommodation.

 

(c)                                  Cause.  The Corporation, by giving written
notice of termination to Executive, may terminate Executive’s employment and
this Agreement at any time prior to the expiration of the Term for Cause, with
Cause to be determined by the Board after reasonable written notice to Executive
and an opportunity for Executive to be heard at a meeting of the Board and such
Cause determination shall be subject to Executive’s cure period set forth in
Section 6(d)(3) below.  For purposes of this Section 6(c), no act or failure to
act on the Executive’s part shall be considered “willful” unless done or omitted
to be done by Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Corporation.

 

(d)                                 For purposes of this Agreement, “Cause”
shall consist only of:   (1) acts committed by Executive during the period of
employment resulting in a felony conviction or a plea of nolo contendere to a
crime of moral turpitude under any federal or state statute; (2) Executive
willfully engaging in dishonest or fraudulent action or omission resulting or
reasonably expected to result in any material financial or material economic
harm to the Corporation, or which materially damages the Corporation’s
reputation; or (3) willful and material breach of this Agreement, willful
neglect of the material duties of the Executive under this Agreement, gross and
willful misconduct, or willful and material violation of (x) the Corporation’s
Code of Business Conduct and Ethics or (y) the Corporation’s Employee Handbook
(as amended from time to time), in each case which remains uncured by Executive
for 30 days following Executive’s receipt of written notice thereof and results
in or is reasonably likely to result in any material financial or material
economic harm to the Corporation or material damage to the Corporation’s
reputation.

 

(e)                                  Without Cause.  The Corporation may
terminate Executive’s employment and this Agreement at any time without Cause
(which shall be for any reason not covered by preceding subsections (a) through
(c)) upon 60 days prior written notice to Executive.

 

(f)                                   By Executive.  Executive may terminate
Executive’s employment and this Agreement at any time for an applicable Good
Reason (subject to Section 6(g)) or otherwise upon written notice thereof to the
Corporation.

 

(g)                                  Notice of Good Reason.  If Executive
believes that he is entitled to terminate his employment with the Corporation
for an applicable Good Reason, he may apply in writing to the Corporation for
confirmation of such entitlement prior to the Executive’s actual separation from
employment, by following the claims procedure set forth in Section 11 hereof. 
The submission shall be delivered by Executive no later than ninety (90) days
after the occurrence of the event that Executive claims is the basis for Good
Reason. The submission of such a request by an Executive shall not constitute
“Cause” for the Corporation to terminate Executive under Section 6(c) hereof;
and Executive shall continue to receive all compensation and benefits he was
receiving at the time of such submission throughout the resolution of the matter
pursuant to the procedures set forth in Section 11 hereof.  If the Executive’s
request for a termination of

 

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employment for Good Reason is denied under both the request and appeal
procedures set forth in Sections 11(a) and (b) hereof, then the parties shall
promptly submit the claim to binding arbitration pursuant to Section 11(c) and
use their best efforts to conclude the arbitration within ninety (90) days after
the claim is submitted.

 

(h)                                 Notice of Termination.  Any termination of
the Executive’s employment by the Corporation or by the Executive (other than
termination based on the Executive’s death) shall be communicated by a written
Notice of Termination to the other party hereto.  For purposes of this
Agreement, a “Notice of Termination” shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the provision so
indicated.  For purposes of this Agreement, no purported termination shall be
effective without the delivery of such Notice of Termination.

 

(i)                                     Date of Termination.  The effective date
of termination of Executive’s employment shall mean (i) if the Executive is
terminated by his death, the date of his death, (ii) if the Executive’s
employment is terminated due to a permanent disability, thirty (30) days after
the Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties on a full-time basis during such
period), (iii) if the Executive’s employment is terminated pursuant to a
termination for Cause, the date specified in the Notice of Termination, and
(iv) if the Executive’s employment is terminated for any other reason, the date
of termination shall be the later of thirty (30) days after termination as
provided by the Notice of Termination or the date of the final resolution of the
arbitration and claims procedures set forth in Section 11 hereof, unless
otherwise agreed by the Executive and Corporation or otherwise provided in this
Agreement.

 

7.                                      PAYMENTS UPON TERMINATION.

 

(a)                                 Accrued Obligations.  Except as otherwise
provided in this Section 7, upon termination of Executive’s employment by the
Corporation or termination by Executive, all compensation due Executive under
this Agreement and under each plan or program of the Corporation in which he may
be participating at the time shall cease to accrue as of the date of such
termination (except, in the case of any such plan or program, if and to the
extent otherwise provided in the terms of such plan or program or by applicable
law).  As of the effective date of such termination, the Corporation shall pay
to Executive all such accrued but unpaid compensation (including without
limitation accrued but unpaid Base Salary, any accrued but unpaid Bonus from the
prior year, a pro-rated portion of the Guaranteed Minimum Bonus, if applicable,
accrued but unpaid vacation and accrued but unreimbursed business expenses)
(collectively, the “Accrued Obligations”); provided, however, that Executive
shall not receive a pro-rated portion of the Guaranteed Minimum Bonus if he is
terminated pursuant to Section 6(c) hereof (subject to any applicable cure
rights hereunder).

 

(b)                                 Change in Control.  If, within 24 months
after a Change in Control or within three (3) months prior to a Change in
Control, Executive’s employment pursuant

 

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to this Agreement is terminated without Cause pursuant to subsection (e) of
Section 6 herein, or Executive terminates this Agreement for Good Reason
pursuant to Section 6(f) herein (in each such case, a Separation from Service),
then, in addition to the payment of Accrued Obligations required by subsection
(a) of this Section 7, Executive shall be entitled to and shall receive:

 

(i)                                     Severance Payment.  Executive shall
receive a lump sum cash payment (the “Severance Payment”) from the Corporation. 
The amount of the Severance Payment shall be an amount equal to the sum of
Executive’s then annual Base Salary and Bonus, multiplied by 150%.  For purposes
of this Section 7(b):

 

(A)                               Executive’s Base Salary shall be Executive’s
annual Base Salary in effect immediately prior to such termination, and

 

(B)                               Executive’s Bonus shall be an amount equal to
the amount which would have been earned by Executive at target under his then
current Bonus Plan assuming that Executive’s employment had been terminated at
the end of the current year of employment and all target performance
requirements had been met.

 

The Severance Payment shall be due and payable on the date determined under
subsection (d), but no later than the Last Payment Date.  The Severance Payment
is subject to withholding as required by applicable law.

 

(ii)                                  Benefits.  During the twelve months
following the effective date of termination by the Corporation without Cause or
by Executive for Good Reason, Executive shall be entitled to the continuation of
the same or equivalent life, health, hospitalization, dental and disability
insurance coverage and other employee insurance or welfare benefits that he had
received (including equivalent coverage for his spouse and dependent children)
immediately prior to termination of employment, as if he had continued to be a
full-time executive employee of the Corporation.  In the event that Executive is
ineligible under the terms of such insurance policies or plans to continue to be
so covered, the Corporation shall provide the Executive, his spouse and covered
dependents with substantially equivalent coverage through other sources or, at
the time of payment of the Severance Payment, will provide Executive with a
lump-sum payment equal to the cost of obtaining such coverage for such twelve
month period.  Notwithstanding the foregoing, in the event Executive obtains
reasonably comparable benefits in connection with other employment, the
Corporation’s obligation to provide such benefits shall cease.  Executive shall
not delay acceptance of such other employment solely for the purpose of
prolonging the Corporation’s obligations hereunder.

 

(iii)                               Vesting upon Delisting or Change-in-Control
Termination.  In the event of (x) a Delisting (defined below), and regardless of
whether Executive’s employment is terminated in connection therewith or
continues, or (y) a Change

 

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in Control and, within three (3) months prior to a Change in Control or within
24 months after a Change in Control, Executive’s employment is terminated
without Cause pursuant to subsection (e) of Section 6 herein or Executive
terminates this Agreement for Good Reason pursuant to Section 6(f) herein, then,
in each such case all Equity-Based Compensation held by Executive at the time of
the Delisting or Change in Control but still subject to vesting shall be fully
vested immediately prior to the Delisting or Change in Control, and, with
respect to the options, shall remain exercisable until the first to occur of the
two (2) year anniversary of the effective date of termination of Executive’s
employment or the expiration date of the applicable option.  Any risk of
forfeiture with respect to any shares of restricted stock or restricted stock
units held by Executive shall lapse immediately prior to the Delisting or such
termination.  For purposes of this Agreement, “Delisting” means any action which
results in the common stock of the Corporation no longer being offered for
exchange on a centralized national security exchange, which exchange does not
include an over-the-counter market.

 

(iv)                              Vesting upon Change in Control without
Termination.  In the event of a Change in Control, and regardless of whether
Executive’s employment is terminated in connection therewith or continues,
(x) the portion of the Equity-Based Compensation held by Executive which is
still subject to vesting and would have vested through the date that is twelve
(12) months following the effective date of such Change in Control, shall be
fully and immediately vested and shall remain exercisable until the first to
occur of the two (2) year anniversary of the effective date of such automatic
vesting or the expiration date of the applicable option; and (y) with respect to
any Equity-Based Compensation that is subject to a risk of forfeiture, such risk
of forfeiture shall automatically lapse and terminate to the extent it would
have lapsed through the date that is twelve (12) months following the effective
date of such Change in Control.

 

(c)                                  No Change in Control.  If Executive’s
employment under this Agreement is terminated pursuant to subsection (e) of
Section 6 herein, or Executive terminates for Good Reason (and such termination
constitutes a Separation from Service) and there has been no Change in Control
within three (3) months after such termination, then, in addition to the payment
of Accrued Obligations required by subsection (a) of this Section 7, Executive
shall be entitled to and shall receive the Severance Payment set forth in
subsection (b)(i) of this Section 7 and the benefits set forth in subsection
(b)(ii) of this Section 7.  In addition, the portion of the Equity-Based
Compensation held by Executive which is still subject to vesting and would have
vested through the date that is twelve (12) months following the effective date
of termination shall automatically vest and, if applicable, become exercisable
on the date of termination.  All vested options held by Executive, including the
options which shall vest in accordance with the immediately preceding sentence,
shall remain exercisable by Executive until the first to occur of the twelve
(12) month anniversary of the effective date of termination or the remaining
term of any options held by Executive.

 

(d)                                 Failure to Renew.  In the event Executive’s
period of employment expires in accordance with Section 1 above and the parties
do not enter into a written agreement

 

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to extend Executive’s period of employment, then, in addition to the payment of
Accrued Obligations, all options held by Executive which have vested through
December 31, 2014 shall remain exercisable by Executive until the first to occur
of December 31, 2015 or the remaining term of any options held by Executive.

 

(e)                                  Additional Requirement for Severance
Compensation.  The amounts payable pursuant to this Section 7(a)-(c) shall be
paid only upon Executive’s execution and delivery to the Corporation of an
agreement and general release, in such form as is acceptable to the Corporation,
in its sole discretion, under which, among other things, the Executive shall
release and discharge the Corporation and related persons from all claims and
liabilities relating to the Executive’s employment with the Corporation and/or
the termination of the Executive’s employment, including without limitation,
claims under the Age Discrimination in Employment Act and the Older Workers
Benefit Protection Act, where applicable (the “Release”).  An irrevocable
Release shall be delivered to the Corporation no later than sixty (60) days of
the effective date of the termination of Executive’s employment.  Subject to
Section 16 hereof, payment of the amounts payable pursuant to this Section 7
will be paid within ten (10) days after the Release Effective Date and
expiration of all periods of permitted rescission under federal or state laws.

 

(f)                                   No Duty to Mitigate; No Right of Offset. 
In the event that Executive is terminated without Cause or terminates the
Agreement for Good Reason, Executive shall not be obligated to seek other
employment or take any actions to mitigate the payments or continuation of
benefits required under this Section 7.  In addition, the Corporation will not
retain or have a right of offset against the amounts payable to Executive under
this Agreement and the Corporation will not be entitled to reduce the amount of
any compensation or benefits payable to Executive under this Agreement by the
amount of salary, bonus or other compensation of any kind, and/or corresponding
benefits, earned or received by Executive from any employment, self-employment
or other activities at any time after the effective date of termination.

 

8.                                      CONFIDENTIAL INFORMATION.  Executive
shall not at any time during the period of employment and thereafter disclose to
others or use any trade secrets or any other confidential information belonging
to the Corporation or any of its subsidiaries, including, without limitation,
programs, specifications, products and services (both existing and under
development), pricing information, vendor information and all other non-public
information relating to customers of the Corporation or its subsidiaries except
in connection with the performance of his duties hereunder.  The provisions of
this Section 8 shall survive the termination of Executive’s employment with the
Corporation, provided that after the termination of Executive’s employment with
the Corporation, the restrictions contained in this Section 8 shall not apply to
any such trade secret or confidential information which becomes generally known
in the trade.

 

9.                                      PATENTS AND OTHER INTELLECTUAL
PROPERTY.  The Corporation shall be entitled to any and all ideas, know-how and
inventions, whether patentable or not, which Executive shall conceive, make or
develop during the period of his employment with the Corporation, relating to
the business of the Corporation or any of its subsidiaries.  The Corporation
agrees that the preceding sentence shall not apply with respect to any and all

 

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intellectual property and other rights relating to the Outside Activities.
Executive shall, from time to time, at the request of the Corporation, execute
and deliver such instruments or documents, and shall perform or do such acts or
things, as reasonably may be requested in order that the Corporation may have
the benefit of such ideas, know-how and inventions and, in particular, so that
patent applications may be prepared and filed in the United States Patent
Office, or in appropriate places in foreign countries, covering any of the
patentable ideas on inventions covered by this Agreement aforesaid, including
appropriate assignments vesting in the Corporation or any of its subsidiaries
(or any successor to the Corporation or any of its subsidiaries) full title to
any and all such ideas, inventions and applications.

 

Further Executive will provide reasonable cooperation and assistance to the
Corporation in the prosecution of any such applications in order that patents
may issue thereon, at the Corporation’s sole cost and expense.

 

10.                               NON-SOLICITATION; REMEDIES.

 

(a)                                 For a period of eighteen (18) months after
Executive’s termination of employment hereunder, regardless of the reasons for
or circumstances of such termination, Executive shall not hire or attempt to
hire any employee of the Corporation, assist in such hiring by any person or
encourage any employee to terminate his or her employment relationship with the
Corporation; provided, however, that the provisions of this Section 10(a) shall
not apply to any of the following persons:  Executive’s personal assistant, any
person whose employment with the Corporation was terminated at least six (6)
months prior to the date of the initial solicitation, or any person who is
solicited and/or hired as a result of (i) Executive or Executive’s employer
conducting generalized solicitations by way of advertisements, engaging firms to
conduct searches or by other means that are not focused on employees of the
Corporation, or (ii) Executive or Executive’s employer responding to unsolicited
requests or contacts by employees of the Corporation.

 

(b)                                 Executive acknowledges that any breach of
Sections 8, 9, or 10(a) would damage the Corporation irreparably and
consequently, the Corporation, in addition to any other remedies available to
it, shall be entitled to seek preliminary and permanent injunctions, without
having to post any bond or other security.

 

11.                               ADMINISTRATOR AND CLAIMS PROCEDURE

 

(a)                                 The Executive, or other person claiming
through the Executive, must file a written claim with the Board as a
prerequisite to the payment of any such claim under this Agreement.  The Board
shall make all determinations as to the right of any person to receive payment
of claims under subsections (a) and (b) of this Section 11.  Any denial by the
Board of a claim by the Executive, his heir or personal representative (“the
claimant”) shall be stated in writing by the Board and delivered or mailed to
the claimant within 10 days after receipt of the claim, unless special
circumstances require an extension of time for processing the claim.  If such an
extension is required, written notice of the extension shall be furnished to the
claimant prior to the termination of the initial 10-day period.  In no event
shall such extension exceed a period of 10 days from

 

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the end of the initial period.  Any notice of denial shall set forth the
specific reasons for the denial, specific reference to pertinent provisions of
this Agreement upon which the denial is based, a description of any additional
material or information necessary for the claimant to perfect his claim, with an
explanation of why such material or information is necessary, and any
explanation of claim review procedures, written to the best of the Board’s
ability in a manner that may be understood without legal or actuarial counsel.

 

(b)                                 A claimant whose claim has been wholly or
partially denied by the Board may request, within 10 days following the date of
such denial, in a writing addressed to the Board, a review of such denial.  The
claimant shall be entitled to submit such issues or comments in writing or
otherwise as he shall consider relevant to a determination of his claim, and he
may include a request for a hearing in person before the Board.  Prior to
submitting his request, the claimant shall be entitled to review such documents
as the Board shall agree are pertinent to his claim.  All requests for review
shall be promptly resolved.  The Board’s decision with respect to any such
review shall be set forth in writing and shall be mailed to the claimant not
later than 10 days following the receipt by the Board of the claimant’s request
unless special circumstances, such as the need to hold a hearing, require an
extension of time for processing, in which case the Board’s decision shall be so
mailed not later than 20 days after receipt of such request.

 

(c)                                  A claimant who has followed the procedure
in subsections (a) and (b) of this section, but who has not obtained full relief
on his claim, shall submit such claim for expedited and binding arbitration of
his claim before an arbitrator in Denver, Colorado, in accordance with the
Employment Arbitration Rules and Mediation Procedures of the American
Arbitration Association, as then in effect (the “Rules”), or pursuant to such
other form of alternative dispute resolution as the parties may agree
(collectively, the “arbitration”).  The arbitrator shall apply Delaware law to
the merits of any dispute or claim arising out of or related to this Agreement,
without reference to rules of conflicts of law.  The Corporation shall pay all
arbitration related expenses that would not have been incurred if the claim had
been brought in a court of law or equity; provided, however, that the prevailing
party may recover his or its outside attorney’s fees and expenses to the extent
permitted by the arbitrator.  Each party to the arbitration shall be entitled to
discovery of essential documents and witnesses, as determined by the arbitrator,
and to pursue all remedies, damages or claims that would be available if the
case had been litigated in the judicial forum having jurisdiction over it;
provided, that the arbitrator shall have no authority to award special or
punitive damages.  The arbitrator shall be appointed by mutual agreement of the
Corporation and the claimant.  If the parties to the arbitration cannot agree on
an arbitrator, the arbitrator shall be selected pursuant to the applicable
Rules provisions.  The arbitrator shall be a professional person with a national
reputation for expertise in executive compensation and employment matters and
who is unrelated to the claimant and any employees or directors of the
Corporation.  All decisions of the arbitrator shall be final and binding on the
claimant and the Corporation.

 

12.                               MISCELLANEOUS.

 

(a)                                 This Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of the Corporation,
including any party with which the

 

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Corporation may merge or consolidate or to which it may transfer substantially
all of its assets and the Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise), by
agreement in form and substance reasonably satisfactory to Executive, to
expressly assume and agree to perform the obligations of the Corporation under
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform this Agreement if no such succession had taken
place.  Failure of the Corporation to obtain such agreement prior to the
effective date of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Corporation in the same
amount and on the same terms as he would be entitled to receive hereunder if he
terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date of termination.  As used in this Agreement,
“Corporation” shall mean the Corporation as hereinbefore defined and any
successor to its business and/or assets as aforesaid, which successor executes
and delivers the agreement provided for in this Section 12(a) or which otherwise
becomes bound by the terms and provisions of this Agreement by operation of law.

 

(b)                                 The rights and obligations of Executive
under this Agreement are expressly declared and agreed to be personal,
non-assignable and nontransferable during his life, but upon his death, this
Agreement shall inure to the benefit of his heirs, legatees and legal
representatives of his estate.

 

(c)                                  The waiver by either party hereto of its
rights with respect to a breach of any provision of this Agreement by the other
shall not operate or be construed as a waiver of any rights with respect to any
subsequent breach.

 

(d)                                 No modification, amendment, addition,
alteration or waiver of any of the terms, covenants or conditions hereof shall
be effective unless made in writing and duly executed by the Corporation and
Executive.

 

(e)                                  This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together will constitute but one and the same agreement.

 

(f)                                   This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law principles thereof.

 

(g)                                  If any provision of this Agreement is
determined to be invalid or unenforceable under any applicable statute or
rule of law, it is to that extent to be deemed omitted and it shall not affect
the validity or enforceability of any other provision.

 

(h)                                 Any notice required or permitted to be given
under this Agreement shall be in writing, and shall be deemed given three
(3) business days after being sent by certified mail, postage prepaid, addressed
as follows:

 

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If to Executive:

 

Richard L. Battista

 

 

224 South Medio Drive

 

 

Los Angeles, CA 90049

 

 

 

With a courtesy copy (which shall not constitute notice) to:

 

 

 

 

 

Venable, LLP

 

 

2049 Century Park East

 

 

21st Floor

 

 

Los Angeles, CA 90067

 

 

Attn:  Alan J. Epstein, Esq.

 

 

 

If to the Corporation:

 

LodgeNet Interactive Corporation

 

 

3900 West Innovation Street

 

 

Sioux Falls, SD 57107-7002

 

 

Attn: General Counsel

 

 

 

With a courtesy copy (which shall not constitute notice) to:

 

 

 

 

 

Mark S. Weitz, Esq.

 

 

Leonard, Street and Deinard

 

 

150 South Fifth Street — Suite 2300

 

 

Minneapolis, MN 55402

 

or mailed to such other person and/or address as the party to be notified may
hereafter have designated by notice given to the other party in a similar
manner.

 

(i)                                     As used in this Agreement, the following
terms have the meanings given:

 

(i)                                     “Change in Control” means, for purposes
of the interpretation of this Agreement, in conformance with section 409A of the
Code and the applicable guidance issued by the Department of the Treasury and
the Internal Revenue Service with respect to the application of section 409A, a
change in control event must relate to the Corporation.  For purposes of this
provision, a majority shareholder is a shareholder owning more than fifty
percent (50%) of the total fair market value and total voting power of such
corporation. Also, for purposes of this provision, Code Section 318(a) applies
to determine stock ownership.  Additionally, for purposes of this provision and
in conformance with Code Section 409A and the applicable guidance issued by the
Department of the Treasury and the Internal Revenue Service with respect to the
application of Code section 409A, a change in the ownership of the Corporation
or a change in the effective control of the Corporation shall be determined in
accordance with the provisions described below in this definition.

 

(A)                               A change in the ownership of the Corporation
shall occur on the date that any one person, or more than one person acting as a
group, in one transaction or a series of transactions, directly or indirectly,

 

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acquires ownership of stock of the corporation that, together with stock held by
such person or group, constitutes more than fifty percent (50%) of the total
fair market value or total voting power of the stock of the Corporation.
However, if any one person or more than one person acting as a group, is
considered to own more than fifty percent (50%) of the total fair market value
or total voting power of the stock of the Corporation, the acquisition of
additional stock by the same person or persons shall not be considered to cause
a change in the ownership of the Corporation (or to cause a change in the
effective control of the Corporation). An increase in the percentage of stock
owned by any one person, or persons acting as a group, as a result of a
transaction in which the Corporation acquires its stock in exchange for property
shall be treated as an acquisition of stock for purposes of this provision.

 

(B)                               For purposes of paragraph (i) above, persons
will not be considered to be acting as a group solely because they purchase or
own stock of the same corporation at the same time, or as a result of the same
public offering. However, persons will be considered to be acting as a group if
they are owners of a corporation which enters into a merger, consolidation,
purchase or acquisition of stock, or similar business transaction with the
Corporation. If a person, including an entity, owns stock in both corporations
that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with
other shareholders in a corporation prior to the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.

 

(C)                               A change in the effective control of the
Corporation shall occur on the date that either:

 

(1)                                 any one person, or more than one person
acting as a group, in one transaction or a series of transactions, directly or
indirectly, acquires (or has acquired during the 12-month period ending on the
date of the most recent acquisition by such person or persons) ownership of
stock of the Corporation possessing thirty-five percent (35%) or more of the
total voting power of the stock of the corporation; or

 

(2)                                 a majority of members of the board of
directors of the Corporation is replaced during any 12-month period by directors
whose appointment or election is not endorsed by a majority of the members of
the board of directors of the Corporation prior to the date of the appointment
or election.

 

(D)                               A change in the ownership of a substantial
portion of the assets of the Corporation shall occur on the date that any one
person, or more than one person acting as a group acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by

 

14

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such person or persons) assets from the Corporation that have a total gross fair
market value equal to or more than forty percent (40%) of the total gross fair
market value of all of the assets of the Corporation immediately prior to such
acquisition or acquisitions. For this purpose, gross fair market value means the
value of the assets of the Corporation, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such
assets.

 

(E)                                The provisions of this subsection
(i) regarding the definition of the term “Change in Control,” shall be
determined and administered in accordance with section 409A and the applicable
guidance issued by the Department of the Treasury and the Internal Revenue
Service with respect to the application of section 409A.

 

(ii)                                  “Good Reason”, in the event of a Change in
Control, shall mean the occurrence of any of the following:

 

(A)                               the assignment to Executive of any duties
inconsistent with Executive’s positions, duties, responsibilities and status
with the Corporation immediately prior to a Change in Control, or an adverse
alteration in the nature of Executive’s reporting responsibilities, titles, or
offices as in effect immediately prior to a Change in Control, or any removal of
Executive from, or any failure to reelect Executive to, any such positions,
except in connection with a termination of the employment of Executive for
Cause, permanent disability, or as a result of Executive’s death or by Executive
other than for Good Reason;

 

(B)                               a material reduction by Corporation in
Executive’s Base Salary or target bonus opportunity in effect immediately prior
to a Change in Control;

 

(C)                               any material breach by Corporation of any
provisions of this Agreement;

 

(D)                               failure by Corporation to continue in effect
(without substitution of a substantially equivalent plan) any compensation plan,
bonus or incentive plan, stock purchase plan, stock option plan, life insurance
plan, health plan, disability plan or other benefit plan or arrangement in which
Executive is participating, or the taking of any action by Corporation which
would adversely affect Executive’s participation in or materially reduce
Executive’s benefits under any of such plans;

 

(E)                                Executive is excluded (without substitution
of a substantially equivalent plan) from participation in any benefit,
incentive, compensation, stock option, health, dental, insurance, or pension
plan generally made available to senior executives of the Corporation;

 

15

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(F)                                 the Corporation’s failure to obtain a
satisfactory agreement from any successor to assume and agree to perform the
Corporation’s obligations under this Agreement;

 

(G)                               Executive determines in good faith that a
change in circumstances has occurred following a Change in Control which has
rendered Executive substantially unable to carry out, has substantially hindered
Executive’s performance of, or has caused Executive to suffer a substantial
reduction in, any of the authorities, positions, duties, responsibilities or
status attached to the position held by Executive immediately prior to the
Change in Control, excluding the reasonable sharing of authority with a Chief
Operating Officer; or

 

(H)                              Executive is required to relocate from, or his
principal place of employment is moved outside of, the greater Los Angeles
metropolitan area;

 

provided, however, that any of the events set forth in subsections (A) through
(H) shall constitute Good Reason only if the Corporation fails to cure such
event, if such event is susceptible of being cured, within thirty (30) days of
the Executive providing written notice of such event from Executive.

 

(iii)                               “Good Reason,” in the absence of a Change in
Control, shall only mean subsections (A), (B), (C), (D), (E), (F) and (H) of the
immediately preceding definition; provided, however, that with respect to such
subsection (D), a termination or adverse change in a life insurance plan, health
plan or disability plan is not Good Reason in the absence of a Change in Control
if such termination or adverse change is applied generally to all executive
officers of the Corporation.  Additionally, such events shall constitute Good
Reason only if the Corporation fails to cure such event, if such event is
susceptible of being cured, within thirty (30) days of Executive delivering
written notice of such event to the Corporation.

 

(iv)                              “Last Payment Date” means the date that is two
and one-half months after the close of the taxable year in which executive
incurs a Separation from Service (as defined below).

 

(v)                                 “Separation from Service” means the complete
and intended termination of the employment relationship with the Corporation
within the meaning of Treasury Regulations Section 1.409A-1(h).

 

(j)                                    Any dispute or controversy arising under
or in connection with this Agreement, other than claims administered under
Section 11, shall be settled exclusively by binding arbitration in the manner
set forth in Section 11(c).

 

13.                               PRIOR AGREEMENTS SUPERSEDED.  This Agreement
together with Exhibit A embodies the entire agreement of the parties hereto with
respect to its subject matter and

 

16

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merges with and supersedes all prior discussions, agreements, commitments, or
understandings of every kind and nature relating thereto, whether oral or
written, between Executive and the Corporation.  Neither party shall be bound by
any term or condition of this Agreement other than as is expressly set forth
herein.

 

14.                               INDEMNIFICATION.  The Corporation shall
indemnify, defend, and hold Executive harmless, to the fullest extent allowed by
law, including without limitation with respect to the advancement of expenses,
from and against any liability, damages, costs, or expenses (including
attorneys’ fees) in connection with any claim, cause of action, investigation,
litigation, or proceeding involving him by reason of having been an officer,
director, employee, or agent of the Corporation or its affiliates, unless it is
judicially determined, in a final, non-appealable order that Executive was
guilty of gross negligence or willful misconduct.  The Corporation also agrees
to maintain adequate directors and officers’ liability insurance for the benefit
of Executive for the period of employment and for at least three years
thereafter, which insurance policy lists Executive as an additional named
insured.

 

15.                               CODE SECTION 280G.  Notwithstanding any other
provision of this Agreement:

 

(a)                                 In the event the Corporation (or its
successor) determines, based on the advice of an independent nationally
recognized public accounting firm engaged by the Corporation, that part or all
of the consideration, compensation or benefits to be paid to Executive under
this Agreement constitute “parachute payments” under Code Section 280G(b)(2)
then, if the aggregate present value of such parachute payments, singularly or
together with the aggregate present value of any consideration, compensation or
benefits to be paid to Executive under any other plan, arrangement or agreement
which constitute “parachute payments” (collectively, the “Parachute Amount”)
exceeds 2.99 times Executive’s “base amount”, as defined in Code Section
280G(b)(3) (the “Base Amount”), the amounts constituting “parachute payments”
which would otherwise be payable to Executive or for Executive’s benefit shall
be reduced to the extent necessary so that the Parachute Amount is equal to 2.99
times the Base Amount (the “Reduced Amount”); provided that such amounts shall
not be so reduced if the Corporation determines, based on the advice of such
public accounting firm, that without such reduction Executive would be entitled
to receive and retain, on a net after tax basis (including, without limitation,
any excise taxes payable under Code Section 4999), an amount which is greater
than the amount, on a net after tax basis, that Employee would be entitled to
retain upon receipt of the Reduced Amount.

 

(b)                                 If the determination made pursuant to
Section 15(a) above results in a reduction of the payments that would otherwise
be paid to Executive except for the application of such Section 15(a) above, any
such reduction in payments shall occur in the following order: (i) any cash
severance, (ii) any other cash amount payable to Executive, (iii) any benefit
valued as a “parachute payment,” and (iv) the acceleration of vesting of any
equity awards.

 

16.                               COMPLIANCE WITH CODE SECTION 409A.  It is the
intention of Corporation and Executive that this Agreement shall comply with the
requirements of Code Section 409A.

 

17

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(a)                                 All payments under this Agreement are
intended to be excluded from the requirements of Code Section 409A, be payable
on a fixed date or schedule under Code Section 409A or be in compliance with
Code Section 409A.  All payments made under this Agreement shall be strictly
paid in accordance with the terms of this Agreement.  Notwithstanding any other
provision of this Agreement to the contrary, if Executive or the Corporation
determines that any compensation or benefit payable under this Agreement may be
subject to Code Section 409A(a)(1), the Corporation and Executive, at the
request of either but with the written consent of the other, which consent shall
not be unreasonably withheld, shall adopt such amendments to this Agreement or
adopt other policies and procedures (including amendments, policies and
procedures with retroactive effect), or take any other actions necessary or
appropriate to cause the compensation and benefits payable under this Agreement
to comply with Code Section 409A and to preserve the intended tax treatment of
such compensation and benefits.

 

(b)                                 Each payment of compensation under this
Agreement shall be treated as a separate payment of compensation for purposes of
Code Section 409A.

 

(c)                                  Any reimbursements or in-kind benefits
provided under this Agreement that are subject to Code Section 409A shall be
made or provided in accordance with the requirements of Code Section 409A,
including, where applicable, the requirement that (a) any reimbursement is for
expenses incurred during the period of time specified in the Agreement, (b) the
amount of expenses eligible for reimbursement, or in-kind benefits provided,
during a calendar year may not affect the expenses eligible for reimbursement,
or in-kind benefits to be provided, in any other calendar year, (c) the
reimbursement of an eligible expense will be made no later than the last day of
the calendar year following the year in which the expense is incurred, and (d)
the right to reimbursement or in-kind benefits is not subject to liquidation or
exchange for another benefit.

 

(d)                                 Notwithstanding anything to the contrary in
this Agreement, the Corporation shall not make any deductions for money or
property that Executive owes to the Corporation, or offset or otherwise reduce
any sums that may be due or become payable to or for the account of Executive,
from amounts that constitute deferred compensation for purposes of Code Section
409A.

 

(e)                                  Executive’s right to any deferred
compensation, as defined under Code Section 409A, shall not be subject to
borrowing, anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors, to the extent necessary to
avoid tax, penalties and/or interest under Code Section 409A.

 

(f)                                   A termination of employment shall not be
deemed to have occurred for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits upon or following a
termination of employment unless such termination is also a Separation From
Service.  If Executive is deemed on the date of termination of his employment to
be a “specified employee”, within the meaning of that term under Code Section
409A(a)(2)(B) then with regard to any payment or benefit that is required to be
delayed in compliance with Code Section 409A(a)(2)(B), such payment or benefit
shall not be made or provided prior to the earlier of (i) the expiration of the
six-month period

 

18

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measured from the date of Executive’s Separation from Service or (ii) the date
of Executive’s death.  On the first day of the seventh month following the date
of Executive’s Separation from Service or, if earlier, on the date Executive’s
death, all payments delayed pursuant to this Section 16(f) (whether they would
have otherwise been payable in a single sum or in installments in the absence of
such delay) shall be paid or reimbursed to Executive in a lump sum, together
with interest accruing on such delayed amounts at the annual prime rate then in
effect, and any remaining payments and benefits due under this Agreement shall
be paid or provided in accordance with the normal payment dates specified for
them in this Agreement.

 

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Execution Copy

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
date and year first above written.

 

 

LODGENET INTERACTIVE CORPORATION

 

 

 

 

 

 

 

By:

/s/ R. Douglas Bradbury

 

 

Name:

R. Douglas Bradbury

 

 

Title:

Chairman of the Board

 

 

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

 

 

/s/ Richard L. Battista

 

Richard L. Battista

 

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Execution Copy

 

EXHIBIT A

 

Outside Activities

 

Snakkle, LLC — owner of entertainment website, snakkle.com

 

Pontiac Digital Media, LLC — partner in TV production ventures

 

Broadway & Vine, LLC — partner in a development fund to adapt films to Broadway
musicals.

 

Board member, privately held digital media company, Tecca (www.tecca.com)

 

Board member, Georgetown University Board of Regents

 

Advisory Board member, HipSwap (www.hipswap.com)

 

Board member, City Year Los Angeles (non-profit)

 

Chairman, The Georgetown Entertainment & Media Alliance (non-profit)

 

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EXHIBIT B

 

LodgeNet Interactive Corporation 2012 CEO Equity Inventive Plan

 

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