Document:

exv10w28

 

Exhibit 10.28

LODGENET ENTERTAINMENT CORPORATION

EXECUTIVE SEVERANCE AGREEMENT

     AGREEMENT, dated as of March 1, 2003, by and between LodgeNet
Entertainment Corporation, a Delaware corporation located at 3900 West
Innovation Street, Sioux Falls, South Dakota 57107 (“Corporation”), and Stephen
D. McCarty (“Executive”).

     WHEREAS, the Executive is presently employed by the Corporation as the
Senior Vice President for Sales and Hotel Relations of the Corporation:

     WHEREAS, the Board of Directors (“Board”) has determined that it would be
in the best interest of the Corporation and its shareholders to reinforce and
encourage the continued attention and dedication of the Executive as a member
of the Corporation’s management without the distractions occasioned from the
possibility of an abrupt change in control of the Corporation;

     WHEREAS, the Board has determined that entering into agreements from time
to time with members of senior management in the form hereof will enhance the
ability of the Corporation to attract and retain capable senior executives; and

     WHEREAS, the Executive is willing to continue serving the Corporation in
accordance with the provisions of this Agreement.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:

     1.     Operation of Agreement.

     This Agreement sets forth the severance compensation which the Corporation
agrees it will pay to the Executive if the Executive’s employment with the
Corporation terminates under one of the circumstances described herein in
connection with or following a Change in Control of the Corporation (as defined
herein). No compensation shall be payable under this Agreement unless and
until: (i) there shall have been a Change in Control of the Corporation and
(ii) the Executive’s employment by the Corporation shall have been terminated
in accordance with Section 4. To the extent that the provisions of this
Agreement, or the benefits provided hereunder, conflict with any provisions of
any existing employment agreement between the Executive and the Corporation,
this Agreement shall supersede any such provisions in any such employment
agreement.

     2.     Term.

     This Agreement shall terminate, except to the extent that any obligation
of the Corporation hereunder remains unpaid as of such time, upon the earliest
of: (i) December 31, 2004 if a Change in Control of the Corporation has not
occurred within such period; (ii) the termination of the Executive’s employment
the with Corporation based on death, Permanent Disability (as defined in
Section 4(b)), or Cause (as defined in Section 4 (c)) or by the

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     Executive other than for Good
Reason (as defined in Section 4 (d)); (iii) two (2) years from the date of a
Change in Control of the Corporation if the Executive has not terminated his
employment for Good Reason as of such time; and (iv) prior to a Change in
Control, in the discretion of the Board, upon the Executive’s ceasing to be an
executive officer of the Corporation. Notwithstanding clause (i) hereof, on
December 31st of each year following the date this Agreement was first entered,
the term of this Agreement automatically shall be extended for one additional
year, unless prior to such anniversary the Corporation notifies the Executive
in writing that it does not wish to extend the term of the Agreement.

     3.     Change in Control.

     For purposes of this Agreement, a Change in Control of the Corporation
shall mean the occurrence of any of the following:

     (a)  any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) in effect on
the date hereof) or group of persons acting in concert, other than the
Corporation or any subsidiary thereof or any employee benefit plan of the
Corporation or any subsidiary thereof, becomes the “beneficial owner” (as such
term is defined in Rule 13d-3 of the Exchange Act except that a person shall
also be deemed the beneficial owner of all securities which such person may
have a right to acquire, whether or not such right is presently exercisable),
directly or indirectly, of securities of the Corporation representing thirty
percent (30%) or more of the combined voting power of the Corporation’s then
outstanding securities ordinarily having the right to vote in the election of
directors (“voting stock”); but excluding any such acquisition (or series of
acquisitions) effected at a purchase price that results in an actual or implied
average valuation of the Corporation’s outstanding common stock of less than
$6.75 per share (adjusted as appropriate for any increase or decrease in the
number of shares resulting from a reclassification, split, subdivision or
consolidation of shares or other distribution of assets or securities to
stockholders without the receipt of consideration by the Corporation or any
other occurrence for which the Board determines an adjustment is appropriate);
or

     (b)  during any period subsequent to the date of this Agreement, a majority
of the members of the Board shall not for any reason be the individuals who at
the beginning of such period constitute the Board or those persons who are
nominated as new directors by a majority of the current directors or their
successors who have been so nominated; or

     (c)  there shall be consummated any merger, consolidation (including a
series of mergers or consolidations), or any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation (meaning assets
representing thirty percent (30%) or more of the net tangible assets of the
Corporation or generating thirty percent (30%) or more of the Corporation’s
operating cash flow), or any other similar business combination or transaction,
but excluding any business combination or transaction which: (i) would result
in the voting stock of the Corporation immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
stock of the surviving entity) more than 70% of the combined voting power of
the voting stock of the Corporation (or such surviving entity) outstanding
immediately after giving effect to such business combination or
transaction; (ii) would be

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effected to implement a recapitalization (or similar
transaction) of the Corporation in which no “person” (as defined in subsection
3(a) hereof) or group of persons acting in concert becomes the beneficial owner
(as defined in subsection 3(a) hereof) of thirty percent (30%) or more of the
combined voting power of the then outstanding voting stock of the Corporation;
or (iii) is effected at a purchase price that results in an actual or implied
average valuation of the Corporation’s outstanding common stock of less than
$6.75 per share (adjusted as appropriate for any increase or decrease in the
number of shares resulting from a reclassification, split, subdivision or
consolidation of shares or other distribution of assets or securities to
stockholders without the receipt of consideration by the Corporation or any
other occurrence for which the Board determines an adjustment is appropriate);
or

     (d)  the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation; or

     (e)  the occurrence of any other event that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A of the
Exchange Act in effect on the date hereof.

     4.     Termination Following Change in Control.

     (a)  If a Change in Control of the Corporation shall have occurred while
the Executive is still an employee of the Corporation, or if Executive’s
employment with the Corporation shall have been terminated prior to but in
connection with a Change in Control (meaning that at the time of such
termination the Company had entered into an agreement, the consummation of
which would result in a Change in Control, or any person had publicly announced
its intent to take or consider actions that would constitute a Change in
Control, or the Board adopts a resolution to the effect that a potential Change
in Control for purposes of this Agreement has occurred), then the Executive
shall be entitled to the compensation provided in Section 5 upon the
termination of the Executive’s employment by the Corporation or by the
Executive, unless such termination is as a result of: (i) the Executive’s
death; (ii) the Executive’s Permanent Disability (as defined in Section 4(b)
below); (iii) the Executive’s termination by the Corporation for Cause (as
defined in Section 4(c) below); or (iv) the Executive’s decision to terminate
employment other than for Good Reason (as defined in Section 4(d) below).

     (b)  Permanent Disability. If, as a result of the Executive’s incapacity
due to physical or mental illness, the Executive shall have been absent from
his duties with the Corporation on a full-time basis for six (6) months and
within thirty (30) days after written notice of termination is thereafter given
by the Corporation the Executive shall not have returned to the full-time
performance of the Executive’s duties, the Corporation may terminate this
Agreement for “Permanent Disability.”

     (c)  Cause. The Corporation may terminate the employment of the Executive
for Cause. For purposes of this Agreement, the termination of the Executive’s
employment shall be deemed to have been for “Cause” only if termination of his
employment shall have been the result of: (i) the Executive’s willful engaging
in dishonest or fraudulent actions or omissions resulting or intended to result
directly or indirectly in any demonstrable material

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financial or economic harm
to the
Corporation or (ii) the Executive’s willful breach or willful and habitual
neglect of his material duties, and such breach or neglect remains uncured for
a period of ninety (90) days after written notice as described below.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause under either clause (i) or (ii) above unless and until
there shall have been delivered to the Executive a Notice of Termination (as
defined in Section 4(f)) and a certified copy of a resolution of the Board
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board (other than the Executive if he is a member of the
Board at such time) at a meeting called and held for that purpose and at which
the Executive was given an opportunity to be heard, finding that the Executive
was guilty of conduct set forth above based on reasonable evidence, specifying
the particulars thereof in detail. For purposes of this Section 4(c), no act
or failure to act on the Executive’s part shall be considered “willful” unless
done or omitted to be done by him not in good faith and without reasonable
belief that his action or omission was in the best interest of the Corporation.

     (d)  Good Reason. The Executive may terminate his employment by the
Corporation for Good Reason at any time following a Change in Control during
the term of this Agreement. For purposes of this Agreement, “Good Reason”
shall mean any of the following:

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

         (ii) a reduction by the Corporation in the Executive’s base salary in
effect immediately prior to a Change in Control;

         (iii) failure by the Corporation to continue in effect (and without
substitution of a comparable plan) any benefit or compensation plan, stock
purchase plan, stock option plan, life insurance plan, health and
hospitalization plan or disability plan in which the Executive is participating
at the time of a Change in Control, or the taking of any action by the
Corporation which would adversely affect Executive’s participation in or
materially reduce Executive’s benefits under any of such plans;

         (iv) any material breach by the Corporation of any provision of this
Agreement;

         (v) following a Change in Control, the Executive is excluded (without
substitution of a substantially equivalent plan) from participation in any
benefit, incentive, stock option, health, dental, insurance or pension plan
generally made available to persons at Executive’s level of responsibility in
the Corporation;

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         (vi) without the Executive’s express written consent, the requirement by
the Corporation that the Executive’s principal place of employment be relocated
more than twenty-five
(25) miles from his place of employment prior to the Change in Control, or
travel on the Corporation’s business to an extent materially greater than the
Executive’s customary business travel obligations;

         (vii) 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, as contemplated in Section 7(a) hereof.

     (e)  Notice of Good Reason. If Executive believes that he is entitled to
terminate his employment with the Corporation for Good Reason as defined in
Section 4(d) above, 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 10 hereof. The
submission of such a request by an Executive shall not constitute “Cause” for
the Corporation to terminate an Executive under Section 4(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 10 hereof. If the
Executive’s request for a termination of employment for Good Reason is denied
under both the request and appeal procedures set forth in Sections 10(b) and
(c) hereof, then the parties shall use their best efforts to resolve the claim
within ninety (90) days after the claim is submitted to binding arbitration
pursuant to Section 10(d).

     (f)  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) following a Change in Control 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.

     (g)  Date of Termination. “Date of Termination” following a Change in
Control 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 shall be 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 10 hereof, unless
otherwise agreed by the Executive and Corporation or otherwise provided in this
Agreement.

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     5.     Termination Benefits.

     If the Executive shall be terminated from employment with the Corporation
as described in Section 4(a) such that Executive is entitled to the
compensation set forth in this Section 5, then the Executive shall be entitled
to receive the following severance benefits:

     (a)  Severance Payment. In lieu of any further payments to the Executive
including any payments to which the Executive would be entitled under any
existing employment agreement, the Corporation shall pay as severance pay to
the Executive an amount equal to the compensation that Executive would have
received for a thirty (30) month period (the “payment period”) at an annualized
rate equal to the higher of the rate in effect immediately prior to the Change
in Control or the rate in effect on the date of the Notice of Termination.
Such cash payment shall be payable in a single sum, within 10 business days
following the Executive’s Date of Termination.

     (b)  Incentive Awards. The Executive shall receive a cash payment in a
single sum, within 10 business days following the Executive’s Date of
Termination, in the amount equal to the pro rata portion of any bonus the
Executive shall be deemed to have earned under any incentive or compensation
plan in which Executive is then participating for the year in which the
Executive’s termination occurs based on the number of completed months (a
partial month shall be counted as a completed month) in the calendar year as of
his Date of Termination. The method of calculating any bonus under such plan
shall be adjusted and/or weighted in such manner as is appropriate and
equitable to reflect partial year results and the Corporation’s historical
operating results, including rates of growth and seasonality.

     (c)  Stock Options. Any non-vested stock options granted to the Executive
by the Corporation shall become 100% vested without change to the stated
expiration dates thereof.

     (d)  Insurance and Welfare Benefits. During the payment period the
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
the Change in Control. In the event that Executive is ineligible under the
terms of such insurance to continue to be so covered, the Corporation shall
provide the Executive with substantially equivalent coverage through other
sources or will provide Executive with a lump sum payment equal to the cost of
obtaining such coverage for the payment period. If the Executive prior to a
Change in Control was receiving any cash-in-lieu payments designed to enable
the Executive to obtain insurance coverage of his choosing, the Corporation
shall, in addition to any other benefits to be provided under this Section
5(d), provide Executive with a lump-sum payment equal to the amount of such
in-lieu payments that the Executive would have been entitled to receive over
the payment period. The benefits to be provided under this Section 5(d) shall
be reduced to the extent of the receipt of substantially equivalent coverage by
the Executive from any successor employer.

     (e)  Tax Gross-Up. If any payments received by Executive pursuant to this
Agreement will be subject to the excise tax (the “Excise Tax”) imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or
any successor or similar provision of the Code, the Corporation shall pay to
the Executive additional compensation such that the net amount received by the
Executive after deduction of any Excise Tax (and

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taking into account any
federal, state and local income taxes payable by the Executive as a result of
the receipt of such gross-up compensation), shall be equal to the total
payments he would have received had no such Excise Tax (or any interest or
penalties thereon) been paid or incurred. The Corporation shall pay such
additional compensation at the time when the Corporation withholds such Excise
Tax from any payments to the Executive. The calculation of the tax gross-up
payment shall be approved by the Corporation’s independent certified public
accounting firm and the Executive’s designated financial adviser.

     6.     No Mitigation.

     The Executive shall not be required to mitigate the amount of any payments
provided for by this Agreement by seeking employment or otherwise, nor shall
the amount of any cash payments or benefit provided under this Agreement be
reduced by any compensation or benefit earned by the Executive after his Date
of Termination (except as provided in Section 5(d) above).

     7.     Successors.

     (a)  The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance reasonably satisfactory to the 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 7(a) or which otherwise
becomes bound by the terms and provisions of this Agreement by operation of
law.

     (b)  This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die after his termination while
any amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive’s devisee,
legatee, or other designee or, if there be no such designee, to the Executive’s
estate.

     8.     Notices.

     Any notice required or permitted by this Agreement shall be in writing,
sent by registered or certified mail, return receipt requested, or by
recognized courier service

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(regularly providing proof
of delivery), addressed to the Board and the Corporation at the Corporation’s
then principal office, or to the Executive at the address set forth under the
Executive’s signature below, as the case may be, or to such other address or
addresses as any party hereto may from time to time specify in writing for the
purpose in a notice given to the other parties in compliance with this Section
8. Notices shall be deemed given when received.

     9.     Limitation on Rights.

     (a)  This Agreement shall not be deemed to create a contract of employment
between the Corporation and the Executive and shall create no right in the
Executive to continue in the Corporation’s employment for any specific period
of time, or to create any other rights in the Executive or obligations on the
part of the Corporation, except as set forth herein. This Agreement shall not
restrict the right of the Corporation to terminate the Executive, or restrict
the right of the Executive to terminate his employment.

     (b)  This Agreement shall not be construed to exclude the Executive from
participation in any other compensation or benefit programs in which he is
specifically eligible to participate either prior to or following the execution
of this Agreement, or any such programs that generally are available to other
executive personnel of the Corporation, nor shall it affect the kind and amount
of other compensation to which the Executive is entitled.

     10.     Administrator and Claims Procedure.

     (a)  The Administrator for purposes of this Agreement shall be the
Corporation. The Corporation shall have the right to designate one or more
Corporation employees as the Administrator at any time. The Corporation shall
give the Executive written notice of any change in the Administrator, or in the
address or telephone number of the same.

     (b)  The Executive, or other person claiming through the Executive, must
file a written claim for benefits with the Administrator as a prerequisite to
the payment of benefits under this Agreement. The Administrator shall make all
determinations as to the right of any person to receive benefits under
subsections (b) and (c) of this Section 10. Any denial by the Administrator of
a claim for benefits by the Executive, his heirs or personal representative
(“the claimant”) shall be stated in writing by the Administrator 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 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
Administrator’s ability in a manner that may be understood without legal or
actuarial counsel.

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     (c)  A claimant whose claim for benefits has been wholly or partially
denied by the Administrator may request, within 10 days following the date of
such denial, in a writing addressed to the Administrator, 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
Administrator. Prior to submitting his request, the claimant shall be entitled
to review such documents as the Administrator shall agree are pertinent to his
claim. The claimant may, at all stages of review, be represented by counsel,
legal or otherwise, of his choice, provided that the fees and expenses of such
counsel shall be borne by the claimant, unless the claimant is successful, in
which case, such costs shall be borne by the Corporation. All requests for
review shall be promptly resolved. The Administrator’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 receipt by the Administrator 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
Administrator’s decision shall be so mailed not later than 20 days after
receipt of such request.

     (d)  A claimant who has followed the procedure in subsections (b) and (c)
of this section, but who has not obtained full relief on his claim for
benefits, may, within 60 days following his receipt of the Administrator’s
written decision on review, apply in writing to the Administrator for expedited
and binding arbitration of his claim before an arbitrator in Minnehaha County,
South Dakota, in accordance with the commercial arbitration rules of the
American Arbitration Association, as then in effect, or pursuant to such other
form of alternative dispute resolution as the parties may agree (collectively,
the “arbitration”). The Corporation shall advance filing fees and other costs
required to initiate the arbitration, as well as up to $2,500 for Executive’s
initial attorney fees (which fees and costs shall not be recoverable by the
Corporation). The arbitrator’s sole authority shall be to interpret and apply
the provisions of this Agreement; he shall not change, add to, or subtract
from, any of its provisions. The arbitrator shall have the power to compel
attendance of witnesses at the hearing. Any court having jurisdiction may
enter a judgment based upon such arbitration. The arbitrator shall be
appointed by mutual agreement of the Corporation and the claimant pursuant to
the applicable commercial arbitration rules. The arbitrator shall be a
professional person with a reputation in the community for expertise in
employee benefit matters and who is unrelated to the claimant and any employees
of the Corporation. All decisions of the arbitrator shall be final and binding
on the claimant and the Corporation.

     11.     Legal Fees and Expense.

     If any dispute arises between the parties with respect to the
interpretation or performance of this Agreement, the prevailing party in any
arbitration or proceeding shall be entitled to recover from the other party its
attorneys’ fees, arbitration or court costs and other expenses incurred in
connection with any such proceeding (subject to the second sentence of Section
10(d) above). Amounts, if any, paid to Executive under this Section 11 shall
be in addition to all other amounts due to Executive pursuant to this
Agreement.

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     12.     Non-Alienation of Benefits.

     Except in so far as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization or attachment
of any benefits under this Agreement shall be valid or recognized by the
Corporation.

     13.     ERISA.

     This Agreement is an unfunded compensation arrangement for a member of a
select group of the Corporation’s management and any exemptions under the
Employee Retirement Income Security Act of 1974, as amended, as applicable to
such an arrangement shall be applicable to this Agreement.

     14.     Deferral.

     The Executive may, by delivery of written notice to the Corporation within
ten (10) business days following the Executive’s Date of Termination, elect to
defer any payment to be made under this Agreement to a date not more than one
(1) year after the Date of Termination.

     15.     Non-Competition.

     If Executive receives compensation under this Agreement, or if Executive
is terminated for Cause (as defined in Section 4(c)), Executive agrees that he
will not, without the prior written consent of the Corporation, directly or
indirectly, during the six (6) month period following the Date of Termination,
engage in any business or employment or provide any consulting service which is
in competition with the Corporation’s business in the lodging industry in the
United States (provided, however, that the parties acknowledge and agree that
all aspects of the cable television business shall not be deemed to be a
business competitive with the Corporation’s business).

     16.     Executive Acknowledgment.

     Executive acknowledges that he has consulted with or has had the
opportunity to consult with independent counsel of his choice concerning this
Agreement, that he has read and understands this Agreement and is fully aware
of its legal effect .

     17.     Miscellaneous.

     This Agreement contains the entire agreement of the parties relating to
the subject matter hereof and supersedes any prior written or oral agreements
or understandings relating to the subject matter hereof. No modification or
amendment of this Agreement shall be valid unless in writing and signed by or
on behalf of the parties hereto. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement
is intended to be performed in accordance with, and only to the extent
permitted by, all applicable laws, ordinances, rules and regulations. If any
provisions of this Agreement, or the application thereof to any person or
circumstance, shall, for any reason and to any extent, be held invalid or
unenforceable, such invalidity and unenforceability shall not affect the
remaining

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provisions hereof and the application of such provisions to other
persons or
circumstances, all of which shall be enforced to the greatest extent permitted
by law. Subject to the provisions of Section 5(e), the compensation provided
to the Executive pursuant to this Agreement shall be subject to any
withholdings and deductions required by any applicable tax laws. Any amounts
payable to the Executive hereunder after the death of the Executive shall be
paid to the Executive’s estate or legal representative. The headings in this
Agreement are inserted for convenience of reference only and shall not be a
part of or control or affect the meaning of any provision hereof. For purposes
hereof, the masculine gender shall be deemed to include the feminine gender, as
appropriate. This Agreement may be executed in one or more counterparts and
each counterpart shall be deemed an original but all counterparts together
shall constitute one instrument.

     18.     Governing Law.

     This Agreement shall be governed and construed in accordance with the
internal laws of the State of South Dakota. The parties agree that any suit or
proceeding arising out of this Agreement shall be brought and maintained
exclusively in the federal or state courts located in such state, and each of
the parties hereby irrevocably submits to the exclusive jurisdiction and venue
of such courts.

     IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.

	 	 	 
	EXECUTIVE:	 	
LODGENET ENTERTAINMENT CORPORATION:
	 
	/s/

	 	
By:  /s/ Scott C. Petersen

	 
	Address:	 	
Title:  President & CEO

	 
	 

	 	 
	 
	 

	 	 

11exv10w29

 

Exhibit 10.29

     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of March 1,
2003 is made by and between LodgeNet Entertainment Corporation, a
Delaware corporation (the “Corporation”), and Steven Pofahl (“Executive”)
with reference to the following circumstances, namely:

	 	A.	 	Executive is employed by the
Corporation, as its Senior Vice President for
Technical Operations and has made, and is making,
an important contribution to the development and
operation of the Corporation’s business.
	 
	 	B.	 	The Corporation desires to provide for
its employment of Executive as hereinafter
provided, and Executive desires such employment,
upon the terms hereinafter provided.

     NOW, THEREFORE, the Corporation agrees to employ Executive, and
Executive agrees to 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 date
hereof and continuing, unless sooner terminated as provided in Section 6
herein, through December 31, 2003; provided, however, that on each
December 31, commencing with December 31, 2003, such period of employment
shall automatically be extended for an additional year unless ninety (90)
days prior thereto either party hereto has given written notice to the
other that such party does not wish to extend the period of employment.

 

 

     2.     Duties. During the period of employment, Executive shall serve
as Senior Vice President for Technical Operations of the Corporation, or
in such other office or offices to which he shall be elected by the Board
of Directors of the Corporation (“Board”) with his approval, performing
the duties of such office or offices as are assigned to him by the Board
or committees of the Board. During the period of employment, Executive
shall devote his full time and attention to the business of the
Corporation and the discharge of the aforementioned duties, except for
permitted vacations, absences due to illness, and reasonable time for
attention to personal affairs.

     3.     Office Facilities. During the period of employment, Executive
shall have his office where the Corporation’s principal executive offices
are located from time to time, which currently are at 3900 West
Innovation Street, Sioux Falls, South Dakota, and the Corporation shall
furnish Executive with office facilities reasonably suitable to his
position at such location.

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

		
	 	     (a.) The Corporation shall pay Executive a salary (the “Base
Salary”), calculated at the rate of $192,500.00 per annum (which
Base Salary may be increased by the Corporation at any time and from
time to time in its discretion), payable monthly, semi-monthly or
weekly according to the Corporation’s general practice for its
executives, for the period of employment under this Agreement.
	 
	 	     (b.) During the period of employment, Executive shall be
allowed to participate in such bonus and other incentive
compensation programs in accordance with their terms as the
Corporation may have in effect from time to time for its
executive 

2

 

		
	 	personnel, and all compensation and other entitlements
earner thereunder shall be in addition to, and shall not in any way
reduce, the amount payable as Base Salary.
	 
	 	     (c.) During the period of employment, Executive shall be entitled
to:

		
	 	     (i) participate in such retirement, investment,
health (medical, hospital and/or dental) insurance,
life insurance, disability insurance and accident
insurance plans and programs as are maintained in
effect from time to time by the Corporation for its
salaried employees;
	 
	 	     (ii) participate in other non-duplicative
benefit programs which the Corporation may from time
to time offer generally to executive personnel of the
Corporation; and
	 
	 	     (iii) take vacations and be entitled to sick
leave in accordance with the Corporation’s policy for
executive personnel of the Corporation.

     (d.) During the period of employment, the Board from
time to time in its discretion may grant to Executive stock
options, and other rights related to shares of the
Corporation’s common stock.

     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 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

3

 

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 on or prior to
December 31, 2003, or any subsequent December 31 to which the end of the
period of employment may have been extended under Section 1, as follows:

		
	 	     (a) In the event of Executive’s death prior to said date, such
employment shall terminate on the date of death.
	 
	 	     (b) Such employment may be terminated prior to said date due to
Executive’s physical or mental disability which prevents the
effective performance by Executive of his duties hereunder on a full
time basis, with such termination to occur on or after the time
which Executive becomes entitled to disability compensation benefits
under the Corporation’s disability benefit program then in effect.
Any dispute as to Executive’s physical or mental disability shall be
settled by the opinion of an impartial physician selected by the
parties or their representatives or, in the event of failure to make
a joint selection after request therefore by either party to the
other, a physician selected by the Corporation, with the fees and
expenses of any such physician to be borne in equal shares by the
Corporation and Executive.
	 
	 	     (c) The Corporation, by giving written notice of termination to
Executive, may terminate such employment at any time prior to said
date for Cause, which means that such
termination must be due to (1) acts during the term of this
Agreement (A) resulting in a felony conviction under any Federal or
state statute or (B) substantial non-

4

 

		
	 	performance of Executive of his
employment duties required by this Agreement or (2) Executive
willfully engaging in dishonesty or gross misconduct injurious to
the Corporation during the term of this Agreement, with “Cause” to
be determined in any case by the Board after reasonable written
notice to Executive and an opportunity for Executive to be heard at
a meeting of the Board and with reasonable opportunity (of not less
than 30 days) in the case of clause (1)(B) to cease substantial
non-performance.
	 
	 	     (d) The Corporation may terminate such employment at any time
prior to said date without Cause (which shall be for any reason not
covered by preceding subsections (a) through (c)) upon 60 days prior
written notice to Executive.
	 
	 	     (e) In the event that a Termination Event (as that term is
defined in the Executive Severance Agreement, dated September 23,
1998) has occurred, then the Executive may terminate such employment
according to the terms and conditions set forth in said Executive
Severance Agreement, and shall then be exclusively entitled to any
and all payments and benefits provided under said Executive
Severance Agreement to the exclusion of any provisions contained
herein.

     7.     Payments Upon Termination.

         (a) Except as otherwise provided in subsection (b) of this
Section 7, upon termination of Executive’s employment by the
Corporation, 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), and all such compensation

5

 

 accrued as of the date of such termination but not previously paid
shall be paid to Executive at the time such payment otherwise would
be due. Unless otherwise expressly provided in the terms of the
bonus plan or program of the Corporation in which the Executive is a
participant at the time of his termination, if the termination of
Executive’s employment is not for Cause, then a pro rata portion of
the “target” full year’s bonus shall be deemed to have accrued for
the Executive under such bonus plan or program for the portion of
the year ended on the date of the termination, which shall be paid
to the Executive at the time bonus payment otherwise would be due.

     (b)  If Executive’s employment pursuant to this Agreement is
terminated without Cause pursuant to subsection (d) of Section 6
herein, then, in addition to the payments required by subsection (a)
of this Section 7, Executive shall be entitled to the vesting of all
options previously granted but still subject to vesting, and shall
receive, subject to the mitigation provisions of Section 11(a)
below, for a period of twelvemonths (the “Severance Period”) cash
severance payments (the Severance Payment”) from the Corporation.
The amount of the Severance Payment shall be equal to the
Executive’s then monthly Base Salary increased by a factor of twenty
percent (20%) to account for the Executive’s loss of benefits.
Executive shall have the right to purchase health and dental
coverage under the Company’s group policies then
in effect for the Severance Period. The Severance Payment
shall be due and payable on the 20th day of each month and is
subject to required withholding. The Executive shall also be
entitled to the benefits under this Section in the event the
Corporation elects at any time not to renew or extend this

6

 

		
	 	Agreement
pursuant to Section 1. The Executive shall not be entitled to a
Severance Payment in any event if he is terminated for Cause as
permitted by Section 6.

     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,
drawings, plans, programs, specifications and non-public information
relating to customers of the Corporation or its subsidiaries, except as
may be required to perform his duties hereunder. The Corporation or its
subsidiaries, except as may be required to perform 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, Etc. 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 his subsidiaries. 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 intentions covered by this Agreement as
aforesaid, including appropriate assignments vesting in the Corporation
or any of its subsidiaries

7

 

(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 cooperate and assist the
Corporation in the prosecution of any such applications in order that
patents may issue thereon.

		
	 	     10. Non-Competition: Non-Mitigation: Litigation Expenses.

		
	 	     (a) For the first nine months following termination of his
employment with the Corporation, Executive shall not be required
to mitigate the amount of termination benefits due him under
Section 7 herein, by seeking employment with others, or
otherwise, nor shall the amount of such benefits be reduced or
offset in any way by any income or benefits earned by Executive
from another employer or other source during said period;
thereafter, said termination benefits shall be reduced by
one-half of the amount Executive may earn from any full time
employment position or occupation. However, if Executive
becomes employed, as a full or part time employee, or as a
consultant or advisor, to any enterprise engaged in competition
with the business then being conducted by the Corporation, any
obligation which the Corporation otherwise would have had under
Section 7 shall thereupon terminate and cease to be of any
further force and effect other than to the extent theretofore
performed by the Corporation.
	 
	 	     (b) Until the period of employment expires (which for these
purposes shall be calculated without giving effect to early
termination pursuant to Section 6), Executive shall not enter
into endeavors that are competitive with the business or
operations of the Corporation in the lodging pay-per-view/guest
services market, and shall not own an interest in, manage,
operate, join, control, lend money or render 

8

 

		
	 	financial or other
assistance to or participate in or be connected with, as an
officer, employee, director, partner, stockholder (expect for
passive investments of not more than a one percent interest in
the securities of a publicly held corporation regularly traded on
a national securities exchange or in an over-the-counter
securities market), consultant or otherwise, any individual,
partnership, firm, corporation or other business organization or
entity that engages in a business which competes with the Company
in the lodging pay-per-view/guest services market. For these
purposes, employment with a vendor of cable television services
shall not be treated as competitive with the business or
operations of the Corporation in the lodging per-view/guest
services market.
	 
	 	     (c) The Corporation shall pay Executive’s out-of-pocket
expenses, including attorneys’ fees, but not to exceed a total of
$10,000 for any proceeding or group of related proceedings to
enforce, construe or determine the validity of the provisions for
termination benefits in Section 7 herein, provided, however, that
if any arbitration or litigation results in a finding in favor of
Executive contrary to the position of the Corporation, then
Executive will be reimbursed for all reasonable legal and related
costs regardless of the
limitation set forth above; and further provided that in no
event will Executive be held liable for the legal and related
costs of the Corporation in an event of a finding in favor of the
Corporation

     11.     Arbitration. Any dispute or controversy arising under or in
connection with the Agreement shall be settled exclusively by
arbitration in the city where the principal executive offices of the
Corporation are then located, in accordance with the

9

 

rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator’s award in any court having jurisdiction.

     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 Corporation may merge or
consolidate or to which it may transfer substantially all of its
assets.
	 
	 	     (b) The rights and obligations of Executive under this
Agreement are expressly declared and agreed to be personal,
nonassignable 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 construed according to the laws
of the State of South Dakota.

10

 

		
	 	     (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 when
sent by registered or certified mail, postage prepaid, addressed
as follows:

	 	 	 
	If to Executive:	 	
Steven Pofahl

1140 North Connor Trail

Sioux Falls, SD 57103
	 	 	 
	If to the Corporation:	 	
LodgeNet Entertainment Corporation

3900 West Innovation Street

Sioux Falls, SD 57107

Attn: General Counsel

	 	 	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.

     14.     Prior Agreements Superseded. This agreement supersedes all
prior agreements, if any, between the parties hereto with respect to the
subject matter hereof including any prior employment agreements, provided
however, that the Executive Severance Agreement, dated September 23,
1998, shall remain in full force and effect and shall exclusively govern
any payments and benefits in the event that a Termination Event (as that
term is defined in said Agreement) has occurred.

11

 

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

	 	 	 
	 	 	
LodgeNet Entertainment Corporation
	 
	By:	 	
/s/ Scott C. Petersen

President and Chief Executive Officer
	 
	 	 	
/s/

Steven Pofahl

12

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