Contract

 

Exhibit 10.1
          THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of June 26, 2006 is madeby and between LodgeNet Entertainment Corporation, a Delaware corporation (the“Corporation”), and James G. Naro (“Executive”) with reference to the followingcircumstances, namely:
  A.   Executive is employed by the Corporation, as its SeniorVice President and General Counsel and has made, and is making,an important contribution to the development and operation ofthe Corporation’s business.
 
  B.   The Corporation desires to provide for itsemployment of Executive as hereinafter provided, and Executivedesires such employment, upon the terms hereinafter provided.
 
  NOW, THEREFORE, the Corporation agrees to employ Executive, and Executive agrees tosuch employment, upon the following
terms and conditions:
     1. Period of Employment. The employment of Executive by the Corporationpursuant 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 soonerterminated as provided in Section 6 herein, through December 31, 2006; provided, however,that on each December 31, commencing with December 31, 2006, such period of employmentshall automatically be extended for an additional year unless ninety (90) days priorthereto either party hereto has given written notice to the other that such party does notwish to extend the period of employment.
     2. Duties. During the period of employment, Executive shall serve as SeniorVice President and General Counsel of the Corporation, or in such other office or officesto which he shall be elected by the Board of Directors of the Corporation (“Board”) withhis approval, performing the duties of such office or offices as are assigned to him by theBoard or committees of the Board. During the period of employment, Executive shall devotehis full time and attention to the business of the Corporation and the discharge of theaforementioned duties, except for permitted vacations, absences due to illness, andreasonable time for attention to personal affairs.

 


 

          3. Office Facilities. During the period of employment, Executive shall havehis office where the Corporation’s principal executive offices are located from time totime, which currently are at 3900 West Innovation Street, Sioux Falls, South Dakota, andthe Corporation shall furnish Executive with office facilities reasonably suitable to hisposition at such location.
          4. Compensation. As compensation for his services performed hereunder, theCorporation shall pay or provide to Executive the following:
          (a.) The Corporation shall pay Executive a salary (the “Base Salary”),calculated at the rate of $ 260,000.00 per annum (which Base Salary may be increasedby the Corporation at any time and from time to time in its discretion), payablemonthly, semi-monthly or weekly according to the Corporation’s general practice forits executives, for the period of employment under this Agreement.
          (b.) During the period of employment, Executive shall be allowed to participatein such bonus and other incentive compensation programs in accordance with theirterms as the Corporation may have in effect from time to time for its executivepersonnel, and all compensation and other entitlements earner thereunder shall be inaddition 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 programsas are maintained in effect from time to time by the Corporationfor its salaried employees;
          (ii) participate in other non-duplicative benefit programswhich the Corporation may from time to time offer generally toexecutive personnel of the Corporation; and

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          (iii) take vacations and be entitled to sick leave inaccordance with the Corporation’s policy for executive personnelof the Corporation.
          (d.) During the period of employment, the Board from time to time inits discretion may grant to Executive stock options, and other rightsrelated to shares of the Corporation’s common stock.
          5. Effect of Disability and Certain Hazards. Executive shall not be obligatedto perform the services required of him by this Agreement during any period in which he isdisabled or his health impaired to an extent which would render his performance of suchservices hazardous to his health or life, and relief from such obligation shall not in anyway affect his rights hereunder except to the extent that such disability may result intermination of his employment by the Corporation pursuant to Section 6 herein.
          6. Termination of Employment. The employment of Executive by the Corporationpursuant to this Agreement may be terminated on or prior to December 31, 2006, or on orprior to any subsequent December 31 to which the end of the period of employment may havebeen extended under Section 1, as follows:
          (a) In the event of Executive’s death prior to said date, such employment shallterminate on the date of death.
          (b) Such employment may be terminated prior to said date due to Executive’sphysical or mental disability which prevents the effective performance by Executiveof his duties hereunder on a full time basis, with such termination to occur on orafter the time which Executive becomes entitled to disability compensation benefitsunder the Corporation’s disability benefit program then in effect. Any dispute asto Executive’s physical or mental disability shall be settled by the opinion of animpartial physician selected by the parties or their representatives or, in theevent of failure to make a joint selection after request therefor by either party tothe other, a physician selected by the Corporation, with the fees and expenses ofany such physician to be borne in equal shares by the Corporation and Executive.

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          (c) The Corporation, by giving written notice of termination to Executive, mayterminate such employment at any time prior to said date for Cause, which means thatsuch termination must be due to (1) acts during the term of this Agreementresulting in a felony conviction under any Federal or state statute, (2) substantialnon-performance of Executive of his employment duties required by this Agreement or(3) Executive willfully engaging in dishonesty or gross misconduct injurious to theCorporation during the term of this Agreement, with “Cause” to be determined in anycase by the Board after reasonable written notice to Executive and an opportunityfor 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 (2) to cease substantialnon-performance.
          (d) The Corporation may terminate such employment at any time prior to saiddate without Cause (which shall be for any reason not covered by precedingsubsections (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 theExecutive Severance Agreement, dated June 12, 2006) has occurred, then the Executivemay terminate such employment according to the terms and conditions set forth insaid Executive Severance Agreement, and shall then be exclusively entitled to anyand all payments and benefits provided under said Executive Severance Agreement tothe exclusion of any provisions contained herein.
          7. Payments Upon Termination.
          (a) Except as otherwise provided in Section 6(e) and subsection (b) of thisSection 7, upon termination of Executive’s employment by the Corporation, allcompensation due Executive under this Agreement and under each plan or program ofthe Corporation in which he may be participating at the time shall cease to accrueas of the date of such termination (except,in the case of any such plan or program, if and to the extent otherwiseprovided in the terms of such plan or program), and all such compensation accrued asof the date of such termination but not previously paid shall be paid to Executiveat the time such payment otherwise would be due.

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Unless otherwise expresslyprovided in the terms of the bonus plan or program of the Corporation in which theExecutive is a participant at the time of his termination, if the termination ofExecutive’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 bonusplan 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 such bonus payment otherwise wouldbe due.
          (b) If Executive’s employment pursuant to this Agreement is terminated withoutCause pursuant to subsection (d) of Section 6 herein, then, in addition to thepayments required by subsection (a) of this Section 7, Executive shall be entitled(i) to the vesting of all options previously granted but still subject to vestingand (ii) to the extent set forth in any agreement regarding the grant of rightsrelated to shares of the Corporation’s common stock, the vesting (or termination ofrisk of forfeiture, as appropriate) of rights or shares previously granted but stillsubject to vesting. The Executive shall also receive, subject to the mitigationprovisions of Section 11(a) below, for a period of eighteen months (the “SeverancePeriod”) cash severance payments (the Severance Payment”) from the Corporation. Theamount of the Severance Payment shall be equal to the Executive’s then monthly BaseSalary increased by a factor of twenty percent (20%) to account for the Executive’sloss of benefits. Executive shall have the right to purchase health and dentalcoverage 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 eachmonth and is subject to required withholding. The Executive shall also be entitledto the benefits under this Section in the event the Corporation elects at any timenot to renew or extend this Agreement pursuant to Section 1. The Executive shallnot be entitled to a Severance Payment in any event if he is terminated for Cause aspermitted by Section 6(c).
          8. Confidential Information. Executive shall not at any time during theperiod of employment and thereafter disclose to others or use any trade secrets or anyother confidential information belonging to the Corporation or any of its subsidiaries,including, without limitation, drawings, plans,

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programs, specifications, code, algorithms,methods, techniques, systems, processes, designs and diagrams and non-public informationrelating to (i) customers of the Corporation or its subsidiaries, (ii) the Corporation’sbusiness plans and budgets, and (iii) the Corporation’s financial information, includingprojections, plans and budgets, except as may be required to perform his duties hereunder.The provisions of this Section 8 shall survive the termination of Executive’s employmentwith the Corporation, provided that after the termination of Executive’s employment withthe Corporation, the restrictions contained in this Section 8 shall not apply to any suchtrade secret or confidential information which becomes generally known in the trade from asource other than Executive.
          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 ordevelop during the period of his employment with the Corporation, relating to the businessof the Corporation or any of his subsidiaries. Executive shall, from time to time, at therequest of the Corporation, execute and deliver such instruments or documents, and shallperform or do such acts or things, as reasonably may be requested in order that theCorporation 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 orinventions covered by this Agreement as aforesaid, including appropriate assignmentsvesting in the Corporation or any of its subsidiaries (or any successor to the Corporationor any of its subsidiaries) full title to any and all such ideas, inventions andapplications. Further, Executive will cooperate and assist the Corporation in theprosecution 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 withthe Corporation, Executive shall not be required to mitigate the amount ofterminationbenefits 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 anyway by any income or benefits earned by Executive from another employer or othersource during said period; thereafter, said

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termination benefits shall bereduced by one-half of the amount Executive may earn from any full timeemployment position or occupation. However, if Executive becomes employed, asa full or part time employee, or as a consultant or advisor, to any enterpriseengaged in competition with the business then being conducted by the Corporationin the lodging pay-per-view/guest services market, any obligation which theCorporation otherwise would have had under Section 7, regardless of whether suchnine-month period has expired, shall thereupon terminate and cease to be of anyfurther force and effect other than to the extent theretofore performed by theCorporation.
          (b) Until the period of employment expires (which for these purposes shallbe calculated without giving effect to early termination pursuant to Section 6but shall include any extension or renewal of the period of employment),Executive shall not enter into endeavors that are competitive with the businessor operations of the Corporation in the lodging pay-per-view/guest servicesmarket, and shall not own an interest in, manage, operate, join, control, lendmoney or render financial or other assistance to or participate in or beconnected with, as an officer, employee, director, partner, stockholder, member,venturer, advisor, consultant or otherwise (except for passive investments ofnot more than a one percent interest in the securities of a publicly heldcorporation regularly traded on a national securities exchange or in anover-the-counter securities market) any individual, partnership, firm,corporation or other business organization or entity that engages in a businesswhich competes with the Company in the lodging pay-per-view/guest servicesmarket. For these purposes, employment with a vendor of cable televisionservices shall not be treated as competitive with the business or operations ofthe Corporation in the lodging per-view/guest services market.
          (c) The Corporation shall pay Executive’s out-of-pocket expenses, includingattorneys’ fees, but not to exceed a total of $10,000 for any proceeding orgroup of related proceedings to enforce, construe or determine the validity ofthe provisions for

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termination benefits in Section 7 herein, provided, however,that if any arbitration or litigation results in a finding in favor of Executivecontrary to the position of the Corporation, then Executive will be reimbursedfor all reasonable legal and related costs regardless of the limitation setforth above; and further provided that in no event will Executive be held liablefor the legal and related costs of the Corporation in an event of a finding infavor of the Corporation.
          11. Arbitration. Any dispute or controversy arising under or inconnection with the Agreement shall be settled exclusively by arbitration in the citywhere the principal executive offices of the Corporation are then located, inaccordance with the rules of the American Arbitration Association then in effect.Judgment may be entered on the arbitrator’s award in any court having jurisdiction.Notwithstanding the foregoing, the Corporation shall be entitled to seek equitableremedies, including injunction and constructive trust, with respect to a breach orthreatened breach of Sections 8, 9 and 10 hereof, without the requirement to post anybond or other security.
          12. Miscellaneous.
          (a) This Agreement shall inure to the benefit of and shall be binding uponthe successors and assigns of the Corporation, including any party with whichthe Corporation may merge or consolidate or to which it may transfersubstantially all of its assets.
          (b) The rights and obligations of Executive under this Agreement areexpressly declared and agreed to be personal, nonassignable and nontransferableduring his life, but upon his death this Agreement shall inure to the benefit ofhis heirs, legatees and legal representatives of his estate, but only to theextent of any remaining financial obligations of the Corporation.
          (c) The waiver by either party hereto of its rights with respect to abreach of any provision of this Agreement by the other shall not operate or beconstrued as a waiver of any rights with respect to any subsequent breach.

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          (d) No modification, amendment, addition, alteration or waiver of any ofthe terms, covenants or conditions hereof shall be effective unless made inwriting and duly executed by the Corporation and Executive.
          (e) This Agreement may be executed in any number of counterparts, each ofwhich shall be deemed an original, but all of which together will constitute butone and the same agreement.
          (f) This Agreement shall be construed according to the laws of the State ofSouth Dakota.
          (g) If any provision of this Agreement is determined to be invalid orunenforceable under any applicable statute or rule of law, it is to that extentto be deemed omitted and it shall not affect the validity or enforceability ofany other provision.
          (h) Any notice required or permitted to be given under this Agreement shallbe in writing, and shall be deemed given when sent by registered or certifiedmail, postage prepaid, addressed as follows:
        If to Executive:   James G. Naro
4 East Twin Oaks Est.
Sioux Falls, SD 57105

        If to the Corporation:   LodgeNet Entertainment Corporation
3900 West Innovation Street
Sioux Falls, SD 57107
Attn: President


or mailed to such other person and/or address as the party to be notified mayhereafter have designated by notice given to the other party in a similar manner.
          13. Prior Agreements Superseded. This agreement supersedes all prioragreements, if any, between the parties hereto with respect to the subject matter hereofincluding any prior employment agreements, provided however, that the Executive SeveranceAgreement, dated June 26, 2006, shall remain in full force and effect and shall exclusivelygovern any payments and benefits in the event that a Termination Event (as that term isdefined in said Agreement) has occurred.

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          IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the dateand year first above written.
         
    LodgeNet Entertainment Corporation
 
       
 
  By:      /s/ Gary H. Ritondaro
 
       
 
           Senior Vice President and Chief Financial Officer
 
       
 
         /s/ James G. Naro
 
       
 
           James G. Naro

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