LightSquared’s recent filing of the Employment Contract with Sanjiv Ahuja, its former CEO, makes for interesting reading, especially for those impacted by the LightSquared bankruptcy. According to the terms of the agreement, Mr Ahuja was entitled to a base salary of $2M per year plus a target bonus of 150% of his base salary. In addition he was to receive restricted stock with an initial fair market valuation of $135M. All of his domestic travel was to take place by private jet (which must have been useful because NetJets was paid $227K in the 90 days prior to LightSquared’s bankruptcy filing, and NetJets was billing around $100K per month prior to Mr Ahuja leaving in February 2012), including short haul international travel, and “in his reasonable good faith judgment” Mr Ahuja could also “require the use of private planes for long-haul international travel, as appropriate”. Remarkably, however, Mr Ahuja was only expected to devote 50% of his working time to the company.
Now that a proposed settlement has been reached over termination of his employment, Mr Ahuja will be able to retain the 8.83M shares of stock he would have been granted (apparently he did not take the restricted stock he was entitled to at the time, because of the large tax liability that would have been incurred: perhaps he thought that the price would go down rather than up!). Indeed, though the 8.83M shares apparently had a “fair market valuation” of $135M (presumably reflecting the restrictions applicable to the grant), LightSquared Inc. had sold 3.39M shares of common stock to SK Telecom for $60M, giving an market valuation of $17.71 per share, for a total value at that time of $156.4M. Indeed, if Harbinger’s supposed prior contribution of $2.9B of assets to LightSquared (in exchange for 91.88M shares) had been taken at face value, then Mr Ahuja’s shares could theoretically have been worth as much as $31.50 each, for a total of $278M. And if LightSquared’s spectrum had been worth $12B, after the waiver grant, as LightSquared’s consultant told the FCC, then (after deducting LightSquared’s debt) Mr. Ahuja’s stock would have been worth $90-$100+ per share, or at least $800M!
Of course, one has to wonder what on earth Mr Falcone thought he was buying for this sort of money, because it certainly didn’t seem to be a realistic judgment about LightSquared’s prospects of resolving its GPS issues. However, perhaps what was really important was that LightSquared’s debt investors believed Mr Ahuja’s assurances that there wasn’t any need to worry about GPS, when he was persuading them to invest an additional $586M in the company in February 2011. I’m sure Mr Ahuja therefore appreciates the indemnification he is receiving under the proposed settlement agreement “to the fullest extent permissible under LightSquared’s organizational documents and the Employment Agreement…from and against any and all claims and demands related to actions or omissions of the Executive during the time the Executive was as a director, officer or employee of LightSquared.”