Exhibit 10.1
METROMEDIA INTERNATIONAL GROUP, INC.
TRANSACTION BONUS AGREEMENT
THIS AGREEMENT is entered into as of the 29th day of
July, 2005 (the "EFFECTIVE
DATE") by and between Metromedia International Group, Inc., a Delaware
corporation (the "COMPANY"), and Xxxxxx X. Xxxx III ("EXECUTIVE").
WHEREAS, Executive is currently employed by the Company
pursuant to an employment agreement, entered into on October 6, 2003, effective
as of October 1, 2003, by and between Executive and the Company (the "EMPLOYMENT
AGREEMENT"), as amended by that certain amendment to the Employment Agreement,
dated July 29, 2005, by and between Executive and the Company (the "Amendment");
and
WHEREAS, the Company has entered into an agreement, dated as
of February 17, 2005, pursuant to which it has agreed to sell all of its
interest in Peterstar ZAO ("PETERSTAR") to First National Holding S.A., a
SOCIETE ANONYME organized under the laws of Luxembourg ("FNH"), Emergent Telecom
Ventures S.A., a SOCIETE ANONYME organized under the laws of Switzerland
("ETV"), Pisces Investment Limited, a company organized under the Companies Law
of Cyprus and a wholly-owned subsidiary of FNH and ETV (the "PETERSTAR SALE
AGREEMENT"); and
WHEREAS, the Board of the Directors of the Company (the
"BOARD") recognizes that (i) during the period pending the consummation of the
transactions contemplated by the Peterstar Sale Agreement, or (ii) in the event
the transactions contemplated by the Peterstar Sale Agreement are not
consummated, because a sale by the Company of its interest in Peterstar may
nevertheless arise, key employees of the Company may be motivated to leave the
employment of the Company or be distracted in the performance of their duties to
the Company and its subsidiaries, to the detriment of the Company and its
stockholders; and
WHEREAS, Executive is a key executive of the Company, and the
Board has determined that it is in the best interests of the Company and its
stockholders to secure Executive's continued services and to ensure Executive's
continued and undivided dedication to his duties in the event of a sale by the
Company of its interest in Peterstar; and
WHEREAS, the Board has authorized the Company to enter into
this Agreement.
NOW, THEREFORE, for and in consideration of the
premises and the mutual covenants and agreements contained herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and Executive hereby agree as follows:
I. EFFECT OF THIS AGREEMENT ON THE EMPLOYMENT AGREEMENT; DURATION OF THIS
AGREEMENT.
A. Other than as specifically stated in this Agreement, the Employment
Agreement, as amended by the Amendment, shall remain in full force and effect.
B. On and following the Effective Date, Section 2.07 of the Employment
Agreement, relating to the reduction of compensation to avoid the trigger of
certain excise taxes, shall be void and of no further effect; PROVIDED, that
such Section 2.07 shall once again become effective on October 1, 2005 if and
only if a "Peterstar Sale Transaction" (defined below) is not consummated prior
to that date.
C. If Executive's employment is terminated by the Company without "CAUSE"
(as defined in the Employment Agreement) at any time after the consummation of a
Peterstar Sale Transaction that is consummated on or prior to September 30,
2005, to the extent that any amounts that become payable to Executive under
Section 7.08 of the Employment Agreement, relating to payments to Executive in
connection with a termination without Cause, or Section 8.02 of the Employment
Agreement, relating to payments to Executive in connection with a termination
without Cause following a "CHANGE OF CONTROL" (as defined in the Employment
Agreement), such amounts shall be reduced by the full amount of any Peterstar
Transaction Bonus.
D. The Executive and the Company agree that the definition of Change of
Control in the Employment Agreement and of Peterstar Sale Transaction in this
Agreement are mutually exclusive such that, the consummation of a Peterstar Sale
Transaction on or before September 30, 2005 shall not constitute a Change of
Control for purposes of the Employment Agreement, and the occurrence of a Change
of Control for purposes of the Employment Agreement shall not also constitute a
Peterstar Sale Transaction.
E. This Agreement shall terminate and be of no further force and effect on
and after October 1, 2005 if a Peterstar Sale Transaction is not consummated
prior to that date.
F. For purposes of this Agreement, a "PETERSTAR SALE TRANSACTION" shall
mean the sale, directly or indirectly, of the Company's entire interest in the
Peterstar ZAO business venture.
II. EFFECT OF A PETERSTAR SALE TRANSACTION.
A. PETERSTAR TRANSACTION BONUS TRIGGER. The Company agrees that, in
connection with a Peterstar Sale Transaction that is consummated on or prior to
September 30, 2005, Executive shall be entitled to the Peterstar Transaction
Bonus, which, subject to Section II.B. of this Agreement, shall be payable as
follows: (i) 50% in one lump sum payment concurrent with the consummation of the
Peterstar Sale Transaction, provided Executive is still employed by the Company
as of the date of such consummation; (ii) 25% in one lump sum payment on the
date that is six months after the consummation of the Peterstar Sale Transaction
(the "SECOND PAYMENT DATE"), provided Executive is still employed by the Company
as of such date; and (iii) 25% in one lump sum payment on the date that is 12
months after the consummation of the Peterstar Sale Transaction (the "THIRD
PAYMENT Date"), provided Executive is still employed by the Company as of such
date.
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B. TERMINATION OF EMPLOYMENT. If Executive's employment with the Company or
any of its affiliates is terminated by the Company without Cause at any time
after payment of the first installment of the Peterstar Transaction Bonus but
before the Second Payment Date or Third Payment Date, the Company shall, within
10 days after such termination (i) cause to be paid the unpaid balance of the
Peterstar Transaction Bonus, and (ii) to the extent that the severance that
Executive would have been entitled to receive under Section 7.08 of the
Employment Agreement upon a termination of Executive's employment by the Company
without Cause on such date (the "EMPLOYMENT AGREEMENT SEVERANCE"), had such
section been in effect, would be greater than the full amount of the Peterstar
Transaction Bonus, pay Executive an additional amount equal to the Employment
Agreement Severance less the Transaction Bonus. In addition, if Executive is
entitled to payments under this Section II.B., he shall also be entitled to any
amounts due under Section 7.07 of the Employment Agreement, and, provided
Executive is eligible for and timely elects to continue group health insurance
coverage for himself and, if applicable, his family, under Part 6 of Title I of
the Employee Retirement Income Security Act of 1986, as amended ("COBRA"), the
Company shall directly pay the cost of continuing group health insurance for
Executive and, if applicable, his qualified beneficiaries under COBRA until the
date Executive or any such qualified beneficiary, as applicable, ceases for any
reason to be eligible for continuation of group health insurance coverage under
COBRA.
C. PETERSTAR TRANSACTION BONUS. The "PETERSTAR TRANSACTION BONUS" shall be
equal to (a) two times Executive's "BASE SALARY" (as defined in the Employment
Agreement) plus (b) $133,333.
D. Except to the extent otherwise provided in this Agreement, if Executive
receives payments pursuant to Section II of this Agreement, Executive shall have
no further rights to any compensation or other benefits under this Agreement
(other than pursuant to Section III of this Agreement, if applicable), and any
other benefits due Executive shall be determined in accordance with all plans,
policies and practices of the Company; PROVIDED, however, that, Executive shall
not be entitled to any payments or benefits under any separately stated
severance, retention or change of control plan, policy, program or arrangement
of the Company.
III. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
A. If it is determined (as hereafter provided) that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "CODE")
(or any successor provision thereto) or to any similar tax imposed by state or
local law, or any interest or penalties with respect to such excise tax (such
tax or taxes, together with any such interest and penalties, are hereafter
collectively referred to as the "EXCISE TAX"), then Executive will be entitled
to receive an additional payment or payments (a "GROSS-UP PAYMENT") in an amount
such that, after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
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B. Subject to Section III.F of this Agreement, all determinations required
to be made under this Section III, including whether an Excise Tax is payable by
Executive and the amount of such Excise Tax and whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment, will be made by a nationally
recognized firm of certified public accountants (the "ACCOUNTING FIRM") selected
by the Company, which may be the Company's regular outside auditors. The Company
will direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and Executive within 30 calendar
days after the consummation of the Peterstar Sale Transaction or the date of
Executive's termination of employment, if applicable, and any other such time or
times as may be requested by the Company or Executive. If the Accounting Firm
determines that any Excise Tax is payable by Executive, the Company will pay the
required Gross-Up Payment to Executive no later than five calendar days prior to
the due date for the Executive's income tax return on which the Excise Tax is
included. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it will, at the same time as it makes such determination, furnish
Executive with an opinion that he has substantial authority not to report any
Excise Tax on his federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment
will be binding upon the Company and Executive. As a result of the uncertainty
in the application of Section 4999 of the Code (or any successor provision
thereto) and the possibility of similar uncertainty regarding applicable state
or local tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. If the Company exhausts or fails to
pursue its remedies pursuant to Section III.F hereof, and Executive thereafter
is required to make a payment of any Excise Tax, Executive shall so notify the
Company, which will direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and Executive as promptly as
possible. Any such Underpayment will be promptly paid by the Company to, or for
the benefit of, Executive within five business days after receipt of such
determination and calculations.
C. The Company and Executive will each provide the Accounting Firm access
to and copies of any books, records and documents in the possession of the
Company or Executive, as the case may be, reasonably requested by the Accounting
Firm, and otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determination contemplated by Section III.B
hereof.
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D. The federal, state and local income or other tax returns filed by
Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
Executive. Executive will make proper payment of the amount of any Excise Tax,
and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of Executive's federal income tax return, or corresponding state
or local tax return, if relevant, the Accounting Firm determines that the amount
of the Gross-Up Payment should be reduced, Executive will within five business
days pay to the Company the amount of such reduction.
E. The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section
III.B and Section III.D hereof will be borne by the Company. If such fees and
expenses are initially advanced by Executive, the Company will reimburse
Executive the full amount of such fees and expenses within five business days
after receipt from Executive of a statement therefor and reasonable evidence of
his payment thereof.
F. Executive will notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification will be given as promptly as
practicable but no later than 10 business days after Executive actually receives
notice of such claim and Executive will further apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid
(in each case, to the extent known by Executive). Executive will not pay such
claim prior to the earlier of (i) the expiration of the 30-calendar-day period
following the date on which he gives such notice to the Company and (ii) the
date that any payment of amount with respect to such claim is due. If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive will:
1. provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
2. take such action in connection with contesting such claim as the Company
will reasonably request in writing from time to time, including without
limitation accepting legal representation with respect to such claim by an
attorney competent in respect of the subject matter and reasonably selected by
the Company;
3. cooperate with the Company in good faith in order effectively to contest
such claim; and
4. permit the Company to participate in any proceedings relating to such
claim;
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PROVIDED, however, that the Company will bear and pay directly
all costs and expenses (including interest and penalties)
incurred in connection with such contest and will indemnify
and hold harmless Executive, on an after-tax basis, for and
against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
limiting the foregoing provisions of this Section III.F, the
Company will control all proceedings taken in connection with
the contest of any claim contemplated by this Section III.F
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided
that Executive may participate therein at his own cost and
expense) and may, at its option, either direct Executive to
pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and Executive agrees to prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company will determine;
PROVIDED, however, that, if the Company directs Executive to
pay the tax claimed and xxx for a refund, the Company will
advance the amount of such payment to Executive on an
interest-free basis and will indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and PROVIDED further,
however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Executive
with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore,
the Company's control of any such contested claim will be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder, and Executive will be entitled to
settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
G. If, after the receipt by Executive of an amount advanced by the Company
pursuant to Section III.F hereof, Executive receives any refund with respect to
such claim, Executive will (subject to the Company's complying with the
requirements of Section III.F hereof) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section III.F hereof, a determination is made that
Executive will not be entitled to any refund with respect to such claim, and the
Company does not notify Executive in writing of its intent to contest such
denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance will be forgiven and will not be required to be
repaid, and the amount of such advance will offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid pursuant to this Section III. If,
after the receipt by Executive of a Gross-Up Payment but before the payment by
Executive of the Excise Tax, it is determined by the Accounting Firm that the
Excise Tax payable by Executive is less than the amount originally computed by
the Accounting Firm and consequently that the amount of the Gross-Up Payment is
larger than that required by this Section III, Executive shall promptly refund
to the Company the amount by which the Gross-Up Payment initially made to
Executive exceeds the Gross-Up Payment required under this Section III.
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IV. WITHHOLDING TAXES. The Company may withhold from all payments due to
Executive hereunder all taxes which, by applicable federal, state, local or
other law, the Company is required to withhold therefrom.
V. NATURE OF OBLIGATIONS. The payments and benefits provided under this
Agreement are contingent on (i) Executive's compliance with Section 3, Section 4
and Section 5 of the Employment Agreement, and (ii) for any payments hereunder
that are made in connection with Executive's termination of employment,
Executive's execution of a Release consistent with that described in Section
7.09(a) of the Employment Agreement no earlier than the date of termination of
employment, and Executive not having revoked such release during the time period
within which he may do so.
VI. NO DUPLICATION OF BENEFITS. It is the intent of the parties that no
duplication of benefits occur between this Agreement and the Employment
Agreement.
VII. NON-EXCLUSIVITY OF RIGHTS. Other than as specifically stated in this
Agreement, nothing in this Agreement shall prevent or limit Executive's right to
participate in any benefit, bonus, incentive or other plan or program provided
by the Company and for which Executive may qualify (other than any severance,
retention or change of control plan, policy, program or arrangement), nor shall
anything herein limit or reduce such rights as Executive may have under any
agreements with the Company. Amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan or program of the
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
VIII. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties hereto and supersedes all prior and contemporaneous agreements and
understandings (including term sheets) both written and oral, between the
parties hereto, or either of them, with respect to the subject matter hereof. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement.
IX. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not, and nothing herein shall
be deemed to create, a contract of employment between Executive and the Company.
The Company may terminate the employment of Executive with the Company at any
time, subject to the terms of this Agreement and/or the Employment Agreement (as
amended by the Amendment) and/or any other employment agreement or arrangement
between the Company and Executive that may be in effect.
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X. SUCCESSORS; BINDING AGREEMENT.
A. The Company agrees that it will cause any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business of the Company (other than a successor in
connection with a Peterstar Sale Transaction), unconditionally to assume, by
written instrument delivered to Executive (or his beneficiary or estate) if such
assumption does not occur by operation of law, all of the obligations of the
Company hereunder. As used in this Agreement, "Company" shall mean (i) the
Company as hereinbefore defined, and (ii) any successor described in the
preceding sentence or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, including any parent or
subsidiary of such a successor.
B. This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive shall die
while any amounts would be payable to Executive hereunder had Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such person or persons
appointed in writing by Executive to receive such amounts or, if no person is so
appointed, to Executive's estate. Neither this Agreement nor any right arising
hereunder may be assigned or pledged by Executive.
XI. NOTICE.
A. For purposes of this Agreement, all notices and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered or, if later, five (5) days after deposit in the
United States mail, certified and return receipt requested, postage prepaid or
two (2) days after deposit with a nationally recognized overnight courier
service, addressed as follows:
If to Executive:
Xxxxxx X. Xxxx III
If to the Company:
Metromedia International Group, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
XII. ARBITRATION: Except as provided in Section 6 of the Employment Agreement,
any dispute between the parties to this Agreement in connection with, arising
out of or asserting breach of this Agreement or the Employment Agreement, or any
statutory or common law claim by Executive relating to Executive's employment
under the Employment Agreement or rights under this Agreement (including any
tort or discrimination claim), shall be exclusively resolved by binding
statutory arbitration. Such dispute shall be submitted to arbitration in New
York, before a panel of three neutral arbitrators in accordance with the
Commercial Rules of the American Arbitration Association then in effect, and the
arbitration determination resulting from any such submission shall be final and
binding upon the parties hereto. Judgment upon any arbitration award may be
entered in any court of competent jurisdiction.
XIII. GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the internal substantive laws of the State of New York, without
regard to conflicts of laws principles.
XIV. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
XV. MISCELLANEOUS. No provision of this Agreement may be modified or waived
unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement. Except as otherwise specifically provided
herein, the rights of, and benefits payable to, Executive, his estate or his
beneficiaries pursuant to this Agreement are in addition to any rights of, or
benefits payable to, Executive, his estate or his beneficiaries under any other
employee benefit plan or compensation program of the Company (other than any
severance, retention or change of control plan, policy, program or arrangement).
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and Executive has
executed this Agreement as of the day and year first above written.
METROMEDIA INTERNATIONAL GROUP, INC.
By: /S/ XXXX X. XXXX
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Title: CHAIRMAN AND CEO
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/S/ XXXXXX X. XXXX, III
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Xxxxxx X. Xxxx, III
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