EXHIBIT 10.3
AGREEMENT REGARDING CERTAIN COMPENSATION
This AGREEMENT REGARDING CERTAIN COMPENSATION, dated and
effective (except as otherwise set forth herein) this 23rd day of June, 2001
(the "Effective Date"), is made by and between Global TeleSystems, Inc., a
Delaware corporation (the "Company"), and Xxxxx X. Xxxxxx (the "Executive" and
collectively, the "Parties").
WHEREAS, the Executive has heretofore been employed by the
Company pursuant to (i) that certain Amended and Restated Employment Agreement
dated and effective November 1, 2000 (the "Employment Agreement") which sets
forth certain terms and conditions with respect to the Executive's employment
with the Company, and which is attached hereto as Exhibit A and (ii) that
certain letter agreement (the "Letter Agreement") which sets forth certain terms
and conditions with respect to that certain Performance Bonus payable to the
Executive by the Company (the "Performance Bonus"), and which is attached hereto
as Exhibit B; and
WHEREAS Executive has in good faith fully performed all his
duties and responsibilities to the Company pursuant to the Employment and Letter
Agreements by, for example, obtaining for the Company approximately 85% of the
economic value sought to be obtained through, inter alia, the Letter Agreement;
and
WHEREAS, Executive has unique experience and expertise in
financial restructuring of the kind in which the Company is currently engaged
and it is the desire of the Company to assure itself of continuous access to
Executive's services; and
WHEREAS, it can be presumed that the Executive has available
to him numerous alternative sources of employment; and
WHEREAS, due to the Company's changed economic and financial
circumstances and strategies, it is likely that the compensation packages and
retention incentives set forth in the Employment Agreement and the Letter
Agreement no longer provide appropriate incentives to the Executive to perform
and to remain in the employ of the Company; and
WHEREAS, the Parties have agreed that it is in their mutual
best interest to amend the Employment Agreement to increase the Executive's
salary and to provide the Executive with certain other retention and incentive
payments in lieu of certain severance programs now set forth therein; and
WHEREAS, the Parties have agreed that it is in their mutual
best interest that the Company pay a portion of the Performance Bonus in lieu of
other payments possibly called for under the Letter Agreement and to terminate
the Letter Agreement and Executive's right to further payments of the
Performance Bonus thereunder;
NOW THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the Parties, the Parties do hereby agree as follows:
A. FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT. The
Employment Agreement is hereby amended, effective as of the Effective Date, as
follows:
1. Annual Base Salary. Section 5(a) of the Employment Agreement is
hereby amended as follows:
a. The first sentence of Section 5(a) is hereby deleted in its
entirety and replaced with the following sentence: "During the
Term, Executive shall receive a base salary at a rate of not less
than $350,000 per annum, which shall be increased to $1,000,000 per
annum as of July 1, 2001 (the "Annual Base Salary"), less standard
deductions, paid in accordance with the Company's general payroll
practices for executives, but no less frequently than monthly."
b. The following sentence is hereby added to the end of Section
5(a): "The Executive agrees that, in partial consideration for the
increase in his Annual Base Salary to $1,000,000 described above,
he shall not, except in extraordinary circumstances approved by the
Board, be entitled to receive any bonus payments pursuant to
Section 5(b) hereof on or after July 1, 2001."
2. Special Retention Bonus. A new Section 5(h) shall be added to
the Employment Agreement to read as follows:
"(h) Special Retention Bonus. On July 1, 2001 (or
within a reasonable time thereafter), the Company shall pay to
the Executive a retention bonus in the amount of $1,500,000
(the "Special Retention Bonus"), provided, however, that in
the event the Executive's employment with the Company
terminates under circumstances other than (a) the Executive's
termination by the Company without Cause (as such term is
defined in this Agreement including, without limitation, in
Section 6(a)(v) hereof); (b) the Executive's death or
Disability or (c) the Executive's resignation for Good Reason,
the Executive shall pay to the Company, in cash, (x) within
ten days of such termination, an amount equal to the Special
Retention Bonus less any taxes paid by or on behalf of
Executive based upon or due to his receipt of such Special
Retention Bonus and (y) within ten days of Executive's receipt
thereof, an amount equal to the amount of any tax refund,
credit or other tax benefit received or recognized by the
Executive pursuant to his previous compliance under Section
5(h)(x) or (y) hereof Provided that, if the Company shall have
withheld portions of the Special Retention Bonus for tax
payments and such Special Retention Bonuses shall have to be
repaid by Executive under the terms hereof, or for any other
reason, the amount of such withholding shall be deemed repaid
by the Executive at the same time Executive repays the net
amount of the Special Retention Bonus actually paid to him."
3. Certain Amendments to Severance Arrangements. In partial
consideration for the awarding and payment of the Special Retention
Bonus described in Section 2 of this agreement, Executive agrees to
waive his right to the severance payments set forth and described in
Section 7(a)(i)(B) of the Employment Agreement (but, for clarity, other
severance benefits set forth in the Employment Agreement will
continue to be due and paid to Executive under their terms) and Section
7(a)(i)(B) of the Employment Agreement shall be deleted in its entirety
and replaced with the phrase "Intentionally Deleted".
4. Special Restructuring Success Bonus. A new Section 5(i) shall be
added to the Employment Agreement to read as follows:
"(i) Special Restructuring Success Bonus. The Company
shall pay to the Executive a bonus in the amount of $1,750,000
(the "Special Restructuring Success Bonus") in payments as set
forth below, provided that (i) Executive is employed hereunder
on the date that the payment in question becomes due; or (ii)
if he is not employed hereunder at that time, his employment
had been previously terminated either (x) by the Company
without Cause; (y) by the Executive for Good Reason; or (z)
due to Executive's death that occurred within one year prior
to the date that such payment become due under the terms
hereof:
(A) Restructuring -- In the event of a
contemplated restructuring (a "Restructuring") of the
balance sheet of the Company and Global TeleSystems
Europe B.V. (collectively, the "Companies") pursuant
to consensual written agreements (the "Restructuring
Agreements") between the Companies on the one hand
and formal or informal committees representing the
holders of publicly-traded debt, common stock and/or
preferred shares of or issued by the Companies (the
"Committees") on the other hand:
(x) 50% of the Special
Restructuring Success Bonus shall vest
and be payable upon the execution of
the Restructuring Agreements, and
(y) the remainder of the
Special Restructuring Success Bonus
shall vest and be payable upon the
earlier of (a) the issuance of any
court orders required in the
Restructuring Agreements as a
condition for the effectiveness
thereof, or, (b) if no such court
orders are required in the
Restructuring Agreements, upon
execution of the Restructuring
Agreements.
(B) Sale of the Company - In the event of
the sale of all or substantially all of the equity in
or assets of either of the Companies that is approved
by the relevant Company's governing Board, (a
"Sale"):
(x) 50% of the Special
Restructuring Bonus shall vest and be
payable upon the signing of the
definitive agreement for such Sale,
and
(y) the remainder of the
Special Restructuring Success Bonus
shall vest and be payable upon the
closing of such Sale."
B. PAYMENT IN LIEU OF PERFORMANCE BONUSES. In full satisfaction of all
of its obligations under the Letter Agreement, and in recognition of his
assistance in achieving approximately 85% of the economic value sought to be
obtained through, inter alia, the letter agreement, the Company shall pay to the
Executive $850,000, which represents 85% of the total Performance Bonus, as
follows:
1. $566,667 shall be payable upon the Effective Date (or as soon as
reasonably practical thereafter); and
2. $283,333 shall be payable upon completion or waiver of all of
the transactions listed in Part II paragraphs 2.1 to 2.28 of the
Explanatory Statement to the Scheme of Arrangement between Global
TeleSystems (Europe) Limited and certain of its creditors (pursuant to
section 425 of the Companies Act 1985).
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement Regarding Certain Compensation as of the day and year first above
written.
GLOBAL TELESYSTEMS, INC.
By: /s/ XXXX XXXXXXX
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Name: Xxxx Xxxxxxx
Title: Chairman, Senior Executive
Compensation Committee
EXECUTIVE:
/s/ XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
