Exhibit 10.5
EMPLOYMENT AGREEMENT
This AGREEMENT (the "Agreement") is made as of the 3rd day of June, 2002
between Global Crossing Ltd., a Bermuda corporation ("GX"), and Xxxx X. Xxxxxx
("Executive").
Upon entry of an order of the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court") authorizing GX to enter
into this Agreement (the "Bankruptcy Court Approval"), this Agreement shall
replace the prior agreement (the "Prior Agreement") made as of October 3, 2001,
among GX, Executive and Asia Global Crossing Ltd., a Bermuda corporation ("AX"),
insofar as the Prior Agreement imposes any continuing obligations upon GX to
Executive or upon Executive to GX. Subject to Section 7(o), this Agreement shall
be effective as of the date of entry of such order (the "Effective Date").
Executive and GX acknowledge that all obligations of Executive and GX under
the Prior Agreement required to have been performed prior to the Effective Date
have been performed by each party hereto in due course as required or have been
superseded by this Agreement.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, GX and Executive hereby agree as follows:
1. Employment.
Subject to the terms and conditions hereinafter contained, GX hereby agrees
to continue the employment of Executive and Executive accepts the employment by
GX.
(a) During the Term (as defined below), Executive shall hold the title of
Chief Executive Officer ("CEO") of GX and Director of GX, shall be the most
senior officer of GX, other than the Chairman of the Board of Directors of GX
(the "Board"), and shall have those powers and duties normally associated with
the position of CEO and such other powers and duties consistent with such
position as may be prescribed by the Board. Executive shall be appointed as a
Director of GX effective as of the date of Executive's appointment as CEO of GX.
During the Term, Executive shall report directly to the Board in carrying out
his responsibilities under this Agreement. Executive's principal business
location shall be at GX's principal executive offices in Madison, New Jersey, or
at such other location in the New York/New Jersey area as selected by GX.
(b) During the Term, all executive officers of GX, other than the Chairman
and the Co-Chairman and any Chief Restructuring Officer who may be retained by
GX, shall report to Executive.
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(c) Executive shall faithfully serve GX to the utmost of his ability and
shall use his best efforts to promote the interests of GX and shall devote all
of his time and attention during the normal working hours of GX (and, for no
further remuneration, during such additional hours as shall be necessary for the
proper performance thereof) to his duties, except insofar as he has the written
consent of the Board to do otherwise. The foregoing shall not preclude Executive
from engaging in appropriate civic, charitable or religious activities or from
devoting a reasonable amount of time to private investments or, subject to Board
approval, from serving on the boards of directors of other entities, as long as
none of such activities, investments and service materially interfere or
conflict with Executive's responsibilities to GX or compete, directly or
indirectly, with GX or its affiliates.
(d) Executive shall comply with such directives and written policies and
procedures as GX may issue from time to time to its officers and executives.
2. Term.
Subject to the provisions of Section 5 below, the term of this Agreement
(the "Term") shall be deemed to have begun on October 3, 2001, and shall end on
October 3, 2004. Subject to Section 5 below, the Term of this Agreement shall
automatically extend for an additional one (1) year period on October 2, 2004
(the "Extension Date"), and on each subsequent anniversary of the Extension Date
thereafter, unless either party notifies the other in writing at least six (6)
months prior to the applicable anniversary of the Extension Date that the Term
shall not be so extended. Upon notice of non-extension, Executive's employment
hereunder shall terminate on the close of business on the last day of the Term.
3. Compensation.
(a) Base Salary. GX agrees to pay and Executive agrees to accept as
compensation for the services rendered by Executive during his employment
hereunder an annualized salary of $1,100,000 (the "Base Salary"), less
withholding taxes and other amounts required by applicable laws, to be paid in
semi-monthly installments. Notwithstanding the foregoing, for the period
commencing on the Effective Date, and ending on the earlier to occur of (i) the
date the Bankruptcy Court enters an order confirming a chapter 11 plan, or (ii)
the date the Bankruptcy Court approves a sale of all or substantially all of
GX's assets, and pursuant to which, in either case, this Agreement and the
obligations hereunder are assumed by a successor to GX's business (the
"Reinstatement Date"), Executive consents to a thirty percent (30%) reduction of
such Base Salary; provided, however, that in no event shall any amount reduced
pursuant to this Section 3(a) reduce the Base Salary for purposes of calculation
of amounts payable under Section 3(c) or Section 5 hereof. On the Reinstatement
Date, the Base Salary shall, without further action by the parties hereto,
revert to the amount provided in the first sentence of this Section 3(a).
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(b) Signing Bonus and Other Payments. Executive acknowledges that the
signing bonus and all other payments required to have been made by GX under the
Prior Agreement have been paid in full or have been superseded by this
Agreement.
(c) Annual Bonus. Executive shall be eligible to receive an annual bonus
(the "Annual Bonus") in accordance with GX's annual incentive plan beginning
with the bonus payable in respect of the fiscal year of GX commencing January 1,
2002. The amount of the Annual Bonus shall be determined based upon the
achievement of established performance goals which, to the extent related to
corporate goals, shall be the same for Executive as other members of GX's senior
executive team, and to the extent related to individual goals, shall be as
determined by the Compensation Committee of the Board (the "Compensation
Committee"). Executive acknowledges that such performance goals shall be subject
to the approval of the Bank Group Steering Committee and the Official Unsecured
Creditors' Committee in GX's chapter 11 case, such approval not to be
unreasonably withheld; provided that such goals shall be deemed to have been
approved unless modified or replaced at the request of such committees and
communicated to Executive within thirty (30) days after submission of such goals
for approval. Upon achievement of performance goals at target level and subject
to Executive being employed by GX on the date any such Annual Bonus is payable,
except as otherwise provided in Section 5, Executive shall receive an Annual
Bonus equal to 125% of Base Salary. If performance goals at target level are not
met, Executive shall not receive an Annual Bonus for that year. Executive shall
not be eligible to participate in any quarterly or semi-annual retention bonus
payment plans, other than as set forth in Section 3(f), or to participate in
GX's Key Employee Retention Plan, until the Reinstatement Date.
(d) GX Stock Options. On October 3, 2001, Executive was granted options to
purchase 5,000,000 shares of GX common stock (the "GX Stock Options") at an
exercise price per share equal to the average of the closing prices of GX common
stock on the New York Stock Exchange ("NYSE") during the ten (10) consecutive
NYSE trading days commencing with September 27, 2001. GX represented in the
Prior Agreement that all necessary approvals for such grant were obtained prior
to the execution of the Prior Agreement. The GX Stock Options shall vest and
become exercisable as follows: one-third (1/3) immediately on the date of grant,
one-third (1/3) on the first anniversary of the date of grant, and the final
one-third (1/3) on the second anniversary of the date of grant. The GX Stock
Options shall be subject to additional terms and conditions, not inconsistent
with this Agreement, as were determined by the Compensation Committee and set
forth in the Nonqualified Stock Option Agreement dated October 10, 2001, between
GX and Executive. Following the initial grant, Executive shall be eligible to
receive future annual grants on a basis consistent with customary practice for
other senior executives of GX.
(e) Change in Control of GX. On October 3, 2001, Executive and GX entered
into a Change in Control Agreement (the "GX Change in Control Agreement"). Upon
the Effective Date, Executive hereby waives and releases all of his rights under
the GX Change in Control Agreement.
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(f) Retention Payments. GX shall make four quarterly, lump sum retention
payments to Executive in the amount of $800,000 per payment (the "Quarterly
Retention Payments") on the first business day following the Effective Date,
July 31, 2002, October 31, 2002 and January 31, 2003, provided that Executive's
employment with GX has continued through the applicable payment date.
Notwithstanding the foregoing, GX shall pay to Executive all remaining unpaid
Quarterly Retention Payments (i) within two (2) business days after the
Reinstatement Date provided that Executive remains employed through that date,
or (ii) if Executive's employment is terminated as a result of an Uninsured
Death or Disability, or by GX without Cause, or if Executive terminates his
employment with Good Reason, within thirty (30) days of such termination.
For purposes of this Agreement, an "Uninsured Death" means: (1) Executive's
death, (2) prior to August 15, 2002, (3) at a time when the life insurance
required to be provided under Section 4(b) is not in force; provided, however,
an Uninsured Death shall not have occurred if (1) Executive's representations
contained in Section 4(b) regarding his health and activities were not true as
of the Effective Date, or (2) Executive did not use his best efforts to obtain
the life insurance policy or policies provided under Section 4(b), including
completing the necessary application forms and other documentation and
undergoing any required physical examination within ten (10) business days from
the Effective Date.
(g) Performance Fee.
(i) Restructuring or Integrated Sale. GX shall pay to Executive an
additional fee (a "Performance Fee") in the amount of $4.0 million, provided
Executive's employment with GX has continued through the effective date under
clause (A) or the closing date under clause (B), as applicable (or Executive's
employment has been terminated as a result of a Disability or an Uninsured
Death, or by GX without Cause, or Executive has terminated his employment with
Good Reason, but in such event only to the extent that prior to such termination
either a Binding Agreement has been entered into in accordance with Section
3(g)(iii) or a plan of reorganization has been filed that meets the criteria set
forth in Section 3(g)(iv) below) in the following circumstances:
(A) the Bankruptcy Court confirms a chapter 11 plan of reorganization that
becomes effective, under which the holders of the Prepetition Claims (as defined
below) receive Distributable Proceeds (as defined below) in the form of cash or
other property including, without limitation, equity securities in a reorganized
GX or in a successor of GX with an aggregate value as of such effective date of
such chapter 11 plan of at least $1.3 billion (taking into account Distributable
Proceeds attributable to Constituent Sales), or
(B) the value of the aggregate proceeds from the sale of all or
substantially all the assets of GX to one or more investors or investor groups
in a single transaction is at least $1.3 billion, and such proceeds are either
distributed to the holders of Prepetition Claims or have been deposited in a
segregated account or otherwise legally
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set aside for the benefit of the holders of Prepetition Claims in a manner such
that the proceeds are not available for the payment of ongoing expenses of
administration during GX's chapter 11 case without Bankruptcy Court approval,
provided that a sale of assets under this clause (B) that does not include one
or more non-core assets, such as Global Marine, Racal, and GX's conferencing
business, shall qualify as a sale of assets under this clause (B) as long as the
aggregate Distributable Proceeds from all sales or other dispositions of core
and non-core assets taken into account under this clause (B) is at least $1.3
billion, (each of (A) and (B) constituting "Distributable Proceeds")(as further
defined below).
The Performance Fee determined under this subsection 3(g)(i) shall be paid to
Executive on the effective date of GX's chapter 11 plan, or on such earlier date
as the Distributable Proceeds are distributed or set aside as described above.
For purposes of this Section 3(g)(i), "Prepetition Claims" shall mean all
claims of unsecured or undersecured creditors of GX and its subsidiaries
(excluding AX and its subsidiaries) outstanding on January 28, 2002, including
claims of the holders of debt under any bank credit agreement and the holders of
any publicly issued debt, but excluding (1) claims satisfied through the curing
of defaults in connection with the assumption of executory contracts or
unexpired leases, (2) claims of creditors of non-debtor domestic and foreign
subsidiaries, (3) claims held by the "Big 9 Vendors, and (4) claims for carrier
access charges except to the extent such claims for carrier access charges (x)
are not excluded by clause (1) of this definition or (y) receive the same
treatment under a chapter 11 plan of reorganization as claims based on the
publicly issued debt of GX.
(ii) Partial Sales. If all or part of GX's assets are sold, other than
pursuant to a restructuring or sale that meets the criteria set forth in Section
3(g)(i) above, then GX shall pay to Executive a Performance Fee in an amount
based upon the value of the Distributable Proceeds attributable to each separate
sale (each a "Constituent Sale"), so that an initial payment of $1 million is
made to Executive for the first $250 million of Distributable Proceeds generated
from Constituent Sales, with additional payments becoming payable at the rate of
$1 million for each subsequent $250 million of Distributable Proceeds generated
from Constituent Sales thereafter, such additional payments to be paid pro-rata
at the time a qualifying Constituent Sale is consummated, up to a maximum
aggregate payment of $4 million if Distributable Proceeds are at least $1
billion, provided that Executive's employment with GX has continued through the
date on which each Constituent Sale is consummated, except as otherwise provided
in clause (iii) below.
(iii) Binding Agreements.
(A) Subject to clause (C) below, if, while Executive is still employed by
GX, GX receives a Binding Agreement (as defined in clause (B) below) for a
transaction that would qualify under Section 3(g)(i)(B), above, and such Binding
Agreement is not accepted by GX solely because the holders of the Senior
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Secured Bank Debt reject the Binding Agreement principally on the basis that the
consideration is insufficient, Executive will nonetheless be entitled to the
Performance Fee; provided, however, that Executive shall not be entitled to a
Performance Fee if (i) GX moves forward with such transaction notwithstanding
the rejection by the holders of the Senior Secured Bank Debt, and (ii) such
transaction is not subsequently consummated. Notwithstanding anything to the
contrary contained herein, the parties acknowledge that the terms of any draft
agreement provided by Singapore Technologies Telemedia PTE, Ltd. and Xxxxxxxxx
Whampoa Ltd. on or before May 15, 2002, does not constitute a Binding Agreement
that would qualify under Section 3(g)(i)(B), above; provided, however, that
nothing in this Agreement shall preclude any position that the any draft
agreement provided after May 15, 2002, does not constitute a Binding Agreement.
(B) If Executive's employment is terminated as a result of a Disability or
an Uninsured Death, or by GX without Cause, or if Executive terminates his
employment with Good Reason prior to the consummation of any Constituent Sale
described in Section 3(g)(ii) above, but such termination occurs after a Binding
Agreement (as defined below) has been entered into with respect to such
Constituent Sale, then Executive shall be entitled to a Performance Fee upon
closing of such transaction for which a Binding Agreement was received for such
assets prior to such termination, to be paid at the same time as it would have
been paid had his employment with GX continued until such transaction is
consummated, in an amount determined in accordance with Section 3(g)(ii).
For purposes of calculating the Distributable Proceeds pursuant to Section
3(g)(i) or Section 3(g)(ii) above with respect to any sale of GX assets, a
"Binding Agreement" shall mean either (1) a fully executed, binding agreement to
purchase the assets, or (2) a fully executed offer to purchase the assets,
accompanied by a legally binding commitment to execute a contract, the form of
which is attached thereto, in each case from a qualified bidder with the
financial capability to close such transaction and the closing of such
transaction being subject only to regulatory approval and to other contingencies
that are highly likely to be met relating to restructuring of AX debt or
customary closing conditions that are within GX's power to satisfy. In
determining whether a Binding Agreement was rejected by the holders of the
Senior Secured Bank Debt principally on the basis that the consideration was
insufficient, GX and/or Executive may request that a representative of JPMorgan
Chase Bank certify as to the reason or reasons for the rejection.
(C) Any Performance Fee that otherwise becomes payable under Section
3(g)(iii)(A) shall be paid on the first to occur of the following after the
rejection of a Binding Agreement: (1) the effective date of a restructuring
under Section 3(g)(i)(A) or the closing date of an integrated sale that meets
the requirements of Section 3(g)(i)(B), (2) the last closing of a partial sale
that meets the requirements of Section 3(g)(ii), or (3) the date of Executive's
termination due to an Uninsured Death or a
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Disability or a termination without Cause or for Good Reason, provided that in
each of clauses (1) and (2) Executive has remained employed until such date. In
the event that a payment becomes payable under this Section 3(g)(iii), but
Executive's employment is thereafter terminated by GX with Cause or by Executive
without Good Reason before the payment dates set forth in the preceding
sentence, Executive's right to payment hereunder shall be null and void and
without further effect.
(iv) Pending Restructuring Plan. If, while Executive is still employed by
GX, a chapter 11 restructuring plan has been filed with the Bankruptcy Court,
and a disclosure statement has been approved by the Bankruptcy Court pursuant to
Section 1125 of title 11 of the United States Code and solicitation has
commenced , and Executive's employment is terminated as a result of a Disability
or an Uninsured Death, or by GX without Cause, or Executive has terminated his
employment with Good Reason, prior to the date that such restructuring plan
becomes effective, then Executive shall be entitled to a Performance Fee upon
the date that such restructuring plan becomes effective provided that the
restructuring plan meets the requirements of Section 3(g)(i)(A) and becomes
effective without material modification from the restructuring plan filed prior
to Executive's termination and that the Performance Fee would otherwise have
been payable to Executive pursuant to Section 3(g)(i)(A).
(v) Distributable Proceeds. For purposes of this Agreement, the term
"Distributable Proceeds" shall include (A) all cash in Bank cash collateral
accounts, and (B) all cash, property and securities (including, without
limitation, equity securities in a reorganized GX or in a successor of GX)
("Securities") offered as part of the consideration paid by one or more
purchasers in a consummated sale of assets, to the extent set aside for the
benefit of or paid to the holders of the Prepetition Claims, as provided in
Section 3(g)(i) above. For this purpose, consideration consisting of Securities
shall be valued, in the case of Securities that are publicly traded, at the
closing price as reported on the principal exchange where such Securities were
last traded, on the day such securities were transferred by purchaser to GX (the
"Funding Date").
(vi) Fair Market Value of Non-Publicly Traded Securities. If Securities are
not publicly traded as of the Funding Date, such Securities shall be valued at
their Fair Market Value as of the Funding Date. Fair Market Value for this
purpose shall be such amount as is agreed upon by Executive and GX or, if no
agreement is reached within three (3) business days of the Funding Date, Fair
Market Value shall be such amount as is determined as of the Funding Date by a
qualified representative of a firm that is independent of the parties and
regularly engages, as a primary occupation, in the professional appraisal of
securities (an "Appraiser") chosen by mutual agreement between GX and Executive
or his personal representatives. If such parties are unable to agree upon an
Appraiser within 20 days after the Funding Date, valuation shall be submitted to
arbitration before the American Arbitration Association (the "AAA") under the
applicable AAA rules. The selection of the Appraiser and the determination of
Fair Market Value by such Appraiser shall be final and binding upon GX and
Executive or his personal representative. The standard of value to be used by
the Appraiser shall be fair market value of the securities being valued as of
the Funding Date, taking into account all relevant factors. The Appraiser shall
use his or her sole discretion in determining the
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amount of investigation necessary in arriving at a determination of the value of
the securities. Notwithstanding the foregoing, if any unrelated third party(ies)
purchase(s) a material number but less than all of the Securities, with the
remaining Securities being set aside for the benefit of the creditors, then the
Fair Market Value of the creditors' Securities will be determined by reference
to the amounts paid by the purchasing party(ies). All fees and expenses of the
Appraiser (as well as the fees and expenses of the AAA) identified above shall
be borne by GX.
(vii) Asset Sales. For purposes of this Agreement, references to sales of
GX assets shall include the assets of its principal subsidiaries, other than AX.
(viii) Non-Cumulative Payments. The payments provided for under subsections
(i), (ii), (iii) and (iv) of this Section 3(g) shall not be cumulative, and in
no instance shall Executive receive total fees pursuant to this Section 3(g) in
excess of $4 million. Notwithstanding the foregoing, the Distributable Proceeds
from any Constituent Sales shall be aggregated with any Distributable Proceeds
received under Section 3(g)(i)(A) or Section 3(g)(i)(B) in order to determine
whether a Performance Fee has become payable under either section.
(viii) Life Insurance Offset. Any payment required to be made hereunder as
a result of an Uninsured Death shall be reduced by any life insurance benefits
paid pursuant to any life insurance policy provided under Section 4(b).
(h) Withholding. All payments required under this Agreement shall be made
minus withholdings for taxes and other amounts required by applicable laws,
which shall be paid by the withholding agent to the applicable tax authorities
within the time prescribed by law.
4. Perquisites and Benefits.
(a) General. Except as otherwise specifically provided in Section 3,
Executive shall be eligible to participate in all pension and welfare GX
benefits, and Executive shall be treated in the same manner as, and shall be
entitled to benefits and other perquisites no less favorable than those provided
to, the most senior officers of GX.
(b) Life Insurance. GX will maintain a one (1) year term life insurance
policy so long as Executive remains an employee of GX, inclusive of coverage
presently maintained for Executive by GX, through an individual policy, a group
policy or a combination thereof, in an aggregate amount of not less than $6
million, at GX's expense and with Executive named by GX as the beneficiary. GX
and Executive will take all necessary steps to obtain coverage in the amount of
$1 million within ten (10) days of the Bankruptcy Court Approval and will use
their best efforts to obtain the applicable policy or policies for the full
amount required under this Section 4(b) as soon as is commercially possible. As
of the date he executes this Agreement, Executive represents that he has never
before been found to be uninsurable for any life, health or disability or other
similar insurance policy and does not engage in any activities and is unaware of
any health issues that could adversely effect his ability to get life insurance
coverage. In the event that the applicable policy or policies have not been
obtained
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within ninety (90) days of the Bankruptcy Court Approval, Executive's rights in
the event of an Uninsured Death shall cease and be of no further force or
effect.
(c) Apartment Prior to Relocation. Prior to any relocation of Executive to
New York/New Jersey, GX shall lease an apartment in New York/New Jersey for
Executive's use.
(d) Vacation. Executive shall be entitled to four (4) weeks of paid
vacation per year and may not carry more than four (4) weeks of accrued vacation
at any time. On the termination of Executive's employment without Cause or by
Executive for Good Reason, Executive shall be paid for any accrued but unused
vacation.
(e) Expense Reimbursements. Executive shall be reimbursed for reasonable
business expenses incurred by Executive on behalf of GX, including, but not
limited to, travel and entertainment expenses, in accordance with GX policies.
Business travel shall be by first class air only for in-air trips lasting at
least five (5) hours.
5. Termination/Resignation.
Subject to the provisions below, Executive may be terminated by GX at any
time, with or without cause. Executive may resign at any time for any reason.
(a) Death or Disability. In the event Executive's employment is terminated
by GX due to the death of Executive or due to his Disability, then Executive or
his estate shall receive at termination (i) a lump sum payment covering his Base
Salary through the date of termination, (ii) reimbursement for unreimbursed
business expenses incurred pursuant to Section 4 hereof: and (iii) any unpaid
Annual Bonus for the calendar year preceding termination, provided Executive
remained employed by GX through the end of the calendar year and performance
goals were achieved at target levels. In addition, if Executive's employment is
terminated due to an Uninsured Death or Disability, Executive shall receive
payment of any unpaid Retention Payments to the extent provided in Section 3(f)
and any Performance Fees to the extent provided in Section 3(g)(iii).
"Disability" shall mean a physical or mental incapacity that prevents
Executive from performing the essential functions of his position with GX (i)
for a period of one hundred eighty (180) or more days, whether or not
consecutive, occurring within any period of twelve (12) consecutive months as
determined in accordance with any long-term disability plan provided by GX of
which the Executive is a participant, or (ii) in the case of a serious illness
or injury for which GX has received a determination from a licensed healthcare
practitioner that Executive is unable to perform his duties, and in all
reasonable likelihood will continue to be unable to perform such duties for no
less than 180 days, by the following procedure: Executive agrees to submit to
medical examinations by a licensed healthcare professional selected by GX, in
its sole discretion, to determine whether a Disability exists. In addition,
Executive may submit to GX documentation of a Disability, or lack thereof, from
a licensed healthcare professional of his choice. Following a determination of a
Disability or lack of Disability by GX's or
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Executive's licensed healthcare professional, the other party may submit
subsequent documentation relating to the existence of a Disability from a
licensed healthcare professional selected by such other party. In the event that
the medical opinions of such licensed healthcare professionals conflict, such
licensed healthcare professionals shall appoint a third licensed healthcare
professional to examine Executive, and the opinion of such third licensed
healthcare professional shall be dispositive.
(b) Termination For Cause. Actions or omissions which will entitle GX to
terminate Executive for Cause shall be:
(i) conviction of a felony; or conviction of a crime of moral
turpitude which causes serious economic injury to GX or
serious injury to GX's reputation; or
(ii) material breach of the Proprietary Information Agreement as
described in Section 6 hereof; or
(iii) fraud or embezzlement; intentional misconduct or gross
negligence which has caused serious and demonstrable injury to
GX or its affiliates; or
(iv) egregious performance or egregious failure to perform
Executive's duties as CEO of GX; provided that a failure to
achieve performance objectives shall not by itself constitute
grounds for termination for Cause; or
(v) material violation of GX's material written policies and
procedures that causes substantial and demonstrable economic
harm to GX.
Upon notice by GX to Executive that it is terminating Executive's
employment for Cause, the "Termination Date" shall be the date on which such
notice is mailed or hand-delivered to Executive or as otherwise specified in the
notice of termination. Any action by GX to terminate Executive's employment for
Cause shall be taken by the full Board, at a meeting duly called such purpose
upon reasonable advance notice to Executive, after having provided him with
notice of the particular acts or circumstances which provide the basis for the
termination and an opportunity to be heard by such Board, with counsel. Upon a
termination for Cause, Executive shall be entitled to a lump sum payment
covering his Base Salary through the date of termination, and (ii) reimbursement
for unreimbursed business expenses incurred pursuant to Section 4 hereof. All GX
Stock Options held by Executive shall immediately terminate.
(c) Termination Without Cause. Executive's employment may be terminated by
GX at any time without Cause, upon the giving of notice by GX to Executive of
termination. GX may, in the notice of termination, discharge Executive
immediately or as of such future date, not to exceed one (1) month, as GX may
determine to be appropriate. In the event that Executive's employment is
terminated without Cause, Executive shall receive at termination (i) a lump sum
payment covering his Base Salary
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through the date of termination; (ii) a lump-sum payment equal to Executive's
annual Base Salary plus an Annual Bonus (calculated by assuming that target
level performance was attained); (iii) any unpaid Annual Bonus for the calendar
year preceding termination, provided Executive remained employed by GX through
the end of the calendar year and performance goals were achieved at target
levels, (iv) for a period of twelve (12) months following the date of such
termination (or until such earlier date as substantially equivalent benefits are
available from other employment), continuation of benefits provided in
accordance with Section 4 hereof; (v) immediate vesting of all stock options and
the right to exercise such options for a period of twelve (12) months following
termination; and (vi) payment of any unpaid Retention Payments and a Performance
Fee, to the extent provided in Section 3(f) and Section 3(g), respectively.
(d) Resignation for Good Reason. Executive may resign from his employment
with GX upon the occurrence of a Good Reason Event during the Term. A "Good
Reason Event" shall mean:
(i) if occurring before the Reinstatement Date, (A) the failure of GX to
pay the Executive's Base Salary or any other compensation that is due and owing
pursuant to this Agreement, unless cured within ten (10) business days of notice
of such failure, (B) failure of any successor of GX to assume in writing all
obligations imposed on GX hereunder on or prior to the date of such succession,
unless such assumption occurs by operation of law; or (C) any material
diminution in the nature or scope of Executive's authority, powers, functions,
duties, positions or responsibilities from those provided under this Agreement,
or the assignment of duties, responsibilities or reporting relationships that
are inconsistent with his then positions or responsibilities under this
Agreement; provided, however, that the appointment of a Chief Restructuring
Officer shall not constitute Good Reason; and
(ii) if occurring after the Reinstatement Date, (A) the failure of GX to
pay the Executive's Base Salary; (B) any material diminution in the nature or
scope of Executive's authority, powers, functions, duties, positions or
responsibilities from those provided under this Agreement, or the assignment of
duties, responsibilities or reporting relationships that are inconsistent with
his then positions or responsibilities under this Agreement (other than due to
the appointment of a Chief Restructuring Officer); (C) without Executive's
consent, relocation by more than 50 miles of Executive's office or GX's
principal executive offices from the location as of the Effective Date; (D) any
material uncured breach by GX of this Agreement (including any failure to
provide compensation when and as required hereunder, unless cured within ten
(10) business days of such failure); (E) failure of any successor of GX to
assume in writing all obligations imposed on GX hereunder on or prior to the
date of such succession, unless such assumption occurs by operation of law; (F)
failure to appoint or elect or reelect Executive as CEO and Director of GX; or
(G) GX's notice of nonrenewal of this Agreement.
For not more than sixty (60) days following the occurrence of a Good Reason
Event, Executive shall have the right to deliver a notice of breach to GX
detailing the specific Good Reason Event that has occurred. In the event that GX
does not cure the breach, if susceptible of cure, within sixty (60) days after
receipt of notice, then
Page 11 of 17
Executive shall have thirty (30) days to deliver notice of resignation. Upon
such resignation, Executive shall receive the same payments and benefits as
provided in Section 5(c) hereof.
(e) Resignation Without Good Reason. Executive may resign from his
employment with GX at any time without the occurrence of a Good Reason Event. In
such instance, his rights hereunder shall be the same as if he had been
terminated for Cause.
(f) Resignation from Board. Upon termination of Executive's employment with
GX for any reason, Executive shall be deemed to have resigned as of the date of
such termination from the Board and any affiliate board of directors.
(g) Payments in Cash. Unless otherwise specifically indicated, all payments
under Section 5 shall be made by wire transfer of immediately available U.S.
funds on the date indicated in accordance with account instructions furnished by
Executive or his tax accountant.
(h) Rights Under Benefit Plans. Upon any termination of employment
hereunder, Executive shall receive the payments and benefits specified in this
Section 5 or as otherwise set forth in this Agreement. Unless provided to the
contrary herein, Executive's rights under any GX benefit plans in which
Executive was a participant at the time of termination shall be determined in
accordance with the terms of the plans, and Executive thereafter shall not
otherwise be entitled to receive any further compensation or payments hereunder.
In the event of a conflict between this Agreement and the terms of any benefit
plans, the terms of this Agreement shall control.
6. Confidentiality and Proprietary Information.
Executive shall comply in all respects with the terms and conditions of the
Proprietary Information Agreement annexed hereto as Exhibit 1 and incorporated
by reference herein.
7. Miscellaneous.
(a) Notices. Any notice or other communications provided for in this
Agreement shall be in writing and deemed received upon receipt after delivery by
certified mail, return receipt requested, or by hand as follows:
Page 12 of 17
(i) in the case of GX, to
Board of Directors
Global Crossing Ltd.
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Chairman
or at such other address as shall be communicated in
the manner provided herein and
(ii) in the case of Executive, to
Xxxx X. Xxxxxx
Global Crossing Ltd.
Seven Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Chief Executive Officer,
with a simultaneous copy to
Xxxxxxx Xxxxx, Esq.
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
or to such other address as shall be communicated in
the manner provided herein.
An email copy shall also be provided
to Executive at his regular corporate email address,
and to Xxxxxxx Xxxxx at xxxxxx@xxxxxxx.xxx.
(b) Modification/Waiver. No waiver or modification of this Agreement, in
whole or in part, or of any term or condition hereof, shall be effective against
any party unless in writing and duly signed by the parties hereto. Any waiver or
any breach of any provision hereof, or of any right or power, by any party on
one or more occasions shall not be construed as a waiver of, or a bar to, the
exercise of such right or power on any other occasion or as a waiver of any
subsequent breach.
(c) Severability. Each provision of this Agreement shall be interpreted so
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision of the
remaining provisions of this Agreement.
Page 13 of 17
(d) Binding Effect: Successors. This Agreement shall inure to the benefit
of and shall be binding upon GX and its successors, assigns and legal
representatives and Executive, his heirs and legal representatives. Executive
may not assign, transfer, or otherwise dispose of this Agreement, or any of his
other rights or obligations hereunder (other than his rights to payments
hereunder, which may be transferred only by will or by the laws of descent and
distribution), without the prior written consent of GX, and any such attempted
assignment, transfer or other disposition without such consent shall be null and
void. GX shall be entitled to assign its obligations under this Agreement,
without the prior written consent of Executive, (i) in connection with an
arm's-length merger or consolidation of GX with another unaffiliated corporation
or (ii) in connection with an arm's-length sale of all or substantially all of
its assets or business operations to another person or entity, provided that
such assignee expressly assumes all of the rights and obligations of such party
hereunder. After any such assignment, this Agreement shall continue in full
force and effect.
(e) Entire Agreement. This Agreement, the other agreements specifically
referenced herein as continuing, and the letter to Executive from the Chairman
of GX dated October 23, 2001, set forth the entire agreement between GX and
Executive with respect to the subject matter hereof, and supersede all other
agreements and understandings, written or oral, between the parties hereto with
respect to the subject matter hereof. Unless specifically provided to the
contrary herein, upon the Effective Date, the Prior Agreement shall be null and
void and without further force and effect. Nothing herein shall be deem to be a
release by Executive of any of his rights against AX.
(f) Controlling Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York, without regard
to conflict of laws.
(g) Authority and Ratification. GX represents that it has obtained all
approvals, including Board and Compensation Committee approvals, required to
enter into and perform its obligations under this Agreement and the Prior
Agreement, that no other agreements would prevent or conflict with GX entering
into this Agreement or the Prior Agreement, and that all payments made pursuant
to the Prior Agreement are ratified and approved. Executive accepts and agrees
to the provisions of this Agreement, and represents that no other agreements to
which he is a party would prevent or conflict with his entering into this
Agreement.
(h) Indemnification.
(i) Post-Petition Indemnification. GX shall indemnify Executive to the
fullest extent permitted by applicable law and by GX's charter and articles of
association and other applicable corporate documents (including a payment of
expenses in advance of final disposition of a proceeding), against all costs,
charges, expenses or liabilities whatsoever incurred or sustained by Executive
(including but not limited to any judgment entered by a court of law) at the
time such costs, charges, expenses or liabilities are incurred or sustained, in
connection with any action, suit or
Page 14 of 17
proceeding to which Executive may be made a party by reason of his being or
having been an officer or employee of GX, or serving as a director, officer or
employee of an affiliate of GX (other than AX or its subsidiaries) subsequent to
the date that GX petitioned the Bankruptcy Court for protection under the United
States Bankruptcy Code. Executive's rights under this Section 7(h)(i) shall
continue without time limit for so long as he may be subject to any such
liability, whether or not the Term may have ended. Bankruptcy Court Approval
shall confer administrative expense priority pursuant to Sections 503(b) and
507(a)(l) of the Bankruptcy Code on all of Executive's claims covered under the
preceding provisions of this Section 7(h)(i) to the extent such claims are
otherwise eligible for indemnification hereunder. The obligation to indemnify
under this Agreement shall survive the consummation of any plan in GX's chapter
11 case.
(ii) Prepetition Expense Reimbursement. After coverage under all applicable
Directors and Officers policies has been exhausted, GX shall reimburse Executive
for his reasonable fees and expenses incurred in defending any claim in
connection with any action, suit or proceeding to which Executive may be made a
party by reason of his being or having been an officer or employee of GX, or
serving as a director, officer or employee of an affiliate of GX (other than AX
or its subsidiaries) prior to the date that GX petitioned the Bankruptcy Court
for protection, subject to the restrictions and limitations set forth in Section
7(h)(i), and subject to the further limitations that reimbursement shall be
provided only (A) to the extent that such expenses would not have been excluded
under any such insurance policy maintained by GX, and (B) to a maximum of $1
million.
(iii) Directors and Officers Liability Insurance. Executive shall be
entitled to the protection of all Directors and Officers liability insurance
policies GX may have maintained in the past and shall be a named insured under
any such policies that GX may in the future maintain from time to time, to the
maximum extent that coverage is available for any officer of GX, subject, in
each instance, to the terms and conditions of such policy or policies, the
applicable corporate documents and applicable law. Nothing in this Section 7(h),
or otherwise contained herein, shall affect Executive's previously acquired
rights under any Directors and Officers insurance policies under which he was
covered and/or a named insured in the course of his employment with AX or GX,
subject to the terms and conditions of such policies, the applicable corporate
documents and applicable law.
(i) Binding Arbitration. Any controversy arising out of or relating to this
Agreement or the breach hereof shall be settled by binding arbitration in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association (with the exception that there will be a panel of three
(3) arbitrators rather than a single arbitrator), and judgment upon the award
rendered may be entered in any court having jurisdiction thereof. Specific
performance, injunctive relief and other remedies at law and equity shall be
permitted to enforce the provisions hereof regarding confidentiality. The AAA
fees associated with any such arbitration proceedings shall be borne solely by
GX. In the event Executive substantially prevails on the majority of any
material claims brought in such arbitration proceedings, the arbitration panel
shall require GX to reimburse Executive for all reasonable legal fees and
expenses incurred during the
Page 15 of 17
course of such arbitration. In the event that Executive does not so prevail, the
arbitration panel shall have the authority to require Executive to reimburse GX
for one-half of the arbitration fees (excluding legal fees and expenses incurred
by GX). The location for the arbitration shall be New York City, New York.
Following the Bankruptcy Court Approval, this arbitration provision shall be
applicable at all times during and after GX's chapter 11 case.
(j) Legal Fees. GX shall reimburse Executive for reasonable legal fees and
costs incurred in the negotiation and preparation of this Agreement, up to a
maximum of $15,000.
(k) Counterparts. This Agreement may be executed in counterparts. Execution
by facsimile shall be binding on the parties.
(l) Mitigation and Offset. Executive shall not be required to mitigate
amounts payable under this Agreement by seeking other employment or otherwise,
and there shall be no offset against amounts due Executive under this Agreement
on account of subsequent employment.
(m) Release. Upon Bankruptcy Court Approval, GX agrees to execute the form
of Release annexed hereto as Exhibit 2, pursuant to which GX agrees to release
Executive from all avoidance actions with respect to the payments listed on
Schedule 1 to such Exhibit 2, and execution thereof is hereby authorized and
approved.
(n) Survival: Unless specifically provided to the contrary herein, all
obligations of GX to make payments under this Agreement shall survive any
termination of Executive's employment or of this Agreement until such
obligations have been discharged in full.
(o) Effective Date. It shall be a condition to the effectiveness of this
Agreement that the Bankruptcy Court Approval order have become final and
nonappealable not later than two (2) weeks from the date of entry of such order.
Such condition shall be waivable in Executive's sole discretion.
Page 16 of 17
(p) Executive's Acknowledgment. Executive acknowledges (i) that he has
consulted with independent counsel of his own choice concerning this Agreement
and has been advised to do so by the Company, and (ii) that he has read and
understands the Agreement, is fully aware of its legal effect, and has entered
into it freely based on his own judgment
IN WITNESS WHEREOF, GX and Executive have executed this Agreement as of the
day and year first above written.
GLOBAL CROSSING LTD.
a Bermuda corporation
By: /s/ Xxxxxxxx Xxxx
---------------------
Name: Xxxxxxxx X. Xxxx
Title: Co-Chairman
AGREED AND ACCEPTED:
/s/ Xxxx Xxxxxx
-------------------
Xxxx X. Xxxxxx
Page 17 of 17
EXHIBIT 1
PROPRIETARY INFORMATION AGREEMENT
--------------------------------------------------------------------------------
[LOGO OF GLOBAL CROSSING]
Proprietary Information Agreement
October 3, 2001
Xxxx X. Xxxxxx
____________________________________
Address
____________________________________
City, State, Zip Code
In connection with your employment or proposed employment with Global Crossing,
Ltd., or a subsidiary thereof (together with its affiliates, successor entities
and assigns), ("GLOBAL CROSSING") you will have access to and may develop
proprietary information, client lists, technical specifications, business plans,
financial statements, marketing and sales plans and other confidential
operational information. In consideration of your continued and/or future
employment by GLOBAL CROSSING and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, you agree as follows:
1. Definition of Proprietary Information.
"Proprietary Information" includes, but is not limited to, any information,
know-how, financial information, marketing and sales information, employee
information, management information, client lists, potential client lists,
technical specifications, business plans, sales or programming matter, written
materials, compositions, drawings, diagrams, photographs, works in progress,
visual demonstrations, and other data, whether oral, written, graphic or in
electronic form, pertaining to GLOBAL CROSSING or its affiliates. Proprietary
Information does not include (i) information which is now or hereafter becomes
publicly known or available through no act or failure on the part of yourself,
(ii) information which is actually known to you at the time of the receipt of
such Proprietary Information, (iii) information which is hereafter furnished to
you by a third party, other than in the course of your employment, (iv)
information which was independently developed or known by you prior to any
contact with GLOBAL CROSSING, without use or reference to Proprietary
Information, and which does not otherwise contravene the terms of this
Agreement, and (v) information which you choose to disclose relating to your
salary and any other compensation or benefits received by you at GLOBAL
CROSSING.
- 2 -
2. Use of Proprietary Information.
You shall use the Proprietary Information solely in connection with the duties
assigned to you as an employee of GLOBAL CROSSING.
3. Non-Disclosure and Confidentiality of Proprietary Information.
You shall at all times keep in strictest confidence and prevent disclosure to
any person, firm, corporation or other entity the Proprietary Information unless
such disclosure is (a) approved in writing by an officer of GLOBAL CROSSING, (b)
necessary or appropriate as part of the business of the company and the
receiving party has executed a non-disclosure agreement with the company, or (c)
otherwise legally required to be disclosed pursuant to a court order.
You agree that money damages would not be a sufficient remedy for any breach of
this Agreement and that GLOBAL CROSSING would be irreparably harmed by any such
disclosure. Accordingly, GLOBAL CROSSING shall be entitled to specific
performance and injunctive or equitable relief as a remedy for any such breach.
Such remedy shall not be deemed to be the exclusive remedy for the breach for
this Agreement.
4. Return of Proprietary Information.
You agree that, immediately upon termination of your employment with GCDC, you
shall return to GCDC all Proprietary Information and reproductions of
Proprietary Information in your possession or control. Any Proprietary
Information which you may have retained electronically in your possession or
control shall be expunged or destroyed.
5. Non-Solicitation.
You agree that during your employment with GLOBAL CROSSING and for two (2) years
thereafter, you will not encourage or solicit any employee or consultant of
GLOBAL CROSSING to leave GLOBAL CROSSING for any reason.
- 3 -
6. Non-Competition; No Conflict.
You agree that during your employment with GLOBAL CROSSING, you will not engage
in, directly or indirectly, any employment, business, or activity that is or may
be in any way competitive with the business or proposed business of GLOBAL
CROSSING. You further agree that you shall not enter into any agreement, either
written or oral, which may conflict with the terms of this Agreement or the
terms of your employment at GLOBAL CROSSING.
You are expected to avoid any agreement, business investment, or other
activity that creates an actual or potential conflict of interest for you; i.e.,
any situation in which your actions or loyalties are divided between your
personal interests and our interests or between our interests and those of
another. If you are unsure whether a conflict exists, consult your supervisor
and the Vice President of Human Resources immediately. Prohibited activities
include, but are not limited to:
(a) Owning, operating, or being employed as an employee or consultant by
any business that competes, directly or indirectly, with GLOBAL CROSSING or its
affiliates.
(b) Having a direct or indirect financial relationship with a competitor,
customer, or supplier; however, no conflict will exist in the case of ownership
of less than 1 percent of the publicly traded stock of a corporation.
(c) Engaging in any other employment or personal activity during work
hours, or using our property in other employment.
(d) Using our name, logo, stationery, supplies, equipment, or other
property for personal purposes.
(e) Soliciting our employees, suppliers, or customers to purchase goods or
services of any kind for purposes not related to our business, or to make
contributions to any organizations or in support of any causes, unless your
supervisor has granted written approval in advance.
(f) Soliciting or entering into any business or financial transaction with
an employee whom you supervise, either directly or indirectly, unless your
supervisor has granted written approval in advance of that transaction. This
restriction applies to all such transactions, however small, including, but not
limited to:
(1) Hiring a subordinate to perform personal services; and
(2) Soliciting a subordinate to participate in an investment of any kind
with you.
When a conflict of interest is found to exist, the conflict may result in
discipline up to and including immediate termination of employment.
- 4 -
7. Prior Agreements; Successors and Assigns; Severability; Attorney Fees.
The terms of this Agreement supersede all prior agreements, whether written or
oral, between the parties hereto, and shall constitute the entire agreement
between you and GLOBAL CROSSING with respect to the matters described in this
Agreement. The terms of this Agreement shall be binding on you during the term
of your association with GLOBAL CROSSING, its successors and/or assigns, and,
except for Paragraph 6, the terms of this Agreement shall be binding on you for
two years thereafter. If any provision of this Agreement is deemed to be invalid
or prohibited by law, that provision will be ineffective to the extent of the
invalidity or prohibition, without invalidating the remainder of this Agreement.
In the event of legal action relating to this Agreement, the prevailing party
shall be entitled to reasonable attorney fees and costs.
Please indicate your agreement to be bound by the terms and provisions of this
Agreement by executing below and returning a signed copy to Xxxxxxxxx Xxxxxxxxx,
Assistant General Counsel in the Xxxxxxx Hills office. Thank you.
ACKNOWLEDGED AND AGREED:
-----------------------
--------------------------- Date: October 3, 2001
Signature
Xxxx X. Xxxxxx
---------------------------
Print Name
- 5 -
EXHIBIT 2
RELEASE
This Release is executed as of the ___ day of May, 2002, by Global Crossing
Ltd., a Bermuda corporation ("GX").
(a) Release by the Company. GX, on behalf of itself and its subsidiaries
and affiliates (other than Asia Global Crossing Ltd., a Bermuda corporation and
its subsidiaries), and GX's estate, and the executors, administrators,
receivers, successors and assigns of all of the foregoing (each, a "GX
Releasor"), in consideration of the agreement by Xxxx X. Xxxxxx ("Executive") to
modify his compensation arrangements with GX as set forth in the Agreement to
which this Release is annexed, hereby irrevocably, unconditionally and generally
releases Executive and his heirs, executors, administrators, and assigns (each,
an "Executive Releasee"), from and hereby waives and/ or settles, any and all
actions, causes of action, suits, debts, sums of money, agreements, promises,
damages, or any liability, claims or demands, known or unknown and of any nature
whatsoever and which the GX Releasors ever had, now have or hereafter can, shall
or may have, for, upon, or by reason of the payments made by GX to Executive as
listed on Schedule 1 hereto through the date of this Release (collectively, the
"GX Avoidance Claims").
(b) No Litigation. GX represents and warrants that neither it nor any GX
Releasor has filed, commenced or participated in any way in any complaints,
claims, actions or proceedings of any kind against Executive or any Executive
Releasee with any federal, state or local court or any administrative,
regulatory or arbitration agency or body, and GX, on behalf of itself and each
GX Releasor, agrees not to file, assert or commence any complaint, claim, action
or proceeding of any kind against Executive or any Executive Releasee with any
federal, state or local court or any administrative, regulatory or arbitration
agency or body with respect to any GX Avoidance Claims.
(c) Controlling Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York, without regard
to conflict of laws.
(d) Facsimile. This Release Agreement may be executed and delivered by
facsimile signature with the same effect as if manually executed.
IN WITNESS WHEREOF, GX has executed this Agreement as of the day and year
first above written.
Global Crossing Ltd.
a Bermuda corporation
By: _________________________
Name: Xxxxxxxx X. Xxxx
Title: Co-Chairman
- 2 -
SCHEDULE 1
TO EXHIBIT 2
LIST OF PAYMENTS SUBJECT TO RELEASE
1. The following payments made pursuant to Prior Agreement Sections 3,
3(a), 3(b), 3(c) (the 2001 Annual Bonus under Section 3(c) being an
obligation of AX which has not yet been paid), in the following
amounts:
(a) Base Salary at the annual rate of $1,100,000, paid from
October 3, 2001, through January 28, 2002;
(b) The Signing Bonus of $3,500,000 referred to in Section 3(b) of
the Agreement to which this Schedule 1 to Exhibit 2 is
attached; and
(c) Gross up payments of $3,410,167.82 relating to the signing
bonus.
2. Grants of stock options under Prior Agreement Section 3(e) - a total of
19.7 million shares of common stock of AX and a total of 5 million
shares of common stock of GX;
3. The forgiveness of the Promissory Note referred to in Prior Agreement
Section 3(g) in the amount of $10,000,000 ($5,000,000 having been
forgiven on February 1, 2001);
4. A gross-up payment made by GX in January, 2002, in the amount of
$4,775,781.40; and
5. All perquisites and benefits provided pursuant to Prior Agreement
Section 4 prior to the date of this Agreement (provided that all such
cash and non-cash perquisites and benefits were consistent with those
given to senior executives of GX generally).
