EXHIBIT 10.8
[FLAG LETTERHEAD]
CONFIDENTIAL
October ___, 2002
Xxxxxx Bande
00 Xxxx Xxxx
Xxxxxx X0X 0XX
Xxxxxx Xxxxxxx
AMENDMENT TO EMPLOYMENT AGREEMENT FOR XXXXXX BANDE PURSUANT TO THE
THIRD AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION OF THE COMPANY
Dear Xxxxxx:
Pursuant to the Third Amended and Restated Joint Plan of Reorganization of
Debtors under Chapter 11 of the Bankruptcy Code (such debtors referred to
collectively herein as the "COMPANY"), as may be amended from time to time (the
"PLAN"), your Employment Agreement dated 11 December 1997 (your "AGREEMENT"), as
amended by the Addendum to your Agreement dated 9 April 2002 (your "ADDENDUM"),
is hereby, effective as of the Effective Date (as defined in the Plan), assumed
by FLAG Telecom Group Limited ("FTGL") as further amended below.
1. RETENTION PAYMENT AMOUNT. You shall vest in your Retention Payment Amount
on the Effective Date. Notwithstanding anything to the contrary in your
Agreement or Addendum, you shall be obligated to repay your Retention
Payment Amount if, prior to the Effective Date, you terminate your
Agreement without Good Reason or your employment under your Agreement is
terminated for Cause.
2. ENTERPRISE VALUE BONUS. You shall not be entitled to payment of the
percentage of the Enterprise Value of the Company as contemplated under
your Addendum.
3. 2002 BONUS. Your Annual Incentive Bonus for 2002 shall be paid in
accordance with the following:
(a) You shall be eligible to earn your target Annual Incentive Bonus as in
effect prior to the Commencement Date (as defined in the Plan) if (i)
you are employed on 31 December 2002 by FTGL or (ii) your employment
with FTGL terminates prior to 31 December 2002 for any reason other
than (A)
termination for Cause or (B) voluntary resignation for other than Good
Reason; provided that the conditions of Section 3(c) below are met.
(b) Your Annual Incentive Bonus shall be payable in a cash lump sum as
soon as practicable following 31 December 2002, but in no event later
than 20 January 2003; provided that, if fourth quarter financial
results are not available on 15 January 2003, the portion of the
Annual Incentive Bonus based upon such results shall be payable within
five days of such results becoming available, but in no event later
than March 31, 2003.
(c) Fifty percent of your target Annual Incentive Bonus shall be payable
if available cash plus working capital of FTGL and its subsidiaries as
of the Effective Date is equal to or greater than projected or if the
available cash plus working capital of FTGL and its subsidiaries as of
the Effective Date is within 2.5 percent of such projection. The
remaining fifty percent of the target Annual Incentive Bonus shall be
payable if each of cash revenue and cash flow in fourth quarter 2002
is equal to or greater than projected or if each of cash revenue and
cash flow in fourth quarter 2002 is within 2.5 percent of each such
projection.
(d) For purposes hereof, the projections referenced in Section 3(c) above
and the meaning of "available cash plus working capital", "cash
revenue" and "cash flow" shall be determined consistent with Section
6.7.4 of the Plan.
4. TERMINATION OF EMPLOYMENT.
(a) The lump-sum payment in Section 5(b)(i) of your Agreement shall equal
one times Base Salary plus target Annual Incentive Bonus.
(b) The phrase "on or after 1 October 2004" shall be substituted for
"after 31 December 2003" in Section 5(c) of your Agreement, as amended
by your Addendum.
(c) The phrase "or (F) failure of FLAG to create the SOP and make the
grants referred to in Sections 3(f)(i) within ninety (90) days of the
Effective Date except to the extent the delay is directly and
primarily the result of Executive's action or inactions" shall be
deleted from Section 5(d)(i) of your Agreement.
(d) The phrase "or your (F) being removed as Chairman of the FTGL Board at
any time prior to the end of the thirty-day period following the
Effective Date or (G) at any time ceasing to be the chief executive
officer of FTGL reporting directly and exclusively to the full Board
of Directors of FTGL" shall be inserted after Section 5(d)(i)(E) of
your Agreement.
(e) You shall not be entitled to terminate your Agreement for Good Reason
solely as a result of a change in composition of the Board of
Directors of FTGL or a change in ownership of FTGL, in each case
pursuant to the Plan.
(f) Except as expressly modified above, "Cause" and "Good Reason" shall be
defined in the manner set forth in your Agreement.
2
5. LEGAL EXPENSES.
(a) FTGL shall pay your actual documented litigation-related costs and
expenses (including attorneys fees) to the extent that (i) such costs
and expenses are pending reimbursement or not actually reimbursed by
the insurers under the directors and officers liability insurance
policies of the Company in existence prior to the Effective Date (the
"POLICIES"), regardless of whether such costs and expenses were
incurred pre- or post-petition, and (ii) the aggregate amount of the
payments described in this sentence, together with all other payments
made pursuant to Section 6.4.1(b) of the Plan, shall not exceed $3.25
million and the aggregate amount of such payments for the period
through the first anniversary of the Effective Date shall not exceed
$1.625 million. Notwithstanding the foregoing, FTGL shall not be
required to advance costs and expenses that are pending reimbursement
by the insurers under the Policies if such advancement would result in
the contravention of the Xxxxxxxx-Xxxxx Act of 2002 (as defined
below). "Xxxxxxxx-Xxxxx Act of 2002" means that certain U.S. federal
legislation adopted on July 30, 2002, as amended or supplemented from
time to time, or any U.S. federal statute or regulation adopted by the
U.S. Securities and Exchange Commission in effect that has replaced,
amended or supplemented or will replace, amend or supplement such
statute.
(b) You shall take all reasonably necessary action to collect from the
directors and officers liability insurers of the Company the costs and
expenses described in Section 5(a) above and fully cooperate with FTGL
in connection with any coverage disputes under Section 5(f) below. In
the event of a material violation of your obligation to cooperate with
FTGL pursuant to the preceding sentence, FTGL's obligation to make
payments under Section 5(a) above shall terminate.
(c) You hereby represent and certify that you have not knowingly made any
fraudulent statements or material misrepresentations to the directors
and officers liability insurers of the Company or persons acting on
their behalf in connection with the Company's directors and officers
insurance application process. In the event that you are found by a
judgment or other final adjudication to have knowingly made such a
fraudulent statement or material misrepresentation, FTGL's obligation
to make the payments in Section 5(a) above shall immediately terminate
and you shall be required to refund your pro rata share of any
payments made by FTGL pursuant to Section 6.4.1(b) of the Plan. Such
pro rata share shall be determined by dividing the total amount of
such payments by the total number of defendants in the relevant
litigation.
(d) All payments made pursuant to Section 5(a) above, to the extent
actually paid by FTGL, shall be immediately reimbursable upon
collection by you to the extent of and out of any indemnified fees,
costs and expenses actually reimbursed by the insurers under the
Policies.
3
(e) FTGL shall reimburse you for attorneys fees and expenses incurred in
connection with the Chapter 11 Cases (as defined in the Plan), in an
amount not to exceed, together with all other reimbursements pursuant
to Section 6.4.2 of the Plan, $180,000 in the aggregate. Any such
reimbursement shall reduce the maximum amount payable under Section
5(a) above.
(f) FTGL shall pay its own attorneys fees and costs in connection with
disputes as to coverage under the Policies and take all reasonably
necessary action to resolve any such disputes; provided, however, that
FTGL shall not be responsible, either directly or through
reimbursement, for costs associated with any legal or other
professionals retained by you in connection with such disputes.
6. INDEMNIFICATION. You shall be indemnified by FTGL with respect to acts and
omissions occurring on or after the Effective Date to the same extent as
the other directors and officers of FTGL.
7. DEFERRED COMPENSATION. Except with respect to your Annual Incentive Bonus
for 2002, you shall not be entitled to receive any deferred compensation
earned or incurred prior to the Effective Date. For the avoidance of doubt,
it is understood that the foregoing sentence shall not prevent you from
receiving the Retention Payment Amount referred to in Section 1 above, to
the extent eligible.
8. NO DEFAULTS/CURE OBLIGATIONS. You hereby acknowledge that no default exists
under your Agreement or Addendum that is required to be cured upon
assumption.
9. OTHER TERMS IN EFFECT. Except as specifically modified herein, the
employment period and other terms of your Agreement and Addendum remain in
force.
Please indicate your acceptance of the above by signing and dating below.
Sincerely,
FLAG Telecom Group Limited
By:
-------------------------------
Name:
Title:
--------------------------------
Xxxxxx Xxxxx
Date
-------------
4
