EXHIBIT 10.1
METROMEDIA INTERNATIONAL GROUP, INC.
TRANSACTION BONUS AGREEMENT
---------------------------
THIS AGREEMENT is entered into as of the 8th day of March,
2005 (the "Effective Date") by and between
Metromedia International Group, Inc.,
a Delaware corporation (the "Company"), and
Mark Stephen Hauf ("Executive").
WHEREAS, Executive is currently employed by the Company as its
Chief Executive Officer ("CEO") pursuant to
an employment agreement, entered
into on October 6, 2003 and effective as of
October 1, 2003, by and between
Executive and the Company (the "Employment
Agreement"); and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the Employment Agreement
does not provide for any equity-based
or other long-term cash-based incentive
compensation for Executive, that
programs providing for such compensation
have not been provided to executive at
any time during the period of his service
as CEO and that such programs are
common for executives of companies that are
similar to the Company; and
WHEREAS, the Board recognizes further that Executive has
performed his services under the Employment
Agreement with the expectation that
he would receive compensation in the future
to make up for the current absence
of equity-based and long-term cash
incentive compensation arrangements, and the
Board has determined that it is in the best
interests of the Company and its
stockholders to provide Executive with such
compensation; 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 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
<PAGE>
WHEREAS, to such end, and in order to
adequately compensate Executive for the
performance of his services to the Company
as its CEO, and in consideration for
Executive's agreement to waive severance
benefits under the Employment Agreement
and abide by the non-competition covenants
in this Agreement, subject to the
terms and conditions described in this
Agreement, the Company desires to provide
Executive with certain payments and
benefits pursuant to the terms of this
Agreement; 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 shall remain in full force and
effect.
B. On and
following the Effective Date, Section 8 of the Employment
Agreement, relating to payments to
Executive in connection with a "Change of
Control" (as defined in the Employment
Agreement), shall be void and of no
further effect; provided, that such Section
8 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. On and
following the Effective Date, Section 5 of the Employment
Agreement (relating to Covenants Not to
Compete) shall be null and void, and
Executive shall be bound by Section VI of
this Agreement; provided, that, if a
Peterstar Sale Transaction is not
consummated prior to October 1, 2005, Section
5 of the Employment Agreement shall once
again become effective on October 1,
2005 pursuant to its terms. The parties
hereby acknowledge that the Company's
agreement to waive the provisions of
Section 5 of the Employment Agreement, and
Executive's agreement to be bound by
Section VI of this Agreement, is part of
the consideration given by each party in
entering into this Agreement.
D. Effective
upon the consummation of a Peterstar Sale Transaction on or
prior to September 30, 2005, Section 7.08
of the Employment Agreement, relating
to payments to Executive upon termination
of employment without "Cause" or for
"Good Reason" (as such terms are defined in
the Employment Agreement), shall be
null and void. The parties hereby
acknowledge that Executive's waiver of the
provisions of Section 7.08 of the
Employment Agreement as described above is
part of the consideration given by
Executive for the Company to enter into this
Agreement.
2
<PAGE>
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 business venture (the "Peterstar
Venture").
II. Effect of a Peterstar Sale
Transaction.
A. Peterstar
Transaction Bonus Trigger. As partial consideration for
Executive's agreement to enter into this
Agreement, including, without
limitation, Section VI of this Agreement,
the Company agrees that, in connection
with the consummation of a Peterstar Sale
Transaction that occurs 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 such date, (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. Following
payment to Executive of the first
installment of the Peterstar Transaction
Bonus, the Company shall cause the balance
of such bonus to be placed in a
"rabbi" trust (the "Trust") and paid to
Executive from the Trust when due in
accordance with the terms of this Section
II.
B. Termination
of Employment. If Executive's employment with the Company or
any of its affiliates is terminated by the
Company without Cause or by Executive
for Good Reason 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 cause to be paid
from the Trust, or pay directly (at the
Company's option) the unpaid balance of
the Peterstar 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. For
purposes of this Agreement, Executive
agrees that the fact that a Peterstar Sale
Transaction has occurred will not, of
itself, constitute Good Reason under the
Employment Agreement.
3
<PAGE>
C. Peterstar
Transaction Bonus. The "Peterstar Transaction Bonus" shall be
equal to the sum of (a) $1,333,333, and (b)
15% of the amount, if any, by which
the "Peterstar Enterprise Value" exceeds
$178 million, where "Peterstar
Enterprise Value" shall mean the aggregate
consideration paid to the Company in
the Peterstar Sale Transaction in respect
of the Peterstar Venture.
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) or, for
the avoidance of doubt, under Section 7.08
or Section 8 of the Employment
Agreement, 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.
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 date of 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.
4
<PAGE>
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.
D. The federal,
state and local income or other tax returns filed by
Executive will be prepared and filed on a
consistent basis with t
