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EXHIBIT 4.7
EXECUTION COPY
EMPLOYMENT AGREEMENT
This AGREEMENT by and between Viatel Holding (Bermuda) Limited,
a
company incorporated in
Bermuda, whose registered office is at Cedar house, 41
Cedar Avenue, Hamilton, HM
12, Bermuda (the "Company"), and Lucy Woods of Kale
House, Reading Road,
Mattingley, Hants RG27 8JY, UK (the "Executive"), dated
as
of the 21st day of April
2004.
1. Employment Period. Subject to the purchase of the Notes by
the
Investors and the Executive
contemplated by the Investment Agreement, dated as
of the date hereof (the
"Investment Agreement"), by and among Morgan Stanley
&
Co. Incorporated, CFSC
Wayland Advisers, Inc., Ahab Partners, L.P., Stonehill
International Partners, L.P.,
Ore Hill Hub Fund Ltd., Varde Partners, Inc.
(together the "Investors"),
the Executive and the Company, the Company hereby
agrees to employ the
Executive, and the Executive hereby agrees to be
employed
by the Company, subject to
the terms and conditions of this Agreement, with
effect from the Closing Date
and continuing thereafter unless and until
terminated in accordance with
Section 3. Capitalized terms used and not defined
herein shall have the
meanings ascribed to such terms in the Investment
Agreement. The Executive's
period of continuous employment commenced on 12 May
2003.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Executive's employment under the terms of
this
Agreement (the "Employment
Period"), the Executive shall (A) serve as Chief
Executive Officer of the
Company and a member of the Board of Directors of the
Company (the "Board"), with
such duties and responsibilities as are commensurate
with such position taking
into account the duties and responsibilities of the
Chairman of the Board of
Directors (B) report to the Board. In addition, the
Executive agrees to serve,
without additional consideration, as a director of
the board of directors of any
of the Company's subsidiaries or any company or
other entity directly or
indirectly controlled by or under common control with
the Company (collectively,
the Company and such entities, the "Affiliated
Group"). The Company shall
provide or procure that the Executive is provided
with directors and officers'
liability insurance in relation to her appointment
as a director and officer of
the Company which is substantially similar to that
provided to members of the
Board in their capacities as directors of the Board
and with directors and
officers' liability insurance in relation to her
appointment as a director or
officer of any member of the Affiliated Group which
is substantially similar to
that provided to members of the board of directors
of such member of the
Affiliated Group.
(ii) During the Employment Period, the Executive shall
devote
her full attention and time
to the business and affairs of the Company and use
her reasonable endeavors to
perform such responsibilities in a professional
manner. The Executive may
serve on corporate boards of companies outside the
Affiliated Group subject to
the reasonable approval of the Board, but only to
the extent any of such board
memberships do not interfere with her duties to the
Company, represent a conflict
of interest with the Company or violate Section 5
of this Agreement.
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(iii) During the Employment Period, the Executive will
work
during the Company's normal
UK business hours, together with such additional
hours as may be reasonably
necessary (with no further compensation) for the
proper performance of her
duties. The Executive agrees in accordance with
Regulation 5 of the Working
Time Regulations 1998 (the "Regulations") that the
provisions of Regulation 4(1)
(which impose a cap on average weekly working
time) do not apply to the
Executive and that the Executive will give three (3)
months' prior written notice
if she wishes Regulation 4(1) to apply to her.
(iv) During the Employment Period, the Executive will be
based
at the Company's principal UK
offices (which, at the date of this Agreement, are
at Inbucon House, Wick Road,
Egham, Surrey TW20 0HR) but will travel (both in
the United Kingdom and
overseas) as reasonably required in the performance of
her duties. In the event that
the principal offices of the Company are relocated
from the address specified in
the previous sentence during the Employment Period
such that it becomes
reasonably necessary for the Executive to relocate her
home, the Company will pay
for or reimburse all reasonable expenses incurred by
the Executive and her family
in undertaking the relocation of the Executive's
home and the personal effects
and belongings of the Executive and her family
(including but not limited to
any legal and estate agents fees and disbursements
incurred with the sale and
purchase of suitable properties and charges incurred
in connection with the
transportation of personal effects and belongings).
(b) Compensation and Benefits.
(i) Base Salary. During the Employment Period, the
Company
shall pay the Executive an
annual base salary of (pound)320,000 (the "Base
Salary"), payable in equal
monthly installments . The Executive's Base Salary
shall be reviewed (upwards
only) by the Board on or as soon as reasonably
practicable after 1 January
each year during the Employment Period for the
purposes of determining the
amount, if any, by which the Executive's salary
shall be
increased.
(ii) Annual Incentive Compensation.
(A) Bonus Eligibility. Subject to clause (B) below, for each
fiscal
year
completed during the Employment Period, the Executive shall
be
eligible
to receive an annual cash bonus ("Annual Bonus") with a target
of
125% of
the Executive's Base Salary (as increased from time to time)
as
set forth
in this Agreement (the "Target Bonus") payable to the
Executive
as set forth in Section
2(b)(ii)(C) of this Agreement. Any such Annual
Bonus
shall be payable in pounds sterling. Any such Annual Bonus shall
be
based on
the amount of (i) consolidated revenue of the Company
calculated
in
accordance with generally accepted accounting principles
("Revenue")
for such
fiscal year (or with respect to the Hurdle described below
for
the
applicable quarter) calculated in (pound)sterling and (ii) EBITDA
-
Working
Capital (as defined below) for such fiscal year (or with
respect
to the
Hurdle described below for the applicable quarter) calculated
in
(pound)sterling, in each case as compared to the "goal" amount of
Revenue
and EBITDA
- Working Capital, respectively, planned for such year as
set
forth in
the materials previously provided to the Executive by the
Company
(the
"Plan"). Any such Annual Bonus will be determined by reference to
the
amount, if
any, that results under clause (B)(1), (2) or (3) plus
the
amount, if any, that
results under clause (B)(4), (5) or (6),
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below. For
purposes of this Agreement, "EBITDA" shall mean the excess
of
(x)
Revenue over (y) the sum of (I) cost of sales (II) property costs
and
rights of
way, (III) repairs, maintenance lifts & shifts, (IV) staff
costs
(excluding
any stock-based compensation expense), (V) marketing, IR &
PR
expenses,
(VI) travel expenses, and (VII) other SG&A (excluding
any
professional services,
foreign exchange gains or losses, gain or loss on
sale of
investments or fixed assets, receipts from bankruptcy estates
and
"Working
Capital" shall mean the excess of (X) Trade Accounts
Receivable
over (Y)
Trade Accounts Payable for cost of sales suppliers. The goals
for
Revenue
and EBITDA - Working Capital as set out in the Plan for the
2004
fiscal
year have been agreed and have been provided in writing by
the
Company to
the Executive. The goals for Revenue and EBITDA -
Working
Capital to
be set out in the Plans for each subsequent fiscal year
shall
be
determined by the Company promptly after the end of each fiscal
year
only after
good faith discussions (undertaken with a view to
reaching
agreement)
with the Executive on the appropriate levels for such
goals.
Any change
from using Revenue and EBITDA-Working Capital as goals shall
be
subject to
agreement between the Executive and the Company. If a goal is
a
negative number, then performance
at less than 100% of the goal would be a
higher
negative number than the goal.
(B) Calculation of Bonus. Subject to clauses (B)(7) and
(B)(8)
below, the
amount of the Annual Bonus shall be calculated as
follows:
(1) If the Company's Revenue for the applicable fiscal year
is
equal to
or greater than 70% and less than 80% of the Revenue goal for
the
applicable
fiscal year as set forth in the Plan, the Executive shall
have
earned an
Annual Bonus of 50% to 74% of 50% of the Target Bonus.
(2) If the Company's Revenue for the applicable fiscal year
is
equal to
or greater than 80% and less than 100% of the Revenue goal
for
the
applicable fiscal year as set forth in the Plan, the Executive
shall
have
earned an Annual Bonus of 75% to 100% of 50% of the Target
Bonus.
(3) If the Company's Revenue for the applicable fiscal year
is
equal to
or greater than 100% and is equal to or less than 110% of
the
Revenue
goal for the applicable fiscal year as set forth in the Plan,
the
Executive
shall have earned an Annual Bonus of 100% to 110% of 50% of
the
Target
Bonus. If the Company's Revenue for the applicable fiscal year
is
greater
than 110% of the Revenue goal for the applicable fiscal year
as
set forth
in the Plan, the Executive shall have earned an Annual Bonus
of
110% of
50% of the Target Bonus.
(4) If the Company's EBITDA - Working Capital for the
applicable
fiscal year is equal to or greater than 70% and less than
80%
of the
EBITDA - Working Capital goal for the applicable fiscal year as
set
forth in
the Plan, the Executive shall have earned an Annual Bonus of
50%
to 74% of
50% of the Target Bonus .
(5) If the Company's EBITDA - Working Capital for the
applicable
fiscal year is equal to or greater than 80% and less than
100%
of the
EBITDA - Working
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Capital
goal for the applicable fiscal year as set forth in the Plan,
the
Executive
shall have earned an Annual Bonus of 75% to 100% of 50% of
the
Target
Bonus.
(6) If the Company's EBITDA - Working Capital for the
applicable
fiscal year is equal to or greater than 100% and is equal to
or
less than
110% of the EBITDA - Working Capital goal for the
applicable
fiscal
year as set forth in the Plan, the Executive shall have earned
an
Annual
Bonus of 100% to 110% of 50% of the Target Bonus. If the
Company's
EBITDA --
Working Capital for the applicable fiscal year is greater
than
110% of
the EBITDA -- Working Capital goal for the applicable fiscal
year
as set forth in
the Plan, the Executive shall have earned an Annual
Bonus
of 110% of
50% of the Target Bonus.
(7) In each case set forth above, the percentage of the
Target
Bonus
earned will be interpolated on a pro-rata basis and rounded to
the
nearest
tenth of a percentage point based upon the percentage
achievement
of the
Revenue or EBITDA - Working Capital goal, as applicable,
before
multiplying such percentage by the Target Bonus to determine
the
(pound)sterling amount
of the Annual Bonus; provided, that in no event
shall the
Executive be eligible to earn an Annual Bonus in excess of
110%
of the
Target Bonus.
(8) Notwithstanding the foregoing, the Executive shall not
be
eligible
to receive any Bonus unless the Hurdle (as defined below)
shall
have been
met. If the Hurdle is met in one fiscal year, it shall be
deemed
to be
satisfied for that and all subsequent fiscal years. The Hurdle
will
be deemed
to be met in any fiscal year only if both (x) the average
of
quarterly
Revenue for the third quarter and quarterly Revenue for
the
fourth
quarter for such fiscal year is equal to at least 69.39% of
the
average of
projected Revenue for the third quarter and projected
Revenue
for the
fourth quarter of such fiscal year, as set forth in the Plan
and
(y) the
average of quarterly EBITDA - Working Capital for the
third
quarter
and quarterly EBITDA - Working Capital for the fourth quarter
for
such
fiscal year is equal to at least 69.39% of the average of
projected
EBITDA -
Working Capital for the third quarter and projected EBITDA
-
Working
Capital for the fourth quarter of such fiscal year, as set
forth
in the
Plan.
(C) Allocation/Payment of the Annual Bonus. Subject to
the
provisions
of this Section 2(b)(ii)(C), prior to the second anniversary
of
the date
hereof, the Executive shall (and the Executive hereby agrees
to)
purchase
Notes from the Company having an aggregate principal amount
(at
the date
of issuance) of up to $520,000 (the "Total Investment
Amount").
At or
prior to the Closing Date, the Executive has purchased from
the
Company
Notes in the aggregate principal amount of $250,000 (the
"Minimum
Investment
Amount"). The Company hereby agrees that any Notes which
represent
all or any part of the Additional Investment Amount (as
defined
below)
which are acquired by the Executive from the Company in
accordance
with this
Section 2(b)(ii)(C) will be subject to and have the benefit
of
all of the
terms and conditions (to the extent applicable to the
Executive
under the
terms of such Agreements) of the Shareholders Agreement dated
as
of the
date hereof among the Company, the Executive, the Investors
(the
"Shareholders Agreement"), the Security Trust and Intercreditor
Deed dated
as of the
date hereof, by and among the Company, the Guarantors and
The
Law Debenture
Trust
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Corporation p.l.c and the Registration Rights Agreement dated as of
the
date
hereof among the Company, the Executive and the other Investors
named
therein.
In addition, on the date or dates of any such acquisition
of
Notes
which represent all or any part of the Additional Investment
Amount
by the
Executive, the Executive shall represent and warrant to the
Company
as to
herself only and not jointly on the terms contained in Article IV
of
the
Investment Agreement. The amount of the Total Investment Amount
minus
the
Minimum Investment Amount shall be referred to as the
"Additional
Investment
Amount." Notwithstanding the foregoing, the Executive shall
not
be
required to purchase any of the Additional Investment Amount in
excess
of the
aggregate after-tax amount of the Annual Bonuses for the 2004
and
2005
fiscal years (except that the Executive shall be permitted
to
purchase such Additional
Investment Amount prior to the end of fiscal year
2005 in
excess of the aggregate after-tax amount of the Annual Bonuses
for
the 2004
and 2005 fiscal years from her own funds if she wishes to do
so).
In the
event that an Annual Bonus is payable in respect of the 2004
fiscal
year, the
entire after-tax amount of such bonus, if less than the
Additional
Investment Amount, shall be used to purchase Notes to
satisfy
this
obligation. In the event that an Annual Bonus is payable in
respect
of the
2005 fiscal year and the Executive has not (on or prior to the
time
that such
Annual Bonus would be payable) purchased the Additional
Investment
Amount from the Company, up to the entire after-tax amount
of
such bonus
shall be used to purchase Notes from the Company to
satisfy
this
obligation. The Company shall have the right to effect such
purchases
by setting
off and reducing any Annual Bonus that is otherwise
payable.
The Annual
Bonus shall be converted from pounds sterling into US
dollars
at the
best (pound)sterling:US dollar exchange rate reasonably
available
to the
Company (as reasonably determined by the Board) on the date
of
purchase
of such Notes. From and after the time that the Minimum
Investment
Amount has been purchased by the Executive from the
Company,
any
amounts not offset to effect any such purchase, and with respect
to
any Annual
Bonuses that are payable with respect to fiscal years
following
2005, the
Executive shall be paid such Annual Bonuses prior to the end
of
the first
fiscal quarter following the end of the fiscal year for
which
the Annual
Bonuses were earned (but in no event later than when
bonuses
are paid
to other Company executives); provided, that with respect to
any
fiscal
year for which the Executive has earned an Annual Bonus below
74%
of the
Target Bonus (a "Minimum Bonus"), the Executive shall not be
paid
the
Minimum Bonus (or be permitted to use the Minimum Bonus to
purchase
Notes from
the Company to satisfy the Additional Investment Amount)
until
the later
of (i) the end of the first fiscal quarter following the end
of
the fiscal
year for which the Minimum Bonus was earned (but in no
event
later than
when bonuses are paid to other Company executives) and (ii)
the
end of the
fiscal quarter on or before the first quarter of 2006 in
which
the
Company achieves positive cash flow. In the event that the
Company
does not
achieve positive cash flow on or before the first quarter
of
2006, the
Executive shall forfeit all right to such Minimum Bonus.
(D) Adjustments. In the event that an extraordinary, unusual
or
nonrecurring event
affects the Company including, without limitation, if
the
Company disposes of a segment of a business or changes
accounting
principles
or engages in a recapitalization such as a merger,
consolidation, separation, spin-off, or other distribution of stock
or
property
of the Company, the Board will consider equitably adjusting
the
Hurdle and
the EBITDA - Working Capital and Revenue performance goals.
Any
such
adjustment shall
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only be
made following good faith consultations with the Executive
during
which the
Company will give the Executive the detailed reasons for
any
such
proposed adjustments and will consider in good faith any
representations made by the Executive in relation to any such
proposed
adjustments. Any adjustments made by the Board shall be made or
designated
at or
about the time of the event causing the adjustment to be
made.
(iii) Employee Benefits. During the Employment Period,
the
Executive shall be eligible
to participate in employee benefit plans as may be
adopted from time to time by
VTL (UK) Limited ("VTL (UK)") on the same basis as
provided to similarly
situated executives of VTL (UK) generally.
(iv) Insurance Benefits. During the Employment Period,
the
Executive will be eligible to
participate in the VTL (UK) standard private
medical health (for the
benefit of the Executive and her family). The provision
of insurance benefits will be
subject to and in accordance with the rules
governing such arrangements
from time to time in force.
(v) Legal Fees. The Company will reimburse the Executive
for
all legal fees (including VAT
and disbursements) reasonably incurred by her in
taking advice in connection
with the preparation and drafting of this Agreement,
the Shareholders Agreement,
the Investment Agreement, the Security Trust and
Intercreditor Deed, the terms
of the Notes and all associated documents and
otherwise generally in
connection with the transaction contemplated by those
documents.
(vi) Pension. During the Employment Period, the Company
will,
subject to any applicable
Inland Revenue limits, pay an annual amount equal to
6% of the Executive's Base
Salary (as amended from time to time) to a personal
pension arrangement of the
Executive's choice, subject to the requirements of
applicable law. Such payment
will be paid in equal monthly installments at the
same time as the Executive's
Base Salary under Section 2(b)(i) is paid.
(vii) Car Allowance. During the Employment Period, the
Company
will pay the Executive an
annual amount (less required deductions) of
(pound)10,000 by way of car
allowance. For the avoidance of doubt, the car
allowance shall not be
pensionable. The car allowance will be paid in equal
monthly installments at the
same time as the Executive's Base Salary under
Section 2(b)(i) is
paid.
(viii) Expenses. During the Employment Period, the
Executive
shall be entitled to prompt
reimbursement for all reasonable business expenses
incurred by the Executive, in
accordance with the policies provided to similarly
situated executives of the
Company generally as may be in effect from time to
time.
(ix) Vacation. During the Employment Period, the
Executive
shall be entitled to 25
working days' holiday per annum in addition to public
holidays in England and
Wales. Holiday entitlement shall be pro-rated for any
part year of employment. Up
to a maximum of five days of holiday may be carried
forward from one calendar
year to the next. On termination of employment, the
Executive will be entitled to
pay in lieu of any holiday entitlement outstanding
for the then current holiday
year.
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(x) Management Incentive Plan. (i) Within six (6) months
following the Closing Date,
subject to the prior relinquishment of all
outstanding stock options
held by the Executive and any future promise of option
grants to the Executive upon
execution of the Investment Agreement (other than
the contractual commitments
contained in this Section 2(b)(i)(x)), the Company
shall establish the Plan. The
"Plan" means an option, equity or cash bonus plan
pursuant to which the
management team of the Company shall receive in respect
of
vested awards in connection
with a liquidity event (to be defined for purposes
of the Plan) a range of value
(payable in cash or equity) equal to 5% of the
Equity Value at a liquidity
event implying an Equity Value of $100 million, 10%
of the Equity Value at a
liquidity event implying an Equity Value of (or in
excess of) $350 million (with
interpolated values in between $100 million and
$350 million on a pro rata
basis) and no value at a liquidity event implying an
Equity Value less than $100
million or if a liquidity event has not occurred
prior to the tenth
anniversary of the date hereof. It is the intention of
the
parties that any payment
required to be made on the grant or exercise of awards
under the Plan would be
nominal.
(ii) For these purposes "Equity Value" means the value of
all
of the common stock of the
Company that is outstanding on the date hereof , all
of the Notes issued in the
transactions contemplated by the Investment Agreement
(including all issued
Additional Notes (as defined in the terms of the Notes)
and Notes issued as
Additional Investment Amount) and all of the stock
issuable
(at the time of determination
of Equity Value) on conversion of such Notes (as
the same may be adjusted as a
result of stock splits or reverse stock splits)
and the value of all equity
awards under the Plan outstanding as of the time of
such determination, provided
that (A) equitable reductions in Equity Value will
be made to the extent that
any such Notes have been repaid or repurchased prior
to the determination of
Equity Value, (B) subject to the provisions of clause
(C), any additional equity or
securities convertible into or exchangeable for
equity issued by the Company,
whether through options, sales, in connection with
acquisitions or otherwise,
shall be dilutive to the management team, and (C)
appropriate adjustments shall
be made by the Board to protect the participants
against dilution (x) from the
first $7.75 million of equity securities (or
securities convertible into
or exchangeable for equity securities) of the
Company issued by the Company
in respect of cash investments in the Company
(other than the sale to the
Executive of the Additional Investment Amount) to
fund the Viatel Business Plan
(other than any funding in connection with or as
consideration for the
acquisition of assets, shares or businesses by the
Company
or any subsidiary) following
the initial sale of Notes by the Company pursuant
to the Investment Agreement
(a "Business Plan Funding") (and against dilution
resulting from any adjustment
to the conversion price of the Notes that is made
(after giving effect to any
amendment or waiver by any Noteholder of any
antidilution provisions) as a
result of any Business Plan Funding) and (y) from
the issuance of equity or
securities convertible into or exchangeable for equity
of the Company in connection
with or as consideration for any acquisition of
assets, shares or businesses
by the Company or any subsidiary, but in the case
of this clause (y) only to
the extent that, and on the same basis that, the
holders of Notes are also
actually protected against dilution in such
transaction (after giving
effect to any amendment or waiver by any Noteholder of
any antidilution
provisions).
(iii) Awards under the Plan will vest in three tranches
(one-third on establishment
of the Plan and one-third on each of the two
anniversaries of the Closing
Date), subject to the Executive's continued
employment through each
applicable vesting date. The Plan will provide that in
the event of the termination
of the Executive's employment by the Company
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without Cause or by the
Executive for Good Reason or by reason of the
Executive's death or
Disability, the Executive will be entitled to immediate
accelerated vesting of the
entire next tranche of the award that would have
vested on establishment of
the Plan or the anniversary of the Closing Date
following the Date of
Termination, if any. In the event that the Executive's
employment terminates for any
other reason, the Executive will not be entitled
to vesting of any further
tranches (or pro-rata proportions thereof) (it being
understood that vested and
unvested awards will be subject to mechanisms to
ensure that the value
received by the Executive does not exceed the value
contemplated to be received
as set forth above).
(iv) The Executive's Awards will constitute 45% of all
awards
available under the Plan.
Bona fide consideration will be given to inclusion of
appropriate tag-along rights
under the Plan. The Plan will have such other terms
not inconsistent with the
foregoing as determined by the Board after
consultation with the
Executive.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate
automatically upon the
Executive's death during the Employment Period. If the
Company reasonably and in
good faith determines that the Disability of the
Executive has occurred during
the Employment Period (pursuant to the definition
of Disability set forth
below), it may provide the Executive with written notice
in accordance with Section
7(b) of this Agreement terminating the Executive's
employment. In such event,
the Executive's employment with the Company shall
terminate effective on the
30th day after receipt of such notice by the
Executive (the "Disability
Effective Date"). For purposes of this Agreement,
"Disability" shall mean any
physical or mental condition which would qualify the
Executive for a disability
benefit under any long-term disability plan
maintained by VTL
UK.
(b) Without Cause. The Company may only terminate the
Executive's
employment during the
Employment Period without Cause (other than by reason of
Disability) by either (i)
giving the Executive 24 months' written notice (or
such lesser full months'
written notice determined by the Company); or (ii)
terminating the Executive's
employment without the notice required under Section
3(b)(i) and, in either case,
paying to the Executive the sum specified in
Section 4(a)
below.
(c) Cause. The Company may terminate the Executive's
employment
during the Employment
Per
