EXHIBIT 10.5
April 1, 2002
CONFIDENTIAL
Xxxxxxx Xxxxx
0 Xxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Re: Employment Agreement
Dear Xxxxxxx:
This letter agreement (this "Agreement") confirms the terms and conditions of
your employment with AT&T Wireless Services, Inc. (the "Company"). Unless
otherwise stated expressly in this Agreement, this Agreement amends and
supercedes your January 3, 2000 Special Retention Agreement ("Prior Agreement")
and all other prior agreements between you and the Company concerning the
subject matter of this Agreement.
1. Term of Agreement: This Agreement begins February 16, 2002 ("Effective
Date"). It is anticipated that this Agreement will end on the earlier of the
completion of your assignment with TeleCorp and May 31, 2003 ("End Date"),
unless your employment is terminated earlier or this Agreement is extended
by a written agreement between you and the Company.
2. Job Responsibilities. As of the Effective Date, you will assume a new role
of President of TeleCorp. The job duties, responsibilities and perquisites
of this position will be consistent with and comparable to that of Executive
Vice President of the Company. In this capacity, you will report to Xxxxx
Xxxxx, President and Chief Executive Officer, AT&T Mobility Services. In
addition, until the completion of the Fixed Wireless closure, you will
continue to report to Xxxx Xxxxxx, Chairman and Chief Executive Officer of
the Company.
3. Compensation: Your base salary will be increased by 3.5% to $538,200,
effective retroactively to February 16, 2002. It is anticipated that this
rate will be reviewed on an annual basis to reflect individual performance
and base salary structure changes applicable to executives in similarly
situated positions, but in no event will your base salary be reduced at any
time. Your target bonus for 2002 will remain at 100% of base salary. As of
the Effective Date, 30% of your bonus will be based on TeleCorp business
results and overall integration. (Specific targets will be mutually agreed
to by you and Xxxx Xxxxxx within 60 days of the Effective Date.) Prior to
the Effective Date, for bonus calculation purposes, you will be considered
as part of the AT&T Mobility Services business unit. Additionally, you will
be eligible for a 2002 stock option grant using the guidelines approved by
the Compensation Committee of the Company's Board of Directors
("Compensation Committee") for other Executive Vice Presidents of the
Company. Your compensation in 2003 will be reviewed to reflect individual
performance, TeleCorp performance, and other factors applied to executives
in similarly situated positions. Upon termination, the bonus for that year
will be paid out on a pro-rata basis for time worked, and based on the
performance against target metrics (as mutually agreed to by you and Xxxx
Xxxxxx) achieved at the time of termination. As for any executive in a
similarly situated position, all aspects of your compensation are subject to
approval by the Compensation Committee, which approval shall not be
unreasonably withheld.
4. Special Individual Non-qualified Supplemental Retirement Arrangements. Under
this Agreement, the Company will maintain three non-qualified arrangements
as follows:
o "SRA1": originally established as Exhibit B of the Prior Agreement.
Notwithstanding any provision in Exhibit B of the Prior Agreement to the
contrary, the SRA1 will become 100% vested on April 1, 2002. At that
time, you will be responsible for Medicare taxes, which are estimated at
$14,000. Payout of the SRA1 will be made in accordance with the terms of
Exhibit B of the Prior Agreement. You are entitled to the payment under
SRA1 unconditionally, except with respect to the Forfeiture Rights
described in the second to last paragraph of this paragraph 4.
o "SRA2": This Agreement does not modify, in any respect, the terms of the
SRA2, effective April 1, 2001.
o "SRA3": The Company will establish the SRA3 on, or as soon as practical
following, April 1, 2002. The SRA3 will be credited with an initial
balance of $2,152,800. This amount will be 100% vested on April 1, 2002.
The Company shall credit interest to this account as of the end of each
calendar quarter at rate equal to one-quarter of the average 10-year
Treasury Note Rate in effect for the previous quarter. Please note that
you will be responsible for Medicare taxes as of the vesting date, which
taxes are estimated at $31,216.
The SRA3 will be maintained as a bookkeeping account on the records of
the Company and you will have no present ownership right or interest in
the SRA3, or in any assets of the Company with respect thereto. The SRA3
constitutes a mere unsecured promise by the Company to make benefit
payments in the future. With respect to account balance and other rights
under the SRA3, you and your beneficiaries shall at all times be and
remain general unsecured creditors of the Company. The SRA3 may not be
assigned, pledged or otherwise alienated by you and any attempt to do
so, or any garnishment, execution or levy of any kind with respect to
the SRA3, will not be recognized.
Payout under the SRA3 will occur in one lump sum within 60 days of
termination, unless, prior to April 1, 2002, you elect to defer receipt
pursuant to and in accordance with Attachment A. You shall not have the
right to receive any other payment with respect to the SRA3.
Like the SRA1 and SRA2, retirement amounts under the SRA3 are subject to
forfeiture (or repayment if such amounts already have been paid) if you
violate the Company's noncompetition guidelines, in effect at the time
of the violation, any time prior to the second anniversary of the
termination of your employment (the "Forfeiture Rights"). The current
form of the Company's noncompetition guidelines are described in
paragraph 13 of this Agreement. Except as otherwise provided in this
paragraph 4, you are entitled to the payments under SRA 3
unconditionally.
We would be willing to exchange, on your request, a portion or
combination of the amounts in SRA1, 2 and 3 for an Estate Enhancement
Program, detail to be agreed by both parties.
5. Additional Benefits:
Life Insurance: Because of your employment with AT&T Corp., it is the
Company's understanding that AT&T Corp. will provide you, for the remainder
of your life, with continued life insurance under the AT&T Senior Management
Universal Life Insurance Plan
equal to two and one half times your annual base salary. The Company does
not control and is not responsible for this benefit.
Financial Counseling: You will receive financial counseling benefits for a
period of two years from your termination date, in accordance with the
financial counseling program maintained by either AT&T Corp. or the Company,
as applicable, during such period.
Outplacement Counseling: The Company will provide you, if you so select
within one year of termination, with outplacement counseling from a firm
selected by the Company in accordance with the practice then in effect for
executives in similarly situated positions.
Telephone Reimbursement: Because of your employment with AT&T Corp., it is
the Company's understanding that AT&T Corp. will continue to provide you
with telephone reimbursement through the AT&T Toll Discount Program. The
Company does not control and is not responsible for this benefit.
6. Restricted Stock Units: Your RSUs granted in September 1998 will continue to
be subject to performance restrictions, in accordance with my prior
correspondence to you on this subject, until April 1, 2002. As of that date,
your RSUs will be deemed 60% vested, provided you remain employed through
that date. As soon as administratively practical after that time, shares
equal to the number of vested units will be issued to you. The remaining 40%
of your RSUs will vest according to the following terms: 20% on January 1,
2003 and the final 20% on the End Date, in both cases provided you meet
performance objectives as mutually agreed to by you and Xxxx Xxxxxx within
60 days of the Effective Date.
7. Stock Options: Stock options granted prior to February 16, 2002 will be
treated as if you had retired from the Company, will continue to vest
regardless of your termination of employment for whatever reason, and will
be exercisable until the original grant expiration date of the option.
Grants made in 2002 and beyond will continue to vest regardless of your
termination of employment for whatever reason and be exercisable for the
full length of the original 10-year term if you meet the retirement
eligibility criteria in effect for these grants as of your termination date.
These criteria currently require achievement of age 55 and at least 10 years
of net credited service upon termination. [Deleted provision regarding
entitlement upon death]. In the event of a Company initiated termination
other than for Cause or in the event you terminate employment for Good
Reason, any outstanding unvested options will be treated as if you had
retired from the Company on that date.
8. Change in Control: Prior to the End Date, if your employment is terminated
by the Company in connection with or following a "change in control" (as
defined in the 2001 Long-Term Incentive Plan) and without Cause, or by you
for Good Reason following a change in control, you will receive a severance
payment in accordance with the terms of the change in control policy, plan,
agreement or program then in effect for executives in similarly situated
positions less $2,152,800. Additionally, to the extent and in accordance
with the terms of the stock option grant agreement, any unvested options
will become fully vested and exercisable upon a change in control. This
Agreement replaces any and all severance or change in control payments and
benefits that may otherwise be due to you upon the termination of your
employment. By signing this Agreement, you waive all rights you may have
under, and forever release the Company and its affiliates from all liability
with respect to, any of their plans, programs or practices providing
severance or change in control payments and benefits, except as expressly
provided in this Agreement.
9. Termination: Upon the termination of your employment by you or the Company
for any reason prior to the End Date, your restricted stock units and stock
options will be treated as follows:
o Unvested stock options from 2002 and beyond will be treated according to
the circumstances of your termination, as specified in each stock option
grant agreement.
o Any remaining unvested Restricted Stock Units from the 1998 grant will
be forfeited.
In the event the Company determines that there is Cause for termination of
your employment, the Company will provide you with written notice specifying
the grounds upon which its determination is based.
For purposes of clarification, if the termination provisions of this
paragraph 9 apply, you, your estate or your legal representative, as
applicable, will also receive your base salary and bonus through your actual
termination date (not the End Date) in accordance with paragraph 3 of this
Agreement as well as the additional benefits described in paragraph 5 of
this Agreement. Nothing in this paragraph 9 shall in any way affect your
rights to any vested payments under the SRA 1, SRA 2 and SRA 3.
Additionally, if your employment is terminated by reason of death or
long-term disability, crediting of interest to the SRA3 will continue
through the end of the quarter of termination, and payout will occur in
accordance with paragraph 4 of this Agreement.
10. Definitions: The definition of "Cause" will remain unchanged from paragraph
5(b) of the Prior Agreement. The definition of "Good Reason" will remain
unchanged from paragraph 5(a) of the Prior Agreement. "Long-term disability"
will have the same meaning as set forth in the Company's long-term
disability plan in place at the time of your disability.
11. Confidentiality: Terms and conditions remain unchanged from paragraph 6 of
the Prior Agreement.
12. Employment at Will: The employment relationship at the Company is by mutual
consent ("employment at will"). This means that employees have the right to
terminate their employment at any time and for any, or no, reason. Likewise
the Company reserves the right to discontinue your employment with or
without Cause at any time and for any, or no, reason. The Company's various
employee and executive benefit and incentive plans, programs, and practices,
as may be mentioned in this Agreement, reflect their current provisions. The
Company reserves the right to discontinue or modify any such plans, programs
and practices at any time. In the event that the Company decides to
terminate your employment, you will receive notice, in writing, 60 calendar
days prior to your termination date. Similarly, in the event that you decide
to terminate your employment for any reason other than for Good Reason, you
will provide notice, in writing, 60 calendar days prior to your termination
date, in order to be eligible for the benefits identified in paragraph 9 of
this Agreement.
13. Non-competition: Terms and conditions remain unchanged from paragraph 9 of
the Prior Agreement.
14. Attorney's Fees: In the event you bring an action to enforce the terms of
this Agreement and prevail in any such action, the Company will pay your
reasonable attorney's fees and costs related to any such action. The Company
agrees to reimburse you for up to $7,500 for attorney's fees incurred by you
in connection with negotiating this Agreement.
15. Governing Law. The construction, interpretation and performance of this
Agreement shall be governed by the laws of the State of Washington, without
regard to its choice or conflict of laws provisions, except to the extent
preempted by federal law.
Xxxxxxx, we value your continued association with the Company, and are pleased
to offer you this opportunity to remain with the Company as head of Telecorp. If
you agree with the foregoing, please sign this Agreement in the space provided
below and return the signed original to me for our files. Please maintain a copy
for your own records.
Sincerely,
/s/ Xxxx Xxxxxx
Xxxx Xxxxxx
EVP, Human Resources
AT&T Wireless Services
Acknowledged and Agreed:
/s/ Xxxxxxx X. Xxxxx April 1, 2002
----------------------------- -------------
Xxxxxxx X. Xxxxx Date
ATTACHMENT A
I, ____________________________ (signature) hereby elect to defer receipt of the
payment under the Special Individual Non-qualified Supplemental Retirement
Arrangement (SRA3) that may become due to me pursuant to the terms of the
attached Agreement, effective February 16, 2002, for a period of _____ (up to 5)
years after the date this payment would otherwise become due. Thereafter, the
amount deferred shall be paid to me in __________ (up to 5) substantially equal
annual installments. I understand that the amount deferred will be credited with
interest each quarter equal to one-quarter of the average 10-year Treasury Note
Rate in effect for the previous quarter. In the event of my death prior to
either the commencement or completion of payout of the deferred amount, the
unpaid balance shall be paid to my beneficiary (or my estate if no beneficiary
has been named) in accordance with instructions on file with the Company at that
time.
I, _____________________ (signature) do not wish to defer receipt of the SRA3
payment that may become due to me pursuant to the terms of the attached
Agreement.
