Exhibit 10
June 27, 1997
Xx. Xxxxxx Xxxxxxxx
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Dear Xxxxxx:
I want to let you know how pleased and excited I am that you will continue
to lead BBN Corporation ("BBN") as it integrates with the data strategy of
GTE Corporation ("GTE"). I am confident that, with you as part of the GTE
team, we will be better able to take on the many challenges, and take
advantage of the many opportunities, that face us. We have constructed a
compensation package as described in this letter ("Letter Agreement") which
recognizes your value to our data business and which will reward you based
on your contributions, the success of the data business, and the success of
GTE.
Term of Letter Agreement: Subject to the early termination provisions
described below, the term of this Letter Agreement will begin on July 1,
1997 and end on June 30, 1999 (the "Term"). The Term may be extended by
mutual written agreement.
Position: Your position will be Executive Vice President and President -
Data, GTE Corporation, and you will report to me. Your principal office
will be located in the greater Dallas, Texas area.
Base Salary: You will receive an annual base salary of $450,000. You will
be on the GTE Service Corporation ("Service Corp.") payroll.
Executive Incentive Plan: You will participate in GTE's Executive Incentive
Plan ("EIP") as if you were employed for the full 1997 calendar year in
accordance with the terms of the EIP. For 1997, the anticipated EIP payout
range for your position will be a norm of $211,500 and a maximum (200% of
norm) of $423,000. The target bonus is typically 130% of norm, or in your
case, $274,950. For illustrative purposes, a bonus opportunity with a
payout at 150% of the norm would provide you with a bonus of $317,250 for
the full 1997 calendar year. Recommended payouts for EIP awards are based
on your actual performance, the performance of your business unit, and the
performance of GTE and its affiliates (the "Company") and are subject to the
approval of the Executive Compensation and Organizational Structure
Committee ("ECC") of the GTE Board of Directors (the "Board"). Subject to
the EIP deferral regulations, awards typically are paid in the first quarter
of the following calendar year.
Long-Term Incentive Plan: You will participate in GTE's Long-Term Incentive
Plan ("LTIP") which provides for stock option grants and performance bonus
awards (collectively referred to herein as "LTIP Grants").
a. Stock Options. On or about July 1, 1997, you will be granted an
option to purchase 75,000 shares of GTE common stock. In addition, in each
of 1998 and 1999, you will be eligible for a grant of a stock option which,
at your current level, typically would be to purchase approximately 62,200
shares of GTE common stock. The exercise price per share for each option
described in this paragraph will be based on the average of the high and low
price of GTE common stock on the New York Stock Exchange composite tape on
the date each grant is approved by the ECC. Each grant will vest on a
one-third per year basis over a period of three years from the grant date.
If you separate from employment at the end of the Term, you will have five
years from your separation date to exercise your GTE stock options which are
or become vested during that five-year period, but in no event more than ten
years from the date of the grant ("Special Exercise Period").
b. Performance Bonus Awards. Effective on the date you become
employed by Service Corp., you will be eligible for participation in the
following outstanding LTIP performance bonus award cycles, 1995-1997,
1996-1998, and 1997-1999, as though you were employed by Service Corp. on
the first day of each outstanding award cycle. As such, you will receive
the following number of performance units for each award cycle: 1995-1997 -
5,900 units, 1996-1998 - 7,400 units, and 1997-1999 - 7,400 units.
Performance in the LTIP is based on achievement of financial objectives by
the Company over a three-year period. Subject to the LTIP deferral
regulations, payment typically is made during the first quarter of the year
following the last year of the award cycle. Actual payment for each cycle
will depend on actual Company performance, the accumulation of dividend
equivalents, and the value of GTE common stock and is subject to ECC
approval.
The ECC has the sole discretion to determine the amount, if any, of an LTIP
Grant to an executive, as well as the value of any payment with respect to
any Performance Bonus Award. Of course, you will be treated in the same
manner as other similarly situated senior executives of Service Corp. with
respect to LTIP Grants.
Special Bonus: In addition to the LTIP performance bonus opportunities
described above, you will be eligible for a special performance bonus
opportunity based on specific performance measures as follows: revenue
growth, operating income, net income, capital expenditures, operating cash
flow, and return on investment for GTE's data business ("Special Bonus").
The target payment for the Special Bonus is $250,000 per fiscal year, and I
will be responsible for determining whether the performance targets for the
Special Bonus have been met. For purposes of the Special Bonus, a "fiscal
year" commences July 1 and ends June 30, and the first fiscal year will
commence July 1, 1997 and end June 30, 1998. The maximum payment for a
fiscal year is $500,000, and, of course, for each performance measure no
payment will be made if certain performance targets are not met. You will
be provided with more details regarding the Special Bonus under separate
cover within the next few days. The Special Bonus is eligible for deferral
but is not eligible for the Equity Participation Program (as described in
the immediately succeeding paragraph).
Savings/Deferred Compensation Opportunities: You will be eligible to
participate in the GTE Savings Plan and the GTE Executive Salary Deferral
Plan in accordance with the plan provisions. These provisions are described
in booklets being sent to you under separate cover.
GTE's EIP and LTIP deferral programs allow for up to 100 percent deferral of
awards to some pre-selected date in the future. In addition, GTE recently
has introduced a new feature, the "Equity Participation Program" ("EPP"),
which, at your level will require a mandatory deferral of a specified
percentage of your combined EIP and LTIP awards into GTE restricted stock
units. If, for example, your combined EIP and LTIP awards equal more than
$400,000 and not more than $800,000, the required deferral percentage will
be 20%, and if your combined EIP and LTIP awards equal more than $800,000,
the required deferral percentage will be 25%. GTE will match deferrals
under the EPP on a one-for-four basis, subject to certain forfeiture
provisions.
Pension Benefits/Executive Retired Life Insurance Plan ("ERLIP"): You will
be eligible to participate in the Service Corp. basic pension plan and the
Supplemental Executive Retirement Plan ("SERP"). However, if you terminate
employment with the Company before you meet the plans' generally applicable
vesting requirements (generally, five years of service), you will not be
entitled to receive any benefits from the plans. If, during the Term, any
enhanced retirement benefits are offered to employees pursuant to the basic
pension plan, the SERP, or otherwise in connection with a voluntary or
involuntary separation or retirement program, you will not be eligible for
such enhanced benefits. Moreover, you will only be eligible for ERLIP
benefits if you separate from employment with the requisite number of years
of service (generally, ten years).
Other Benefit Plans: As a Service Corp. employee, you will be entitled to a
full range of benefits as detailed in the GTE CHOICES Benefits Program
Summary booklet being sent to you under separate cover.
Changes to Benefits and Compensation Plans/Summary of Terms: As you
probably know, the Company reserves the right to modify or terminate any of
its benefit plans or compensation plans, including but not limited to any of
the executive benefit plans or compensation plans described in this letter.
You should know that this Letter Agreement is intended only as a brief
summary of the terms of the GTE benefit and compensation plans. In the
event of any conflict with the description in this Letter Agreement and the
plan terms, the plan terms will control.
Vacation: You will be entitled to four weeks of vacation annually.
Perquisites: You will receive perquisites provided to other executives at
your level in accordance with Service Corp. policy. In addition, you will
receive the sum of $2,500 per month to cover the cost of maintaining an
apartment in Dallas during the Term. During the Term, you also will receive
$1,000 per month as a car allowance, and you will be reimbursed for the
reasonable and customary expenses of one country club membership in either
the greater Boston or greater Dallas area (not including special assessments
in excess of $500 or personal, non-business expenses). Finally, during the
Term, you will be reimbursed for reasonable travel expenses you incur for
travel between Cambridge, Massachusetts and Dallas, Texas, in accordance
with Service Corp. policy.
Intellectual Property: As a Service Corp. employee, you must agree to
comply with the provisions of GTE's Intellectual Property Rights Agreement
and policies. I am enclosing a copy of the Intellectual Property Rights
Agreement, which reflects those policies and which you will need to execute
on or before commencing employment.
Separation Benefit: Since you already have an executive severance agreement
as described below, upon your separation from employment with the Company
during or at the end of the Term, you will not be eligible to participate in
any separation program sponsored by the Company whether payable from a
qualified plan or from the Company's general assets, other than the BBN
executive severance agreement and GTE Change in Control Agreement, both as
described below.
Executive Severance Agreement: You agree that neither the offer nor the
acceptance of your new position as described in this Letter Agreement shall
constitute a triggering event for the receipt of severance benefits under
the Executive Severance Agreement between you and BBN, dated January 5, 1994
(the "Severance Agreement"). You further agree: that the Severance
Agreement shall remain in effect until June 30, 1999; that the Severance
Agreement applies only to those of your BBN benefits (including compensation
arrangements) that were in effect prior to the consummation of the GTE/BBN
tender offer on June 10, 1997; that the Severance Agreement will not apply
to any of the benefits and compensation arrangements described in this
Letter Agreement; and that by entering into this Letter Agreement, you
consent to an amendment of the Severance Agreement to so provide. As we
have discussed, the significance of the Severance Agreement remaining in
effect until June 30, 1999 is that, if you separate from employment with GTE
on or before June 30, 1999, other than on account of your death, total
disability, or retirement after normal retirement date, and other than for
"Cause" as set forth in the Severance Agreement, such separation will
constitute a triggering event for the receipt of severance benefits under
the Severance Agreement.
You will be eligible for an executive Change in Control Agreement from GTE
("Change in Control Agreement") which is similar to the change in control
agreements provided to other executives at your level; provided that any
payments or benefits payable pursuant to the Change in Control Agreement
will be reduced dollar for dollar by any payments or benefits paid to you or
which you are eligible to receive solely pursuant to the Severance
Agreement.
Early Termination of Term: In the event any of the following occurs prior
to the expiration of the Term, any salary earned through the date of
separation will be paid as soon as practicable following such separation and
you will receive no further salary; your EIP, LTIP performance bonus awards,
and the Special Bonus will be pro-rated to your date of separation (but
these bonuses will not be paid until the date they would otherwise have been
paid if any one of the events described below had not occurred); all
unvested options as of your separation date will be canceled; the Special
Exercise Period will be shortened if you separate prior to attaining age 60,
so that you will have one year from your separation date to exercise your
GTE stock options which are vested on the date of separation; your deferral
opportunities and other benefits will be determined in accordance with the
relevant plan documents; your entitlement to the perquisites will cease on
your date of separation; and you will not be entitled to any other
compensation or benefits:
a. You voluntarily separate from employment for any reason including
as a result of invoking your Severance Agreement;
b. Your employment is terminated for "Cause";
c. You die; or
d. You become disabled (within the meaning of the Company's Long-Term
Disability Plan).
For purposes of this Letter Agreement, "Cause" is defined as your commission
of a felony which is intended to result in your substantial personal
enrichment at the Company's expense, or your conviction of a crime involving
moral turpitude.
In the unlikely event your employment is involuntarily terminated for
reasons other than those set forth in a-d above, this Letter Agreement will
remain in effect until the end of the Term.
Of course, in the event of a Change in Control as defined in the Change in
Control Agreement, the provisions of that Change in Control Agreement will
apply.
Applicable Law: This Letter Agreement shall be construed in accordance with
the laws of the State of New York determined without regard to its choice of
law rules, and any disputes will be resolved by courts in the State of New
York.
Entire Agreement: Except as specifically provided in this Letter Agreement,
this Letter Agreement sets forth our entire understanding and supersedes any
prior agreement or understanding relating to your employment with GTE and
the matters contained in this Letter Agreement. No amendment to this Letter
Agreement will be effective unless it is in writing and signed by both you
and GTE.
Xxxxxx, as we discussed, we believe that GTE is well positioned to
capitalize on the significant opportunities which the merger with BBN has to
offer, in particular the enhancement of GTE's data strategy. To help us get
there, we need you on the GTE team. This letter presents what I consider to
be a very attractive employment offer. I trust you agree and recognize that
if we can exceed our business targets, the compensation rewards will be
significant. If any aspect of this letter raises questions, please contact
me or Xxxxx XxxXxxxxx.
Please indicate your acceptance of this offer by signing below and return
the signed acceptance to me, retaining one copy for your records.
Sincerely,
Xxxx X. Xxxxxx
I agree to the terms and conditions as set forth in this Letter Agreement
and accept the position of Executive Vice President and President - Data,
GTE Corporation.
Xxxxxx Xxxxxxxx DATE: July 1, 1997
cc: J. R. MacDonald
bcc: M.A. Cameron
X.X. Xxxxxxxx
X.X. Xxxxxx
