General Counsel - Employment Agreement

EXECUTION COPY


EMPLOYMENT AGREEMENT


EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 31, 2005, by and among Zeus Holdings Limited (the "Parent"), a Bermuda corporation, Intelsat Ltd. (the "Company"), and Phillip L. Spector, a resident of the State of Florida (the "Executive").


WHEREAS, pursuant to the transactions contemplated by the Transaction Agreement and Plan of Amalgamation among the Company, Intelsat (Bermuda), Ltd., the Parent, Zeus Merger One Limited and Zeus Merger Two Limited dated as of August 16, 2004 (the "Transaction Agreement"), the Company will become a wholly owned subsidiary of the Parent; and


WHEREAS, subject to the consummation of the transactions contemplated by the Transaction Agreement, the Company desires to employ the Executive on a full-time basis and the Executive desires to be so employed by the Company;


NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein (including, without limitation, the Company's employment of the Executive, and the Executive's departure from his present position and acceptance of employment with the Company and the advantages and benefits thereby inuring to the Company and the Executive) and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by each party hereto, the parties hereby agree as follows:


1. Effectiveness of Agreement and Employment of the Executive.


1.1 Effectiveness of Agreement. This Agreement shall become effective upon execution by the parties.


1.2 Employment by the Company. The Company hereby employs the Executive as Executive Vice President and General Counsel and the Executive hereby accepts such employment as of February 15, 2005 (the "Effective Date"). During the Employment Period (as defined in Section 3), the Executive shall directly and exclusively report to, and perform such duties and services for the Company (including supervising the Company's investment in its subsidiaries and affiliates (such subsidiaries and affiliates, collectively, "Affiliates")) as may be designated from time to time by, the Company's Chief Executive Officer. During the Employment Period, the Executive shall devote all of his business time and attention to his employment under this Agreement; provided, however, that, subject to the provisions of Sections 5.1 and 5.3, the Executive may continue to serve as a non-executive director on the board of directors of only one company (other than the Company and its Affiliates) during the Employment Period, unless the Executive obtains the prior written consent of the Company to serve as a non-executive director on any other board of directors. The Executive acknowledges that he shall be required to travel on business in connection with the performance of his duties hereunder.


1.3 Location. During the Employment Period, the Executive's principal place of employment shall be Washington, D.C.; provided that the Executive shall also provide services in London; provided, further, that it is the parties' current intention that the Executive


will spend an appropriate amount of time working at the Company's headquarters, currently located in Bermuda, in order to fulfill his duties.


2. Compensation and Benefits.


2.1 (a) Salary. During the Employment Period, the Company shall pay the Executive for services during his employment under this Agreement a base salary of no less than the annual rate of $450,000 ("Base Salary"). The Base Salary received by the Executive shall be reviewed by the Compensation Committee of the Board of the Company and, following an initial public offering of the Company or a direct or indirect subsidiary or parent of the Company, the Compensation Committee of the Board of the Company or such parent or subsidiary to be publicly-traded pursuant to such initial public offering (such applicable committee, the "Compensation Committee") no less frequently than annually. Any and all increases to the Executive's Base Salary shall be determined by the Compensation Committee, in its sole discretion. During the Employment Period, such Base Salary shall be payable in equal biweekly installments pursuant to the Company's customary payroll policies in force at the time of payment, less any required or authorized payroll deductions. The Base Salary may be increased, but not decreased, during the Employment Period.


(b) Annual Bonus. For each fiscal year during the Employment Period, the Executive shall be eligible to receive an annual discretionary bonus with a maximum amount up to 65% of his Base Salary, subject to his satisfaction of objective performance criteria that have been pre-established by the Compensation Committee in a consistent manner with those of other senior executives of the Company. For each fiscal year during the Employment Period, the Compensation Committee may award an additional bonus, in its sole discretion, to the Executive of up to 50% of the Executive's Base Salary, in the event of the Executive's significant out-performance of objective performance criteria that have been pre-established by the Compensation Committee. During the Employment Period, the Executive also will be eligible to participate in any deferred compensation plan that is sponsored by the Company in accordance with its terms.


(c) Purchased Shares. On January 31, 2005, the Executive purchased shares of common stock of the Parent ("Common Parent Shares") and Series A 9.75 percent preferred stock of the Parent ("Preferred Parent Shares"), in an aggregate number and at the price set forth in the Subscription Agreement between the Parent and the Executive dated as of January 31, 2005 (such purchased Common Parent Shares and Preferred Parent Shares, "Purchased Parent Shares").


(d) Equity Compensation. The Executive has received a grant equal to .81% of the Common Parent Shares outstanding as of Closing ("New Parent Restricted Shares") as of January 31, 2005, having the terms and conditions provided below and such other terms and conditions not inconsistent therewith as may be provided for in the plan under which they are granted. The New Parent Restricted Shares shall provide that upon payment of any cash distribution or dividend on the Common Parent Shares to Parent shareholders generally, the holder of such New Parent Restricted Shares shall have credited to an escrow account an amount equal to the amount of cash (which cash amount shall be credited with interest at the lesser of the interest rate applicable to the Parent's revolving credit agreement, as in effect from time to time,


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or 5% compound interest per annum, or other property that would have been distributed to the Executive had the New Parent Restricted Shares not been subject to restriction, which escrow account shall be distributable as of, and will be distributed to the Executive as soon as practicable following, the date upon which such New Parent Restricted Shares vest. It shall be a condition to the Executive's receipt of New Parent Restricted Shares that he become a party to the Shareholders Agreement by and among the Parent and the Shareholders named therein as in effect as of the Closing (the "Shareholders Agreement"). The Executive acknowledges that the New Parent Restricted Shares will be subject to the terms and conditions set forth in this Agreement and shall be subject to a substantial risk of forfeiture and restrictions on transferability. The Executive will be permitted to transfer the Purchased Parent Shares and the New Parent Restricted Shares to a grantor trust solely for the benefit of the Executive and/or the Executive's immediate family members. If the Executive does not commence employment by the Effective Date, the Parent may repurchase, and the Executive agrees to sell, the Purchased Parent Shares, free and clear of any liens, at the price paid by the Executive for the Purchased Parent Shares (less the value of any dividends, distributions or dividend equivalents previously paid to the Executive in respect of the Purchased Parent Shares) and the New Parent Restricted Shares will be immediately forfeited.


(A) Time-Vesting Shares. 40.9 percent of the New Parent Restricted Shares granted to the Executive hereunder (the "Time-Vesting Shares") shall vest over sixty months in equal monthly installments commencing on the last day of the first month following the Closing, subject to the Executive's continued employment on the date of vesting and to Section 4 below. Subject to the Executive's continued employment, notwithstanding the foregoing, if "private equity investors" own less than 40% of the aggregate equity interests, measured by vote and value, of the Parent ("Private Equity Dilution"), then the Time-Vesting Shares will become fully vested on the later to occur of (x) the third anniversary of the Closing or (y) twelve months following the transaction which causes the Private Equity Dilution. For purposes of this Section 2.1(d)(A), "private equity investors" shall mean the Investors (as defined below) and any other similar entities or divisions of entities which are similar type private equity investors including, without limitation, entities which provide venture capital or long-term share capital in exchange for an ownership interest in another entity.


(B) Performance Shares. An additional 40.9 percent of the New Parent Restricted Shares granted to the Executive hereunder shall vest (less any such percent of shares that have already vested) if and when the Investors have received a Cumulative Total Return as set forth below (the "Cumulative Total Return Goals") between 2.5 to 3 times the amount invested by the Investors collectively during the applicable period over which Cumulative Total Return Goal is measured (the "Performance Period"), subject to the Executive's continued employment as of the date, if any, that such Cumulative Total Return is reached and to Section 4 below. The remainder of the New Parent Restricted Shares granted to the Executive hereunder shall vest (less any such percent of shares that have already vested) if and when the Investors have received a Cumulative Total Return between 4 to 4.5 times the amount invested by the Investors collectively during the Performance Period, subject to the Executive's continued employment as of the date, if any, that such Cumulative Total Return is reached and to Section 4 below (together with the New Parent Restricted Shares described in the immediately preceding sentence, the "Performance Shares"). If the Performance Shares remain outstanding but not yet vested as of the eighth anniversary of the Closing, they shall be forfeited upon such anniversary.


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If the Cumulative Total Return is between 2.5 to 3 times or 4 to 4.5 times the amount invested by the Investors, respectively, the number of Performance Shares which shall vest shall be interpolated and rounded to the nearest whole share.


(C) Cumulative Total Return. The "Cumulative Total Return" means the sum (net of all transaction and valuation costs) of (i) all dividends and other distributions (including management fees) paid to the Investors with respect to Common Parent Shares and Preferred Parent Shares, (ii) the gross proceeds of any sale of Common Parent Shares and Preferred Parent Shares by any of the Investors, and (iii) solely for purposes of determining Cumulative Total Return as of the eighth anniversary of the Closing, the fair market value of the Common and Preferred Parent Shares held by the Investors on the eighth anniversary of the Closing (the "Fair Market Value"), which will be determined by the Compensation Committee in its sole reasonable discretion. Notwithstanding anything in this Agreement to the contrary, upon a corporate transaction in which all of the Common Parent Shares and Preferred Parent shares are converted into the right to receive cash, Cumulative Total Return shall be finally determined and there shall be no further opportunity to vest in any Performance Shares. The "Investors" means each of the members of the Investor Group as defined in the Shareholders Agreement.


(D) Adjustment. In the event of any stock split, reverse stock split, dividend, merger, consolidation, recapitalization or similar event affecting the capital structure of the Parent, the number and kind of shares (or other property, including without limitation cash) subject to the New Parent Restricted Shares shall be equitably adjusted to prevent the dilution or enlargement of the value of the Executive's New Parent Restricted Shares (taking into account the amounts set aside in the escrow account as a result of such event).


2.2 Benefits. During the Employment Period, the Executive shall be eligible to participate, on the same basis and at the same level as other similarly situated senior executives of the Company generally, in any group insurance, hospitalization, medical, vision, health and accident, disability, life insurance and enhanced executive life insurance, fringe benefit and retirement plans or programs of the Company now existing or hereafter established to the extent that he is eligible under the general provisions thereof (including eligibility provisions relating to pre-privatization and post-privatization employment status). During the Employment Period, the Executive shall be entitled to 20 days vacation time annually, and with vacation accruals consistent with the Company's policies at such time as applied to similarly situated executives of the Company generally up to a maximum of 60 days.


2.3 Expenses. During the Employment Period, pursuant to the Company's customary reimbursement policies in force at the time of payment, the Executive shall be promptly reimbursed, subject to the Executive's presentation of vouchers or receipts therefor, for all expenses incurred by the Executive on behalf of the Company in the performance of the Executive's duties hereunder.


2.4 Tax Planning Benefits. During the Employment Period, the Company shall provide the Executive with a cash reimbursement for financial accounting and planning services up to a maximum of $15,000 per annum.


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2.5 Signing Bonus. As soon as practicable following the Effective Date, the Company shall pay Executive a lump sum payment of $120,000 in order to provide the Executive with the liquidity necessary to pay the required withholding taxes in connection with the equity grant described in Section 2.1(d) (and corresponding Section 83(b) election). The Executive shall immediately repay such amount to the Company in the event that prior to the first anniversary of the Effective Date, the Executive voluntarily terminates employment without Good Reason or is terminated by the Company for Cause.


3. Employment Period. The Executive's employment under this Agreement shall commence as of the Effective Date, and shall terminate on the first anniversary thereof, unless terminated earlier pursuant to Section 4 (the "Initial Employment Period"). Unless written notice of either party's desire to terminate this Agreement has been given to the other party at least ninety days but no more than one hundred and twenty days prior to the expiration of the Initial Employment Period (or any renewal thereof contemplated by this sentence), the term of the Executive's employment hereunder shall be automatically renewed for successive one-year periods (such term, including the Initial Employment Period, as it may be extended, the "Employment Period"). A notice of non-renewal provided by the Company shall be treated as a termination by the Company without Cause for purposes of Sections 4.4(a), (b), (c) and (d) (and the Company shall have no additional obligation other than the payment of the Executive's earned but unpaid compensation through the effective date of such termination, except as otherwise required by law or the terms of the Company's benefit plans), and a notice of non-renewal provided by the Executive shall be treated as a termination by the Executive without Good Reason for purposes of Section 4.6.


4. Termination and Forfeiture of Payments and Benefits.


4.1 Termination by the Company for Cause. The Executive's employment with the Company may be terminated at any time by the Company for Cause. Upon such a termination, the Company shall have no obligation to the Executive pursuant to this Agreement other than the payment of the Executive's earned and unpaid compensation through the effective date of such termination, except as otherwise required by law or by the terms of the Company's benefit plans. All New Parent Restricted Shares (and the related escrow account) that have not yet been vested (or paid, as applicable) as of the date of termination, shall be forfeited as of the date of termination. Any Purchased Parent Shares may be repurchased by the Company at any time following such termination of employment at a price per Purchased Parent Share equal to the lesser of (i) the greater of (x) the Fair Market Value of such Purchased Parent Share on the date of the most recent valuation prior to such termination minus (y) the value of any dividends, distributions, or dividend equivalents previously paid to the Executive in respect of such Purchased Parent Share (subject to equitable adjustment in Parent's discretion to reflect dividends, distributions, corporate transactions, or similar events, to the extent not reflected in (y)) or $0, or (ii) (x) the amount paid by the Executive to purchase such Purchased Parent Share minus (y) the value of any dividends, distributions, or dividend equivalents previously paid to the Executive in respect of such Purchased Parent Share (subject to equitable adjustment in Parent's discretion to reflect dividends, distributions, corporate transactions, or similar events, to the extent not reflected in (y)) but in no event less than $0, and any Common Parent Shares held by the Executive as a result of the vesting of New Parent Restricted Shares shall be cancelled and no payment shall be made to the Executive for such Common Parent Shares.


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For purposes of this Agreement, the term "Cause" shall mean any of the following: (i) the Executive's failure to perform materially his duties under the Agreement (other than by reason of illness or disability), (ii) the Executive's commission of, or plea of no contest to, a felony or his commission of, or plea of no contest to, any other crime involving moral turpitude or his commission of a material dishonest act or fraud against the Company or any of its Affiliates, (iii) any act or omission by the Executive that is the result of his misconduct or gross negligence and that is, or may reasonably be expected to be, materially injurious to the financial condition, business or reputation of the Company or any of its Affiliates, or (iv) the Executive's breach of any material provision of this Agreement. Any such occurrence described in clause (i) or (iv) of the preceding sentence that is curable shall constitute "Cause" only after the Company has given the Executive written notice of, and twenty (20) business days' opportunity to cure, such violation, and then only if such occurrence is not cured.


4.2 Permanent Disability. If, during the Employment Period, the Executive becomes disabled within the meaning of the Company's applicable long-term disability plan, the Company shall have the right to terminate the Executive's employment with the Company upon written notice to the Executive. Upon such a termination, the Company shall have no obligation to the Executive other than to pay the Executive's earned and unpaid compensation through the effective date of such termination and to treat the New Parent Restricted Shares as described below in this Section 4.2, except as otherwise required by law or by the terms of the Company's benefit plans. Any Time-Vesting Shares (and the related escrow account) that are not vested as of the date of termination shall vest as of the date of termination. If the Performance Shares (and the related escrow account) are not vested as of the date of termination, the Performance Shares (and the related escrow account) will remain outstanding and if the Investors meet the Cumulative Total Return Goal prior to the eighth anniversary of the Closing, the Executive will vest in a number of Performance Shares (and the related escrow account), at such time as each applicable Cumulative Total Return Goal is met, equal to the difference between (1) the product of (x) the total number of Performance Shares which would have been vested as of the date of the determination had the Executive remained employed through such date and (y) a fraction, the numerator of which is the period of time that the Executive was employed by the Company from the Closing and the denominator of which is the period of time from the Closing until the applicable Cumulative Total Return Goal is met, and (2) any Performance Shares that already vested. All other Performance Shares (and the related escrow account) will be forfeited. If the Performance Shares (and the related escrow account) remain outstanding but not yet vested as of the eighth anniversary of the Closing, they shall be forfeited. Section 4.4(d) shall apply to the Company repurchases of Common Parent Shares held by the Executive as a result of the vesting of New Parent Restricted Shares and to Company repurchases of Purchased Parent Shares. Notwithstanding the foregoing, the Compensation Committee, in its sole discretion, may permit the vesting of any Performance Shares (and the related escrow account) that are not vested as of the date of termination.


4.3 Death. The Executive's employment with the Company shall terminate automatically upon the death of the Executive and the Company shall have no obligation to the Executive or the Executive's estate other than to pay the Executive's earned and unpaid compensation through the date of the Executive's death, and to treat the New Parent Restricted Shares as described below in this Section 4.3, except as otherwise required by law or by the terms of the Company's benefit plans. Any Time-Vesting Shares (and the related escrow


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account) that are not vested as of the date of death shall vest as of the date of death. If the Performance Shares (and the related escrow account) are not vested as of the date of death, the Performance Shares (and the related escrow account) will remain outstanding and if the Investors meet the Cumulative Total Return Goal prior to the eighth anniversary of the Closing, the Executive will vest in a number of Performance Shares (and the related escrow account), at such time as each applicable Cumulative Total Return Goal is met, equal to the difference between (1) the product of (x) the total number of Performance Shares which would have been vested as of the date of the determination had the Executive remained employed through such date and (y) a fraction, the numerator of which is the period of time that the Executive was employed by the Company from the Closing and the denominator of which is the period of time from the Closing until the applicable Cumulative Total Return Goal is met, and (2) any Performance Shares that already vested. All other Performance Shares (and the related escrow account) will be forfeited. If the Performance Shares (and the related escrow account) remain outstanding but not yet vested as of the eighth anniversary of the Closing, they shall be forfeited. Section 4.4(d) shall apply to the Company repurchases of Common Parent Shares held by the Executive as a result of the vesting of New Parent Restricted Shares and to Company repurchases of Purchased Parent Shares. Notwithstanding the foregoing, the Compensation Committee, in its sole discretion, may permit the vesting of any Performance Shares (and the related escrow account) that are not vested as of the date of termination.


4.4 Termination by the Company Without Cause. The Executive's employment with the Company may be terminated at any time by the Company without Cause. In such event, the Executive shall have the rights set forth in the subparagraphs below.


(a) Severance. Subject to the Executive's continued compliance with his obligations under this Agreement, the Company shall have no obligation to the Executive other than: (i) the payment of the Executive's earned and unpaid compensation through the effective date of such termination; (ii) the payment of any deferred bonus, subject to the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"); (iii) the payment of an amount equal to the sum of the Executive's annual Base Salary plus the Executive's maximum bonus amount of 65% of Base Salary (as in effect as of the date of termination), 50% of which shall be paid to the Executive upon the first business day following the six month anniversary of the date of termination of employment and the remainder of which shall be paid to the Executive in equal installments each month thereafter for six months; and (iv) treatment of the New Parent Restricted Shares (and, if applicable Purchased Parent Shares) as described below in Sections 4.4(b), (c) and (d), except as otherwise required by law or by the terms of the Company's benefit plans (excluding severance plans); provided, that if the termination without Cause occurs within the six-month period after a Change of Control (as defined in Section 4.8 below), in lieu of the cash severance benefits set forth in clause (iii) above, the Executive shall receive the payment over a 12-month period in equal monthly installments of the sum of the Executive's annual Base Salary plus the greater of (x) the Executive's maximum bonus amount of 65% of Base Salary (as in effect as of the date of termination) and (y) the annual bonus paid to the Executive for the year immediately preceding the year in which the date of termination occurs . In the event that the Executive is eligible to receive the severance benefits provided for by this Section 4.4(a), the Executive shall not be eligible to receive severance benefits under any other Company plan, policy, or agreement.


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(b) Time-Vesting Shares. Any unvested Time-Vesting Shares (and the related escrow account) shall be forfeited as of the date of termination; provided, that if the termination without Cause occurs within the six-month period after a Change of Control (as defined in Section 4.8 below), all unvested Time-Vesting Shares (and the related escrow account) shall vest as of the date of termination.


(c) Performance Shares. If the Performance Shares (and the related escrow account) are not vested as of the date of termination, they shall remain outstanding until the 180th day following the date of termination, and if still unvested as of such day, shall be forfeited; provided, that in the event that such termination is within six months following a merger of the Company with or into, an acquisition by the Company of, or an acquisition of the Company by, any of the entities set forth on Exhibit C or any transaction involving the Company's subsidiaries to effectuate the foregoing, the Performance Shares (and the related escrow account) will remain outstanding and if the Investors meet the Cumulative Total Return Goal prior to the eighth anniversary of the Closing, the Executive will vest in a number of Performance Shares (and the related escrow account), at such time as each applicable Cumulative Total Return Goal is met, equal to the difference between (1) the product of (x) the total number of Performance Shares which would have been vested as of the date of the determination had the Executive remained employed through such date and (y) a fraction, the numerator of which is the period of time that the Executive was employed by the Company from the Closing and the denominator of which is the period of time from the Closing until the applicable Cumulative Total Return Goal is met, and (2) any Performance Shares that have already vested. All other Performance Shares (and the related escrow account) will be forfeited. If the Performance Shares (and the related escrow account) remain outstanding but not yet vested as of the eighth anniversary of the Closing, they shall be forfeited.


(d) Repurchase Right. Any (i) Common Parent Shares held by the Executive as a result of the vesting of New Parent Restricted Shares may be repurchased by the Company at any time during the two-year period following (x) the date of termination of employment in the event such Common Parent Shares were vested as of such termination and (y) the vesting of Common Parent Shares in the event such vesting occurred after the date of termination of employment, and (ii) Purchased Parent Shares may be repurchased by the Company at any time following the second anniversary of the date of termination of employm ...