Pact Reduces Global Crossing's CEO's Salary By 30%

Global Crossing Ltd. (GBLXQ) is seeking bankruptcy court approval for an employment agreement with Chief Executive Officer John J. Legere that would cut the executive's salary by 30% during the company's restructuring. A hearing is scheduled for May 1 at 9:45 a.m. EDT before the U.S. Bankruptcy Court in Wilmington, Del. Objections may be filed through April 18, according to court papers obtained recently by Dow Jones Newswires.

Four months prior to filing for Chapter 11 protection on Jan. 28, Global Crossing hired Legere as its chief executive. At the time, he was chief executive of Asia Global Crossing Ltd. (AX), a 58.8%-owned non-debtor affiliate of Global Crossing.

The company said in its court filing that it believes the loss of Legere's services would make it difficult to execute its new operating plan and could prompt other defections of key management. The agreement is necessary to assure Legere that his contract will be honored so that he may give his undivided efforts to Global Crossing, the motion said. Legere's employment agreement expires on Oct. 3, 2004, but provides the option of automatic one-year renewals.

Among several concessions agreed among Global Crossing, Legere and the unsecured creditors committee are a reduction in Legere's base salary to $770,000 from $1.1 million during the restructuring process, creditors committee's approval of performance goals for Legere's annual bonus, waiver of relocation expenses and a 50% mitigation of severance payments in certain circumstances. Legere's annual bonus will be equal to 125% of his base salary, provided that he meets certain performance goals, according to the company's motion. The proposed employment contract also provides for a $5 million tax indemnification for Legere, paid in advance, to cover taxes due in connection with the forgiveness of a $15 million loan from Asia Global Crossing. Any unvested portion of this payment will be repayable to the company if Leger voluntarily terminates his employment. One-quarter will vest on July 15, Sept. 2, Dec. 15 and the date the court confirms a reorganization plan or converts the case to Chapter 7 or appoints a trustee or examiner to oversee business operations. Also, included is a two-year non-solicitation agreement that prohibits Legere from soliciting the employment of any Global Corssing exmployee or the business of the company's clients. Legere also agreed to be excluded from any employee retention bonus program established by the company for its employees.

Global Crossing recently announced an aggressive operating plan designed to reduce its cash burn to a minimum over the remainder of 2002 by eliminating additional costs as it maintains or exceeds existing revenue levels. The company said it expects to reduce operating expenses to a run rate below $800 million by the middle of this year, compared with a $1.5 billion run rate for the fourth quarter of 2001.

Global Crossing filed for Chapter 11 bankruptcy protection Jan. 28 in the U.S. Bankruptcy Court in Manhattan listing assets of $22.4 billion and debts of $12.4 billion at that time.

I'd settle for just the bonus of 125% of the base salary. Legere really has a sweetheart deal for a bankrupt company in a recession economy even after the 30% salary cut.

I know this sounds whiny, but I hope this MF gets everything he deserves. As someone who believed him when he said (right up until 2 months prior to bankruptcy) that BK was not EVER going to be an option, I lost several thousand dollars on GX. This guy Legere, Gary Winnick and his buddy Chinese Billionaire Li Ka-shing (thats the sound made by Gore & Clinton's eyeballs when Li contributed millions of dollars in the 1996 presidential elections) are making a wholesale purchase of Global Crossing. And they are all profiting from it. The company is the best and only global fiber optic network that exists today. It WAS an American company that could easily be considered vital to our national security.

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