A golden guarantee at GFI Group…

August 26, 2008

The stock price of GFI Group (GFIG), an interdealer broker, took a bounce when the firm announced on July 31 that it was in merger talks with UK-based Tullett Prebon plc. (If the two companies do hook up, I guess someone will have to decide whether the combined firm is in the business of “broking,” as the British say, or “brokering,” as we call it over here.)

GFI has kept quiet since that announcement. But Tullett CEO Terry Smith, playing the role of likely acquirer, has been a bit chattier. On August 5 he told The Times (the other one, from across the pond) he might wrap up the merger in a 4-6 weeks. Last Wednesday Dow Jones reported that Smith would likely head up the merged company, with GFI chief Mickey Gooch as deputy chairman and current GFI President Colin Heffron as COO.

The fate of GFI’s current COO, Ronald Levi, is unclear; supposedly he’s in competition with a Tullett executive to become head of e-commerce. As that news surfaced, Levi signed this employment agreement with GFI. (Unlike some other GFI officers, he’d been working without a written contract, although he’s been with the firm since 1993 and in the COO post since 2006.)

There’s still no official word on the merger (here’s one theory as to what’ s holding it up), or which executives will survive it. But Levi needn’t fear the reaper, thanks to an explicit compensation guarantee in his agreement: for the next 2 years his salary, bonus and equity grants must add up to at least $2.7M annually — even if he loses his job (except for cause).

The contract also includes a $2.5M “sign-on” grant of restricted stock, vesting over 3 years. And as the maraschino cherry on the compensation sundae, GFI is covering Levi’s New York City rent and the cost of schooling his kids, but, alas, only up to a total of $425K per year.

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Note from Michelle: Thanks to everyone who participated in Footnoted’s 5th anniversary celebration last week. Over the weekend, I selected the winners for the 5 different prizes that we were giving away, so be sure to check your inboxes to see if you’ve received an email with the subject line “Footnoted Fifth Anniversary Giveway.”

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