EXHIBIT 6.17
EMPLOYMENT AGREEMENT WITH XXXXXX X. XXXXXXXXXXX
EMPLOYMENT AGREEMENT
This Agreement is entered into effective this lst day of October, 1999 (the
"Effective Date"), by and among Global Telephone Communication, Inc., a
Nevada corporation, (hereafter referred to as the "Employer") and XXXXXX X.
XXXXXXXXXXX (hereafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Employer is a corporation engaged in the telecommunications
business and desires to employ the Employee; and
WHEREAS, the Employee is willing to accept such employment on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. POSITION AND DUTIES. Employer hereby agrees to employ Employee on the
terms and conditions set forth herein in the position of Chief Executive
Officer. The Board of Directors may appoint Employee to additional corporate
offices. Employee shall use his best efforts and such time as may be required
to perform the duties of those positions as established by the Board of
Directors and the By-Laws of Employer. Employee may concurrently with this
Agreement continue to perform consulting services in the telecommunications
industry so long as the duties to be performed under his consulting
agreements (i) do not require Employee to use or to reveal trade secrets or
confidential information of Employer as those terms are defined in Subsection
8(a) below and (ii) do not prevent Employee from performing his duties under
this Agreement in a satisfactory manner. Employee shall report directly to
the Board of Directors.
2. TERM.
a. Unless renewed by the mutual agreement of the Employer and Employee,
Employer shall employ Employee for the period beginning on the Date and
ending on the third anniversary of the Effective Date (the "Employment
Period"); provided that the Employment Period shall terminate prior to
such third anniversary (i) upon Employee's resignation, death, mental
or physical disability (as determined by the Board in its good faith
judgment pursuant to Section 7 below), (ii) by action taken by Employer
at any time prior to such third anniversary for Cause (as defined
below) or without Cause, (iii) by action taken by Employee at time
prior to such third anniversary for "Good Reason" (as defined below) or
(iv) upon the Employee's election to convert the third year of the
Employment Period into a consultancy arrangement as provided for in
Section 9 below.
b. If the Employment Period is terminated (other than in accordance
with item (iv) in subsection a above) (i) by the Employer without
Cause, or (ii) by the Employee for Good Reason, Employee shall be
entitled to receive his Base Salary (as defined below) for the
remainder of the Employment Period in a lump sum within five
business days of the date of termination. The amounts payable pursuant
to this paragraph 2(b) shall not be reduced by the amount of any
compensation Employee receives with respect to any other employment
during
the remainder of the Employment Period. Termination of the Employment
Period pursuant to this subparagraph 2b shall entitle Employee to
outplacement services paid by Employer which are consistent with his
position and customary in the Chicago market.
c. If the Employment Period is terminated by the Employer for Cause or
is terminated pursuant to clause (a)(i) above, Employee shall be
entitled to receive his Base Salary through the date of termination,
subject to the provisions of Section 7 below.
d. All of Employee's rights to fringe benefits, bonuses and relocation
reimbursements hereunder accruing after the date of termination of the
Employment Period shall (i) continue for the remainder of the
Employment Period if the termination is pursuant to subsection (b)
above and (ii) cease upon the date of termination if termination is
pursuant to subsection (c) above. If (A) Employee is entitled to any
fringe benefit following the termination of the Employment Period and
(B) the Employee is ineligible to participate in the plan providing
such fringe benefits because he is no longer an employee, Employer
shall provide Employee a substitute fringe benefit or cash payment to
Employee that is economically equivalent (including any "gross up"
required so that the substitute fringe benefit or the cash payment has
the same after income tax equivalence to Employee).
e. For purposes of this Agreement, "Cause" shall mean (i) a "material
breach" of this Agreement by Employee, (ii) a breach of Employee's duty
of loyalty to the Employer or any act of dishonesty or fraud with
respect to the Employer, (iii) the conviction of Employee of a felony,
a crime involving moral turpitude or other act causing material harm to
the Employer's assets, standing or reputation. For the purposes of this
Agreement, a "material breach" shall be determined by a majority of the
Board (excluding Employee if he is a member of the Board) as provided
herein. The Board shall give Employee written notice of the Board's
concern over Employee's actions or failure to act, specifying in detail
the alleged breach and the material effect of such breach on Employer
and setting the time and place for a meeting with the full board of
directors at a location within the United States. Employee shall have
15 days to prepare for such meeting with the Board, at which meeting
Employee may present any information on market competitive conditions
and any other factors bearing upon his performance or disputing the
facts related to the alleged breach. Notwithstanding the above, general
dissatisfaction with Employee's job performance or a good faith
conclusion by the Board of Directors that Employee's performance is
substandard shall not constitute "Cause". Employer's sole option if the
Board of Director's conclusion is that EMPLOYEE'S JOB PERFORMANCE IS
SUBSTANDARD OR IF THERE IS general dissatisfaction with Employee's job
performance shall be to discharge Employee without Cause.
f. For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following events at any time prior to the end
of the Employment Period: (i) any non-payment, reduction or attempted
reduction in Employee's Base Salary (ii) the elimination of, or a
material reduction in, any fringe benefits required to be furnished to
Employee pursuant to Section 5 below or that are made available to
other employees but from which Employee is excluded (Provided, however,
that Good Reason shall not occur if Employer provides to Employee a
substitute fringe benefit or cash payment to Employee
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that is economically equivalent (including any "gross up" required so
that the substitute fringe benefit or the cash payment has the same
after income tax equivalence to Employee) to the eliminated, reduced or
non-provided fringe benefit; (iii) failure of Employer's stockholders
to elect and retain Employee as a member of the Board of Directors;
(iv) a material change in Employee's duties (including status, office,
title, reporting relationships or working conditions),
responsibilities, authority or duties (v) relocation of Employee's
office location after the Effective Date, which the parties agree is
Chicago, Illinois on the Effective Date; (vi) failure of the Board of
Directors to adopt the recommendation of Employee as to the auditors
for Employer or outside legal counsel for Employer; (vii) failure of
the Board of Directors to implement changes to financial statements or
procedures recommended by either the auditors or the outside legal
counsel recommended by the Employee for the purpose of bringing
Employer into compliance with any federal or state securities law or
regulation and to maintain such compliance; (viii) failure of any
"Successor" (as defined below) to assume, either by an enforceable
agreement or by operation of law, all of Employer's liabilities and
obligations to Employee under this Agreement or (ix) a "Change of
Control" (as defined below).
g. For purposes of this Agreement, "Successor" shall mean any successor
in interest to Employer by virtue of a Change in Control, merger,
consolidation or other business combination involving Employer.
h. For purposes of this Agreement, "Change of Control" shall mean
either of the following events:
i. the sale, transfer or exchange of all or substantially all
of the assets of the Employer to any person or entity other
than a direct or indirect majority-owned subsidiary of
Employer;
ii. a 50% or greater change in the voting control of
Employer. Voting control shall be based upon an assumption
that all securities, warrants and options to acquire voting
shares of Employer are converted or exercised. A TRANSFER OF
SECURITIES, warrants or options among existing stockholders
and issuance of additional securities, warrants or options to
existing stockholders shall not be considered a change in the
ownership for purposes of the calculation. Provided, however,
a "Change of Control" shall occur upon the acquisition
following the Effective Date of 50% or more of the voting
control of Employer by any person, including existing
stockholder, (as defined in section 3 of the Securities
Exchange Act of 1934) or group, including a group containing
one or more existing stockholders, (as defined in
Rule 13d-5(b) of the Securities and Exchange Commission) or
the appointment of nominees of such person or group to a
MAJORITY OF THE SEATS ON THE BOARD OF DIRECTORS OF EMPLOYER.
3. COMPENSATION. During and throughout the Employment Period, Employee shall
receive compensation for services performed hereunder by payment of a base
annual salary of no less than $360,000 (the "Base Salary").
The Base Salary to be paid the Employee hereunder shall be paid in equal
monthly or bi-weekly installments, as the Board of Directors of the Employer
shall determine. All salary and other cash compensation shall be paid in U.S.
Dollars and shall be subject to U.S., state and local withholding taxes and
payroll taxes.
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Employee shall be entitled to participate in any cash or stock bonus plan
that may be adopted by the Board after the Effective Date. Immediately upon
the execution of this Agreement, Employer shall pay to Employee a signing
bonus of $95,000 less all applicable withholding and payroll taxes.
4. INCENTIVE STOCK OPTIONS. The Board of Directors shall have adopted an
incentive stock option plan that qualifies under Section 422A of the Internal
Revenue Code as soon as possible, but in no event later than the Effective
Date, and shall take all steps necessary to implement said plan, including
seeking stockholder approval of the plan, reserving shares for issuance under
the plan and, if necessary, amending the certificate of incorporation to
provide for sufficient shares of authorized stock to be reserved and issued
under the plan. Subject to any required stockholder approval, Employer shall
grant to Employee options to acquire 1,000,000 shares of Employer's common
stock with a xxxxx xxxxx equal to 125% of fair market value of the common
stock at the time of the grant, said options to be fully vested as of the
date of the grant. Provided, however, that if the aggregate fair market value
of stock with respect to which said options are exercisable for the first
time by Employee in any one year exceeds $100,000, the award of grants shall
be staggered, the vesting schedule shall be adjusted or the date of exercise
shall be staggered, as directed by Employee, so that the grant of options
will not result in exceeding the $100,000 limitation specified in Section
422(d) of the Internal Revenue Code.
In the event that (i) Employer has not adopted the Incentive Stock Option
Plan and performed the other duties required by the preceding paragraph by
the Effective Date, or (ii) the fair market value of the common stock causes
part of the options to lose their status as Incentive Stock Options because
of the $100,000 limitation referenced in the preceding paragraph then
Employer shall, as directed by Employee, issue as of the Effective Date fully
vested warrants or nonqualified stock options to Employee to purchase
1,000,000 shares of Employer's common stock with an exercise price equal to
125% of the fair market value of the common stock at the date of issue of the
warrants or non-qualified options.
5. BOARD SEATS-APPOINTMENTS-ADDITIONAL BENEFITS. During the Employment
Period, Employer shall use its best efforts to nominate Employee and Xxxxxx
X. Xxxx to its Board of Directors. Employee shall have the right to propose
the nomination of two additional outside directors which Employer agrees to
consider in good faith. The Employee shall be entitled to participate, after
any applicable waiting periods and subject to any underwriting standards, in
any cash or stock bonus plans, any stock option plans, any employee welfare
benefits plans or any other fringe benefit plan, whether such plan is
available to all employees or available only to Key management personnel,
which may from time to time be established by the Board of Directors. Nothing
herein shall restrict or prohibit Employer's right to amend, terminate or
install any such plan. Notwithstanding the above, Employer shall pay the full
amount of Employee's (i) medical, dental, prescription drug, and vision
insurance premiums for family coverage (ii) any co-payments and deductibles
under such medical, dental, prescription drug, and vision policies and (iii)
basic group or individual term life insurance. If Employer has no group
medical, dental, prescription drug, or vision insurance plan, Employer shall
reimburse Employee for his premium costs for his purchase of individual
policies with family coverage, in addition to reimbursement for copayments
and deductibles. The amount of life insurance to be paid for by Employer, the
proceeds of which shall be paid to beneficiaries designated by Employee,
shall be up to $250,000, the exact amount to be elected in writing by
Employee.
Employer shall use its reasonable best efforts to obtain Director and Officer
Liability Insurance in an expeditious manner.
Employer shall reimburse Employee no less frequently than once per month for
all necessary and reasonable travel and other expenses incurred by Employee
in furtherance of Employer's business. In order to receive such
reimbursement, Employee shall be required to furnish to Employer such
documentation as is required by the Internal Revenue Service to permit
Employer to deduct such
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reimbursement. Reimbursement shall also be subject to such reasonable
policies and procedures as are established by the Board of Directors from
time to time.
For all air travel required of Employee in the performance of his
duties hereunder, (i) Employee shall have the right to select a
recognized airline carrier of his choice, (ii) inter-continental air
travel tickets shall be no less than business class and (iii) domestic
air travel tickets shall be no less than coach with upgrade coupons.
6. VACATION. During each twelve months of employment, the Employee
shall be entitled to take up to four weeks vacation. Employee shall
schedule his vacation so as to create a minimum of disruption to the
business of the Employer. Employer shall pay to Employee cash in the
amount of one week's annual base salary for each week of allowed
vacation not taken by Employee during each twelve month period.
7. DISABILITY. In the event Employee shall become unable by reason of
mental or physical disability to continue the proper performance of his
duties hereunder on a full-time basis, payment of the Base Salary to
Employee under the terms of this Agreement shall continue until the
earlier of (i) Employee's receipt of disability benefits pursuant to
any disability insurance, or (ii) three (3) months from the date
Employee shall become unable by reason of such disability to continue
the proper performance of his duties hereunder on a full-time basis (in
either event, the "Date of Disability"). For purposes of termination of
the Employment Period, the Date of Disability shall be the date of
termination. After such period, Employee's rights to disability
benefits, if any, shall be dependent solely upon any existing employee
disability insurance plan, or amendments to any such disability
insurance plan which may be adopted by Employer from time to time. If
Employee is not satisfied with the level of disability benefits, if
any, provided by Employer, he is encouraged to procure his own personal
disability insurance.
8. NON DISCLOSURE-NON SOLICITATION. In consideration of and in exchange
for being employed, the payment of any severance pay and other good and
valuable considerations, Employee shall not, during the Employment
Period and thereafter:
a. use any of Employer's trade secrets or confidential
information or disclose any of Employer's trade secrets or
confidential information to anyone who is not under a
non-disclosure obligation to Employer. This non-disclosure and
non-use obligation shall continue with respect to each trade
secret and each item of confidential information until such
knowledge or information ceases to be a Trade Secret or
confidential information by virtue of its becoming known to
third parties under no non-disclosure obligation to Employer.
The term "trade secrets" and "confidential information" shall
mean information which is not generally known to the public
and which, if revealed to unauthorized persons, would be
detrimental to the reputation or business interests of
Employer and includes information relating to Employer's
business operations and structure, sales, METHODS, PRACTICES
AND TECHNIQUES, technical know-how, advertising or marketing
methods and practices, customer relationships and customer
lists (including customer names and addresses), and Employer's
relationships with suppliers, employees, customers, potential
customers, or other persons or entities doing business with
Employer.
In the event Employee so uses or discloses trade secrets or
confidential information in violation of this subsection (a),
then, in addition to any other remedy, Employer shall be
entitled to a temporary restraining order, temporary or
permanent injunction, specific performance, and other
equitable relief in addition to any other rights and remedies
which then may be available to Employer or its
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affiliates, without any showing of irreparable harm or damage
or the posting of any bond.
b. for a period of one year following termination of the
Employment Period, solicit customers, suppliers or other
entities having business relations with Employer or its
affiliates for the purpose of encouraging them to terminate
their relationships with Employer or its affiliates.
c. Encourage other employees of Employer or its affiliates to
terminate their employment with Employer or its affiliates.
Employee acknowledges and agrees that the foregoing restrictions are
reasonable restrictions for the protection of the goodwill and business of
the Employer, and that the foregoing restrictions do not place any undue
hardship on him.
Employee further acknowledges and agrees that the Employer's remedy at law
for any breach of the obligations set forth in this Section 8 would be
inadequate and that temporary and permanent injunctive relief may be granted
in any proceeding which may be brought to enforce the provisions of this
section without the necessity of proof of actual damage. With respect to any
such provision of this section finally determined by a court of competent
jurisdiction to be unenforceable, it is agreed that such court shall have
jurisdiction to reform this section of this Agreement and such provision(s)
so that it is enforceable to the maximum extent permitted by law, and the
parties involved in such action agree to abide by such court's determination.
If such unenforceable provision cannot be reformed, such provision shall be
deemed to be severed from this agreement but every other provision of this
section shall remain in full force and effect.
9. CONSULTING AGREEMENT. At Employee's sole option, to be exercised by
Employee sending written notice to Employer prior to the second anniversary
of the Effective Date, Employee may elect to terminate the Employment Period
at the end of the second year of the Employment Period and to be a consultant
to the Company during the third year of the Employment Period. The effects of
such election by Employee shall be as follows:
(i) Employee shall be deemed to have (a) terminated the employment
relationship AND RESIGNED AS AN OFFICER, BOTH EFFECTIVE AS OF
THE SECOND ANNIVERSARY OF the Effective Date
(ii) Employer shall no longer be required to use its best efforts
to secure for Employee a seat on the Board of Directors.
(iii) Employee's non-solicitation obligation under subsection 8(b)
shall run for a two- year period commencing on the second
anniversary of the Effective Date.
(iv) Employer and Employee shall enter into a written consulting
agreement, which shall include (A) the economic benefits to
Employee set forth in this Agreement except to the extent
fringe benefits cannot be provided to Employee under group
PLANS ADOPTED BY EMPLOYER DUE TO EMPLOYEE'S ceasing to be
an employee, (B) granting to Employer the right to terminate
the payment of consulting fees for Cause and (C) preserving
Employer's right to seek injunctive relief as set forth in
this Agreement.
10. EMPLOYEE REPRESENTATIONS. Employee hereby represents and
warrants to the Employer that (i) the execution, delivery and performance of
this Agreement by Employee does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which Employee is a party or by which he is bound, (ii)
Employee is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity which
prohibits or restricts his ability to enter into this Agreement or perform his
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duties as contemplated hereunder, and (iii) upon the execution and delivery
of this Agreement by the Employer, this Agreement shall be the valid and
binding obligation of Employee, enforceable in accordance with its terms.
11. WAIVER. Failure by either party to insist upon strict compliance
with any of the terms and conditions of this Agreement shall not be
deemed a waiver of any such term or condition, nor shall any such
failure at any one or more times be deemed a waiver or relinquishment
at any other time of any right under the terms or conditions hereof.
12. BENEFIT.This Agreement shall inure to the benefit of and be
binding upon the heirs, legal representatives, successors or assigns
of the parties hereto.
13. ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto in respect of the subject
matter hereof and supersedes all prior and contemporaneous agreements
between the parties in connection with the subject matter of this
Agreement.
No modification of this Agreement shall be effective unless the same
shall be in a writing duly executed by both parties hereto.
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14. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, as such laws
apply to an employment agreement between an Illinois resident and a
corporation qualified to do business in Illinois. Any legal, equitable
or injunctive action brought by Employer to enforce its rights under
this Agreement shall be brought only in a court of appropriate
jurisdiction located within the state of Employee's primary residence
at the time such action is brought.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the Effective Date.
Global Telephone Communication, Inc.,
Employer
By:_
Xxxxxx X. Xxxxxxxxxxx
Employee Print Name:
Its:
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