EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 10th day of June,
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1998 between SMARTALK TELESERVICES, INC., a California corporation (the
"Company") and XXXXXX XXXXXX, XX. (the "Executive"); and
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WHEREAS, the parties hereto wish to enter into an employment agreement to
employ the Executive as the President - Direct to Consumer division and to set
forth certain additional agreements between the Executive and the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
1. Term.
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The Company will employ the Executive, and the Executive will serve the
Company, under the terms of this Agreement for an initial term of three (3)
years (the "Initial Term"), commencing on the date hereof (the "Effective
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Date"). Effective as of the expiration of the Initial Term and as of each
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anniversary date thereof, the term of this Agreement shall be extended for an
additional one-year period unless, not later than three months prior to each
such respective date, either party hereto shall have given notice to the other
that the term shall not be so extended. Notwithstanding the foregoing, the
Executive's employment hereunder may be earlier terminated, as provided in
Section 4 hereof. The term of this Agreement, as in effect from time to time in
accordance with the foregoing, shall be referred to herein as the "Term". The
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period of time between the Effective Date and the termination of the Executive's
employment hereunder shall be referred to herein as the "Employment Period."
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2. Employment.
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(a) Positions and Reporting. The Company hereby employs the Executive for
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the Employment Period as its President - Direct to Consumer division, which may
include, among other things, responsibility for prepaid cellular products, new
product development, direct response distribution and media purchases and
marketing. During the Employment Period, the Executive shall report directly to
the Chief Executive Officer (the "CEO") or the CEO's designee.
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(b) Authority and Duties. The Executive shall exercise such authority,
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perform such executive duties and functions and discharge such responsibilities
as are reasonably associated with the Executive's positions, commensurate with
the authority vested in the Executive pursuant to this Agreement and consistent
with the bylaws of the Company. During the Employment Period, the Executive
shall devote full business time, skill and efforts to the business of the
Company. Notwithstanding the foregoing, the Executive may (i) make and manage
personal business investments of his choice and serve in any capacity with any
civic, educational or charitable organization, or any trade association, without
seeking or obtaining approval by the Board of Directors of the Company (the
"Board"), provided such
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activities and service do not materially interfere or conflict with the
performance of his duties hereunder and (ii) with the approval of the Board,
serve on the boards of directors of other corporations.
3. Compensation and Benefits.
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(a) Salary. During the Employment Period, the Company shall pay to the
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Executive, as compensation for the performance of his duties and obligations
under this Agreement, a base salary at the rate of $200,000 per annum, payable
in arrears not less frequently than monthly in accordance with the normal
payroll practices of the Company (the "Base Salary"). Such Base Salary shall be
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subject to review each year for possible increase by the Board in its sole
discretion, but shall in no event be decreased from the levels set forth above
during the Initial Term, or from its then-existing level during the Employment
Period.
(b) Annual Bonus. The Executive shall earn bonus amounts in the form of
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cash and stock awards based upon the satisfaction of performance criteria that
will be established by a committee of the Board (the "Compensation Committee")
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in its discretion and upon consultation with the Executive at the beginning of
each year, subject to the approval of the Board. Performance criteria will be
based upon the achievement of corporate performance goals for the Company's
Direct to Consumer division as established by the CEO pursuant to the Company's
business plan. The final determinations as to the achievement of the
pre-established goals and the amounts of any bonus payout in relationship to
such performance, shall be made by the Compensation Committee in its sole
discretion. Executive's bonus shall be paid to Executive at such time as other
executive bonuses are paid.
(c) Other Benefits. During the Employment Period, the Executive shall
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receive such life insurance, pension, health insurance, holiday, vacation and
sick pay benefits and other benefits which the Company extends, as a matter of
policy, to its executive employees and, except as otherwise provided herein,
shall be entitled to participate in all deferred compensation and other
incentive plans of the Company on the same basis as other like employees of the
Company. Without limiting the generality of the foregoing, the Executive shall
be entitled to three (3) weeks vacation during each year of the Employment
Period, which shall be scheduled in the Executive's discretion, subject to and
taking into account the business exigencies of the Company. Unused vacation may
be accrued up to a maximum of four (4) weeks of unused vacation, and thereafter
the Executive shall cease to accrue vacation thereafter until used.
(d) Business Expenses. During the Employment Period, the Company shall
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promptly reimburse the Executive for all documented reasonable business expenses
incurred by the Executive in the performance of his duties under this Agreement,
in accordance with the Company's policies and standards of similar or comparable
companies.
(e) Car Allowance. The Company shall pay to Executive as an automobile
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allowance the sum of $600 per month during the Employment Period in lieu of any
other provision for an automobile, insurance, maintenance, gasoline and
expenses.
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(f) Stock Options. Concurrently with the execution of this Agreement, the
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Company and Executive will enter into a Stock Option Agreement, attached hereto
as Exhibit A, pursuant to which the Company shall grant to the Employee an
option to purchase up to 100,000 shares of common stock of the Company on the
terms and conditions set forth therein.
4. Termination of Employment.
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(a) Termination for Cause. The Company may terminate the Executive's
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employment hereunder for cause. For purposes of this Agreement and subject to
the Executive's opportunity to cure as provided in Section 4(c) hereof, the
Company shall have "cause" to terminate the Executive's employment hereunder if
Executive shall commit any of the following:
(i) any act or omission which shall represent a material breach in
any material respect of any of the terms of this Agreement.
(ii) gross misconduct that, in the reasonable good faith opinion of
the Company that is or is likely to be significantly injurious to the
Company;
(iii) gross negligence or wanton and reckless acts or omissions in
the performance of Executive's duties, in any such case which are to the
material detriment of the Company;
(iv) bad faith in the performance of Executive's duties, consisting
of willful acts or omissions, to the material detriment of the Company;
(v) addiction to illegal drugs or chronic alcoholism; or
(vi) any conviction or pleading of guilty to a crime that
constitutes a felony under the laws of the United States or any political
subdivision thereof.
(b) Termination for Good Reason. The Executive shall have the right at
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any time to terminate his employment with the Company for any reason. For
purposes of this Agreement and subject to the Company's opportunity to cure as
provided in Section 4(c) hereof, the Executive shall have "good reason" to
terminate his employment hereunder if such termination shall be the result of:
(i) a diminution during the Employment Period in the Executive's
title, duties or responsibilities as set forth in Section 2 hereof;
(ii) a breach by the Company of the compensation and benefits
provisions set forth in Section 3 hereof; or
(iii) a material breach by the Company of any material terms of this
Agreement.
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(c) Notice and Opportunity to Cure. Notwithstanding the foregoing, it
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shall be a condition precedent to the Company's right to terminate the
Executive's employment for "cause" and the Executive's right to terminate his
employment for "good reason" that (1) the party seeking the termination shall
first have given the other party written notice stating with specificity the
reason for the termination ("breach") and (2) if such breach is susceptible of
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cure or remedy, a period of 30 days from and after the giving of such notice
shall have elapsed without the breaching party having effectively cured or
remedied such breach during such 30-day period, unless such breach cannot be
cured or remedied within 30 days, in which case the period for remedy or cure
shall be extended for a reasonable time (not to exceed 30 days) provided the
breaching party has made and continues to make a diligent effort to effect such
remedy or cure.
(d) Termination Upon Death or Permanent and Total Disability. The
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Employment Period shall be terminated by the death of the Executive. The
Employment Period may be terminated by the Company if the Executive shall be
rendered incapable of performing his duties to the Company by reason of any
medically determined physical or mental impairment that reasonably can be
expected to result in death or that can be expected to last for a period of six
(6) or more consecutive months from the first date of the disability
("Disability"). In the event of a dispute as to whether the Executive is
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impaired within the meaning of this Section 4(d), or as to the likely duration
of any incapacity of the Executive either party may request a medical
examination of the Executive by a doctor appointed by the Chief of Staff of a
hospital selected by mutual agreement of the parties, or as the parties may
otherwise agree, and the written medical opinion of such doctor shall be borne
by the Company. If the Employment Period is terminated by reason of Disability
of the Executive, the Company shall give 30-days' advance written notice to that
effect to the Executive.
5. Consequences of Termination.
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(a) Termination Without Cause or for Good Reason. In the event of
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termination of the Executive's employment hereunder by the Company without
"cause" (other than upon death or Disability) or by the Executive for "good
reason" (each as defined in Section 4 hereof), the Executive shall be entitled
to the following severance pay and benefits:
(i) Severance Pay - a lump sum amount equal to the Executive's
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annual Base Salary; and
(ii) Benefits Continuation - continuation for six (6) months (the
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"Severance Period") of coverage under the group medical care, disability and
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life insurance benefit plans or arrangements in which the Executive is
participating at the time of termination with the Company continuing to pay
its share of premiums and associated costs as if Executive continued in the
employ of the Company; provided, however, that the Company's obligation to
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provide such coverages shall be terminated if the Executive obtains
comparable substitute coverage from another employer at any time during the
Severance Period. The Executive shall be entitled, at the expiration of the
Severance Period, to elect continued medical coverage in accordance with
Section
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4980B of the Internal Revenue Code of 1986, as amended (or any successor
provision thereto).
(b) Termination Upon Disability. In the event of termination of the
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Executive's employment hereunder by the Company on account of Disability, the
Executive shall be entitled to the following severance pay and benefits:
(i) Severance Pay - severance payments in the form of continuation
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of the Executive's Base Salary as in effect immediately prior to such
termination for a period of 6 months following the first date of Disability;
and
(ii) Benefits Continuation - the same benefits as provided in Section
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5(a)(ii) above, to be provided during the Employment Period while the
Executive is suffering from Disability and for a period of 6 months following
the effective date of termination of employment by reason of Disability.
In addition to the foregoing, the Company shall remit to the Executive any
benefits received by the Company, as beneficiary, pursuant to any additional
disability insurance policy which was maintained by the Executive prior to his
employment with the Company.
(c) Termination Upon Death. In the event of termination of the
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Executive's employment hereunder on account of the Executive's death, the
Executive's heirs, estate or personal representatives under law, as applicable,
shall be entitled to the payment of the Executive's Base Salary as in effect
immediately prior to death for a period of not less than two calendar months and
not more than the earlier of six calendar months or the payment of benefits
pursuant to the Executive's life insurance policy, as provided for in Section
3(c) above. The Executive's beneficiary or estate shall not be required to
remit to the Company any payments received pursuant to any life insurance
policy purchased pursuant to Section 3(c) above.
(d) Other Terminations. In the event of termination of the Executive's
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employment hereunder for any reason other than those specified in subsection (a)
through (c) of this Section 5, the Executive shall not be entitled to any
severance pay or benefits continuation contemplated by the foregoing, except as
may otherwise be provided under the applicable benefit plans or award agreements
relating to the Executive.
(e) Accrued Rights. Notwithstanding the foregoing provisions of this
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Section 5, in the event of termination of the Executive's employment hereunder
for any reason, the Executive shall be entitled to payment of any unpaid portion
of his Base Salary though the effective date of termination, and payment of any
accrued but unpaid rights solely in accordance with the terms of any incentive
bonus or employee benefit plan or program of the Company.
(f) Conditions to Severance Benefits. (i) The Company shall have the
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right to seek repayment of the severance payments and benefits provided by this
Section 5 in the
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event that the Executive fails to honor in accordance with their terms the
provisions of Sections 6, 7 and 8 hereof.
(ii) For purposes only of this Section, Executive shall be treated as
having failed to honor the provisions of Sections 6, 7 or 8 hereof only
upon the vote of two-thirds of the Board following notice of the alleged
failure by the Company to the Executive, an opportunity for the Executive
to cure the alleged failure for a period of 30 days from the date of such
notice and the Executive's opportunity to be heard on the issue by the
Board.
6. Confidentiality. The Executive agrees that he will not at any time
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during the Employment Period or at any time thereafter for any reason, in any
fashion, form or manner, either directly or indirectly, divulge, disclose or
communicate to any person, firm, corporation or other business entity, in any
manner whatsoever, any confidential information or trade secrets concerning the
business of the Company, including, without limiting the generality of the
foregoing, the techniques, methods or systems of its operation or management,
any information regarding its financial matters, or any other material
information concerning the business of the Company (including customer lists),
its manner of operation, its plans or other material data (the "Business"). The
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provisions of this Section 6 shall not apply to (i) information disclosed in the
performance of the Executive's duties to the Company based on his good faith
belief that such a disclosure is in the best interests of Company; (ii)
information that is, at the time of the disclosure, public knowledge; (iii)
information disseminated by the Company to third parties in the ordinary course
of business; (iv) information lawfully received by the Executive from a third
party who, based upon inquiry by the Executive, is not bound by a confidential
relationship to the Company; or (v) information disclosed under a requirement of
law or as directed by applicable legal authority having jurisdiction over the
Executive.
7. Inventions. The Executive is hereby retained in a capacity such
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that the Executive's responsibilities may include the making of technical and
managerial contributions of value to Company. The Executive hereby assigns to
Company all rights, title and interest in such contributions and inventions made
or conceived by the Executive alone or jointly with others during the Employment
Period which relate to the Business. This assignment shall include (a) the right
to file and prosecute patent applications on such inventions in any and all
countries, (b) the patent applications filed and patents issuing thereon, and
(c) the right to obtain copyright, trademark or trade name protection for any
such work product. The Executive shall promptly and fully disclose all such
contributions and inventions to Company and assist Company in obtaining and
protecting the rights therein (including patents thereon), in any and all
countries; provided, however, that said contributions and inventions will be the
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property of Company, whether or not patented or registered for copyright,
trademark or trade name protection, as the case may be. Inventions conceived by
the Executive which are not related to the Business, will remain the property of
the Executive.
8. Non-Competition. Concurrently with the execution of this
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Agreement, the Company and Executive will enter into a Non-Competition
Agreement, attached hereto as
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Exhibit A, pursuant to which the Executive agrees that he shall not engage in
any Proscribed Business (as defined in the Non-Competition Agreement) for a
period of five (5) years.
9. Breach of Restrictive Covenants. The parties agree that a breach or
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violation of Sections 6, 7, or 8 hereof will result in immediate and irreparable
injury and harm to the innocent party, and that such innocent party shall have,
in addition to any and all remedies of law and other consequences under this
Agreement, the right to seek an injunction, specific performance or other
equitable relief to prevent the violation of the obligations hereunder.
10. Notice. For the purposes of this Agreement, notices, demands and all
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other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Company, to:
Attn: Xxxxxxxx Xxxxxxx
General Counsel
SmarTalk TeleServices, Inc.
0000 Xxxxxx Xxxxxxxx Xxxx.
Xxxxxx, Xxxx 00000
If to the Executive, to:
Xxxxxx Xxxxxx, Xx.
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
11. Arbitration. Except as provided in Section 9 hereof, any dispute or
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controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Columbus, Ohio in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
12. Waiver of Breach. Any waiver of any breach of this Agreement shall not
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be construed to be a continuing waiver or consent to any subsequent breach on
the part either of the Executive or of the Company.
13. Non-Assignment Successors. Neither party hereto may assign his or its
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rights or delegate his or its duties under this Agreement without the prior
written consent of the other party; provided, however, that: (i) this Agreement
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shall inure to the benefit of and be
7 June 8, 1998
binding upon the successors and assigns of the Company upon any sale of all or
substantially all of the Company's assets, or upon any merger, consolidation or
reorganization of the Company with or into any other corporation, all as though
such successors and assigns of the Company and their respective successors and
assigns were the Company; and (ii) this Agreement shall inure to the benefit of
and be binding upon the heirs, assigns or designees of the Executive to the
extent of any payments due to them hereunder. As used in this Agreement, the
term "Company" shall be deemed to refer to any such successor or assign of the
Company referred to in the preceding sentence.
14. Withholding of Taxes. All payments required to be made by the Company
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to the Executive under this Agreement shall be subject to the withholding of
such amounts, if any, relating to tax, and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation.
15. Severability. To the extent any provision of this Agreement or portion
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thereof shall be invalid or unenforceable, it shall be considered deleted
therefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
16. Payment. All amounts payable by the Company to the Executive under
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this Agreement shall be paid promptly on the dates required for such payment in
this Agreement without notice or demand. Any salary, benefits or other amounts
paid or to be paid to Executive or provided to or in respect of the Executive
pursuant to this Agreement shall not be reduced by amounts owing from Executive
to the Company.
17. Authority. Each of the parties hereto hereby represents that each has
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taken all actions necessary in order to execute and deliver this Agreement.
18. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
19. Governing Law. This Agreement shall be construed, interpreted and
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enforced in accordance with the laws of the State of Ohio, without giving effect
to the choice of law principles thereof.
20. Entire Agreement. This Agreement constitutes the entire agreement by
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the Company and the Executive with respect to the subject matter hereof and
supersedes any and all prior agreements or understandings between the Executive
and the Company with respect to the subject matter hereof, whether written or
oral. This Agreement may be amended or modified only by a written instrument
executed by the Executive and the Company.
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8 June 8, 1998
IN WITNESS WHEREOF, the parties have executed this Agreement as of June 9,
1998.
SMARTALK TELESERVICES, INC.
/s/ Xxxxx X. Xxxxxxxxxxx
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By: Xxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
/s/ Xxxxxx Xxxxxx, Xx.
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Xxxxxx Xxxxxx, Xx.
9 June 8, 1998
