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EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES: GST USA, INC. (a Delaware Corporation)
0000 XX Xxxxxxxx Xxx,
Xxxxxxxxx, Xxxxxxxxxx 00000 ("Corporation")
XXXXXX X. XXXXXX, Xx.
00000 XX 00xx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000 ("Executive")
EFFECTIVE DATE: October 20, 1998
RECITALS:
A. Corporation employed Executive under an employment agreement dated
March 11, 1997;
B. Corporation and Executive wish to modify the terms of Executive's
employment with Corporation as set forth in this Agreement.
In consideration of the mutual promises set forth herein, the parties agree
as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
definitions set forth below:
1.1 "BASE SALARY" means Twenty-Seven Thousand Eighty-Three and 33/100
dollars ($27,083.33) monthly.
1.2 "BOARD" means the Board of Directors of GST.
1.3 "CAUSE" means, for purposes of Section 4.2 and Section 4.3, any one or
more of the following: (i) the willful and repeated failure of Executive to
perform any material duties hereunder or gross negligence of Executive in the
performance of such duties, and if such failure or gross negligence is
susceptible of cure by Executive, the failure to effect such cure within 20 days
after written notice of such failure or gross negligence is given to Executive;
(ii) excessive use of alcohol or illegal drugs interfering with the performance
of Executive's duties hereunder; (iii) theft, embezzlement, fraud,
misappropriation of funds, other acts of dishonesty or the violation of any law
or ethical rule relating to Executive's employment by the Corporation; (iv) the
conviction of a felony or other crime involving moral turpitude by Executive; or
(v) the breach by Executive of any other material provision of this Agreement,
and if such breach is susceptible of cure by Executive, the failure to effect
such cure within 30 days after written notice of such breach is given to
Executive.
1.4 "CHANGE IN CONTROL" means, for the purpose of Section 3.4, (i) the
direct or indirect sale, lease, exchange or other transfer of all or
substantially all (50% or more) of the assets of GST or of the Corporation to
any person or entity or group of persons or entities acting in concert as a
partnership or other group (a "Group of Persons") excluding the GST Companies,
(ii) the merger, consolidation or other business combination of either or both
of GST and the Corporation with or into another corporation with the effect that
the shareholders of GST or the Corporation, as the case may be, immediately
before the merger, consolidation or other business combination, hold immediately
after any such transaction, 50% or less of the combined voting power of the then
outstanding securities of the surviving corporation of such merger,
consolidation or other business combination ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors of such surviving entity, or (iii) a person or Group of Persons
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise (except for the ownership of the
Corporation's stock by GST) have become the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of GST or of the Corporation representing (except for the ownership
of the Corporation's stock by GST) 50% or more of
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the combined voting power of the then outstanding securities of such corporation
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors.
1.5 "CORPORATION" means GST USA, INC., a Delaware Corporation.
1.6 "DISABILITY" OR "DISABLED" means the inability of Executive due to
mental or physical impairment, despite reasonable accommodation by the
Corporation, to perform the duties of his position for a period of 135 days in
any consecutive 225 day period. A determination of Disability shall be made by a
qualified physician agreed upon by Executive and the Board. Executive shall
cooperate in promptly providing medical records and submitting to a medical
examination as reasonably necessary to determine whether a Disability exists.
1.7 "FAIR MARKET VALUE" means the closing price of the Common Shares of
GST on the U.S. national securities exchange on which the Common Shares are
listed (if the shares are so listed) or on the Nasdaq National Market or Small
Cap Market (if the Common Shares are regularly quoted on the Nasdaq National
Market or Small Cap Market), or, if not so listed or regularly quoted or if
there is not such closing price, the mean between the closing bid and asked
prices of the Common Shares in the over-the-counter market or on such exchange
or on Nasdaq, or, if such bid and asked prices shall not be available, as
reported by any nationally recognized quotation service selected by the
Corporation. On the date hereof, the Common Shares are listed and traded on
Nasdaq and the Vancouver Stock Exchange.
1.8 "GST" means GST Telecommunications, Inc., a Federally Chartered
Canadian Corporation.
1.9 "GST COMPANIES" means the Corporation, its parent corporation, GST,
and GST's subsidiaries.
ARTICLE 2
EMPLOYMENT, DUTIES AND TERM
2.1 EMPLOYMENT. Corporation hereby employs Executive as President and
Chief Executive Officer of GST and the Corporation, respectively, under the
terms and conditions set forth in this Agreement, subject to the control and
direction of the Board.
2.2 DUTIES. Executive's duties shall include such duties as assigned by
the Board from time to time, as reasonably consistent with responsibilities
customarily assumed by executives with similar titles in GST's industry.
Executive shall devote his full-time and best efforts to the GST Companies and
fulfilling the duties of his position. Executive shall comply with the policies
and procedures of the GST Companies to the extent they are not inconsistent with
this Agreement, in which case the provisions of this Agreement prevail. While
employed by the Corporation, Executive shall not accept employment or perform
services of any nature for any business enterprise other than the Corporation.
Executive shall be elected to, and serve without additional compensation, such
offices of the GST Companies as may from time to time be determined by the
Board. Executive's primary place of employment will be Vancouver, Washington but
he will be required to travel from time to time to perform his duties.
2.3 TERM. This Agreement and Executive's employment shall commence on the
date of this Agreement and continue to and include the day preceding the fourth
anniversary date hereof unless earlier terminated as provided in this Agreement.
ARTICLE 3
COMPENSATION AND EXPENSES
3.1 BASE SALARY. For the services rendered under this Agreement, during
the term of Executive's employment, the Corporation shall pay Executive the Base
Salary, payable in accordance with Corporation's normal payroll practices.
3.2 BONUS COMPENSATION. Executive shall be eligible to participate in the
Variable Incentive Plan applicable to Corporation executives, as adopted and
modified by the Board from time to time.
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3.3 BUSINESS EXPENSES. Corporation shall reimburse Executive for the
necessary and reasonable business expenses incurred by Executive in performing
his duties as an employee of the Corporation, subject to Corporation's generally
applicable policies relating to amounts and documentation of expenses.
3.4 STOCK OPTIONS GRANT. GST will grant Executive stock options subject to
the following conditions:
3.4.1 GST will grant Executive options to purchase up to One Million
(1,000,000) GST Common Shares at an exercise price equal to the Fair Market
Value of the shares on January 11, 1999. Such options shall be granted upon
Executive's execution of this Agreement.
3.4.2 Options shall vest as follows: (i) 25% of the 1,000,000 shares
subject to the option shall vest on the first anniversary date of this
Agreement, (ii) 1/36th of the 1,000,000 shares subject to the option shall
vest on the completion of each full calendar month following the date of
this Agreement; provided, however, any and all unvested options granted
pursuant to this Section 3.4 shall vest and become immediately exercisable
upon a Change in Control; only if (i) in the event of such Change of
Control, Executive does not receive substituted options with substantially
the same benefits as those provided herein; and (ii) if such acceleration
does not cause, either with or without any other transaction, an inability
of a Change of Control transaction to be accounted for as a pooling of
interest, if applicable or desired.
3.4.3 The options granted pursuant to this Section 3.4 are subject to
the terms and conditions of any applicable Stock Option Plan designated by
GST as a source of shares to comply with Section 3.4 herein.
3.5 OTHER STOCK OPTIONS. Executive hereby acknowledges that all options to
purchase common shares of GST held by Executive that have not vested as of the
date of this Agreement, including without limitation, all unvested stock option
grants or rights thereto Executive holds or claims pursuant to his employment
agreement dated March 11, 1997, are null and void and of no force or effect.
3.6 BENEFITS, VACATION. Executive shall be offered the following
employment-related benefits:
3.6.1 Insurance: Executive shall be offered such health, life, and
disability insurance and employment-related benefits as are available to
other executive employees of Corporation, subject to any and all terms,
conditions, and eligibility requirements imposed by the Corporation or the
benefit provider. These terms, conditions, and eligibility requirements,
and the availability of specific benefits, may change from time to time or
be eliminated by the Corporation.
3.6.2 Vacation: Executive shall be entitled to four weeks' paid
vacation each year. Vacation not used as of each anniversary date of this
Agreement shall not be carried over but shall be paid out to Executive at
his Base Salary rate.
3.6.3 Car Allowance: Executive shall receive an expense allowance of
One Thousand and 00/100 dollars ($1,000.00) per month for the cost of
operating and maintaining a motor vehicle to assist Executive in rendering
services to the Corporation, plus automobile liability insurance with
coverage in an amount appropriate to his potential liability. Executive
will not be required to submit to the Corporation documentation relating to
this automobile allowance.
3.6.4 D & O Insurance: So long as the Corporation or GST provides
directors' and officers' liability insurance coverage for the directors and
officers of GST and the Corporation generally, the Corporation shall use
its best efforts to cause GST to obtain and maintain, at GST's expense,
such coverage applicable to Executive. Executive shall not be required to
serve in any office of the GST Companies if such coverage is not applicable
to his service in such office.
3.7 WITHHOLDING. All compensation paid or benefits provided to Executive
by the Corporation shall be subject to tax or other withholding as required by
law.
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ARTICLE 4
EARLY TERMINATION
4.1 EARLY TERMINATION. This Article governs termination of this Agreement
at any time during its term. Unless otherwise stated in this Agreement,
termination of this Agreement also terminates Executive's employment.
4.2 TERMINATION FOR CAUSE. The Corporation may terminate this Agreement
immediately for Cause. In the event of termination for Cause pursuant to this
Section 4.2, the Corporation shall pay Executive his Base Salary through the
date of termination specified in any notice of termination.
4.3 TERMINATION WITHOUT CAUSE. Either Executive or the Corporation may
terminate this Agreement and Executive's employment without Cause on 30 days'
written notice. This Section 4.3 does not apply to termination due to
Executive's death, Disability, or where Cause for termination exists. In the
event of termination of this Agreement pursuant to this Section 4.3, Executive
shall be paid as provided in this Section.
4.3.1 If the notice of termination is given by Executive without Good
Reason, as that term is defined below, the Corporation shall pay Executive
his Base Salary through the date of termination specified in such notice
(but not to exceed 60 days).
4.3.2 If the notice of termination is given by the Corporation, or by
Executive for Good Reason, (i) the Corporation shall pay Executive his Base
Salary through the date of termination specified in the notice, provided,
however, the Corporation shall have the option of making termination of the
Agreement and Executive's employment effective immediately in which case
Executive shall be paid through a notice period of 60 days; and (ii)
Executive shall receive, within 30 days following the date of termination,
a lump sum payment equivalent to one year's Base Salary.
4.3.3 For purposes of this Section 4.3, "Good Reason" shall mean the
breach by the Corporation of a material provision of this Agreement and, if
such breach is susceptible of cure, the failure to effect such cure within
30 days after written notice of such breach is given by Executive to the
Corporation.
4.4 TERMINATION IN THE EVENT OF DEATH OR DISABILITY.
4.4.1 In the event of Executive's death, this Agreement shall terminate
immediately and Executive's estate or beneficiary (as designated by Executive in
writing to Corporation) shall be entitled to receive an amount equal to 1.5
times Executive's then current annual Base Salary, payable over 18 months in
equal quarterly installments.
4.4.2 Upon determination of Executive's Disability, the Corporation may,
at its option, terminate Executive's employment upon not less than ten (10)
days' written notice, provided, however, that termination of this Agreement
shall not effect Executive's entitlement to the benefits set forth in this
Section 4.4.2. Executive shall be entitled to Disability benefits as follows:
(i) Executive shall be entitled to salary continuation for a period
of Disability lasting up to six months (First Disability Payment Period).
(ii) If the First Disability Payment Period ends prior to March 10,
2000, but Executive remains Disabled, then Executive shall be entitled to
salary continuation during such period of Disability at the rate of
one-half his Base Salary until the earlier of (A) one year or (B) March 10,
2000 (the Second Disability Payment Period).
(iii) Upon expiration of the Second Disability Payment Period,
Executive shall not be entitled to any further payments until Executive
ceases to be disabled and has resumed his duties under this Agreement,
provided the Corporation has not previously terminated this Agreement.
(iv) The Corporation or GST shall be entitled to deduct from the
amounts payable to Executive under this Section 4.4 all amounts paid to
Executive under any disability insurance policy maintained for his benefit
by the GST companies.
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4.5 SOLE REMEDY. The compensation provided for in this Article 4 for
termination of this Agreement shall constitute Executive's sole remedy for
termination during the Agreement's term, including without limitation,
termination due to breach by the GST Companies. Executive shall not be entitled
to any other termination or severance payment from GST, the Corporation, or any
other GST Company.
ARTICLE 5
CONFIDENTIALITY, CONFLICTS OF INTEREST
5.1 CONFIDENTIALITY.
5.1.1 Executive shall hold in a fiduciary capacity for the benefit of the
GST Companies all Confidential Information and shall not, during the term or
after the termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while employed by
the Corporation except as may be reasonably necessary during the term of his
employment to perform the duties of his position or as required by law. Upon
termination of Executive's employment with Corporation, Executive shall promptly
deliver to the Corporation all documents or materials in any form containing
Confidential Information.
5.1.2 "Confidential Information" means information or material of the GST
Companies which is not in the public domain, or the utility or value of which is
not generally known or recognized, whether or not the underlying details are in
the public domain, including without limitation, information relating to the GST
Companies and their business as conducted or anticipated to be conducted;
business plans; operations; past, current or anticipated products, services or
facilities; customers or prospective customers; or research, engineering,
development, manufacturing, purchasing, accounting, or marketing activities.
5.2 BUSINESS CONDUCT AND ETHICS. During the term of his employment with
the Corporation, Executive will engage in no activity or employment which may
conflict with the interest of the GST Companies. Executive will comply with the
policies and guidelines of the GST Companies pertaining to business conduct and
ethics.
5.3 SURVIVAL. The obligations of this Article 5 shall survive the
expiration or termination of this Agreement.
ARTICLE 6
NON-COMPETITION, NON-SOLICITATION
6.1 GENERAL. The parties acknowledge that at the outset of Executive's
employment by the Corporation, they entered into an employment agreement dated
March 11, 1997, which contained non-competition and non-solicitation provisions.
The parties agree that those terms are of continuing force and effect, as set
forth in this Article 6. The parties recognize and agree that these provisions
shall remain in full force and effect and that they are necessary because (a)
Executive is a senior executive of the Corporation and a key Executive of the
Corporation, (b) Executive has received, and will in the future receive,
substantial amounts of Confidential Information, (c) The GST Companies' business
is conducted on a worldwide basis, and (d) provision for non-competition and
non-solicitation obligations by Executive is critical to the GST Companies'
continued economic well-being and protection of Confidential Information.
6.2 NON-COMPETITION.
6.2.1 During the term of Executive's employment by GST and for a period of
one (1) year following termination of Executive's employment (the "Restricted
Period"), Executive shall not directly or indirectly, own, manage, operate,
join, control, participate in, invest in, or otherwise be connected with,
whether as an officer, director, employee, partner, Shareholder (as defined
below), investor or otherwise, any business, firm or entity, that Competes, as
that term is defined below, with the GST Companies, or any of them, anywhere the
GST Companies do business or anywhere the GST Companies, or any of them, are
Actively Pursuing a business opportunity; provided however, that this Section
6.2 shall not be applicable in the event Executive's
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employment is terminated pursuant to Section 4.3(b) or due to Disability
pursuant to Section 4.4 of this Agreement.
6.2.2 For purposes of this Section 6.2, "Shareholder" shall not include
beneficial ownership of less than one percent (1%) of the combined voting power
of all issued and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange.
6.2.3 For purposes of this Section 6.2, "Actively Pursuing" means that the
management of one or more of the GST Companies is actively considering the
opportunity, regardless of whether specific bids have been submitted, and the
GST Companies have expended not less than $100,000 in connection with such
opportunity.
6.2.4 For purposes of this Section 6.2, "Compete" means any one or more of
the following: (i) designing, developing, constructing or operating alternate
access or other telecommunications networks, providing long distance or other
telecommunications services, (ii) engaging in any other business engaged in by
any of the GST Companies or their affiliates, or (iii) engaging in any other
business engaged in by any entity in which the GST Companies, or any of them,
are partners or joint venturers.
6.3 NON-SOLICITATION. During the Restricted Period, as that term is
defined in Section 6.2, Executive shall not for himself or on behalf of any
other person or entity, directly or indirectly: (i) call on any customer of the
GST Companies, or any of them, for the purpose of soliciting, diverting or
taking away any customer; or (ii) seek to induce or influence any employee,
representative, agent or independent contractor of the GST Companies, or any of
them, to terminate his relationship with the GST Companies, or any of them.
6.4 SURVIVAL. The obligations of this Article 6 shall survive the
expiration or termination of this Agreement.
ARTICLE 7
GENERAL PROVISIONS
7.1 SUCCESSORS AND ASSIGNS. Executive may not assign this Agreement.
Subject to the limitation on Executive's right of assignment, this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective executors, heirs, administrators, successors and permitted assigns.
7.2 CONSENT TO INJUNCTION. Executive agrees that the GST Companies, or
any of them, will or would suffer an irreparable injury if Executive were to
violate the covenants contained in Article 5 or Article 6 and that monetary
damages alone would not adequately compensate GST and the GST Companies for the
harm suffered. Executive agrees that GST and the GST Companies shall be entitled
to injunctive relief to enjoin any breach or threatened breach of Articles 5 or
6 in addition to any other available remedies.
7.3 ATTORNEYS FEES. The prevailing party in any action to enforce or
interpret this Agreement shall be entitled to its reasonable attorneys fees and
costs incurred in any proceeding in arbitration, at trial and on appeal.
7.4 DISPUTE RESOLUTION. Any and all disputes concerning the
interpretation, construction, breach or enforcement of this Agreement or arising
in any way from Executive's employment with the Corporation or termination of
employment shall be submitted to final and binding arbitration; provided,
however, that this Section 7.4 shall not apply to an action by any GST Company
seeking an injunction against Executive relating to violations of Articles 5 or
6 of this Agreement. The arbitration is to be conducted before a single
arbitrator in Xxxxx County, Washington, pursuant to the rules of the American
Arbitration Association ("AAA") Employment Dispute Resolution Rules. Except as
otherwise provided in this Section 7.4, Executive and the Corporation agree that
the procedures outlined in this Section 7.4 are the exclusive method of dispute
resolution.
7.5 NOTICES. All notices, requests and demands given to or made pursuant
to this Agreement shall be in writing and be delivered or mailed to a party at
the address appearing on the face of the Agreement. Either party may, by notice
hereunder, designate a changed address. Any notice, if mailed properly
addressed,
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postage prepaid, registered or certified mail, shall be deemed dispatched on the
registered date or that stamped on the certified mail receipt, and shall be
deemed received within the second business day thereafter or when it is actually
received, whichever is sooner.
7.6 GOVERNING LAW/FORUM SELECTION. The validity, construction and
performance of this Agreement shall be governed by the laws of the State of
Washington. Any action to enforce or interpret, or otherwise arising in
connection with this Agreement shall be brought exclusively in the appropriate
courts of the State of Washington located in Xxxxx County, Washington.
7.7 CONSTRUCTION. If any provision of this Agreement, or the application
thereof, is held invalid, the invalidity shall not affect other obligations,
provisions, or applications of this Agreement which can be given effect without
the invalid obligations, provisions, or applications, and to this end, the
provisions of this Agreement are declared to be severable. In the event any
specific provisions of the non-competition covenant are found invalid or
unenforceable by a court of competent jurisdiction, the court shall have
discretion to modify such provisions so as to render them valid and enforceable.
7.8 WAIVERS. The failure of either party to demand strict performance of
any provision of this Agreement shall not constitute a waiver of any provision,
term, covenant, or condition of this agreement or of the right to demand strict
performance in the future.
7.9 MODIFICATION. This Agreement may be modified only by a written
instrument signed by both parties.
7.10 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and, except as expressly set forth herein, supersedes all
prior or contemporaneous oral or written understandings, statements,
representations or promises with respect to its subject matter. This Agreement
was the subject of negotiation between the parties and, therefore, the parties
agree that the rule of construction requiring that the agreement be construed
against the drafter shall not apply to the interpretation of this Agreement.
Executive acknowledges that, excepting any previously vested shares, he is not
entitled to any compensation, unvested stock option grants or benefits of any
kind pursuant to that certain employment agreement between the Corporation and
Executive dated March 11, 1997, and upon execution of this Agreement, except for
the non-competition and non-solicitation provisions of such Agreement referred
to herein in Section 6, the March 11, 1997, Agreement is hereby terminated and
is of no further force or effect.
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This Agreement is not effective until it is signed by all parties.
EXECUTIVE GST USA, INC.
By:
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Xxxxxx X. Xxxxxx, Xx. Xxxxxx Ferchat, Chairman of the Board
By:
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Xxxxxx Xxxx, III
Chairman-Compensation Committee
GST Telecommunications, Inc.
Approved as to form and content:
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Xxxx Xxxxxxxx
General Counsel
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J. Xxxxxxx Xxxxxxx
Corporate Secretary
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