EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
13th day of October, 1998 between Tel-Save, Inc. ("TSI"), a Pennsylvania
corporation and a wholly-owned subsidiary of Tel-Save Holdings, Inc.
("Holdings"), Holdings, having its principal place of business at Xxxxx 000, Xxx
Xxxx, XX 00000 ("Principal Place of Business"), and Xxxxxxxx X. Lawn, IV
("Employee"). TSI and Holdings shall be collectively referred to herein as
"Company"
Preliminary Statement
WHEREAS, the term of the current employment agreement between the Company
and Employee is scheduled to terminate;
WHEREAS, Company desires to continue to employ Employee, and Employee
desires to continue to be employed by Company; and
WHEREAS, Company and Employee desire to enter into this Agreement which
sets forth the terms and conditions of said continued employment.
1. Employment. Company agrees to employ Employee, and Employee accepts such
employment and agrees to serve Company, on the terms and conditions set forth
herein. Except as otherwise specifically provided herein, Employee's employment
shall be subject to the employment policies and practices of Company in effect
from time to time during the Term of Employee's employment hereunder (including
without limitation its practices as to reporting and withholding).
2. Term of Agreement. The term of Employee's employment hereunder shall
commence on December 1, 1998 (the "Effective Date") and shall continue in effect
for a period of two years thereafter, except as hereinafter provided ("Term").
3. Position and Duties. Except as may otherwise be agreed upon between
Company and Employee, Employee shall perform such duties and responsibilities of
General Counsel and Secretary of Company or such duties and responsibilities as
may be reasonably assigned or delegated to him from time to time, including
without limitation service as an employee, officer or director of Company and
affiliates of Company without additional compensation. Employer agreed that
Employee shall perform such duties and responsibilities at the Principal Place
of Business or such other place as mutually agreed by Employee and Employer.
References in this Agreement to Employee's employment with Company shall be
deemed to refer to employment with Company or an affiliate. Employee shall
perform his duties and responsibilities to the best of his abilities in a
diligent, trustworthy, business like and efficient manner. Employee shall devote
substantially all of his working time and efforts to the business and affairs of
Company; provided, however, that nothing in this Agreement shall preclude the
Employee from (i) engaging in charitable activities and community affairs and
(ii) managing his personal investments and affairs.
4. Compensation and Related Matters.
4.1 Base Salary. During the Term of his employment hereunder, Company
shall pay to Employee an annualized base salary of not less than $200,000,
subject to review from time to time by Company's Board of Directors ("Base
Salary"). Base Salary shall be paid in accordance with Company's usual and
customary payroll practices.
4.2 Benefit Plans and Arrangements. Employee shall be entitled to
participate in and to receive benefits under Company's employee benefit plans
and arrangements (including bonus plans) as are made available to the Company's
senior executives in effect during the Term of his employment hereunder, which
may be altered from time to time at the discretion of Company.
4.3 Perquisites. During the Term of his employment hereunder, Employee
shall be entitled to receive fringe benefits as are made available to the
Company's senior executives.
4.4 Expenses. Company shall promptly reimburse Employee for all normal
out-of-pocket expenses related to Company's business that are actually paid or
incurred by him in the performance of his services under this Agreement and that
are incurred, reported and documented in accordance with Company's policies. In
addition, during the Term of his employment hereunder, the Company agrees to
provide Employee with an automobile, as the Company shall determine, and the
Company shall keep such automobile fully insured in accordance with the
Company's practices for similarly situated employees.
4.6 Stock Options. (a) Employee shall be granted an option to purchase
50,000 shares of common stock of Holdings (the "Option") in accordance with the
Stock Option Agreement attached hereto as Exhibit A. The Option shall have an
exercise price equal to $5.75 which is equal to the fair market value of the
common stock of Holdings on the date hereof. The Option shall be subject to and
conditional upon the Option receiving (i) the approval of the Compensation
Committee of the Board of Directors of Holdings and (ii)the affirmative vote of
a majority of all outstanding shares of Holdings at the next annual meeting of
the stockholders of Holdings of the Long Term Incentive Plan ("Stockholder
Approval") and the Option shall be null and void if such approval or Stockholder
Approval is not obtained. The Option shall be exercisable (A) in installments,
as follows: (i) 25,000 shares of common stock may be purchased on the first
anniversary hereof and, (ii) 25,000 shares of common stock may be purchased on
the second anniversary hereof; and (B) in full upon a "Change of Control", as
defined below. A "Change in Control" shall be deemed to have occurred if: (i)
any person (as defined in Section 3(a)(9) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than the Company or Holdings,
becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act;
provided, that a Person shall be deemed to be the Beneficial Owner of all shares
that any such Person has the right to acquire pursuant to any agreement or
arrangement or upon exercise of conversion rights,
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warrants, options or otherwise, without regard to the 60 day period referred to
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
Holdings, the Company or any Significant Subsidiary (as defined below)
representing 50% or more of the combined voting power of Holdings', the
Company's or such subsidiary's then outstanding securities; (ii) during any
period of two years, individuals who at the beginning of such period constitute
the Board of Holdings cease for any reason to constitute at least a majority of
the Board of either Holdings; (iii) the consummation of a merger or
consolidation of Holdings, the Company or any subsidiary owning directly or
indirectly all or substantially all of the consolidated assets of the Company (
a "Significant Subsidiary") with any other entity, other than a merger or
consolidation which would result in the voting securities of the Holdings, the
Company or a Significant Subsidiary outstanding immediately prior thereto
continuing to represent more than 50% of the combined voting power of the
surviving or resulting entity outstanding immediately after such merger or
consolidation; (iv) the shareholders of the Company approve a plan or agreement
for the sale or disposition of all or substantially all of the consolidated
assets of the Company in which case the Board shall determine the effective date
of the Change of Control resulting therefrom; (v) any other event occurs which
the Board determines, in its discretion, would materially alter, the structure
of the Company or its ownership and (vi) Xxxxxx Xxxxxxxx ceases to be the Chief
Executive Officer of Holdings and/or TSI.
(b) Company agrees to file with the Securities and Exchange
Commission a Registration Statement on Form S-8 (or if unavailable, a
registration statement on Form S-3) to register the shares issueable upon
exercise of the Option under the Securities Act of 1933 ("Securities Act") and
any applicable state securities or "Blue Sky" laws on or before the first
anniversary of the date hereof. Notwithstanding the foregoing, the Company shall
be entitled to postpone for a reasonable period of time the filing or the
effectiveness of such registration statement if the Board of Directors of the
Company shall determine in good faith that such filing or effectiveness would be
materially detrimental to the Company's business interest.
5. Termination. The Term of Employee's employment hereunder may be
terminated under the following circumstances:
5.1 Death. The Term of Employee's employment hereunder shall terminate
upon his death.
5.2 Disability. Company may terminate the Term of Employee's
employment hereunder as a result of Employee's physical or mental incapacity in
accordance with Company's disability policy.
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5.3 Cause. (a) Upon written notice, Company may terminate the Term of
Employee's employment hereunder for Cause. For purposes of this Agreement,
Company shall have "Cause" to terminate Employee's employment hereunder upon (i)
material breach of any material provision of this Agreement; (ii) willful
misconduct as an employee of Company in connection with misappropriating any
funds or property of Company or attempting to willfully obtain any personal
profit from any transaction in which Employee has an interest which is adverse
to the interests of Company; or (iii) gross neglect or unreasonable refusal to
perform the duties assigned to Employee under or pursuant to this Agreement.
5.4 By Employee.
(i) Employee may terminate the Term of his employment hereunder
upon sixty days' prior written notice to Company, provided that, upon the giving
of such notice by Employee, Company may establish an earlier date for the
termination of the Term and such termination under this Section 5.4.
(ii) Employee may terminate employment hereunder for Good Reason
immediately and with notice to Company. "Good reason" for termination by
Employee shall include, but is not limited to, the following:
(a) Material breach of any provision of this Agreement by
Company, which breach shall not have been cured by
Company within thirty (30) days of receipt of written
notice of said material breach;
(b) Failure to maintain Employee in a position commensurate
with that referred to in Section 3 of this Agreement;
(c) Change of the Principal Place of Business to a location
outside the metropolitan Philadelphia area or the
inability of Employer and Employee to mutually agree to
a location other than the Principal Place of Business
from which Employer to perform his duties pursuant to
Section 3 of this Agreement; or
(d) The assignment to Employee of any duties inconsistent
with the Employee's position, authority, duties or
responsibilities as contemplated by Section 3 of this
Agreement, or any other action by Company which results
in a diminution of such position, authority, duties or
responsibilities.
5.5 Without Cause. Company may otherwise terminate the Term of
Employee's employment at any time upon written notice to Employee.
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6. Compensation In the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the Term of this Agreement, the Company shall pay the Employee compensation as
set forth below:
6.1 By Employee for Good Reason; By Company Without Cause. In the
event that the Employee's employment hereunder is terminated: (i) by the
Employee for good reason or (ii) by the Company without Cause, then (A) the
Company shall continue to pay and provide Employee his compensation and benefits
as set forth in Section 4 in the same manner as before termination, and for a
period of time ending on the earlier of the date when the Term of this Agreement
would otherwise have expired in accordance with Section 2 of this Agreement and
the second anniversary of the date of such termination and (B) one hundred
percent (100%) of the outstanding stock options granted to Employee which are
unvested shall immediately vest and Employee shall have the right to exercise
any vested stock options during the period ending on the second anniversary of
the date of such termination or for the remainder of the exercise period; if
less.
6.2 By Company for Cause; By Employee Without Cause. In the event that
the Company shall terminate the Employee's employment hereunder for Cause
pursuant to Section 5.3 hereof or Employee shall terminate his employment
hereunder without Good Reason, all compensation and benefits, as specified in
Section 4 of this Agreement, heretofore payable or provided to the Employee
shall cease to be payable or provided, except for salary and benefits which may
have been earned and are due and payable but which have not been paid as of the
date of termination and reimbursements for expenses which may have been
incurred, reported and documented but which have not been paid as of the date of
termination.
6.3 Death. In the event of Employee's death the Company shall not be
obligated to pay Employee or his estate or beneficiaries any compensation except
for salary and benefits which may have been earned and are due and payable but
which have not been paid as of the date of termination and reimbursements for
expenses which may have been incurred, reported and documented but which have
not been paid as of the date of termination; provided, however, that upon
termination due to death, all outstanding stock options granted to the Employee
which are unvested shall immediately vest and the Employee's estate or
beneficiaries as the case may be, shall have the right to exercise any vested
stock options during the period ending on the second anniversary of the date of
such termination or, for the remainder of the exercise period, if less.
6.4 Disability. In the event of Employee's disability, the Company
shall not be obligated to pay Employee or his estate or beneficiaries any
compensation except for: (a) salary and benefits which may have been earned and
are due and payable but which have not been paid as of the date of termination;
and (b) reimbursement for expenses which may have been incurred, reported and
documented but which have not been paid as of the date of termination.
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6.5 No Mitigation. In the event of any termination of employment under
Section 5, the Employee shall be under no obligation to seek other employment;
provided, however, to the extent that Employee does obtain other employment
subsequent to the termination of Employee's employment hereunder, Company's
obligations under this Agreement shall terminate.
7. Unauthorized Disclosure. Employee shall not, without the prior written
consent of Company, disclose or use in any way, either during the Employee's
employment with Company or thereafter, except as required in the course of such
employment, any confidential business or technical information or trade secret
acquired in the course of such employment, whether or not conceived of or
prepared by him, which is related to any service or business of Company or any
Company affiliate; provided, that the foregoing shall not apply to (i)
information which is not unique to the Company or which is generally known to
the industry or the public other than as a result of Employee's breach of this
covenant, (ii) information known to the Employee prior to the Effective Date, or
(iii) information which Employee is required to disclose to or by any
governmental or judicial authority; provided, however, if Employee should be
required in the course of judicial or administrative proceedings to disclose any
information Employee shall give Company prompt written notice thereof so that
Company may seek an appropriate protective order and/or waive in writing
compliance with the confidentiality provisions of this Agreement. If, in the
absence of a protective order or the receipt of a waiver by the Company,
Employee is nonetheless, in the written opinion of its counsel, compelled to
disclose information to a court or tribunal or otherwise stand liable for
contempt or suffer other serious censure or penalty, Employee may disclose such
information to such court or tribunal without liability to any other party
hereto.
8. Tangible Items. All files, records, documents, manuals, books, forms,
reports, memoranda, studies, data, calculations, recordings, correspondence, in
whatever form they may exist, and all copies, abstracts and summaries of the
foregoing and all physical items related to the business of Company and its
affiliates, other than merely personal items, whether of a public nature or not,
and whether prepared by Employee or not, are and shall remain the exclusive
property of Company and its affiliates and shall not be removed from their
premises, except as required in the course of employment by Company, without the
prior written consent of Company, and the same shall be promptly returned by
Employee on the termination of Employee's employment with Company or at any time
prior thereto upon the request of Company.
9. Inventions and Patents. Employee agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to Company's
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by or at the
direction of Employee while employed by Company will be owned by Company.
Employee also agrees to promptly perform all reasonable actions (whether before,
during or after the Term) necessary to establish and confirm such ownership (to
the extent of such ownership).
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10. Certain Restrictive Covenants. For a period ending six (6) months after
the earlier of the Employee's termination of employment hereunder or the Term
Employee agrees that, he will not act either directly or indirectly as a
partner, officer, director, substantial stockholder or employee, or render
advisory or other services for, or in connection with, or become interested in,
or make any substantial financial investment in any firm, corporation, business
entity or business enterprise competitive with the business of Company, except
with the express written consent of the Board of Directors of Company. Employee
further agrees that in the event of the termination of his employment under
Section 5, for a period of one year thereafter, he will not employ or offer to
employ, call on, solicit, actively interfere with Company's or any Company
affiliate's relationship with, or attempt to divert or entice away, any employee
of Company or any Company affiliate.
11. Employee Representations. Employee hereby represents and warrants to
Company 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) except as disclosed to Company
in writing prior to the execution of this Agreement, Employee is not a party to
or bound by any employment agreement, non-compete agreement or confidentiality
agreement with any other person or entity, and (iii) upon the execution and
delivery of this Agreement by Company, this Agreement shall be the valid and
binding obligation of Employee, enforceable in accordance with its terms.
12. Company Representations. The Company represents and warrants (i) that
it is duly authorized and empowered to enter into this Agreement, (ii) that the
performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization and (iii) upon
the execution and delivery of this Agreement by the Employee, this Agreement
shall be the valid and binding obligation of the Company, enforceable in
accordance in accordance with its terms.
13. Remedies. Employee acknowledges that the restrictions and agreements
contained in this Agreement are reasonable and necessary to protect that
legitimate interests of Company, and that any violation of this Agreement will
cause substantial and irreparable injury to Company that would not be
quantifiable and for which no adequate remedy would exist at law and agrees that
injunctive relief, in addition to all other remedies, shall be available
therefor.
14. Effect of Agreement on Other Benefits. Except as specifically provided
in this Agreement, the existence of this Agreement shall not be interpreted to
preclude, prohibit or restrict the Employee's participation in any other
employee benefit or other plans or programs in which he currently participates.
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15. Rights of Executive's Estate. If the Employee dies prior to the payment
of all amounts due and owing to him under the terms of this Agreement, such
amounts shall be paid to such beneficiary or beneficiaries as the Employee may
have last designated in writing filed with the Secretary of the Company or, if
the Employee has made no beneficiary designation, to the Employee's estate. Such
designated beneficiary or the executor of his estate, as the case my be, may
exercise all of the Employee's rights hereunder. If any beneficiary designated
by the Employee shall predecease the Employee, the designation of such
beneficiary shall be deemed revoked, and any amounts which would have been
payable to such beneficiary shall be paid to the Employee's estate. If any
designated beneficiary survives the Employee, but dies before payment of all
amounts due hereunder, such payments shall, unless the Employee has designated
otherwise, be made to such beneficiary's estate. In the event of the Employee's
death or judicial determination of his incompetence, reference in this Agreement
to the Employee shall be deemed where appropriate, to refer to his beneficiary,
estate or other legal representative.
16. Severability. It is the intent and understanding of the parties hereto
that if, in any action before any court or agency legally empowered to enforce
this Agreement, any term, restriction, covenant, or promise is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant, or promise shall not thereby be terminated but that it shall be deemed
modified to the extent necessary to make it enforceable by such Court or agency
and, if it cannot be so modified, that it shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such modification or amendment in any event to apply only with respect to the
operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
17. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when received if delivered in person or by
overnight courier or if mailed by United States registered mail, return receipt
requested, postage prepaid, to the following addresses:
If to Employee:
Xx. Xxxxxxxx X. Lawn, IV
0000 Xxxxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
If to Company:
Tel-Save, Inc.
0000 Xxxxx 000
Xxx Xxxx, Xxxxxxxxxxxx 00000
Attn: President
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Either party may change its address for notices by written notice to the other
party in accordance with this Section 17.
18. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Employee and Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
Pennsylvania relating to contracts made and to be performed entirely therein.
19. Headings. The headings in this Agreement are inserted for convenience
only and shall have no significance in the interpretation of this Agreement.
20. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, personal representatives and
successors, including without limitation any affiliate to which Company may
assign this Agreement. Employee may not assign or transfer his rights to
compensation and benefits, except by will or operation of law and, except as
provided in Section 15 above.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first written above.
Tel-Save, Inc.
By:
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Xxxxxx Xxxxxxxx
Chairman and Chief Executive Officer
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Xxxxxxxx X. Lawn, IV
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