EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made this 1st day of October,
1996 between COMMUNICATION TELESYSTEMS INTERNATIONAL, a California
corporation, having its principal office at 0000 Xx Xxxxx Xxxxxxx Xxxxx,
Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, (hereinafter referred to as "CTS" or
the "Company") and XXXX X. XXXXXX of 3455 Lebon, #1010, Xxx Xxxxx, Xxxxxxxxxx
00000 (hereinafter referred to as "Employee").
This Agreement is made and entered into with reference to the following
facts:
WHEREAS, CTS and Employee's law firm, Raring & Xxxxxx, are parties to an
Amended and Restated Agreement for Legal Services dated January 19, 1993 (the
"Prior Agreement");
WHEREAS, the parties desire to modify the terms of their relationship as
set forth in the Prior Agreement;
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT: CTS hereby agrees to hire Employee as an employee of
CTS, effective as of January 1, 1997 (the "Commencement Date").
2. GENERAL DUTIES OF EMPLOYEE: Employee shall have the title of
General Counsel for CTS. Employee shall perform such duties as reasonably
requested by CTS and, upon request and agreement of Employee, serve on the
Board of Directors of CTS and/or its subsidiaries and affiliates.
3. CONDUCT OF EMPLOYEE: Employee shall use his best efforts to promote
the interests of CTS and shall refrain from any acts which may adversely
affect the reputation or business of CTS. Employee shall adhere to all laws
and ethical standards applicable to his conduct as an Employee for CTS, shall
abide by and observe all rules, regulations and policies of CTS presently in
effect and any amendments
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and additions thereto made from time to time which are applicable to all
employees of CTS and shall perform in a manner consistent with generally
accepted procedures for his profession.
4. COMPENSATION: As Employee's sole and complete compensation, CTS
will pay to Employee, subject to the conditions and limitations set forth in
this Agreement and all applicable withholding requirements and authorized
deductions, the following compensation:
(a) SALARY: CTS shall pay Employee a salary of EIGHTY THREE
THOUSAND THREE HUNDRED THIRTY-THREE Dollars ($83,333.00) per month.
(b) EMPLOYEE BENEFITS: Employee shall participate in such
medical, dental, disability insurance and life insurance programs or plans
that are generally available to executives of CTS.
(c) VACATION: Employee shall be entitled to twenty (20) business
days of vacation per year.
(d) OPTION PLAN: Employee shall be entitled to earn stock options
under the terms and conditions of the Non-Qualified Option Agreement attached
hereto as Exhibit "A".
5. ADVANCES: CTS may, in its sole discretion, upon the written request
of Employee, make payments to Employee as advances on compensation expected
to become earned pursuant to this Agreement. Employee agrees that each such
advance constitutes a personal indebtedness of Employee to CTS, repayable by
Employee in full immediately upon demand by CTS, until such time as the
compensation on which the advance is made becomes fully earned.
6. TERMINATION OF EMPLOYMENT:
(a) At all times prior to January 1, 2000, CTS may not terminate
Employee's employment except in the following cases: (i) upon written notice
to Employee within thirty (30) days after the occurrence of a "Trigger Event"
as defined below; (ii) for "Cause" as defined below; or (iii) upon written
notice to Employee within thirty (30) days after the closing of an initial
public offering of Company's stock. As used herein, a "Trigger Event" shall
mean: (i) if the beneficial ownership of 50% or more of the voting
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securities of the Company is transferred (excluding transfers in trust or by
operation of law) to person(s) other than shareholders of the Company as of
the Effective Date of this Agreement (the "present shareholders") and
relatives and affiliates of the present shareholders (a "stock sale"); (ii)
actual consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or the parent of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company, surviving entity or
parent of the surviving entity outstanding immediately after such merger or
consolidation (a "merger"); or (iii) complete liquidation of the Company or
the sale or disposition by the Company of all or substantially all the
Company's assets (an "asset sale"). As used herein, the term "cause" shall
mean: willful misconduct of a serious nature, abandonment of employment or
excessive absences after reasonable notice, conflict of interest or breach of
fiduciary duty involving his responsibilities as an employee involving intent
for or obtainment of material personal or family profit, conviction of any
criminal offense which constitutes a felony under the laws of the United
States or any state, a court order prohibiting Employee's continued
employment with CTS which is not vacated or removed within ten (10) days
after entry, a final cease-and-desist order issued by a regulatory agency, or
a material breach by Employee of any provision of this Agreement which is not
cured within ten (10) days after written notice Employee.
(b) At any time on or after January 1, 2000, CTS may terminate
Employee's employment, with or without cause, upon written notice.
7. COMPENSATION AFTER TERMINATION OF EMPLOYMENT: Except as expressly
provided in this Agreement and in any written option plan or agreement,
Employee shall have no further right to salary or any other compensation
after termination of Employee's employment with CTS, irrespective of the
time, manner or cause of such termination.
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8. PAYMENT UPON CERTAIN EVENTS:
(a) Upon the occurrence of a "trigger event" as defined in
paragraph 6 of this Agreement, CTS shall pay Employee the lesser of the
following amounts: (i) five percent (5%) of the following -- in the case of
an asset sale, the total consideration received by CTS for the assets sold;
in the case of a stock sale, the price or value per-share paid for the stock
sold, multiplied by the total number of shares of CTS common stock then
outstanding; or, in the case of a merger, the value attributed to CTS in the
merger; or (ii) seven-tenths of one percent (0.7%) of the gross monthly
revenues of CTS and WXL Communications Ltd., a Canadian Corporation ("WXL")
(after deduction only for bad debt, in-house write-offs and inter-company
write-offs) for the last full calendar month immediately prior to the closing
of the subject transaction, multiplied by the number of months (including the
pro-rata portion of any partial month) remaining from the closing date of the
subject transaction through December 31, 1999. The amount payable pursuant to
this provision shall be paid to Xxxxxx upon the closing of the subject
transaction.
(b) In the event that any division or customer base asset of CTS
or WXL is sold, CTS shall pay to Employee the lesser of the following
amounts: (i) five percent (5%) of the total consideration received by CTS or
WXL for the division or customer base asset sold; or (ii) seven-tenths of one
percent (0.7%) of the gross monthly revenues (after deduction only for bad
debt and in-house write-offs) generated by the division or customer base
asset sold during the last full calendar month immediately prior to the
closing of the subject transaction, multiplied by the number of months
(including the pro-rata portion of any partial month) remaining from the
closing of the subject transaction through December 31, 1999. The amount
payable pursuant to this provision shall be paid to Xxxxxx upon the closing
of the subject transaction.
(c) In the event Company exercises its right to terminate
Employee's employment in the event of an initial public offering ("IPO") as
provided in Paragraph 6(a)(iii) of this Agreement, CTS shall pay to Employee
the lesser of the following amounts: (i) five percent (5%) of the following
amount -- the price per share received by CTS in the IPO, multiplied by the
total number of shares of CTS outstanding
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immediately after closing of the IPO; or (ii) seven-tenths of one-percent
(0.7%) of the gross monthly revenues of CTS and WXL (after deduction only for
bad-debt, in-house write-offs and inter-company write-offs) for the last full
calendar month immediately prior to the closing of the IPO, multiplied by the
number of months (including the pro-rata portion of any partial month)
remaining from the closing of the IPO through December 31, 1999. The amount
payable pursuant to this provision shall be paid to Xxxxxx upon termination
of his Employment.
9. RECORDS TO REMAIN PROPERTY OF CTS: All records of CTS, and all
records and documents prepared or generated by Employee, CTS or any other
person or entity in connection with the performance of Employee under this
Agreement, including but not limited to account cards, invoice copies,
customer lists, leads and all documents containing the names or addresses of
or information relating to clients who have done business with CTS, are and
shall remain the property of CTS at all times during the term of Employee's
employment with CTS, and after termination of such employment for any reason.
None of such records, nor any part of them may be used by Employee either in
original form or in computerized, duplicated, or copied form except for the
purpose of conducting the business of CTS and the names, addresses, and other
information and data in such records are not to be transmitted verbally, in
writing, or in computerized form by Employee except in the ordinary course of
conducting business for CTS. All of said records or any part of them are the
sole proprietary information of CTS and shall be treated by Employee as
confidential information of CTS. In the event of the termination of
Employee's employment with CTS for any reason, Employee shall return to CTS
all such records and any copies or summaries thereof in computerized,
duplicated, copied or any other form.
10. LIMITATIONS ON EMPLOYEE'S USE OF PROPRIETARY INFORMATION: During
the term of Employee's employment with CTS, and for a period of eighteen
(18) months after the termination of Employee's employment with CTS,
irrespective of the time, manner or cause of such termination Employee shall
not, in any manner, directly or indirectly divulge, disclose or communicate to
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any other person, firm or corporation, nor shall Employee use for his own
benefit other than in connection with the performance of Employee's duties
under this Agreement: (i) any of the names, addresses, telephone numbers of
or other data relating to carrier vendors or customers of CTS, prospective
customers of CTS or persons, firms or corporations to whom Employee may have
provided services in his capacity as a representative of CTS or to whom other
representatives of CTS have provided such services at any time; (ii) any of
the records or documents referred to in Paragraph 9 of this Agreement; or
(iii) any other information acquired by Employee as a consequence of his
employment with CTS. Notwithstanding the foregoing, however, these
limitations shall not apply to information which: (i) was actually known to
Employee prior to the commencement of his employment with CTS; or (ii) is
widely known among firms engaged in CTS' business.
11. INVENTIONS: All improvements, discoveries, inventions, designs,
documents or other data related to the Company's business (whether or not
deemed patentable) conceived, developed, made, perfected, acquired, or first
reduced to practice, in whole or in part, during off-duty hours and away from
the Company's premises as well as in the regular course of employment by
Employee during development and research of the Company or its subsidiaries
and affiliates shall be promptly disclosed to the Company, and Employee shall
hereby assign and transfer his right, interest and title thereto and such
improvements, discoveries, inventions, designs, documents, or other data
shall become the property of the Company. During the term of Employee's
employment and any time thereafter, upon request and at the expense of the
Company, Employee will join and render reasonable assistance in any
proceedings, and execute any papers necessary to file and prosecute
applications for, and to acquire, maintain and enforce letters, patent,
trademarks, registrations and/or copyrights, both domestic and foreign, with
respect to such improvements, discoveries, inventions, designs, documents, or
other data as required for vesting title to same in the Company.
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12. NON-COMPETITION AND NON-SOLICITATION PROVISIONS: During the term
of Employee's employment with CTS, and for a period of one (1) year after the
termination of Employee's employment with CTS, irrespective of the time,
manner or cause of such termination, Employee shall not without the prior
written consent of Company; directly or indirectly: (i) be employed by or
consult for any person or entity engaged in the business of, or be engaged in
the business of, offering or providing long-distance or international
telecommunications service; (ii) knowingly solicit, assist any other person,
firm or corporation in soliciting or be a principal in any firm or
corporation soliciting any of the CTS customers served by Employee or by any
other employee of CTS during the term of Employee's employment with CTS;
(iii) knowingly purchase, assist others in purchasing or be a principal in
any firm or corporation purchasing international termination service from any
vendor utilized by CTS during the term of Employee's employment with CTS,
with the exception of carrier vendor sources which are widely known among or
known firms engaged in CTS' business; or (iv) knowingly solicit, assist
others in soliciting or be a principal in any firm or corporation soliciting
any employee of CTS or its affiliates to terminate his or her employment with
CTS or offer, assist others in offering or be a principal in any firm or
corporation which offers employment to any person who is then employed by CTS
or its affiliates or has been employed by CTS or its affiliates within the
six (6) month period before such offer of employment is made.
13. PLACE OF EMPLOYMENT: Employee shall not be required to work at a
place of employment more than forty (40) miles away from the location where
the CTS corporate headquarters is located as of the Commencement Date, except
at such other location where the primary corporate headquarters of CTS may be
moved in the future.
14. ASSIGNMENT: Neither this Agreement nor any other benefits to
accrue hereunder shall be assigned or transferred by Employee, either in
whole or in part (except a transfer effective upon the death of Employee of
any payments due hereunder), without the written consent of CTS, and any
purported assignment in violation hereof shall be void. This Agreement may be
assigned to and assumed by a
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successor to Company upon notice to Employee.
15. INDEMNITY: CTS and Employee shall have such indemnity rights and
obligations as provided by California law.
16. CHOICE OF LAW: This Agreement shall be construed under the laws of
the State of California without regard to choice of law principles.
17. PARTIAL INVALIDITY: If any term, provision, covenant, or condition
of this Agreement is held by a Court of competent jurisdiction to be invalid,
void or unenforceable, the rest of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated. In the
event any provision contained in Paragraphs 9, 10, 11, 12 or 13 of this
Agreement should ever be deemed to exceed the law in any respect, then the
parties hereto agree that such provision shall be amended automatically to
provide CTS with the maximum protection permitted by law.
18. ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties concerning the subject matter of this Agreement. It
supersedes all negotiations, statements, promises, or understandings, if any,
made prior to the execution of this Agreement. Any such negotiations,
promises, or understandings shall not be used to interpret or constitute this
Agreement.
19. GENDER: As used in this Agreement, the masculine, feminine or
neuter gender, and the singular or plural number, shall each be deemed to
include the others whenever the context so indicates.
20. OUTSIDE EMPLOYMENT: During the term of Employee's employment with
CTS, Employee shall not engage in any other employment (other than for
affiliates of CTS) or outside business activity (as defined below) without
the prior written consent of CTS. The term "outside business activity" shall
not include (i) totally passive investments of any kind, with the exception
of investments in competitors of CTS which are not publicly traded, or (ii)
serving on the board of directors or as an occasional consultant to a
non-profit organization, or (iii) Employee's involvement as counsel of record
in the Multivest Class Action litigation presently pending in the United
States District Court for the Southern District of Florida
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21. VENUE: The venue of any civil action, arbitration or other legal
proceeding between Employee, on one hand, and CTS and/or its officers,
directors and employees, on the other hand, arising out of or relating to
this Agreement, the employment of Employee by CTS, the termination of
Employee's employment with CTS, or any other dealings between Employee and
CTS, lies only in San Diego, California, and Employee and CTS waive any right
they may have under any statute or law to cause such action or proceeding to
be transferred to any other venue.
22. AMENDMENT OR WAIVER: The terms of this Agreement may be amended,
modified or eliminated, or the observance or performance of any term,
covenant or provision herein may be omitted or waived (either generally or in
a particular instance, and either prospectively or retroactively) only by a
writing signed by Employee and CTS. The waiver by CTS of any breach by
Employee of any term or provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
23. SURVIVAL OF PROVISIONS: The provisions contained in Paragraphs 9,
10, 11, 12, 13, 15, 21 and 27 of this Agreement, and the other provisions
hereof to the extent applicable, shall survive the termination of Employee's
employment with CTS.
24. INUREMENT: This Agreement shall be binding upon and inure to the
benefit of all heirs, assigns (to the extent permitted) and successors in
interest of the parties hereto.
25. HEADLINES: The titles and headlines herein are for convenience
only and shall not be used to interpret this Agreement.
26. EFFECTIVE DATE: This Agreement shall be effective as of the date
written on the first page hereof.
27. ARBITRATION: Any claim or controversy between Employee, on one
hand, and CTS and/or its officers, directors and employees, on the other
hand, arising out of or relating to this Agreement (including the Option
Agreement and other attachments hereto), the employment of Employee by CTS,
9
the termination of Employee's employment with CTS, the Consulting
Relationship or any other dealings between Employee and CTS, shall be
resolved by final and binding arbitration before J.A.M.S./ENDISPUTE ("JAMS")
in accordance with the then obtaining Comprehensive Arbitration Rules and
Procedures of JAMS, as modified herein. The arbitrator may not limit, expand
or otherwise modify the terms of this Agreement and shall not have authority
to award punitive or other non-compensatory damages to either party. The
award in such arbitration proceeding may be entered in any Court specified in
Paragraph 21 of this Agreement.
28. INTERPRETATION: This Agreement is the product of good faith, arm's
length negotiations between the parties during which each of the parties was
represented by competent counsel. It has been drafted, reviewed and commented
upon by counsel for each party. Accordingly, the contract rule of
interpretation against the drafter of a document shall not apply.
IT IS SO AGREED:
EMPLOYEE:
/s/ Xxxx X. Xxxxxx
------------------------------
(Signature)
XXXX X. XXXXXX
------------------------------
(Print Name)
CTS:
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Xxxxxx X. Xxxxx
Its: President
-------------------------
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EXHIBIT "A" TO EMPLOYMENT AGREEMENT
NON-QUALIFIED OPTION AGREEMENT
1. Employee is hereby granted non-qualified options to purchase up to
Eighty Three Thousand Three Hundred Forty (83,340) shares of Communication
TeleSystems International's ("CTS or Company") common stock ("Options"),
which Options shall be earned and vest on the terms and conditions set forth
in this agreement ("Option Agreement").
2. The Options will vest as follows: one thirty-sixth (1/36) of the
Options (2315 shares) will vest on the first day of each month ("Monthly
Vesting Date") from January of 1997 through December of 1999 if, and only if,
Employee is still employed by CTS on such Monthly Vesting Date.
3. The exercise price of each share of common stock covered by each
Option granted under this Option Agreement is fifteen dollars ($15.00) per
share.
4. Except as provided in Paragraph 5 hereof, vested Options earned by
Employee must be exercised on the earliest of the following dates: (i) at any
time on or before December 31, 2004 or (ii) ten (10) days after written
demand by Company, which may only be given upon the occurrence of a Trigger
Event as defined in Paragraph 6 of Employee's Employment Agreement with
Company dated October 1, 1996. No partial exercise of any Option may be for
less than one hundred (100) full shares. In no event shall the Company be
required to transfer fractional shares to Xxxxxx.
5. Any vested Options earned under this Option Agreement shall be
exercisable within the time period stated herein, by the delivery of written
notice of intent to exercise to the Secretary of the Company accompanied by
payment in cash to the Company of the full purchase price of the
1
shares which the Employee elects to purchase. In the event that any Options
would terminate pursuant to any provision of this Agreement prior to December
31, 2004, the Employee shall have the option to pay the exercise price
thereof with a promissory note having an interest rate equal to the then
applicable mid-term adjusted federal rate assuming annual compounding,
payable in four equal installments on the first, second, third and fourth
anniversary dates of the date of execution of such promissory note, which
note shall be secured by a pledge of the stock covered by the exercise (with
25% of the pledged shares released upon each annual payment), in form
reasonably acceptable to Company. The Company shall not be required to
transfer or deliver any certificate or certificates for shares of the
Company's common shares purchased upon exercise of any Option granted
hereunder until all then applicable requirements of law have been met, but
shall be obligated to transfer or deliver such certificates promptly after
all their applicable requirements have been met.
6. Any Option and all rights granted hereunder, to the extent those
rights have not been exercised, will terminate and become null and void on
December 31, 2004. If the Employee dies, the person or persons to whom his
vested rights under this Agreement shall pass, whether by will or by the
applicable laws of descent and distribution, may exercise all Options which
had vested as of the date of Employee's death. Such exercise must be made by
December 31, 2004.
7. Except as Paragraph 6 hereof otherwise provides, during the lifetime
of the Employee the Options and all rights granted hereunder shall be
exercisable only by the Employee, and the Options and all rights granted
under this contract shall not be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise),
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and shall not be subject to execution, attachment, or similar process. Upon
any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of
such Option or of such rights contrary to the provisions hereof, or upon the
levy of any attachment or similar process upon such Option or such rights,
such Option and such rights shall immediately become null and void.
8. In the event of any forward or reverse split in, stock dividend with
respect to or reclassification of the Company's common stock, the amount of
Options and price per share specified in this Option Agreement shall be
adjusted accordingly. In the event of any other change in the capital
structure of Company, including but not limited to the issuance of additional
shares, the amount of Options and price per share set forth herein shall not
be adjusted.
9. Neither the Employee nor his executor, administration, heirs, or
legatees, shall be or have any rights or privileges of a shareholder of the
Company in respect of the shares transferable upon exercise of the Option
obtainable hereunder, unless and until certificates representing such shares
shall have been endorsed, transferred, and delivered and the transferee has
caused his name to be entered as the shareholder of record on the books of
the Company.
10. THE SHARES TO BE ISSUED UPON EXERCISE OF THE OPTIONS HEREUNDER HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL
OR OTHER
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EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE
NOT REQUIRED, OR (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES.
11. The Company does not attempt to advise Employee regarding any
consequences arising hereunder or from acquisition of the shares through the
exercise of Options. Employee should consult his personal tax advisor with
respect to such tax matters.
12. By receipt of this Option, by its execution, and by its exercise in
whole or in part, Employee represents to the Company that Employee
understands that:
(i) both this Option and any shares purchased upon its exercise
are securities, the issuance by the Company of which requires compliance with
federal and state securities laws;
(ii) these securities are made available to Employee only on the
condition that Employee makes the representations contained in this Section
24 to the Company;
(iii) Employee has make a reasonable investigation of the affairs
of the Company sufficient to be well informed as to the rights and the value
of these securities;
(iv) Employee understands that the securities have not been
registered under the Securities Act of 1933, as amended (the "Act") in
reliance upon one or more specific exemptions contained in the Act, if
available, or which may depend upon (a) Employee's bona fide investment
intention in acquiring these securities; (b) Employee's intention to hold
these securities for Employees own benefit for an indefinite period; (c)
Employee having no present intention of selling or transferring any part
thereof (recognizing that the Option is not transferable); and (d) there
being certain restrictions on transfer of the shares subject to the
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Option;
(v) Employee understands that the Shares subject to this Option,
in addition to other restrictions on transfer, must be held indefinitely
unless subsequently registered under the Act, or unless an exemption from
registration is available; that Rule 144, the usual exemption from
registration, is only available after the satisfaction of certain holding
periods and in the presence of a public market for the Shares; that there is
no certainty that a public market for the Shares will exist, and that
otherwise it will be necessary that the Shares be sold pursuant to
another exemption from registration which may be difficult to satisfy; and
(vi) Employee understands that the certificate representing the
Shares will bear a legend prohibiting their transfer in the absence of
their registration or the opinion of
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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counsel for the Company that registration is not required.
IT IS SO AGREED:
EMPLOYEE:
/s/ Xxxx X. Xxxxxx
-----------------------------
(Signature)
XXXX X. XXXXXX
-----------------------------
(Print Name)
CTS:
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Xxxxxx X. Xxxxx
Its:
------------------------
President
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NON-QUALIFIED OPTION AGREEMENT
This Non-Qualified Option Agreement ("Agreement") is entered into
effective as of this 1st day of September, 1995, by and between WXL
International Australia, Inc., a Delaware Corporation ("Company") and Xxxx
X. Xxxxxx ("Xxxxxx"), and is made with reference to the following facts:
WHEREAS, Xxxxxx is presently performing legal services for Company and
Company's parent corporation, Communication TeleSystems, International
("CTS"); and
WHEREAS, Company and Xxxxxx wish to modify the terms of their agreement
regarding such services;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Company and Xxxxxx agree as follows:
1. During the time period that Xxxxxx is performing legal services for
CTS under the current agreement between Xxxxxx and CTS or any replacement
thereto, Xxxxxx shall also perform similar legal services for Company without
additional compensation.
2. Xxxxxx is hereby granted non-qualified options to purchase Two
Hundred Seven Thousand Six Hundred Forty-Nine (207,649) shares of Company's
common stock ("Options").
3. The exercise price of each share of common stock covered by each
Option granted under this Option Agreement is ten cents ($0.10) per share.
4. Except as provided in Paragraph 6 hereof, vested Options earned by
Xxxxxx must be exercised on the earliest of the following dates: (i) at any
time on or before December 31,
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2004 or (ii) ten (10) days after written demand by Company, which may only be
given upon a merger or acquisition of Company or CTS. No partial exercise of
any Option may be for less than one hundred (100) full shares. In no event
shall the Company be required to transfer fractional shares to Xxxxxx.
5. Any vested Options earned under this Option Agreement shall be
exercisable within the time period stated herein, by the delivery of written
notice of intent to exercise to the Secretary of the Company, accompanied by
payment in cash to the Company of the full purchase price of the shares which
Xxxxxx elects to purchase.
6. Any Option and all rights granted hereunder, to the extent those
rights have not been exercised, will terminate and become null and void on
December 31, 2004. If Xxxxxx dies, the person or persons to whom his vested
rights under this Agreement shall pass, whether by will or by the applicable
laws of descent and distribution, may exercise all Options which had vested
as of the date of Xxxxxx'x death. Such exercise must be made by December 31,
2004.
7. Except as Paragraph 6 hereof otherwise provides, during the
lifetime of Xxxxxx the Options and all rights granted hereunder shall be
exercisable only by Xxxxxx, and the Options and all rights granted under this
contract shall not be transferred, assigned, pledged, or hypothecated in any
way (whether by operation of law or otherwise), and shall not be subject to
execution, attachment, or similar process. Upon any attempt to transfer,
assign, pledge, hypothecate, or otherwise dispose of such Option or of such
rights contrary to the provisions hereof, or upon the levy of any attachment
or similar process upon such Option or such rights, such Option and such
rights shall immediately become null and void.
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8. In the event of any forward or reverse split in, stock dividend
with respect to or reclassification of the Company's common stock, the amount
of Options and price per share specified in this Option Agreement shall be
adjusted accordingly. In the event of any other change in the capital
structure of the Company, including but not limited to the issuance of
additional shares, the amount of Options and price per share set forth herein
shall not be adjusted.
9. Neither Xxxxxx nor his executor, administration, heirs, or
legatees, shall be or have any rights or privileges of a shareholder of the
Company in respect of the shares transferable upon exercise of the Option
obtainable hereunder, unless and until certificates representing such shares
shall have been endorsed, transferred, and delivered and the transferee has
caused his name to be entered as the shareholder of record on the books of
the Company.
10. THE SHARES TO BE ISSUED UPON EXERCISE OF THE OPTIONS HEREUNDER HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL
OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, OR (iii) RECEIPT OF NO-ACTION LETTERS FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES.
11. The Company does not attempt to advise Xxxxxx regarding any
consequences
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arising hereunder or from acquisition of the shares through the exercise of
Options. Xxxxxx should consult his personal tax advisor with respect to such
tax matters.
12. By receipt of this Option, by its execution, and by its exercise in
whole or in part, Xxxxxx represents to the Company that Xxxxxx understands
that:
(i) both this option and any shares purchased upon its exercise
are securities, the issuance by the Company of which requires compliance with
federal and state securities laws;
(ii) these securities are made available to Xxxxxx only on the
condition that Xxxxxx makes the representations contained in this Section 24
to the Company;
(iii) Xxxxxx has make a reasonable investigation of the affairs of
the Company sufficient to be well informed as to the rights and the value of
these securities;
(iv) Xxxxxx understands that the securities have not been
registered under the Securities Act of 1933, as amended (the "Act") in
reliance upon one or more specific exemptions contained in the Act, if
available, or which may depend upon (a) Xxxxxx'x bona fide investment
intention in acquiring these securities; (b) Xxxxxx'x intention to hold these
securities for Xxxxxx'x own benefit for an indefinite period; (c) Xxxxxx
having no present intention of selling or transferring any part thereof
(recognizing that the Option is not transferable); and (d) there being
certain restrictions on transfer of the shares subject to the Option;
(v) Xxxxxx understands that the Shares subject to this Option, in
addition to other restrictions on transfer, must be held indefinitely unless
subsequently registered under
4
the Act, or unless an exemption from registration is available; that Rule
144, the usual exemption from registration, is only available after the
satisfaction of certain holding periods and in the presence of a public
market for the Shares; that there is no certainty that a public market for
the Shares will exist, and that otherwise it will be necessary that the
Shares be sold pursuant to another exemption from registration which may be
difficult to satisfy; and
(vi) Xxxxxx understands that the certificate representing the
Shares will bear a legend prohibiting their transfer in the absence of their
registration or the opinion of counsel for the Company that registration is
not required.
IT IS SO AGREED:
/s/ Xxxx X. Xxxxxx
------------------------------
(Signature)
XXXX X. XXXXXX
------------------------------
(Print Name)
WXL INTERNATIONAL AUSTRALIA, INC.:
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Xxxxxx X. Xxxxx
Its:
-------------------------
President
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