Exhibit 10.13
EMPLOYMENT AGREEMENT
AGREEMENT by and between Econophone, Inc. (the "Company"), and Xxxxxx Xxxx
(the "Executive"), effective as of January 1, 1997 (the "Effective Date").
1. EMPLOYMENT TERM. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to enter the employ of the Company, commencing
on the Effective Date and continuing for a three-year term from such Effective
Date, unless terminated earlier in accordance with Section 4 below (such period,
including any extension thereto pursuant to Section 9 below, is hereinafter
referred to as the "Employment Term").
2. TITLE AND DUTIES.
(a) Commencing on the Effective Date and for the remainder of the
Employment Term, the Executive shall be President and Chairman of the Board
of Directors (the "Board") of the Company, and shall serve as the Company's
Chief Executive Officer with such duties, responsibilities and authority as
shall be consistent therewith. The Executive shall be based in New York
City.
(b) During the Employment Term, and excluding any periods of
vacation, holiday and sick leave to which the Executive is entitled, the
Executive agrees to devote substantially all of his working hours to the
business and affairs of the Company and to use the Executive's best efforts
to perform faithfully and efficiently such responsibilities.
3. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Employment Term, the Executive shall
receive an annual base salary ("Annual Base Salary") of not less than
$330,000 for each year of the Employment Term. The Annual Base Salary
shall be increased from time to time as shall be approved by the Board or
the compensation committee thereof, if any; provided, that, effective as of
January 1, 1998, for each year of the Employment Term, the Annual Base
Salary shall be increased by the percentage increase, if any, in the
consumer price increase in the New York, New York area (the "CPI") over the
CPI published the preceding January. The Annual Base Salary shall be paid
in equal bimonthly installments.
(b) ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each year during the Employment Term, an annual bonus
(the "Annual Bonus"), pro rated in the case of a bonus for any year during
which the Executive was employed for less than 12 months. The Executive
shall have a target Annual Bonus of between 25% and 75% of his Annual Base
Salary, subject to attainment of certain performance goals as determined by
the Board or the compensation committee thereof, if any. Each such Annual
Bonus shall be paid no later than the end of the third month of the term
year next following the term
year for which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(c) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Term, the Executive shall be eligible to participate in all incentive,
savings and retirement plans, practices, policies and programs, if any,
that are applicable generally to other senior executives of the Company.
(d) WELFARE BENEFIT PLANS. During the Employment Term, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs, if any) that are applicable
generally to other senior executives of the Company.
(e) EXPENSES. During the Employment Term, the Company shall pay or
promptly reimburse the Executive for all business expenses upon
presentation of receipts therefor in accordance with the normal practices
of the Company.
(f) FRINGE BENEFITS. During the Employment Term, the Executive shall
be entitled to an automobile allowance of $1,000 per calendar month to
cover the cost of obtaining, insuring and maintaining an automobile of
Executive's choice. The Company also shall pay the Executive's reasonable
legal fees for preparation and review of this Employment Agreement. The
Executive shall be entitled to such other fringe benefits as are provided
to the senior executives of the Company generally or as shall otherwise be
agreed to by the Board or the compensation committee thereof, if any.
(g) VACATION AND HOLIDAYS. During the Employment Term, the Executive
shall be entitled to four weeks of paid vacation per year and all other
paid holidays given to employees of the Company.
4. TERMINATION OF EMPLOYMENT.
(a) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean: (i) the conviction of, or pleading guilty to, a felony or crime
involving moral turpitude, or (ii) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company after
a written demand for substantial performance is delivered to the Executive by
the Board, which specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive's duties; or
(iii) a disability that prohibits the Executive from substantially meeting his
responsibilities as a senior executive of the Company on a full-time basis for
90 out of 120 consecutive business days.
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(b) (1) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean in each case, without the Executive's prior written consent:
(i) the assignment to the Executive of any duties inconsistent
with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 2 of this Agreement, or any other action by
the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose any action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
compensation and benefits provisions of Section 3 of this Agreement,
other than failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location outside New York City; or
(iv) any failure by the Company to comply with and satisfy any
covenant or agreement contained in this Agreement, excluding for this
purpose any failure or omission not occurring in bad faith or any
action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive.
(b) (2) GOOD REASON: CHANGE OF CONTROL. The Executive's
employment further may be terminated by the Executive for Good Reason upon a
Change of Control. For purposes of this Agreement, "Change of Control" shall
have the meaning set forth in the Certificate of Incorporation of the Company,
as the same may be amended from time to time.
(c) DEATH. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Period.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance
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which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be (although such Date of
Termination shall retroactively cease to apply if the circumstances providing
the basis of termination for Cause or Good Reason are cured in accordance with
Section 4(a) or 4(b) of this Agreement, respectively), (ii) if the Executive's
employment is terminated by the Company other than for Cause, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death, the Date of Termination shall be the date of death of the Executive.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER
THAN FOR CAUSE. If, during the Employment Term, the Company shall terminate the
Executive's employment other than for Cause or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive the aggregate of
the following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, and (2) any compensation previously deferred by the
Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the extent
not theretofore paid (the sum of the amounts described in clauses
(1) and (2) shall be hereinafter referred to as the "Accrued
Obligations"). All Accrued Obligations shall be paid in a lump
sum in cash within 30 days of the Date of Termination; and
B. the Executive's Annual Base Salary for the greater of
twelve months or the remainder of the Employment Term, to be paid
either (1) in a lump sum, if approved by the Board, 30 days after
the Date of Termination, or (2) as salary continuation. The
Executive shall have no duty or obligation to mitigate; provided,
that, in the event the Executive becomes reemployed by another
employer, such salary continuation payments will be reduced by
the amount of the salary payments received from such other
employer.
(ii) for the greater of two years after the Executive's Date of
Termination, or the remainder of the Employment Term, the Company
shall continue benefits to the Executive and/or the Executive's family
at
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least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described
in Section 3(c) of this Agreement if the Executive's employment had
not been terminated, provided, however, that if the Executive becomes
re-employed with another employer and is eligible to receive medical
or other welfare benefits under another employer provided plan, the
corresponding medical and other welfare benefits described herein
shall be terminated. For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until the
later of two years after the Date of Termination or the end of the
Employment Term and to have retired on the last day of such period;
(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided to the Executive or which
the Executive is entitled to receive under any plan, program, policy
or practice or contract or agreement of the Company and its affiliated
companies, to the extent payment of any such amounts or benefits are
not already provided for under this Agreement (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If, during the Employment
Term, the Executive's employment shall be terminated by the Company for Cause or
by the Executive without Good Reason, this Agreement shall terminate without
further obligations to the Executive other than the payment of Accrued
Obligations, and the payment or provision of Other Benefits. All Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. If the Executive's employment is terminated for
Cause, nothing in this Agreement shall prevent the Company from pursuing any
other available remedies against the Executive.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan,
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policy, practice or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
7. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make the
payments provided for in this Agreement shall be subject to set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive. The Company agrees to pay as incurred,
all legal and professional fees and expenses which the Executive may reasonably
incur as a result of the negotiation and preparation of this Agreement, the
Executive's indirect investment in the Company and the transactions contemplated
hereby and thereby, and any contest by the Executive in good faith, by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), provided that in
connection with any contest of this Agreement, the Executive shall only be
entitled to reimbursement of legal fees in the event that he prevails with
respect to at least one material issue.
8. PROTECTIVE COVENANTS. The Executive hereby acknowledges that,
pursuant to his employment as a key executive of the Company, he shall have
access to confidential and proprietary information regarding the Company and the
employees, clients and competitors of the Company and that the Executive,
pursuant to his employment hereunder, shall be in a unique position of authority
with regard to the Company's employees and clients. Furthermore, the Executive
hereby acknowledges that the provisions of this Section 8 constitute an
essential and integral portion of this Agreement and that the provisions of this
Section 8 are reasonable and necessary for the protection of the Company and its
subsidiaries and affiliates.
(a) NO COMPETING EMPLOYMENT. As of the Effective Date and continuing
until the first anniversary of the end of the Employment Term (the "Restricted
Period"), the Executive shall not, without the prior written consent of the
Board, directly or indirectly, whether as owner, consultant, employee, partner,
venturer or agent, through stock ownership, investment of capital, lending of
money or property, rendering of services or otherwise (except ownership of less
than 5% of the number of shares outstanding of any securities which are publicly
traded), compete with the telecommunications business of the Company or any
subsidiary or controlled affiliate of the Company (such business is hereinafter
referred to as the "Business"), provide services to, whether as an employee or
consultant, own, manage, operate, control, participate in or be connected with
(as a stockholder, partner, or any similar ownership interest) any corporation,
firm, partnership, joint venture, sole proprietorship or other entity which so
competes with the Business, except for the aforementioned 5% ownership of
publicly traded securities. The parties understand and agree that this Section
8(a) shall survive the termination of this Agreement.
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(b) NO SOLICITATION OF EMPLOYEES AND CERTAIN OTHER PERSONS. During the
Restricted Period, the Executive shall not, without the prior written consent of
the Board, directly or indirectly (i) solicit in competition with the Business
any person, group or class of persons who at any time either during the
Employment Term or during the Restricted Period have any business relationship
with the Business, the loss, diminution or moderation of which would likely be
materially detrimental to the Business; (ii) solicit or recruit, directly or
indirectly, any employee or independent contractor of the Company, or any
subsidiary or affiliate, for the purpose of being employed by the Executive,
directly or indirectly, or by any competitor of the Company on behalf of which
the Executive is acting as an agent, representative or employee; (iii) solicit,
influence or attempt to influence, for a purpose or in a manner that would
likely be materially detrimental to the Business, any provider of services or
products to the Business with respect to its relationship with the Business,
including, without limitation, any person or entity which has been a provider of
services or products to the Business at any time during the Employment Term or
the Restricted Period, or take any action detrimental to the existing or
prospective relationships between the Business and any provider of services; or
(iv) assist or encourage any other person in carrying out, directly or
indirectly, any activity that would be prohibited by the provisions of this
Section 8(b) if such activity were carried out by the Executive, and, in
particular, the Executive agrees that he will not, directly or indirectly,
induce any employee of the Business to carry out any such activity. The parties
understand and agree that this Section 8(b) shall survive the termination of
this Agreement.
(c) CONFIDENTIALITY. The Executive hereby acknowledges that the services
he performs for the Company under this Agreement are special, unique and
extraordinary in that the Executive may acquire confidential information and
trade secrets concerning the operations of the Company, its subsidiaries and its
affiliates, the use or disclosure of which could cause the Company substantial
loss and damages which could not be readily calculated, and for which no remedy
at law would be adequate. Accordingly, the Executive hereby covenants and
agrees with the Company that he will not at any time, except in performance of
his obligations to the Company hereunder or with the prior written consent of
the Board, directly or indirectly, disclose any secret or confidential
information that the Executive may learn by reason of his association with the
Company. The term "confidential information" includes information not
previously disclosed to the public or to the trade by the Company, or not
otherwise known to the public or trade (other than as a result of any act by the
Executive or any representative of the Executive in violation of this
Agreement), with respect to, without limitation, the Company or any of its
subsidiaries or affiliates' business plans, prospects and opportunities, the
identity of any suppliers, proprietary information regarding customers,
operational strengths and weaknesses, trade secrets, know-how and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, marketing plans or strategies and financial information.
The parties hereby acknowledge and agree that the rights and obligations set
forth in this Section 8(c) are perpetual and, in any case, shall extend beyond
the Restricted Period. Nothing contained in this paragraph shall prohibit the
Executive from disclosing any confidential information to the extent required by
law or legal process.
(d) INJUNCTIVE RELIEF. Without limiting the remedies available to the
Company, the Executive acknowledges that a breach of any of the covenants
contained in this
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Section 8 may result in material irreparable injury to the Company for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and a preliminary and/or permanent injunction (without the requirement of
any bond) restraining the Executive from engaging in any actual or threatened
breach of the covenants included in this Section 8 and shall also be entitled to
obtain such other relief as may be required to specifically enforce any of the
covenants in this Section 8.
9. EMPLOYMENT RENEWAL. This Agreement automatically shall be renewed for
successive one year periods unless, at least six months prior to expiration of
the Employment Term, either the Company or the Executive shall notify the other
in writing that it does not wish to extend the Employment Term. If the Company
fails to offer to renew the Employment Term, or if such offer is subsequently
revoked, the Executive shall receive (A) one times the Executive's then current
Annual Base Salary as set forth in Section 3(a) herein to be paid either (1) in
a lump sum, if approved by the Board, 30 days after the date of expiration of
the Employment Term or (2) as salary continuation for a period of one year
following the date of the expiration of the Employment Term, and (B)
continuation, for a period of one year, of medical and other welfare benefits as
described in Section 3(c) herein.
10. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) Subject to Section 4(b)(2), the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
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11. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
Xx. Xxxxxx Xxxx
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
IF TO THE COMPANY:
Econophone, Inc..
00 Xxxxxx Xxxxxx
Xxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxx, Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 4 (b)(1) and (b)(2) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
XXXXXX XXXX
_____________________________________________________
ECONOPHONE, INC.
By:__________________________________________________
Name:
Title:
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