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EXHIBIT 10.33
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 3rd day
of November, 1997 between SMARTALK TELESERVICES, INC., a California corporation
(the "Company") and XXXX XXXXXXXX (the "Executive").
WHEREAS, the parties hereto wish to enter into an employment agreement
to employ the Executive as the President of the Company and to set forth
certain additional agreements between the Executive and the Company.
NOW THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
1. Term.
The Company will employ the Executive, and the Executive will serve the
Company, under the terms of this Agreement for an initial term of three years,
commencing on November 12, 1997. Effective as of the expiration of such
initial three-year term and as of each anniversary date thereof, the term of
this Agreement shall be extended for an additional one-year period unless, not
later than six months prior to each such respective date, either party hereto
shall have given notice to the other that the term shall not be so extended.
Notwithstanding the foregoing, the Executive's employment hereunder may be
earlier terminated, as provided in Section 4 hereof. The term of this
Agreement, as in effect from time to time in accordance with the foregoing,
shall be referred to herein as the "Term". The period of time between the
commencement and the termination of the Executive's employment hereunder shall
be referred to herein as the "Employment Period."
2. Employment.
(a) Positions and Reporting. The Company hereby employs the
Executive for the Employment Period as its President on the terms and
conditions set forth in this Agreement. During the Employment Period, the
Executive shall report directly to the Chief Executive Officer of the Company.
(b) Authority and Duties. The Executive shall exercise such
authority, perform such executive duties and functions and discharge such
responsibilities as are reasonably associated with the Executive's positions,
commensurate with the authority vested in the Executive pursuant to this
Agreement and consistent with the By-Laws of the Company as in effect on the
date hereof. The Executive's duties and responsibilities shall include the
management and supervision of all aspects of the Company's operations
(including, among other things, sales, marketing, finance, production and
distribution) and participation in the establishment of the Company's strategic
direction. During the Employment Period, the Executive shall devote full
business time, skill and efforts to the business of the Company.
Notwithstanding the foregoing, the Executive may (i) make and manage personal
business investments of his choice and serve in any capacity with any civic,
educational or charitable
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organization, or any trade association, without seeking or obtaining approval
by the Board of Directors of the Company (the "Board"), provided such
activities and service do not materially interfere or conflict with the
performance of his duties hereunder and (ii) with the approval of the Board,
serve on the boards of directors of other corporations. The Executive shall not
be relocated from Los Angeles without the Executive's consent.
3. Compensation and Benefits.
(a) Salary. During the Employment Period, the Company shall pay to
the Executive, as compensation for the performance of his duties and
obligations under this Agreement, a base salary at the rate of $300,000 per
annum, payable in arrears not less frequently than monthly in accordance with
the normal payroll practices of the Company (the "Base Salary"). Such Base
Salary shall be subject to review each year for possible increase by the Board
in its sole discretion, but shall in no event be decreased from its
then-existing level during the Employment Period.
(b) Annual Bonus. The Executive shall earn bonus amounts in the
form of cash and stock awards, to be paid to the Executive within sixty (60)
days following the year-end audit, based upon the satisfaction of performance
criteria that will be established by a committee of the Board (the "Compensation
Committee") in its discretion and upon consultation with the Executive at the
beginning of each year, but in no case after January 31, subject to the approval
of the Board. Such performance criteria will include corporate performance goals
consistent with the Company's business plan for the year, as well as individual
objectives for the Executive's performance that are separate from, but are
consistent with, the Company's business plan. The final determination as to the
actual corporate and individual performance against the pre-established goals
and objectives, and the amounts of any additional bonus payout in relationship
to such performance, shall be made by the Compensation Committee in its sole
discretion. The cash and stock components of the Executive's bonus awards shall
be in the same average proportion as the awards granted to the other senior
management of the Company. For purposes of this Agreement, senior management
("Senior Management") of the Company shall be the chairman, chief executive
officer, president and COO and the executive vice president. The Executive's
yearly bonus shall not be less than 25% of the total yearly bonus paid to the
Senior Management. In no event shall the Executive's yearly bonus be an amount
less than the Executive's Base Salary.
(c) Care Allowance. The Company shall pay to Executive as an
automobile allowance the sum of $1,500 per month during the Employment Period
in lieu of any other provision for an automobile, insurance, maintenance,
gasoline and expenses.
(d) Insurance Policies. The Company shall pay to the Executive the
premium amount of $7,000 per year for Executive to maintain in force during the
Employment Period, life and disability insurance on the Executive, the
beneficiary of which shall be designated by the Executive (the "Executive
Policies"). The Company may also purchase "key-person" life insurance policies
on the Executive's life in such amounts and of such types as is determined by
the Board. The Executive shall cooperate fully with the Company in
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obtaining such insurance and shall submit to such physical examinations and
provide such information as is reasonably required to obtain and maintain such
policies. Neither the Executive nor his successor-in-interest or estate shall
have any interest in any such key-person policies so obtained.
(e) Other Benefits. During the Employment Period, the Executive
shall receive such other life insurance, pension, disability insurance, health
insurance, holiday, vacation and sick pay benefits and other benefits which the
Company extends, as a matter of policy, to its executive employees and, except
as otherwise provided herein, shall be entitled to participate in all deferred
compensation and other incentive plans of the Company on the same basis as other
like employees of the Company. Without limiting the generality of the foregoing,
the Executive shall be entitled to three (3) weeks vacation during each year of
the Employment Period, which shall be scheduled in the Executive's discretion,
subject to and taking into account the business exigencies of the Company.
Unused vacation may be accrued up to a maximum of six (6) weeks of unused
vacation, and thereafter the Executive shall cease to accrue vacation thereafter
until used.
(f) Business Expenses. During the Employment Period, the Company
shall promptly reimburse the Executive for all documented reasonable business
expenses incurred by the Executive in the performance of his duties under this
Agreement in accordance with the Company's policies and standards of similar or
comparable companies.
(g) Stock Options. Concurrently with the execution of this
Agreement, the Company and Executive will enter into a Stock Option Agreement,
attached hereto as Exhibit A, pursuant to which the Company shall grant to the
Executive an option to purchase up to 400,000 shares of common stock of the
Company on the terms and conditions set forth therein.
(h) Signing Bonus. The Company shall pay to the Executive upon the
execution of this Agreement three hundred thousand dollars ($300,000) as a
signing bonus.
(i) Relocation Expense and Loss. The Company shall reimburse the
Executive for all relocation expenses incurred by the Executive in connection
with the Executive's relocation from Atlanta to the Los Angeles area, including,
without limitation, all broker's fees, finder's fees, and packing and moving
expenses. The Company shall reimburse the Executive for any loss incurred by the
Executive on or in connection with the sale of the Executive's principal
residence in Atlanta. At the Executive's request, the Company shall provide, for
a period of up to six months, the Executive and his family with temporary living
quarters in size and condition comparable to Executive's current residence. The
expense to the Company pursuant to this Section 3(i) shall not exceed
eighty-eight thousand dollars ($88,000.00).
4. Termination of Employment.
(a) Termination for Cause. The Company may terminate the
Executive's employment hereunder for cause. For purposes of this Agreement and
subject to the
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Executive's opportunity to cure as provided in Section 4(c) hereof, the Company
shall have "cause" to terminate the Executive's employment hereunder if:
(i) The Executive has materially breached a material provision
of this Agreement, and, if such breach is curable, it has not been cured
or reasonably commenced being cured within thirty (30) days after
written notice from the Company;
(ii) The Executive is convicted of or pleads guilty to a
felony involving financial misconduct or moral turpitude.
(b) Termination for Good Reason. The Executive shall have the
right at any time to terminate his employment with the Company for any reason.
For purposes of this Agreement and subject to the Company's opportunity to cure
as provided in Section 4(c) hereof, the Executive shall have "good reason" to
terminate his employment hereunder if such termination shall be the result of:
(i) a material diminution during the Employment Period in the
Executive's duties or responsibilities as set forth in Section 2 hereof;
(ii) a breach by the Company of the compensation and benefits
provisions set forth in Section 3 hereof;
(iii) termination by the Executive for any reason within 12
months following the occurrence of a Change in Control (as defined in
Section 4(e) hereof);
(iv) a material breach by the Company of any material terms of
this Agreement.
(c) Notice and Opportunity to Cure. Notwithstanding the foregoing,
it shall be a condition precedent to the Company's right to terminate the
Executive's employment for "cause" and the Executive's right to terminate his
employment for "good reason" that (1) the party seeking the termination shall
first have given the other party written notice stating with specificity the
reason for the termination ("breach") and (2) if such breach is susceptible of
cure or remedy, a period of 30 days from and after the giving of such notice
shall have elapsed without the breaching party having effectively cured or
remedied such breach during such 30-day period, unless such breach cannot be
cured or remedied within 30 days, in which case the period for remedy or cure
shall be extended for a reasonable time (not to exceed 30 days) provided the
breaching party has made and continues to make a diligent effort to effect such
remedy or cure.
(d) Termination Upon Death or Permanent and Total Disability. The
Employment Period shall be terminated by the death of the Executive. The
Employment Period may be terminated by the Company if the Executive shall be
rendered incapable of performing his duties to the Company by reason of any
medically determined physical or mental impairment that can be expected to
result in death or that can be expected to last for a period of six or more
consecutive months from the first date of disability ("Disability"). If the
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Employment Period is terminated by reason of Disability of the Executive, the
Company shall give 30-days' advance written notice to that effect to the
Executive.
(e) Definition of Change in Control. A "Change in Control" shall
be deemed to have taken place if:
(i) there shall be consummated any consolidation or merger of
the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's capital stock
are converted into cash, securities or other property (other than a
consolidation or merger of the Company in which the holders of the
Company's voting stock immediately prior to the consolidation or merger
shall, upon consummation of the consolidation or merger, own at least
50% of the voting stock) or any sale, lease, exchange or other transfer
(in one transaction or a series of transactions contemplated or arranged
by any party as a single plan) of all or substantially all of the assets
of the Company; or
(ii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) shall, after the date hereof, become the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of securities of the Company representing 35% or
more of the voting power of all of the then outstanding securities of
the Company having the right under ordinary circumstances to vote in an
election of the Board (including, without limitation, any securities of
the Company that any such person has the right to acquire pursuant to
any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, shall be deemed beneficially owned by such
person); or
(iii) individuals who as of the date hereof constitute the
entire Board and any new directors whose election by the Company's
shareholders, or whose nomination for election by the Company's board,
shall have been approved by a vote of at lease a majority of the
directors then in office who either were directors at the date hereof or
whose election or nomination for election shall have been so approved
(the "Continuing Directors") shall cease for any reason to constitute a
majority of the members of the Board.
5. Consequences of Termination.
(a) Termination Without Cause or for Good Reason. In the event of
termination of the Executive's employment hereunder by the Company without
"cause" (other than upon death or Disability) or by the Executive for "good
reason" (each as defined in Section 4 hereof), the Executive shall be entitled
to the following severance pay and benefits:
(i) Severance Pay - a lump sum amount equal to three (3) times
the combined total of the Executive's Base Salary as in effect
immediately prior to such termination and the highest bonus paid to the
Executive during the Employment Period.
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(ii) Benefits Continuation - continuation for the longer of
(A) the then remainder of the Term (as if a timely non-renewal notice
has been given) and (B) 24 months (the "Severance Period") of coverage
under the group medical care, disability and life insurance benefit
plans or arrangements in which the Executive is participating at the
time of termination; provided, however, that the Company's obligation to
provide such coverages shall be terminated if the Executive obtains
comparable substitute coverage from another employer at any time during
the Severance Period. The Executive shall be entitled, at the expiration
of the Severance Period, to elect continued medical coverage in
accordance with Section 4980B of the Internal Revenue Code of 1986, as
amended (or any successor provision thereto).
(b) Termination Upon Disability. In the event of termination of
the Executive's employment hereunder by the Company on account of Disability,
the Executive shall be entitled to the following severance pay and benefits:
(i) Severance Pay - severance payments in the form of
continuation of the Executive's Base Salary as in effect immediately
prior to such termination for a period of the longer of 12 months
following the first date of Disability and the then remainder of the
Term (as if a timely non-renewable notice has been given);
(ii) Benefits Continuation - the same benefits as provided in
Section 5(a)(ii) above, to be provided during the Employment Period
while the Executive is suffering from Disability and for a period of 12
months following the effective date of termination of employment by
reason of Disability.
In addition to the foregoing, the Company shall remit to the Executive
any benefits received by the Company, as beneficiary, pursuant to any
additional disability insurance policy which was maintained by the Executive
prior to his employment with the Company.
(c) Termination Upon Death. In the event of termination of the
Executive's employment hereunder on account of the Executive's death, the
Executive's heirs, estate or personal representatives under law, as applicable,
shall be entitled to the payment of the Executive's Base Salary as in effect
immediately prior to death for a period of three calendar months. The
Executive's beneficiary or estate shall not be required to remit to the Company
any payments received pursuant to any life insurance policy purchased or
maintained pursuant to Section 3(d) above.
(d) Other Terminations. In the event of termination of the
Executive's employment hereunder for any reason other than those specified in
subsection (a) through (c) of this Section 5, the Executive shall not be
entitled to any severance pay or benefits continuation contemplated by the
foregoing, except as may otherwise be provided under the applicable benefit
plans or award agreements relating to the Executive.
(e) Accrued Rights. Notwithstanding the foregoing provisions of
this Section 5, in the event of termination of the Executive's employment
hereunder for any
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reason, the Executive shall be entitled to payment of any unpaid portion of his
Base Salary through the effective date of termination, and payment of any
accrued but unpaid rights solely in accordance with the terms of any incentive
bonus or employee benefit plan or program of the Company.
(f) Conditions to Severance Benefits. (i) The Company shall have
the rights to seek repayment of the severance payments and benefits provided by
this Section 5 in the event that the Executive fails to honor in accordance
with their terms the provisions of Sections 6, 7 and 8 hereof.
(ii) For the purposes only of this Section, the Company may
assert that the Executive has failed to honor the provisions of Sections
6, 7 and 8 hereof only upon the vote of two-thirds of the Board, following
notice of the alleged failure by the Company to the Executive, an
opportunity for the Executive to cure the alleged failure for a period of
30 days from the date of such notice, and the Executive's opportunity to
be heard on the issue by the Board. Nothing in this Section shall limit
the Executive's right to arbitration as set forth in Section 12 hereof.
(iii) In the event that the Company fails to honor in accordance
with their terms the provisions of Section 5 hereof, the Executive shall
not be bound by the terms of Sections 6, 7, and 8 hereof.
6. Confidentiality. The Executive agrees that he will not at any
time during the Employment Period or at any time thereafter for any reason, in
any fashion, form, or manner, either directly or indirectly, divulge, disclose
or communicate to any person, firm, corporation or other business entity, in
any manner whatsoever, any confidential information or trade secrets concerning
the business of the Company, including, without limiting the generality of the
foregoing, the techniques, methods or systems of its operation or management,
any information regarding its financial matters, or any other material
information concerning the business of the Company (including customer lists),
its manner of operation, its plans or other material data (the "Business). The
provisions of this Section 6 shall not apply to (i) information disclosed in
the performance of the Executive's duties to the Company based on his good
faith belief that such a disclosure is in the best interests of Company; (ii)
information that is, at the time of the disclosure, public knowledge; (iii)
information disseminated by the Company to third parties in the ordinary course
of business; (iv) information lawfully received by the Executive from a third
party who, based upon inquiry by the Executive, is not bound by a confidential
relationship to the Company; of (v) information disclosed under a requirement
of law or as directed by applicable legal authority having jurisdiction over
the Executive.
7. Inventions. The Executive is hereby retained in a capacity such
that the Executive's responsibilities may include the making of technical and
managerial contributions of value to Company. The Executive hereby assigns to
Company all rights, title and interest in such contributions and inventions
made or conceived by the Executive alone or jointly with others during the
Employment Period which relate to the Business. This assignment shall
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include (a) the right to file and prosecute patent applications on such
inventions in any and all countries, (b) the patent application filed and
patents issuing thereon, and (c) the right to obtain copyright, trademark or
trade name protection for any such work product. The Executive shall promptly
and fully disclose all such contributions and inventions to Company and assist
Company in obtaining and protecting the rights therein (including patents
thereon), in any and all countries; provided, however, that said contributions
and inventions will be the property of Company, whether or not patented or
registered for copyright, trademark or trade name protection, as the case may
be. Inventions conceived by the Executive which are not related to the
Business, will remain the property of the Executive.
8. Non-Competition. (i) The Executive agrees that he shall not
during the Employment Period and for a period of one (1) year thereafter,
without the approval of the Board, directly or indirectly, alone or as partner,
joint venturer, officer, director, employee, consultant, agent, independent
contractor or stockholder (other than as provided below) of any company or
business, engage in any "Competitive Business" within the United States. For
purposes of the foregoing, the term "Competitive Business" shall mean any
business directly involved in prepaid telecommunications services industry.
Notwithstanding the foregoing, the Executive shall not be prohibited during the
noncompetition period applicable above from acting as a passive investor where
he owns not more than five percent (5%) of the issued and outstanding capital
stock of any publicly-held company. During the period that the above
noncompetition restriction applies, the Executive shall not, without the written
consent of the Company, solicit any employee who is under contract with the
Company or any current or future subsidiary or affiliate thereof to terminate
his or her employment; nor shall the Executive solicit employees for any
enterprise that competes with Company; but shall have the right to solicit
employees not under contract with the Company for an enterprise that does not
compete with the Company.
9. Breach of Restrictive Covenants. The parties agrees that a
breach or violation of Section 6, 7 or 8 hereof will result in immediate and
irreparable injury and harm to the innocent party, and that such innocent party
shall have, in addition to any and all remedies of law and other consequences
under this Agreement, the right to seek an injunction, specific performance or
other equitable relief to prevent the violation of the obligations hereunder.
10. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
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(a) If to the Company, to:
Attn: Xxxxx Xxxxxxxxx
General Counsel
SmarTalk TeleServices, Inc.
0000 Xxxxx Xxxxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
(b) If to the Executive, to:
Xxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
11. Excise Tax Limit. Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any payment or distribution
by the Company or any other person or entity to or for the benefit of the
Executive is a "parachute payment" (within the meaning of Section 280G of the
Code, whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise) (a "Payment") in connection with, or
arising out of, his employment with the Company or a change in ownership or
effective control of the Company (within the meaning of Section 280G of the
Code, and would be subject to the excise tax imposed by Section 4999 of the
Code) (the "Excise Tax"), the Payments shall be reduced to the extent necessary
so that such remaining Payment would not be subject to the excise tax imposed by
Section 4999 of the Code.
12. Arbitration; Legal Fees. Except as provided in Section 9 hereof, any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in Los Angeles County, California in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The Company shall reimburse Executive for all reasonable legal
fees and costs and other fees and expenses which Executive may incur in respect
of any dispute or controversy arising under or in connection with this
Agreement; provided, however, that the Company shall not reimburse any such fees
costs and expenses if the fact finder determines that the action brought by the
Executive was frivolous.
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13. Waiver of Breach. Any waiver of any breach of this Agreement shall
not be construed to be a continuing waiver or consent to any subsequent breach
on the part either of the Executive or of the Company.
14. Non-Assignment; Successors. Neither party hereto may assign his or its
rights or delegate his or its duties under this Agreement without the prior
written consent of the other party; provided, however, that: (i) this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
the Company upon any sale of all or substantially all of the Company's assets,
or upon any merger, consolidation or reorganization of the Company with or into
any other corporation, all as though such successors and assigns of the Company
and their respective successors and assigns were the Company; and (ii) this
Agreement shall insure to the benefit of and be binding upon the heirs, assigns
or designees of the Executive to the extent of any payments due to them
hereunder. As used in this Agreement, the term "Company" shall be deemed to
refer to any such successor or assign of the Company referred to in the
preceding sentence.
15. Withholding of Taxes. All payments required to be made by the Company
to the Executive under this Agreement shall be subject to the withholding of
such amounts, if any, relating to tax, and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation.
16. Severability. To the extent any provision of this Agreement or portion
thereof shall be invalid or unenforceable, it shall be considered deleted
therefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
17. Director and Officer Insurance. The Company shall use its best efforts
to obtain and maintain director's and officer's insurance for the Executive (in
such amounts as are appropriate for executives of businesses comparable to that
of the Company) pursuant to Board of Directors indemnity agreements then in
force and shall give timely notice to the Executive of termination of any such
insurance policy.
18. Indemnification. The Company shall indemnify the Executive to fullest
extent permitted under applicable law and the Company's By-Laws, and shall be
obligated to advance expenses (including attorney's fees) to the Executive
incurred in connection with any proceeding. Without limiting the generality and
scope of the foregoing, the Company shall indemnify the Executive in connection
with any action brought against the Executive by MCI relating in any way to the
Executive's acceptance of employment within the Company.
19. Payments; Mitigation. All amounts payable by the Company to the
Executive under this Agreement shall be paid promptly on the dates required for
such payment in this Agreement without notice or demand. There shall be no right
of set-off or counterclaim in respect of any claim, debt or obligation against
any payment to the Executive, his dependents, beneficiaries or estate provided
for in this Agreement. Any salary, benefits or other amounts paid or to be paid
to Executive or provided to or in respect of the Executive pursuant to this
Agreement shall not be reduced by amounts owing from Executive to the
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Company. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or the arrangements made under any provision
of this Agreement, and any such employment obtained by Executive shall not
reduce or affect the amounts payable or the arrangements made under any
provision of this Agreement.
20. 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.
21. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of California, without giving
effect to the choice of law principles thereof.
22. Entire Agreement. This Agreement constitutes the entire agreement by
the Company and the Executive with respect to the subject matter hereof and
supersedes any and all prior agreements or understandings between the Executive
and the Company with respect to the subject matter hereof, whether written or
oral. This Agreement may be amended or modified only by a written instrument
executed by the Executive and the Company.
* * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of
November 3, 1997.
SMARTALK TELESERVICES, INC.
/s/ XXXXX X. XXXXXXXXXXX
---------------------------
By: Xxxxx X. Xxxxxxxxxxx
Its: President
/s/ XXXX XXXXXXXX
---------------------------
Xxxx Xxxxxxxx
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EXHIBIT "A"
STOCK OPTION AGREEMENT
SmarTalk TeleServices, Inc.
1996 Stock Incentive Plan - Stock Options
STOCK OPTION AGREEMENT (the "Agreement") dated as of November 3, 1997,
(the "Date of Grant"), between SmarTalk TeleServices, Inc., a California
corporation (the "Company") and Xxxx Xxxxxxxx (the "Optionee").
Pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), the
Company has authorized the execution and delivery of this Agreement. A copy of
the Plan as in effect on the Date of Grant has been supplied to the Optionee,
and the Optionee hereby acknowledges receipt thereof. The provisions of the
Plan, including the definitions of capitalized terms that are not otherwise
defined in this Agreement, are incorporated herein by reference.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree
as follows:
1. Grant of Option. Subject to all the terms and conditions of the
Plan and this Agreement, the Company grants to the Optionee as of the Date of
Grant an option (the "Option") to purchase 400,000 shares of common stock, no
par value, of the Company ("Common Stock"). The Option is not intended to
qualify as an "incentive stock option" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be treated as a
nonqualified stock option under the Plan. The Company represents and warrants
that all of the Common Stock which Optionee is given a right to purchase
hereunder has been duly registered pursuant to the Securities Act of 1933, as
amended, and is freely tradable.
2. Exercise Price. The exercise price per share of Common Stock covered
by this Option (the "Option Price") shall be the closing price of the Company's
Common Stock on the Nasdaq national securities market (the "Nasdaq") on the
Date of Grant, or, in the event the Date of Grant is a date on which no trading
occurred on the Nasdaq, the Option Price shall be the closing price of the
Company's Common Stock on the Nasdaq on the trading date immediately preceding
the Date of Grant.
3. Vesting. The Optionee's right to purchase shares of Common Stock
under this Option shall vest as follows:
(a) The Optionee's right to purchase one hundred thousand (100,000)
of the shares of the Company's Common Stock under the Option shall vest on the
Date of Grant (the "Initial Vesting Date").
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(b) The Optionee's right to purchase one hundred thousand (100,000) of
the shares of the Company's Common Stock under the Option shall vest on the
first anniversary of the Initial Vesting Date.
(c) The Optionee's right to purchase one hundred thousand (100,000) of
the shares of the Company's Common Stock under the Option shall vest on the
second anniversary of the Initial Vesting Date.
(d) The Optionee's right to purchase one hundred thousand (100,000) of
the shares of the Company's Common Stock under the Option shall vest on the
third anniversary of the Initial Vesting Date.
(e) Notwithstanding the provisions of (a), (b), (c) and (d) above, in the
event of (i) a "Change in Control," as defined in Section 4(e) of the
Employment Agreement dated as of November 3, 1997 between the Company and the
Optionee (the "Employment Agreement"), or (ii) a termination of the Optionee's
employment other than for "cause" (as such terms is defined in the Employment
Agreement), all of the unvested shares subject to the Option shall become fully
vested and exercisable immediately prior thereto.
4. Term. The term of the Option (the "Option Term") shall commence on
the Date of Grant and shall expire on the tenth anniversary thereof unless the
Option shall have been earlier terminated in accordance with the terms hereof
or of the Plan. Shares of Common Stock as to which the Option becomes
exercisable pursuant to Section 3 hereof may be purchased at any time during
the Option Term.
5. Termination of Option. The unexercised portion of the Option shall
automatically terminate and shall become null and void and be of no further
force or effect upon the expiration of the Option Term.
6. Procedure for Exercise.
(a) The Option may be exercised, in whole or part (for the purchase of
whole shares only), by delivery of a written notice (the "Notice") from the
Optionee to the Secretary of the Company at the Company's principal office,
which Notice shall:
(i) state that the Optionee elects to exercise the Option;
(ii) state the number of shares with respect to which the Optionee is
exercising the Option (the "Optioned Shares");
(iii) state the method of payment for the Optioned Shares pursuant to
Section 6(b) hereof and the method of payment of withholding taxes
pursuant to Section 6(c) hereof;
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(iv) in the event that the Option shall be exercised by any person
other than the Optionee pursuant to Section 9 hereof, include
appropriate proof of the right of such person to exercise the
Option;
(v) include any representation of the Optionee required pursuant
to Section 6(e) hereof; and
(vi) comply with such further reasonable requirements consistent with
the Plan as the Committee may from time to time prescribe.
(b) Payment of the Option Price for the Optioned Shares shall be made (i)
in cash or by personal or certified check, (ii) by delivery of stock
certificates (in negotiable form) representing shares of Common Stock having a
fair market value on the trading date immediately preceding the date of
exercise equal to the aggregate Option Price of the Optioned Shares or (iii) a
combination of the methods set forth in the foregoing clauses (i) and (ii).
(c) As a condition of delivery of the Optioned Shares, the Optionee shall
remit or, in appropriate cases, shall agree to remit when due, an amount in
cash or in shares of Common Stock (to the extent permitted under Section 6(b)
hereof) sufficient to satisfy all current or estimated future Federal, state
and local withholding tax and employment tax requirements relating thereto. The
Optionee may elect in the Notice that the Company withhold from delivery the
number of Optioned Shares that is sufficient to satisfy such tax withholding
obligation, based on the Fair Market Value of the Common Stock on the trading
date immediately preceding the date of exercise. Any such election by the
Optionee to withhold Optioned Shares is subject to disapproval by the Committee
and, in the case of any Optionee subject to the provisions of Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"), is subject to the
requirements of Rule 16(b)-3 under the Exchange Act. Notwithstanding the
foregoing, no amounts shall be withheld as set forth in this section (c) in the
event that Optionee shall furnish the Company with (i) written advice of tax
counsel or an accountant that no withholding shall be required under Federal,
state or local law and (ii) an undertaking by Optionee to defend, indemnify and
hold harmless the Company from any claim by any government taxing authority
with respect to any failure to withhold.
(d) No single exercise of the Option shall be for fewer than 100 shares
of Common Stock unless the number of Optioned Shares purchased is the total
number at the time available for purchase under this Option.
7. No Rights as a Shareholder, Employee, etc.
(a) The Optionee shall not have any privileges of a shareholder of the
Company with respect to any shares of Common Stock subject to (but not acquired
upon valid exercise of) the Option, nor shall the Company have any obligation
to issue any dividends or otherwise afford any rights to which shares of Common
Stock are entitled with respect to any such shares, until the date of the
issuance to the Optionee of a stock certificate evidencing such shares.
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(b) Nothing in this Agreement or the Option shall confer upon the
Optionee any right to continue in the employ of the Company or to interfere in
any way with the right of the Company or the stockholders of the Company to
terminate the Optionee's employment or directorship or to increase or decrease
the Optionee's compensation at any time.
8. Adjustments. If at any time while the Option is outstanding, the
number of outstanding shares of Common Stock is changed by reason of a
reorganization, recapitalization, stock split or any similar events, the number
and kind of shares subject to the Option and/or the Option Price of such shares
shall be adjusted accordingly.
9. Restriction on Transfer of Option. The Option may not be
transferred, pledged, assigned, hypothecated or otherwise disposed of in any
way by the Optionee, except by will or by the laws of descent and distribution,
and may be exercised during the lifetime of the Optionee only by the Optionee.
In the event an Optionee becomes legally incapacitated, his Option shall
thereafter be exercisable by his legal guardian, committee, or legal
representative to the full extent to which the Option was exercisable by the
Optionee. If the Optionee dies, the Option shall thereafter be fully
exercisable within six (6) months of the date of death by the Optionee's
executors or administrators. The Option shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions
hereof, and the levy of any execution, attachment or similar process upon the
Option, shall be null and void and without effect.
10. Future Options. For each year that the Company continues to employ
the Optionee under the Employment Agreement beyond the initial three-year term
thereof (the "Initial Term of Employment"), the Company shall grant to the
Optionee the option (the "Future Option") to purchase that number of shares of
the Company's Common Stock which the Company's Board of Directors, through the
exercise of its discretion, may set; provided, however, that for each year of
the Optionee's employment beyond the Initial Term of Employment, the Company
shall grant to the Optionee a Future Option to purchase a minimum of 100,000
shares of the Company's Common Stock. Future Options shall vest one year after
the date on which they were granted (the "Future Date of Grant") or sooner as
may be provided in the Future Option grant agreement. The exercise price per
share of Common Stock covered by any Future Option (the "Future Option Price")
shall be the closing price of the Company's Common Stock on the Nasdaq on the
Future Date of Grant, or, in the event the Future Date of Grant is a date on
which no trading occurred on the Nasdaq, the Future Option Price shall be the
closing price of the Company's Common Stock on the Nasdaq on the trading date
immediately preceding the Future Date of Grant.
11. Notices. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
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(a) If to the Company, to:
Attn: Xxxxx Xxxxxxxxx
General Counsel
SmarTalk TeleServices, Inc.
0000 Xxxxx Xxxxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
(b) If to the Executive, to:
Xxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
12. No Waiver. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
13. Optionee Undertaking. The Optionee shall take whatever additional
actions and execute whatever additional documents the Company or the Committee
may in its reasonable judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions imposed on the
Optionee pursuant to the express provisions of this Agreement.
14. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, excluding the choice of
law rules thereof.
15. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
16. Entire Agreement. This Agreement and the Plan constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof, merging any and all prior agreements.
* * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
November 3, 1997.
SMARTALK TELESERVICES, INC.
/s/ XXXXX X. XXXXXXXXXXX
-------------------------
By: Xxxxx X. Xxxxxxxxxxx
Its: President
/s/ XXXX XXXXXXXX
-------------------------
Xxxx Xxxxxxxx
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