Exhibit 10.5.3
EXECUTIVE EMPLOYMENT AGREEMENT
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This Agreement made and entered into as of January 1, 1998 (the "Effective
Date") by and between PACIFIC GATEWAY EXCHANGE (the "Company") and XXXXXX X.
XXXXXXXX (the "Executive"),
WITNESSETH THAT:
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WHEREAS, the parties desire to enter into this Agreement pertaining to the
continued employment of the Executive by the Company;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Company and the Executive
as follows:
1. Employment Period. Subject to the terms and conditions of this
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Agreement, the Company hereby agrees to employ the Executive during the
Employment Period (as defined below) and the Executive hereby agrees to remain
in the employ of the Company and to provide services during the Employment
Period in accordance with this Agreement. The "Employment Period" shall be the
period beginning on the Effective Date and ending on the third anniversary
thereof. After the third anniversary of the Effective Date, the Employment
Period shall be automatically extended for 12-month periods, unless one party to
this Agreement provides written notice of non-renewal to the other at least 90
days before the last day of the Employment Period.
2. Duties. Subject to the terms of this Agreement, the Company hereby
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agrees to employ the Executive as its Senior Vice President, Operations and
Engineering during the Employment Period, and the Executive hereby agrees to
remain in the employ of the Company during the Employment Period. During the
Employment Period, while the Executive is employed by the Company, the Executive
shall devote substantially all of his business time, energies and talents to
serving as its Senior Vice President, Operations and Engineering. The Executive
agrees that he shall perform his duties faithfully and efficiently subject to
the directions of the President of the Company (the "President"). The Executive
will have such authority and power as are inherent to the undertakings
applicable to his positions and necessary to carry out his responsibilities and
the duties required of him hereunder.
3. Compensation. Subject to the terms and conditions of this Agreement,
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during the Employment Period while the Executive is employed by the Company, the
Company shall compensate him for his services as follows:
(a) The Executive shall receive, for each 12-consecutive month period
beginning on the Effective Date and each anniversary thereof, an
annual salary of $175,000 (the "Salary"), which Salary shall be
payable in substantially equal monthly installments. The Executive's
Salary rate shall be reviewed annually on or about the anniversary of
the Effective Date, to determine whether an increase in the amount of
Salary is appropriate. In no event shall the Salary of the Executive
be reduced to an amount that is less than the amount specified in this
paragraph (a), or to an amount that is less than the amount that he
was previously receiving.
(b) The Executive shall be entitled to incentive compensation in the form
of a target annual cash bonus of $60,000. The actual bonus paid may
be more or less than the target and shall be determined by the
President taking into consideration whether the Executive has met the
performance targets set by the President for such year, (which shall
be set by the President, in consultation with the Executive, on or
about January 31 of each year), the relative contribution by the
Executive to the business of the Company, the Company's financial
performance for the year, general economic conditions, and such other
factors as the President deems relevant.
(c) Except as otherwise specifically provided to the contrary in this
Agreement, the Executive shall be provided with the retirement,
welfare benefits and other fringe benefits to the same extent and on
the same terms as those benefits are provided by the Company from time
to time to the Company's other senior management employees.
(d) The Executive shall be reimbursed by the Company, on terms and
conditions that are substantially similar to those that apply to other
similarly situated senior management employees of the Company, for
reasonable expenses for entertainment, travel, meals, lodging and
similar items which are authorized by the Company and actually
incurred by the Executive in the promotion of the Company's business.
4. Rights and Payments Upon Termination or Change in Control. The
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Executive's right to benefits and payments, if any, for periods after the date
on which his employment with the Company terminates for any reason (his
"Termination Date") shall be determined in accordance with this Section 4:
(a) Minimum Payments. If the Executive's Termination Date occurs during
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the Employment Period for any reason, the Executive shall be entitled
to the following payments, in addition to any payments or benefits to
which the Executive may be entitled under the following provisions of
this Section 4 (other than this paragraph (a)):
(i) his earned but unpaid Salary for the period ending on his
Termination Date; and
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(ii) his accrued but unpaid vacation pay for the period ending with
his Termination Date, as determined in accordance with the
Company's policy as in effect from time to time.
Payments to be made to the Executive pursuant to this paragraph 4(a)
shall be made in a lump sum as soon as practicable after the
Executive's Termination Date. Except as may be otherwise expressly
provided to the contrary in this Agreement, nothing in this Agreement
shall be construed as requiring the Executive to be treated as
employed by the Company following his Termination Date for purposes of
any employee benefit plan or arrangement in which he may participate
at such time.
(b) Termination By Company for Cause. If the Executive's Termination Date
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occurs during the Employment Period and is a result of the Company's
termination of the Executive's employment on account of Cause (as
defined in paragraph (g) below), then, except as agreed in writing
between the Executive and the Company, the Executive shall have no
right to future payments or benefits under this Agreement (and the
Company shall have no obligation to make any such future payments or
provide any such future benefits) for periods after the Executive's
Termination Date.
(c) Termination for Death or Disability. If the Executive's Termination
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Date occurs during the Employment Period on account of the Executive's
death or disability (as defined below), then the Executive (or in the
event of his death, his estate) shall be entitled to continuing
payments of his Salary for the period commencing on his Termination
Date and ending on the earliest of (i) 30 days from his Termination
Date, (ii) the last day of the Employment Period, or (iii) in the case
of the Executive's disability, the date on which the Executive
violates the provisions of Section 6 of this Agreement.
(d) Termination for Good Reason or by the Company for Reasons Other Than
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Cause. If the Executive's Termination Date occurs during the
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Employment Period and before the date of a Change of Control (as
defined in Exhibit A hereto), and is a result of the Executive's
termination of employment by the Company for any reason other than
Cause or on account of termination by the Executive for Good Reason (
as defined in paragraph (g)), and is not on account of the Executive's
death, disability, or voluntary resignation, the mutual agreement of
the parties or any other reason, then:
(A) The Executive shall receive from the Company for the period
commencing on his Termination Date and ending on the earliest of (i)
the 18-month anniversary of
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his Termination Date, (ii) the date on which the Executive violates
the provisions of Section 6 of this Agreement, or (iii) the date of
the Executive's death, the Salary in effect as of his Termination Date
(without regard to any reduction in such Salary which gives the
Executive the right to termination employment for Good Reason),
payable in accordance with the provisions of paragraph 3(a).
(B) Stock options awarded to the Executive under any option plans of
the Company shall be 100% vested upon the occurrence of the
Executive's Termination Date as described in this paragraph (d) and
shall be exercisable for the period after the Termination Date as
specified for vested options in the applicable option agreement.
(e) Termination for Voluntary Resignation, Mutual Agreement or Other
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Reasons. If the Executive's Termination Date occurs during the
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Employment Period on account of his voluntary resignation, mutual
agreement of the parties, or any reason other than those specified in
paragraphs (b), (c) or (d) above then, except as agreed in writing
between the Executive and the Company, the Executive shall have no
right to future payments or benefits under this Agreement (and the
Company shall have no obligation to make any such future payments or
provide any such future benefits) for periods after the Executive's
Termination Date.
(f) Payment Upon a Change in Control. If the Executive's Termination Date
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occurs within two years following a Change in Control, including a
Termination Date occurring on the date of a Change of Control, on
account of termination by the Company for reasons other than Cause or
on account of termination by the Executive for Good Reason, then the
Executive shall receive from the Company a lump sum payment equal to
18 months Severance in effect as of his Termination Date (without
regard to any reduction in such Salary which gives the Executive the
right to termination employment for Good Reason).
(g) Definitions. For purposes of this Agreement:
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(i) the term "Cause" shall mean (1) the willful and continued failure
by the Executive to substantially perform his duties under this
Agreement, other than by reason of his being disabled (as defined
below), (2) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or
its affiliates, (3) conduct by the Executive that involves theft
or fraud or, in connection with his duties under this Agreement,
dishonesty, (4) Executive's violation of the provisions of
Sections 6 and 7 hereof, or (5) conviction of felony involving
moral turpitude;
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(ii) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that
the Executive's action or omission was in the best interest of
the Company; and
(iii) the term "disability" shall mean the inability of the Executive,
after reasonable accommodation, to continue to perform his
duties under this Agreement on a full-time basis as a result of
mental or physical illness, sickness or injury for a period of
180 days within any 12-month period, as determined in the sole
discretion of the Board of Directors of the Company; and
(iii) the term "Good Reason" shall mean any of the following which
occur without the Executive's consent and which are not
corrected by the Company within 10 days of written notice to the
Company by the Executive: (1) a diminution of the Executive's
duties or the assignment to him of duties that are inconsistent
in any substantial respect with the position, authority or
responsibilities associated with the position of Senior Vice
President, Operations and Engineering, (2) a reduction in the
Executive's Salary rate or bonus potential; or (3) a relocation,
without the Executive's consent, of the Executive's principal
office from his current office as of the Effective Date to an
office that is more than 10 miles of the Executive's current
office, except for required travel on Company business to an
extent substantially consistent with the Executive's business
travel obligations on the Effective Date.
Notwithstanding any other provision of this Agreement, the Executive shall
automatically cease to be an officer and/or director of the Company and its
affiliates as of his Termination Date.
5. Set-Off. The Company shall be entitled to set off against the amounts
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payable to the Executive under this Agreement, any amounts owed to the Company
or its affiliates by the Executive.
6. Confidential Information. The Executive agrees that:
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(a) Except as may be required by the lawful order of a court or agency of
competent jurisdiction or as necessary to carry out his duties to the
Company and its affiliates, or except to the extent that the Executive
has express authorization from the Company, he shall keep secret and
confidential indefinitely all non-public information (including,
without limitation, information regarding litigation and pending
litigation) concerning the Company and its affiliates which was
acquired
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by or disclosed to the Executive during the course of his employment
with the Company or during the course of his consultation with the
Company following his termination of employment and not to disclose
the same, either directly or indirectly, to any other person, firm, or
business entity, or to use it in any way.
(b) Upon his Termination Date or at the Company's earlier request, he will
promptly return to the Company any and all records, documents,
physical property, information, computer disks or other materials
relating to the business of the Company and its affiliates obtained by
him during his course of employment with the Company.
(c) Nothing in the foregoing provisions of this Section 6 shall be
construed so as to prevent the Executive from using, in connection
with his employment for himself or an employer other than the Company
or any of its affiliates, knowledge which was acquired by him during
the course of his employment with the Company and its affiliates, and
which is generally known to persons of his experience in other
companies in the same industry.
7. Noncompetition. During the Noncompetition Period (as defined below),
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the Executive agrees that he will not directly or indirectly engage in, assist,
perform services for, establish or open, or have any equity interest (other than
ownership of 5% or less of the outstanding stock of any corporation listed on
the New York or American Stock Exchange or included in the National Association
of Securities Dealers Automated Quotation System) in any person, firm,
corporation, or business entity (whether as an employee, officer, director,
agent, security holder, creditor, consultant, or otherwise) that engages in the
business of providing international or domestic long distance telephone
services. Nothing in this Section 7 shall be construed as limiting the
Executive's duty of loyalty to the Company while he is employed by the Company,
or any other duty he may otherwise have to the Company while he is employed by
the Company. For purposes of this Agreement, the "Noncompetition Period" shall
be the period while the Executive is employed by the Company and for the period,
if any, after the Executive's Termination Date that he is receiving payments
pursuant to Section 4 hereof
8. Equitable Remedies. The Executive acknowledges that the Company would
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be irreparably injured by a violation of Sections 6 and 7 and agrees that the
Company, in addition to other remedies available to it for such breach or
threatened breach, shall be entitled to a preliminary injunction, temporary
restraining order, other equivalent relief, restraining the Executive from any
actual or threatened breach of Sections 6 and 7 without any bond or other
security being required.
9. Defense of Claims. The Executive agrees that, on and after the
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Effective Date, he will cooperate with the Company and its affiliates in the
defense of any claims that may be made against the Company or its affiliates to
the extent that such claims may relate to services
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performed by him for the Company. To the extent travel is required to comply
with the requirements of this Section 9, the Company shall, to the extent
possible, provide the Executive with notice at least 10 days prior to the date
on which such travel would be required and the Company agrees to reimburse the
Executive for all of his reasonable actual expenses associated with such travel;
provided, however, that if the Company reasonably expects the travel to be
extensive or unduly burdensome to the Executive from a financial perspective,
the Company may provide to the Executive pre-paid tickets for transportation in
connection with such travel.
10. Notices. Notices provided for in this Agreement shall be in writing
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and shall be deemed to have been duly received when delivered in person or sent
by facsimile transmission, on the first business day after it is sent by air
express courier service or on the second business day following deposit in the
United States registered or certified mail, return receipt requested, postage
prepaid and addressed, in the case of the Company to the following address:
Pacific Gateway Exchange
000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
or to the Executive at his last residence address as shown on the Company's
payroll records, or such other address as either party may have furnished to the
other in writing in accordance herewith, except that a notice of change of
address shall be effective only upon actual receipt.
11. Withholding. All compensation payable under this Agreement shall be
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subject to customary withholding taxes and other employment taxes as required
with respect to compensation paid by a corporation to an employee and the amount
of compensation payable hereunder shall be reduced appropriately to reflect the
amount of any required withholding. The Company shall have no obligation to
make any payments to the Executive or to make the Executive whole for the amount
of any required taxes.
12. Successors. This Agreement shall be binding on, and inure to the
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benefit of, the Company and its successors and assigns and any person acquiring,
whether by merger, reorganization, consolidation, by purchase of assets or
otherwise, all or substantially all of the assets of the Company.
13. Nonalienation. The interests of the Executive under this Agreement
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are not subject to the claims of his creditors, other than the Company, and may
not otherwise be voluntarily or involuntarily assigned, alienated or encumbered.
14. Waiver of Breach. The waiver by either the Company or the Executive
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of a breach of any provision of this Agreement shall not operate as or be deemed
a waiver of any subsequent
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breach by either the Company or the Executive. Continuation of payments
hereunder by the Company following a breach by the Executive of any provision of
this Agreement shall not preclude the Company from thereafter terminating said
payments based upon the same violation.
15. Arbitration. Any dispute, claim or controversy relating to or arising
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out of this Agreement (or the breach thereof) shall be settled by final, binding
and non-appealable arbitration before the American Arbitration Association (the
"Association"), with the hearing to be held in Santa Xxxxx or San Mateo County,
California, under the California Employment Dispute Resolution Rules then in
effect for that organization. This Section 15 shall not be construed to limit
the Company's right to obtain relief under Section 8 with respect to any matter
or controversy subject to Section 8, and, pending a final determination by the
arbitrator with respect to any such matter or controversy, the Company shall be
entitled to obtain any such relief by direct application to a court of law,
without being required to first arbitrate such matter or controversy.
Arbitration shall be conducted before a single arbitrator selected by the
Company and the Executive. In the event the parties cannot agree on an
arbitrator, then the Association will supply both parties with a list of seven
names from which the parties will alternately strike one name until only one
remains, first choice is determined by a coin toss. The party winning the coin
toss has the option of striking first. Judgment may be entered on the
arbitrator's award in any court of competent jurisdiction to prevent any
continuation of any violation of the provisions of this Agreement. The cost of
the arbitrator, any record or transcript of the arbitration, and administrative
fees, shall be borne by the Company. Each party shall bear the fees of their
respective attorneys, the expenses of their witnesses and any other expenses
connected with presenting their cases.
16. Severability. It is mutually agreed and understood by the parties
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that should any of the agreements and covenants contained herein be determined
by any court of competent jurisdiction to be invalid by virtue of being vague or
unreasonable, including but not limited to the provisions of Sections 6 and 7,
then the parties hereto consent that this Agreement shall be amended retroactive
to the date of its execution to include the terms and conditions said court
deems to be reasonable and in conformity with the original intent of the parties
and the parties hereto consent that under such circumstances, said court shall
have the power and authority to determine what is reasonable and in conformity
with the original intent of the parties to the extent that said covenants and/or
agreements are enforceable.
17. Applicable Law. This Agreement shall be construed in accordance with
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the laws of the State of California.
18. Amendment. This Agreement may be amended or canceled by mutual
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Agreement of the parties in writing without the consent of any other person.
19. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall
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together constitute one and the same instrument. Each counterpart may consist of
a copy hereof containing multiple signature pages, each signed by one party
hereto, but together signed by both of the parties hereto.
20. Other Agreements. This Agreement constitutes the sole and complete
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Agreement between the Company and the Executive and supersedes all other
agreements, both oral and written, between the Company and the Executive with
respect to the matters contained herein including, without limitation any prior
employment agreements between the Company and the Executive. No verbal or other
statements, inducements, or representations have been made to or relied upon by
the Executive. The parties have read and understand this Agreement.
Dated as of the date set forth above.
PACIFIC GATEWAY EXCHANGE
By: /s/ Xxxxxx X. Xxxxxxxxx
Its: President and Chief Executive Officer
/s/ Xxxxxx X. Xxxxxxxx
EXECUTIVE
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Exhibit A
Definition of Change in Control
For purposes of the Agreement, a "Change in Control" shall mean the
earliest to occur of any one of the following events:
(1) any "Person", as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, the Executive, any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, and any trustee or other fiduciary holding securities under
an employee benefit plan of the Company), becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act),
of 25% or more of the combined voting power of the Company's then
outstanding securities having the right to vote for the election of
directors ("Voting Stock");
(2) the majority of the Board of Directors of the Company (the "Board")
does not consist of individuals who are Incumbent Directors, which
term means the members of the Board on the date of this Agreement;
provided that any person becoming a director subsequent to such date
whose election or nomination for election was supported by three-
quarters of the directors who then comprised the Incumbent Directors
shall be considered to be an Incumbent Director;
(3) the Company adopts any plan of liquidation for the distribution of
all or substantially all of its assets;
(4) the company merges with or into another company, or all or
substantially all of the assets or business of the Company is
disposed of pursuant to a merger, consolidation or other transaction
(unless the shareholders of the Company immediately prior to such
merger, consolidation or other transaction beneficially own, directly
or indirectly, in substantially the same proportion as they owned the
Voting Stock of the Company, all of the Voting Stock or other
ownership interest of the entity or entities, if any, that succeed to
the business of the Company); or
(5) the Company combines with any other company and is the surviving
corporation but, immediately after the combination, the shareholders
of the Company immediately prior to the combination hold, directly or
indirectly, 50% or less of the Voting Stock of
the combined company (there being excluded from the number of shares
held by such shareholders, but not from the Voting Stock of the
combined company, any shares received by affiliates of such other
company in exchange for stock of such other company). Once a Change
in Control has occurred, no subsequent event shall be considered a
Change in Control for purposes of this Agreement.
