EXHIBIT 10.1
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SEVERANCE, GENERAL RELEASE AND COOPERATION AGREEMENT
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This Agreement, made as of the 21st day of August, 1998, is entered into by and
between Xxxxxxx Xxxxxx (hereafter "Employee") and US WATS, Inc., (hereafter
"Employer") and arises out of the termination of Employee's employment. In
consideration of the material promises contained herein; the parties agree as
follows:
1. Compensation and Benefits. In lieu of all rights Employee may have
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pursuant to the Employment Agreement between Employer and Employee dated as of
December 23, 1993, as amended (the "Employment Agreement"), Employer agrees to
pay or provide, or arrange for the payment or provision of the following:
a. Balance of Salary and Bonus; Severance Pay; Accumulated Vacation and
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Sick Pay. On or before September 18, 1998, Employer will pay Employee a single
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cash lump sum payment of $300,000, subject to such federal, state, local and
other withholding taxes as Employer may determine to apply. Subject to
applicable limits on the amount of compensation that may be taken into account
for any year under the Internal Revenue Code of 1986, as amended, and Employer's
401(k) plan, Employer shall treat the amount payable pursuant to this Paragraph
1a as compensation that is eligible compensation and subject to Employee's
salary deferral election, consistent with the terms of such plan. Except as
otherwise provided in this Agreement, this amount is in full satisfaction of any
claims for compensation and benefits, including, but not limited to claims for
base compensation, bonus, severance pay and accumulated but unpaid vacation and
sick leave.
b. Fringe Benefits. Employee's date of termination of employment with
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Employer for all purposes shall be August 21, 1998. Employee shall continue to
have the contractual right to medical/surgical/hospitalization insurance as set
forth in Paragraph 5(c) of the Employment Agreement from the date of this
Agreement through December 31, 2000. Employee's termination of coverage on
December 31, 2000, or on such earlier date as he may die, shall be treated as a
"qualifying event" for purposes of Employee's (and Employee's dependents, if
applicable) rights to continuation health care coverage under the provisions of
Employer's medical/surgical/hospitalization insurance plan, in accordance with
terms of such plan and the applicable provisions of part 6 of Title I of the
Employee Retirement Income Security Act of 1974, as amended. Employee shall
also be entitled to such other benefits available to former employees of
Employer as may be provided to similarly situated former employees under the
plans, programs and policies of the Employer.
c. Reimbursement of Business Expenses. Employer shall reimburse Employee
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for reasonable business expenses incurred by Employee and submitted to Employer
for reimbursement by August 31, 1998 consistent with Employer's past practice of
expense reimbursement with respect to Employee.
2. Continuance of Existing Indemnification Rights. Employer shall
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indemnify, defend and hold harmless Employee against all losses, claims,
damages, liabilities, costs and expenses (including attorneys' fees and
expenses), judgments, fines, losses and amounts paid in settlement in connection
with any actual or threatened action, suit, claim, proceeding or investigation
(each a "Claim") to the extent that any such Claim is based on, or arises out of
the fact that Employee is or was a director, officer, employee or agent of
Employer or any of its subsidiaries or is or was serving at the request of
Employer or any of its subsidiaries as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, to
the extent that any such Claim pertains to any matter or fact arising, existing
or occurring prior to or at August 21, 1998, regardless of whether such Claim is
asserted or claimed prior to, at or after such date, to the full extent
permitted under the laws of the State of New York, Employer's Certificate of
Incorporation or By-laws or any indemnification agreement in effect as of August
21, 1998 including provisions relating to advancement of expenses incurred in
the defense of any such Claim; provided, however, that Employer shall not be
required to indemnify Employee in connection with any proceeding (or portion
thereof) involving any Claim initiated by Employee unless the initiation of such
proceeding (or portion thereof) was authorized by the Board of Directors of
Employer or unless such proceeding is brought by Employee to enforce rights
under this Paragraph 2. Without limiting the generality of the preceding
sentence, in the event Employee becomes involved in any Claim, after August 21,
1998, Employer shall periodically advance to Employee his legal and other
expenses (including the cost of any investigation and preparation incurred in
connection therewith), provided, however, that Employee will reimburse all
amounts so advanced in the case of a final nonappealable determination by a
court of competent jurisdiction that Employee is not entitled to be indemnified
therefor. Employer shall continue to maintain its current directors' and
officers' liability insurance, which shall cover Employee with respect to events
that occurred before the date hereof, or substantially similar coverage
containing terms no less advantageous to Employee.
3. Resignation; Termination of Employment Agreement.
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(a) This Agreement shall reflect Employee's resignation as an officer and
employee of Employer effective as of August 21, 1998. Employer and Employee
mutually agree to refer to Employee's termination of service as Employee's
retirement.
(b) No rights, duties or obligations shall exist under the Employment
Agreement after August 21, 1998, except for the rights, duties and obligations
stated in Paragraphs 11 and 12 thereof.
(c) Employer shall direct employees assigned to answer telephones to advise
callers who ask for Employee that Employee has retired and to provide callers
who wish
to speak with Employee other than with respect to Employer's business with
Employee's home telephone number.
(d) Employee shall have reasonable access to his former office to remove
personal items, including decorations, personal papers and his Rolodex.
(e) Employee shall be afforded a reasonable opportunity to announce his
retirement and express his appreciation to employees at a full company meeting.
4. Release. Employee hereby fully and forever releases and discharges
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Employer and its parents, affiliates and subsidiaries, including all
predecessors and successors, assigns, officers, directors, trustees, employees,
agents and attorneys, past and present (hereinafter collectively the "Released
Parties") from any and all claims, demands, liens, agreements, contracts,
covenants, actions, suits, causes of action, obligations, controversies, debts,
costs, expenses, damages, judgments, orders and liabilities, of whatever kind or
nature, direct or indirect, in law, equity or otherwise, whether known or
unknown, vested or contingent, suspected or unsuspected, which existed in the
past or which currently exist, arising out of Employee's employment by Employer
or the termination thereof, including, but not limited to, any claims for relief
or causes of action under federal, state or local statute, ordinance or
regulation dealing in any respect with discrimination in employment including
any and all claims of employment discrimination including but not limited to the
Age Discrimination in Employment Act of 1967 (29 U.S.C. par. 621 et seq.), Title
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VII of the Civil Rights Act of 1964 (42 U.S.C. par. 2000 et seq.), the Civil
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Rights Act of 1866 and 1871 (42 U.S.C. par. 1981 and 1983), the Americans with
Disabilities Act (42 U.S.C. (S) 206 et seq.), the Rehabilitation Act of 1973 (29
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U.S.C. (S) 791 et seq.), the Equal Pay Act of 1963 (29 U.S.C. (S) 206 et seq.)
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and the Worker Adjustment and Retraining Notification Act (29 U.S.C. par. 2101),
and any claims, demands or actions based upon alleged wrongful or retaliatory
discharge or breach of contract under any state or federal law.
5. Rescission Right. Employee expressly acknowledges and recites that (a)
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he has entered into this Agreement knowingly and voluntarily, without any duress
or coercion;
(b) he has read and understands this Agreement in its entirety; (c) he has been
advised orally and is hereby advised in writing to consult with an attorney with
respect to this Agreement BEFORE signing it; (d) he has not been forced to sign
this Agreement by any employee or agent of the Released Parties; (e) he was
provided twenty-one (21) calendar days after receipt of the Agreement to
consider its terms before signing it; and (f) he is provided seven (7) calendar
days from the date of signing to terminate and revoke this Agreement in which
case this Agreement shall be unenforceable, null and void. Employee may revoke
this Agreement during those seven (7) days by providing written Notice of
Revocation to the Employer.
6. No Right of Reinstatement. Employee expressly agrees never to assert a
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right to reinstatement with Employer and expressly forever releases and
discharges the Released Parties from any obligation to employ him or her in any
capacity. However, Employee shall not be precluded from making any application
for future employment and the Released Parties shall not be precluded from
voluntarily rehiring Employee.
7. Employee's Acknowledgment. Employee has fully reviewed the terms of
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this Agreement, acknowledges that he understands the terms of this Agreement and
states that he is entering into this Agreement knowingly, voluntarily and in
full settlement of all claims that he may have as a result of his or her
employment with or separation of employment from Employer.
8. Cooperation Agreement. Employee further agrees that, subject to
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reimbursement by Employer of reasonable out-of-pocket costs and expenses, and to
compensation in the capacity as a consultant and independent contractor to
Employer, and not as an employee of Employer, for time devoted to Employer's
matters pursuant to this Paragraph 8 in excess of five hours in any calendar
month at the rate of $250 per hour, Employee will cooperate fully with Employer
and its counsel with respect to any matter (including litigation, investigation
or governmental proceeding) which relates to matters with which Employee was
involved during the term of employment with Employer. Such cooperation shall
include appearing from time to time at the offices of Employer or Employer's
counsel for conferences and interviews and in general providing the officers of
Employer and its counsel with the full benefit of Employee's knowledge with
respect to any such matter. Employee agrees to render such cooperation in a
timely fashion and at such times as may be mutually agreeable to the parties
concerned.
9. Return of Employer Property. Employee shall return to Employer prior
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to August 31, 1998 all documents, files (including copies thereof) and other
Employer property, provided that Employee shall not be required to return office
equipment purchased by Employer and made available for use by Employee,
including a laptop computer, fax machine, cellular telephone and similar items.
10. Employee's Successors. This Agreement shall be binding upon the
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parties hereto, their representatives, agents and assigns, and as to Employee,
his or her spouse, heirs, legatees, administrators and personal representatives.
11. Entire Agreement of the Parties. This Agreement constitutes the
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exclusive and complete agreement between the parties hereto relating to the
subject matter hereof. No amendment of this Agreement shall be binding unless
in writing and signed by the parties.
12. Severability. The provisions of this Agreement are severable. If any
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provision or the scope of any provision is found to be unenforceable or is
modified by a court of competent jurisdiction, the other provisions or the
affected provisions as so modified shall remain fully valid and enforceable.
13. Business Goodwill. Employer, its officers, directors, employees and
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agents, shall make no comment or take any other action, direct or indirect, that
will reflect adversely on Employee or adversely affect his business reputation
or goodwill.
14. Elimination of Guarantor Obligations. On or before September 18,
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1998, Employer shall have taken such action as may be necessary to remove
Employee as a personal guarantor on all of Employer's lines of credit, including
but not limited to the $2.2 million line of credit extended to Employer by
Century Credit.
15. Governing Law. This Agreement shall be governed by the law of the
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Commonwealth of Pennsylvania, without regard to the application of the
principles of conflicts of laws.
IN WITNESS WHEREOF, the undersigned acknowledge that they have executed this
instrument as their free and voluntary act, for the uses and purposes set forth
herein on the dates set forth below.
Accepted:
US WATS, INC. EMPLOYEE
By: _____________________________ By:______________________________
Xxxxxxx Xxxxxx
Date: ____________________________ Date: ____________________________
