EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 11th day of
June, 1997 between SMARTALK TELESERVICES, INC., a California corporation (the
"Company") and XXXX XXXXXXX (the "Executive"); and
WHEREAS, the parties hereto wish to enter into an employment agreement
to employ the Executive as the Vice President - Sales 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.
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The Company will employ the Executive, and the Executive will serve
the Company, under the terms of this Agreement for an initial term of two and
one-half years (the "Initial Term"), commencing on the date hereof (the
"Effective Date"). Effective as of the expiration of the Initial 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 three 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 Effective Date and the termination of the Executive's
employment hereunder shall be referred to herein as the "Employment Period."
2. Employment.
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(a) Positions and Reporting. The Company hereby employs the
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Executive for the Employment Period as its Vice President - Sales on the terms
and conditions set forth in this Agreement.
(b) Authority and Duties. The Executive shall exercise such
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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 bylaws of the Company. 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 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.
3. Compensation and Benefits.
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(a) Salary. During the Employment Period, the Company shall pay to
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the Executive, as compensation for the performance of his duties and obligations
under this Agreement, a base salary at the rate of $150,000 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 the levels set forth above
during the Initial Term, or from its then-existing level during the Employment
Period.
(b) Annual Bonus. The Executive shall earn bonus amounts in the form
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of cash and stock awards 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, 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 determinations 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.
(c) Insurance Policies. The Company shall purchase for up to an
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annual premium amount of $3,000 and 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"). In the event
that the Company cancels the Executive Policies, the Executive shall have the
option to continue them in force at his own expense. The Executive Policies
shall be assigned to the Executive upon the termination of this Agreement. 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 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.
(d) Other Benefits. During the Employment Period, the Executive
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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
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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.
(e) Business Expenses. During the Employment Period, the Company
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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.
(f) Stock Options. Concurrently with the execution of this Agreement,
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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 sixty thousand (60,000) shares of common stock of
the Company on the terms and conditions set forth therein.
(g) Signing Bonus. The Company shall pay to the Executive upon the
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execution of this Agreement fifteen thousand dollars ($15,000) as a signing
bonus which amount shall be earned by Executive pro rata over the first year of
the Employment Period. Should Executive cease to be employed during the first
year of the Employment Period, Executive shall promptly remit any unearned
portion of this signing bonus.
4. Termination of Employment.
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(a) Termination for Cause. The Company may terminate the Executive's
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employment hereunder for cause. For purposes of this Agreement and subject to
the 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
Executive shall commit any of the following:
(i) any act or omission which shall represent a breach in any
material respect of any of the terms of this Agreement;
(ii) gross misconduct that, in the reasonable good faith
opinion of the Company could be significantly injurious to the Company;
(iii) gross negligence or wanton and reckless acts or omissions
in the performance of Executive's duties, in any such case which are to the
material detriment of the Company;
(iv) bad faith in the performance of Executive's duties,
consisting of willful acts or omissions, to the material detriment of the
Company;
(v) addiction to illegal drugs or chronic alcoholism; or
(vi) any conviction or pleading of guilty to a crime that
constitutes a felony
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under the laws of the United States or any political subdivision thereof.
(b) Termination for Good Reason. The Executive shall have the right
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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 diminution during the Employment Period in the Executive's
title, duties, reporting relationship 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) a material breach by the Company of any material terms of
this Agreement.
(c) Notice and Opportunity to Cure. Notwithstanding the foregoing, it
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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
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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 the disability ("Disability"). If the
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.
5. Consequences of Termination.
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(a) Termination Without Cause or for Good Reason. In the event of
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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 one-half (.5) the
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Executive's annual Base Salary; and
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(ii) Benefits Continuation - continuation for six (6) months (the
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"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
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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
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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
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continuation of the Executive's Base Salary as in effect immediately prior
to such termination for a period of six (6) months following the first date
of Disability;
(ii) Benefits Continuation - the same benefits as provided in
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Section 5(a)(ii) above, to be provided during the Employment Period while
the Executive is suffering from Disability and for a period of six (6)
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
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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 not less than two calendar months and
not more than the earlier of six calendar months or the payment of benefits
pursuant to the Executive's life insurance policy, as provided for in Section
3(c) above. 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 pursuant to Section 3(c) above.
(d) Other Terminations. In the event of termination of the
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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
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Section 5, in the event of termination of the Executive's employment hereunder
for any reason,
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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
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right 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 purposes only of this Section, Employee shall be treated as
having failed to honor the provisions of Sections 6, 7 or 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.
6. Confidentiality. The Executive agrees that he will not at any
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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; or (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
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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 include (a) the
right to file and prosecute patent applications on such inventions in any and
all countries, (b) the patent applications 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
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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
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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 agree that a breach
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or violation of Sections 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
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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:
(a) If to the Company, to:
Attn: Xxxxx Xxxxxxxxx
General Counsel
SmarTalk TeleServices, Inc.
0000 Xxxxx Xxxxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
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(b) If to the Executive, to:
Xxxx Xxxxxxx
00000 Xxxxxxx Xxxxx
Xxxxxx Xxxxx, XX 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. Arbitration; Legal Fees. Except as provided in Section 9 hereof,
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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.
12. Waiver of Breach. Any waiver of any breach of this Agreement
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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.
13. Non-Assignment; Successors. Neither party hereto may assign his
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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
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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 inure 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.
14. Withholding of Taxes. All payments required to be made by the
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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.
15. Severability. To the extent any provision of this Agreement or
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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.
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16. Payment. All amounts payable by the Company to the Executive
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under this Agreement shall be paid promptly on the dates required for such
payment in this Agreement without notice or demand. 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 Company.
17. Authority. Each of the parties hereto hereby represents that
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each has taken all actions necessary in order to execute and deliver this
Agreement and the Stock Option Agreement attached hereto as Exhibit A.
18. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
19. Governing Law. This Agreement shall be construed, interpreted
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and enforced in accordance with the laws of the State of California, without
giving effect to the choice of law principles thereof.
20. Entire Agreement. This Agreement constitutes the entire
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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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
June 11, 1997.
SMARTALK TELESERVICES, INC.
/s/ XXXXX X. XXXXXXXXXXX
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By: Xxxxx X. Xxxxxxxxxxx
Its: President and Chief Operating Officer
/s/ XXXX XXXXXXX
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Xxxx Xxxxxxx
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