EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this ______ day of
September, 1998 between SMARTALK TELESERVICES, INC., a California corporation
(the "Company"), and XXXXX XXXXXXXX (the "Executive").
WHEREAS, the Executive was previously a party to that certain Employment
Agreement, dated July 30, 1997 (the "1997 Employment Agreement"), pursuant to
which, among other things, Executive was employed as the Vice President -
Integration of ConQuest Telecommunication Services Corp., a subsidiary of the
Company;
WHEREAS, the parties hereto wish to enter into an employment agreement to
employ the Executive as the Chief Financial Officer, Vice President of Finance,
and Assistant Secretary 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 years,
effective as of September 21, 1998 (the "Effective Date"). Effective as of the
expiration of such initial two-year term and 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 Executive for
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the Employment Period as its Chief Financial Officer, Vice President of Finance,
and Assistant Secretary 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 or his designee.
(b) Authority and Duties. The Executive shall exercise such authority,
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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. 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 the
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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 its then-existing level
during the Employment Period.
(b) Annual Bonus. The Executive shall earn bonus amounts in the form of
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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
determinations as to the actual corporate and individual performance against the
preestablished 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 of the Company shall be the chief executive
officer, the president, the chief operating officer, the executive vice
president, and the general counsel.
(c) Car Allowance. The Company, at its election, shall either (i) pay to
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Executive as an automobile allowance the sum of $400 per month during the
Employment Period in lieu of any other provision for an automobile, insurance,
maintenance, gasoline and expenses or (ii) permit Executive to continue the use
of a Company-provided automobile during the Employment Period.
(d) Other Benefits. During the Employment Period, the Executive shall
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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.
(e) Business Expenses. During the Employment Period, the Company shall
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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.
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 material 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 that is or is likely to 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 under the laws of the United States or any political
subdivision thereof.
(b) Termination for Good Reason. The Executive shall have the right at
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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 title, duties or responsibilities with the Company
as set forth in Section 2 hereof;
(ii) a material 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); or
(iv) 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" (other than pursuant to Section 4(b)(iii) hereof)
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 (6) 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.
(e) Definition of Change in Control. A "Change in Control" shall be deemed
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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 least 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
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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:
(1) Severance Pay - a lump sum amount equal to three (3) times the
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Executive's Base Salary as in effect immediately prior to such
termination and the highest bonus paid (including the fair value,
as of the date of grant, of any bonus paid in the form of stock
based awards) to the Executive during the Employment Period.
(ii) Benefits Continuation - continuation for the longer of (A) the
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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
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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 the longer
of (x) 12 months following the first date of Disability and (y)
the then remainder of the Term (as if a timely non-renewal notice
has been given);
(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 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
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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(d) 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(d) above.
(d) Other Terminations. In the event of termination of the Executive's
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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, 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) Condition to Severance Benefits.
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(i) The Company shall have the 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 time
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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 that
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the Executive's responsibilities may include the making of technical and
managerial contributions of value to the 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 property of the 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. The Executive agrees that he shall not during the
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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 or
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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 all
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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: Chief Executive Officer
SmarTalk TeleServices, Inc.
0000 Xxxxx Xxxxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx Xxxxxxxxxx
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
(b) If to the Executive, to:
Xxxxx Xxxxxxxx
000 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. Excise Tax Limit. Notwithstanding anything in this Agreement to the
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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
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dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in Franklin County, Ohio 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.
13. Waiver of Breach. Any waiver of any breach of this Agreement shall not
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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
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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 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.
15. Withholding of Taxes. All payments required to be made by the Company
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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
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thereof shall be invalid or unenforceable, it shall be considered deleted there
from 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
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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. Payments; Mitigation. All amounts payable by the Company to the
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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 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.
19. 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.
20. Governing Law. This Agreement shall be construed, interpreted and
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enforced in accordance with the laws of the State of California, without giving
effect to the choice of law principles thereof.
21. Entire Agreement. This Agreement constitutes the entire agreement by
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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, including without limitation the 1997 Employment Agreement; provided,
however, that all stock option agreements between the Company and the Executive
shall remain in full force and effect and provided, further, that Executive
shall be entitled to all amounts payable or reimbursable under the 1997
Employment Agreement for periods ending on or prior to the date hereof. 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
September , 1998.
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SMARTALK TELESERVICES, INC.
/s/ Xxxxx X. Xxxxxxxxxxx
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By: Xxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
/s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
