EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of June 1, 1994 by and between K. Xxxx Xxxxx, a
resident of Alexandria, Virginia (the "Execu-tive"), and Global
Telecommunications, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company").
WITNESSETH:
WHEREAS, the Executive is currently the Chairman of the Board,
President and Chief Executive Officer of the Company; and
WHEREAS, the Board of Directors of the Company desires assurance that
the Executive will continue as its leader for at least the next five years; and
WHEREAS, the Executive is willing to commit to undertake his
responsibilities as Chairman of the Board, President and Chief Executive Officer
of the Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound, the parties,
subject to the terms and conditions set forth herein, hereby agree as follows:
1. Employment and Term. The Company hereby employs the Executive, and the
-------------------
Executive hereby accepts employment with the Company, for the period commencing
on the date hereof and continuing until May 30, 1999 and from year to year
thereafter,
unless terminated by either party by written notice of termination given to the
other party. Termination by the Company of the employment of Executive
hereunder shall be effective (a) 90 days after the date such notice is given if
such termination is pursuant to paragraphs 5 or 6 below, or (b) immediately upon
the date such notice is given if such termination is pursuant to paragraph 7
below.
2. Responsibilities. During the term of his employment, the Executive
----------------
shall devote his full time, attention, loyalty, skill and efforts to the
performance of his responsibilities to the Company as Chairman of the Board,
President and Chief Executive Officer, or if another person should be appointed
President by the Board of Directors, as Chairman of the Board and Chief
Executive Officer. Executive shall also be a member of the Compensation
Committee of the Board of Directors. The Company will not during the terms of
this Agreement demote the Executive of reduce his responsibility as the CEO, or
otherwise reduce his stature in the Company.
3. Compensation. The Company shall pay or provide to the Executive, and
------------
the Executive shall accept, the following as full compensation for all services
rendered hereunder. All compensation shall be subject to all applicable
withholding and similar requirements.
(A) Base Salary. The Company shall pay to the Executive a base salary
-----------
(the "Base Salary") at the annual rate of
-2-
$185,000. The Base Salary shall be reviewed on an annual basis and may be
increased from time to time at the discretion of the Board of Directors. It is
understood and agreed that Executive has and will defer payment of Base Salary
until April 1, 1995, at which time Executive will be entitled to received Base
Salary since June 1, 1994.
(B) Bonus or Incentive Compensation. Executive will participate in
-------------------------------
any bonus or incentive compensation plan (including stock option and stock bonus
plans) approved by the Board of Directors for senior management of the Company.
(C) Benefits. The Company shall provide to the Executive, without any
--------
payment or contribution by the Executive or members of his family, throughout
his employment by the Company the following benefits:
a. Life Insurance. The policy in the amount of three times the
--------------
Base Salary insuring the life of the Executive currently owned by the Company,
the death benefits of which are payable to the beneficiaries designated by the
Executive.
b. Disability Insurance. Disability Insurance providing the
--------------------
Executive with monthly payments during the period of his disability (after
termination of his employment) in an amount equal to 1/12th of his then
applicable annual Base Salary immediately prior to his disability. If the
disability insurance policy should begin payment while the Executive is still
being compensated by the Company under the terms of this Agreement, the
-3-
Executive will reimburse the Company for all portions of such payments which
cause his total compensation to exceed the amounts otherwise payable to the
Executive under the terms of this Agreement.
c. Medical. Medical insurance protection for the Executive and
-------
his family at least as favorable to the Executive and his family as the
protection and plan being made available to them on the date of this Agreement.
In addition, if not covered by insurance, the Company shall provide the
Executive with an annual health checkup.
d. Professional Services Allowance. The Company will pay up to
-------------------------------
$2,500 per year for Executive's tax planning and preparation and/or other
financial planning services used by the Executive.
e. Other. Such other benefits, not duplicative of the
-----
foregoing, which the Board of Directors may now or in the future make available
to its senior Executives.
4. Support and Expenses. The Company shall provide the Executive with an
--------------------
office, staff and other support appropriate for the Chief Executive Officer of
an organization of the stature of the Company, and the Company shall pay or
reimburse the Executive for all reasonable travel and other expenses incurred by
him in connection with the performance of his services under this Agreement upon
presentation of expense statements or vouchers and such other supporting
information as the Company may from time to time reasonably request.
-4-
5. Termination by Company After May 30, 1999. If the Company shall
-----------------------------------------
terminate the employment of Executive after May 30, 1999, for a reason other
than "disability" or "cause," as defined in Section 7 hereof, the Company shall
continue to pay the Executive all of his compensation set forth in Section 3
hereof through the effective date of termination. Thereafter the Company shall
pay to the Executive any compensation and other benefits which were vested as of
the effective date of termination but payable at a later date. In addition to
all of the foregoing, the Company shall pay to the Executive on the first
business day of the month following the effective date of termination severance
pay (herein called "Severance Pay") in a lump sum equal to 1/12th of his then
applicable annual Base Salary.
6. Termination by Company Prior to June 1, 1999. If the Company shall
--------------------------------------------
terminate the employment of Executive prior to June 1, 1999, for a reason other
than "disability" or "cause" as defined in Section 7 hereof, or if the Executive
shall terminate his employment after the Company has committed a material breach
of this Agreement, then the Company shall pay to the Executive as they become
due, amounts otherwise payable to the Executive if he had remained in the
employment of the Company until June 1, 1999. In addition, the Company shall (i)
forthwith pay Severance Pay computed in accordance with Section 5 hereof, (ii)
thereafter pay all amounts of compensation and benefits which were vested on the
date of termination but not payable until a later date, including
-5-
amounts payable under Section 3B hereof, and (iii) comply with Section 9 hereof.
7. Termination for Disability of Cause. The Company may terminate the
-----------------------------------
Executive's employment due to "disability" if the Board of Directors shall
determine in good faith, that, by reason of physical or mental illness or other
condition continuing for more than one hundred and twenty (120) consecutive days
or for shorter periods aggregating more than one hundred and twenty (120) days
in any period of twelve (12) months (excluding in each case days on which on the
Executive was on vacation), the Executive has been substantially unable to
render services of the character contemplated by this Agreement. The Company may
terminate the Executive's employment for "cause" if the Board of Directors shall
determine in good faith that there shall have been a willful breach by the
Executive in a material manner of his duty of loyalty to the Company. If the
Company shall terminate the employment of Executive for disability or for cause
at any time, the Company shall have no further obligation hereunder except for
payment of Base Salary for services previously rendered, payment or provision of
other compensation or benefits previously vested, and the duty set forth in
Section 9 hereof.
8. Voluntary Termination. If prior to breach of this Agreement by the
---------------------
Company, the Executive shall resign as an employee during the term of his
employment, the Company shall
-6-
have no further obligation hereunder except for payment of Base Salary for
services previously rendered, payment or provision of other compensation or
benefits previously vested, and the duty set forth in Section 9 hereof.
9. Insurance after Termination. If the Company's group life, health and
---------------------------
disability insurance plans do not continue to protect the Executive after
termination of employment, the Company will use its best efforts upon
termination of the Executive's employment for any reason other than death to
arrange for transfer from a Company plan to the Executive (to be carried
thereafter at his own expense) any life, health and disability insurance
protection which may be so transferred.
10. Loans. Executive has loaned the Company $300,000 (Three-hundred
-----
thousand dollars). It is agreed that the Company shall repay the loan, plus
interest, out of operating revenues of the Company. Interest shall be calculated
at the rate in effect from time to time designated by The Chase Manhattan Bank,
N.A., as its prime rate.
11. Covenant Not to Compete. The Executive covenants and agrees that, from
-----------------------
the date hereof and until (i) six months following resignation by the Executive
pursuant to Section 8 hereof, or (ii) in the case of any other termination of
Executive's employment, six months following the date upon which the final
payment of amounts payable to the Executive by the Company by reason of such
termination becomes due, he shall not,
-7-
either directly or indirectly, (a) engage in or conduct any business competitive
with the Company's business, whether individually or as an employee, agent,
officer, director, owner, consultant or otherwise, without the prior written
consent of the Board of Directors of the Company, or (b) induce or attempt to
induce any existing or future employee or consultant of the Company or any of
its Affiliates to leave such employment.
12. Litigation. If litigation shall be brought by either party to enforce
----------
or interpret any provision contained herein and such party (the "prevailing
party") shall prevail on any issue contested in such litigation either through
settlement or judgment in favor of the prevailing party, the other party shall
reimburse the prevailing party for reasonable attorneys' fees and disbursements
incurred by the prevailing party in such litigation, and shall pay prejudgment
interest on any money judgment obtained by the prevailing party calculated at
the rate in effect from time to time designated by The Chase Manhattan Bank,
N.A., as its prime rate from the date of the breach by such other party under
this Agreement.
13. Entire Agreement; Amendments. This Agreement contains the entire
----------------------------
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior discussions, agreements and understandings of every
nature between them. This Agreement may not be changed or modified, except by an
agreement in writing signed by all of the parties hereto.
-8-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day of year first above written.
/s/ K. Xxxx Xxxxx
_______________________________
K. Xxxx Xxxxx
ATTEST: GLOBAL TELECOMMUNICATIONS, INC.
/s/ Xxxx XxXxxxxxx By:/s/ K. Xxxx Xxxxx
________________________________ ____________________________
Secretary
-9-
