PERSONAL SERVICES AGREEMENT
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AGREEMENT made as of this 1st day of October, 1995, by and
between GST USA, INC. and GST TELECOM INC., each Delaware corporations with
their principal offices at 0000 X.X. Xxxxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx 00000
(the "Corporations"), and XXXXXXX XXXXX, with an office at 00 Xxxxxxxxxx Xxxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000 ("Xxxxx").
W I T N E S S E T H :
WHEREAS, Xxxxx is an attorney at law with extensive experience
in the representation of publicly held corporations and otherwise advising
management of publicly held corporations in respect of corporate matters; and
WHEREAS, the Corporations desire to retain Xxxxx to render
management and legal services to the Corporations, their parent corporation, GST
Telecommunications, Inc. ("GST"), and their subsidiaries (collectively, the "GST
Companies"), and Xxxxx is willing to be retained to render such services;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. Retention of Xxxxx. The Corporations hereby retain Xxxxx to
render management and legal services to the GST Companies, subject at all times
to the control and direction of the Board of Directors of the Corporations.
Xxxxx shall be appointed as a director and Vice Chairman of the Board of
Directors of GST. He shall be elected to such additional offices of the GST
Companies as determined by the Board of Directors of GST.
2. Acceptance of Retention. Xxxxx hereby accepts such
retention and agrees that throughout the period of such retention, he will
devote one-half of his working time and attention to the performance of his
duties hereunder. Xxxxx further agrees to devote his knowledge and skills,
faithfully, diligently and to the best of his ability, in furtherance of the
business of the GST Companies, and to perform the duties assigned to him
pursuant to Paragraph 1 hereof, subject, at all times, to the direction and
control of the Board of Directors of the Corporations and GST. Xxxxx shall at
all times be subject to, observe and carry out such rules, regulations,
policies, directions and restrictions as the GST Companies shall from time to
time establish. The Corporations acknowledge that Xxxxx will continue to provide
legal and management services to persons and entities other than the GST
Companies. The performance of such services shall not constitute a breach of
this Agreement, provided that they do not interfere with the performance by
Xxxxx of his duties hereunder. Apart from any travel required to perform Xxxxx'x
duties hereunder, he shall not be required to be regularly based outside the New
York metropolitan area without his prior written consent (which may be withheld
in his discretion).
3. Term. Except as otherwise provided herein, the term of
Xxxxx'x retention hereunder shall commence as of the date hereof and shall
continue to and including the 28th day of February, 1999.
4. Compensation. As compensation for his services hereunder,
and in lieu of xxxxxxxx for his services through the firm of Xxxxxx Xxxxxxxx
Frome & Xxxxxxxxxx LLP, or any other law firm with which he may hereafter become
affiliated, the
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Corporations shall pay to Xxxxx a retainer at the rate of $280,000 per annum, or
such greater amount as the Board of Directors of GST (the "GST Board") may from
time to time determine, in equal installments no less frequently than
semi-monthly, and such incentive compensation and bonuses as the GST Board may
from time to time determine to award him. Xxxxx shall, for all purposes, be
deemed an independent contractor. The Corporations shall not be obligated to
deduct social security, withholding or any other payroll or related taxes from
any payments to be made to Xxxxx under this Agreement.
5. Additional Benefits. In addition to such retainer, Xxxxx
(and his family) shall be entitled to participate, to the extent he is (and they
are) eligible under the terms and conditions thereof, in any profit sharing,
pension, retirement, hospitalization, insurance, disability, medical service,
stock option, bonus or other benefit plan generally available to the executive
officers of the Corporations that may be in effect from time to time during the
period of Xxxxx'x retention hereunder. The Corporations shall be under no
obligation to institute or continue the existence of any such benefit plan. By
separate agreement, GST is issuing and delivering to Xxxxx a five-year warrant
to purchase 300,000 of its Common Shares at a price of $6.75 per share, such
warrant to become exercisable in three equal annual installments on October 1,
1996, 1997 and 1998.
6. Reimbursement of Expenses. The Corporations shall reimburse
Xxxxx in accordance with applicable policies of the GST Companies for all
expenses reasonably incurred by him in connection with the performance of his
duties hereunder and the business of
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the GST Companies, upon the submission to the Chief Financial Officer of either
of the Corporations of appropriate receipts or vouchers therefor.
7. Facilities and Personnel. Xxxxx shall be provided such
facilities, supplies, personnel and services as shall be required or reasonably
requested for the performance of his duties hereunder.
8. Vacation. Xxxxx shall be entitled to paid vacation for such
periods annually as are consistent with those taken by senior executives of the
Corporations, such vacation to be taken at times mutually agreeable to Xxxxx and
the Board of Directors of the Corporations.
9. D&O Insurance Coverage. The Corporations shall use their
best efforts to cause GST to obtain and maintain, at GST's cost and expense,
directors' and officers' liability insurance coverage for the directors and
officers of GST, including Xxxxx. Nothing herein shall be deemed to require GST
to provide such coverage for Xxxxx if it is not then providing such coverage
generally to its directors and officers.
10. Restrictive Covenant. In consideration of his retention
hereunder, Xxxxx agrees that during the period of such retention, he will not
(a) directly or indirectly own, manage, operate, join, control, participate in
or invest in, whether as an officer, director, employee, partner or investor,
any business entity that is engaged in the design, development, construction or
operation of alternate access or other telecommunications networks, in providing
long distance or other telecommunications services or in any other business in
which the GST Companies, or any of them,
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are engaged during such period within the United States of America (1) in all
locations in which the GST Companies or any of them are doing business, and (2)
in all locations in respect of which the GST Companies are actively planning for
and/or pursuing a business opportunity, whether or not the GST Companies, or any
of them theretofore have submitted any bids, provided that if such planning
and/or pursuit relates to a business opportunity that is not a competitive
access project (a "CAP") such planning and/or pursuit must have involved
material efforts on the part of the GST Companies or any of them, (b) for
himself or on behalf of any other person, partnership, corporation or entity,
call on any customer of the GST Companies for the purpose of soliciting,
diverting or taking away any customer from the GST Companies (1) in all
locations in which the GST Companies or any of them are doing business, and (2)
in all locations in respect of which the GST Companies or any of them are
actively planning for and/or pursuing a business opportunity, whether or not the
GST Companies or any of them theretofore have submitted any bids, provided that
if such planning and/or pursuit relates to a business opportunity that is not a
CAP, such planning and/or pursuit must have involved material efforts on the
part of the GST Companies or any of them, or (c) induce, influence or seek to
induce or influence any person engaged as an employee, representative, agent,
independent contractor or otherwise by the GST Companies or any of them, to
terminate his or her relationship with the GST Companies or any of them. Nothing
herein contained shall be deemed to prohibit Xxxxx from (x) investing his funds
in securities of an issuer if the securities of such issuer are listed for
trading on a national securities
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exchange or are traded in the over-the-counter market and Xxxxx'x holdings
therein represent less than 2% of the total number of shares or principal amount
of the securities of such issuer outstanding, (y) owning securities, regardless
of amount, of GST or (z) representing as legal counsel firms or individuals
engaged in any aspect of the telecommunications industry.
Xxxxx acknowledges that the provisions of this Paragraph 10
are reasonable and necessary for the protection of the GST Companies, and that
each provision, and the period or periods of time, geographic areas and types
and scope of restrictions on the activities specified herein are, and are
intended to be, divisible. In the event that any provision of this Paragraph 10,
including any sentence, clause or part hereof, shall be deemed contrary to law
or invalid or unenforceable in any respect by a court of competent jurisdiction,
the remaining provisions shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect and any invalid and
unenforceable provisions shall be deemed, without further action on the part of
the parties hereto, modified, amended and limited to the extent necessary to
render the same valid and enforceable.
11. Confidential Information. Xxxxx shall hold in a fiduciary
capacity for the benefit of the GST Companies all information, knowledge and
data relating to or concerned with their operations, sales, business and
affairs, and he shall not, at any time for a period of two years after
termination of his retention hereunder, use, disclose or divulge any such
information, knowledge or data to any person, firm or corporation (unless the
GST Companies no longer treat such information as confidential) other
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than to the GST Companies or their designees and employees or except as may
otherwise be required in connection with the business and affairs of the GST
Companies; provided, however, that Xxxxx may use, disclose or divulge such
information, knowledge or data that (i) is known to Xxxxx at the commencement of
his employment hereunder; (ii) is or becomes generally available to the public
through no wrongful act on Xxxxx'x part; or (iii) becomes available to Xxxxx
from a person or entity other than the GST Companies or their agents not bound
by this or a similar agreement with the GST Companies.
12. Equitable Relief. The parties hereto acknowledge that
Xxxxx'x services are unique and that, in the event of a breach or a threatened
breach by Xxxxx of any of his obligations under this Agreement, the Corporations
will not have an adequate remedy at law. Accordingly, in the event of any such
breach or threatened breach by Xxxxx, the Corporations shall be entitled to such
equitable and injunctive relief as may be available to restrain Xxxxx and any
business, firm, partnership, individual, corporation or entity participating in
such breach or threatened breach from the violation of the provisions hereof.
Nothing herein shall be construed as prohibiting the Corporations from pursuing
any other remedies available at law or in equity for such breach or threatened
breach, including the recovery of damages and the immediate termination of the
retention of Xxxxx hereunder.
13. Survival of Provisions. Neither the termination of this
Agreement, nor of Xxxxx'x retention hereunder, shall terminate or affect in any
manner any provision of this Agreement that is intended by its terms to survive
such termination.
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14. Death. In the event of termination of Xxxxx'x retention
hereunder by reason of his death, the Corporations shall pay a benefit (the
"Benefit Payment") to such person or persons as Xxxxx shall, at his option, from
time to time designate by written instrument delivered to the Corporations, each
subsequent designation to revoke all prior designations, or if no such
designation is made, to Xxxxx'x estate (the "Payment Beneficiary"). The Benefit
Payment shall be in an amount equal to one and one-half times Xxxxx'x then
current annual retainer, and shall be payable to the Payment Beneficiary in
equal quarterly installments over a period of one and one-half years, provided
that if the GST Companies, or any of them, then maintain a life insurance policy
on the life of Xxxxx under which they are the beneficiary, the amount of the
death benefit payable thereunder, to a maximum amount equal to the Benefit
Payment, less installments of the Benefit Payment theretofore paid, shall be
paid to the Payment Beneficiary on the Benefit Payment installment payment date
next succeeding the date on which the GST Companies receive such death benefit
proceeds, which shall satisfy in full the Corporations' obligations under this
Paragraph 14.
15. Disability. In the event that during the term of his
retention by the Corporations Xxxxx shall become Disabled (as such term is
hereinafter defined) he shall continue to receive the full amount of the
retainer to which he was theretofore entitled for a period of six months after
he shall be deemed to have become Disabled (the "First Disability Payment
Period"). If the First Disability Payment Period shall end prior to February 28,
1999, Xxxxx thereafter shall be entitled to receive a retainer at an
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annual rate equal to one-half of his then current retainer for a further period
ending on the earlier of (i) one year thereafter, or (ii) February 28, 1999 (the
"Second Disability Payment Period"). Upon the expiration of the Second
Disability Payment Period, Xxxxx shall not be entitled to receive any further
payments on account of his retainer until he shall cease to be Disabled and
shall have resumed his duties hereunder and provided that the Corporations shall
not have theretofore terminated this Agreement as hereinafter provided. The
Corporations may terminate this Agreement and Xxxxx'x retention hereunder at any
time after Xxxxx is Disabled, upon at least 10 days' prior written notice. For
the purposes of this Agreement, Xxxxx shall be deemed to have become Disabled
when (x) by reason of physical or mental incapacity, Xxxxx is not able to
perform a substantial portion of his duties hereunder for a period of 135
consecutive days or for 135 days in any consecutive 225-day period or (y) when
Xxxxx'x physician or a physician designated by the Corporations shall have
determined that Xxxxx shall not be able, by reason of physical or mental
incapacity, to perform a substantial portion of his duties hereunder. If Xxxxx
shall receive benefits under any disability policy maintained by the GST
Companies, the Corporations shall be entitled to deduct the amount equal to the
benefits so received from the retainer that they otherwise would have been
required to pay to Xxxxx as provided above.
The foregoing provisions regarding disability shall be
adjusted during the term hereof to match the most favorable disability benefits
provided to any other senior executive of the Corporations.
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16. Termination for Cause. The Corporations may at any time
upon written notice to Xxxxx terminate Xxxxx'x retention for Cause. For purposes
of this Agreement, the following shall constitute Cause: (i) the willful and
repeated failure of Xxxxx to perform any material duties hereunder or gross
negligence of Xxxxx in the performance of such duties, and if such failure or
gross negligence is susceptible of cure by Xxxxx, the failure to effect such
cure within 20 days after written notice of such failure or gross negligence is
given to Xxxxx; (ii) excessive use of alcohol or illegal drugs interfering with
the performance of Xxxxx'x duties hereunder; (iii) theft, embezzlement, fraud,
misappropriation of funds, other acts of dishonesty or the violation of any law
or ethical rule relating to Xxxxx'x retention; (iv) the conviction of a felony
or other crime involving moral turpitude by Xxxxx; or (v) the breach by Xxxxx of
any other material provision of this Agreement, and if such breach is
susceptible of cure by Xxxxx, the failure to effect such cure within 20 days
after written notice of such breach is given to Xxxxx. For purposes of this
Agreement, an action shall be considered "willful" if it is done intentionally,
purposely or knowingly, distinguished from an act done carelessly, thoughtlessly
or inadvertently. In any such event, Xxxxx shall be entitled to receive his
retainer to and including the date of termination. Should Xxxxx in good faith
dispute his termination for Cause, he shall give prompt written notice thereof
to the Corporations, in which event such dispute shall be submitted to and
determined by arbitration in New York, New York before an arbitrator appointed
pursuant to the rules of the American Arbitration Association (the
"Arbitrator"). Such arbitration shall
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be conducted in accordance with such rules as shall be promulgated by the
Arbitrator, which shall include a discovery period not to exceed 30 days in
length and which may include any or all of the rules then obtaining of the
American Arbitration Association. Any award or decision of the Arbitration shall
be conclusive in the absence of fraud and judgment thereon may be entered in any
court having jurisdiction thereof. The costs of such arbitration shall be borne
by the party against whom any award or decision is rendered. Xxxxx shall not be
entitled to receive any compensation for periods subsequent to his dismissal
pursuant to this Paragraph 16.
17. Change of Control.
(i) If prior to the termination of this Agreement,
there is a Change of Control (as such term is defined herein) and thereafter any
of the following occur: (a) Xxxxx is placed in any position of lesser stature
than that of Vice Chairman of the Board of Directors of GST; is assigned duties
inconsistent with those theretofore performed by him or duties which, if
performed, would result in a significant change in the nature or scope of the
functions or duties theretofore performed by him; is assigned performance
requirements or working conditions that are at variance with the performance
requirements and working conditions in effect on the date hereof; or is accorded
treatment on a general basis that is in derogation of his status as Vice
Chairman of the Board of GST; (b) Xxxxx ceases to serve as a member of the GST
Board; (c) any breach of Paragraph 2 or Paragraphs 4 through 8, inclusive, of
this Agreement; or (d) any requirement of the Corporations that the location at
which Xxxxx performs his principal duties for the
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Corporations be outside a radius of 50 miles from the location at which Xxxxx
performed such duties immediately prior to the Change of Control, then the
Agreement shall be deemed to have been terminated by the Corporation otherwise
than by reason of Cause and the Corporations shall pay to Xxxxx within five days
after notice from Xxxxx to such effect, as liquidated damages, a lump sum cash
payment equal to 2.99 times the "base amount" of Xxxxx'x compensation hereunder.
For purposes hereof, "base amount" shall have the meaning provided in Section
280G (b) (2) (A) of the Internal Revenue Code of 1986, as amended, and the
Proposed Regulations thereunder.
(ii) For the purposes of this Agreement, a Change of Control
means (i) the direct or indirect sale, lease, exchange or other transfer of all
or substantially all (50% or more) of the assets of GST or the Corporations to
any person or entity or group of persons or entities acting in concert as a
partnership or other group (a "Group of Persons") excluding the GST Companies
(ii) the merger, consolidation or other business combination of GST or the
Corporations with or into another corporation with the effect that the
shareholders of GST or the Corporations, as the case may be, immediately
following the merger, consolidation or other business combination, hold 50% or
less of the combined voting power of the then outstanding securities of the
surviving corporation of such merger, consolidation or other business
combination ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, (iii) the
replacement of a majority of the GST Board or of any committee of the GST Board
or of either of the Boards in any given year as compared to the
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directors who constituted the GST Board or such committee or either of the
Boards at the beginning of such year, and such replacement shall not have been
approved by the GST Board or the Boards, as the case may be, as constituted at
the beginning of such year, (iv) a person or Group of Persons shall, as a result
of a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise, have become the beneficial owner (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities
of GST or either of the Corporations representing 50% or more of the combined
voting power of the then outstanding securities of such corporation ordinarily
(and apart from rights accruing under special circumstances) having the right to
vote in the election of directors.
18. Insurance Policies. The GST Companies shall have the right
from time to time to purchase, increase, modify or terminate insurance policies
on the life of Xxxxx for the benefit of the Corporation, in such amounts as the
GST Companies shall determine in their sole discretion. In connection therewith,
Xxxxx shall, at such place or places as the GST Companies may reasonably direct,
submit himself to physical examinations on an annual basis (or more frequently)
should an insurer or prospective insurer so require, and execute and deliver
such documents as the GST Companies may deem necessary to obtain such insurance
policies.
19. Entire Agreement; Amendment. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof, and any prior agreement between the Corporations and Xxxxx with respect
to the subject matter hereof is hereby superseded and terminated effective
immediately and shall be
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without further force or effect. No amendment or modification himself shall be
valid or binding unless made in writing and signed by the party against whom
enforcement thereof is sought.
20. Notices. Any notice required, permitted or desired to be
given pursuant to any of the provisions of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered in person
or by responsible overnight delivery service or sent by certified mail, return
receipt requested, postage and fees prepaid to the parties at their respective
addresses set forth above (in the case of the Corporations, Attention: Chief
Executive Officer). Any of the parties hereto may at any time and from time to
time change the address to which notice shall be sent hereunder by notice to the
other parties given under this Paragraph 20. The date of the giving of any
notice hand delivered or delivered by responsible overnight carrier shall be the
date of its delivery and of any notice sent by mail shall be the date five days
after the date of the posting of the mail.
21. No Assignment; Binding Effect. Neither this Agreement, nor
the right to receive any payments hereunder, may be assigned by Xxxxx or the
Corporations without the prior written consent of the other parties hereto. This
Agreement shall be binding upon Xxxxx, his heirs, executors and administrators
and upon the Corporations, their respective successors and permitted assigns.
22. Waivers. No course of dealing nor any delay on the part of
the Corporations in exercising any rights hereunder shall operate as a waiver of
any such rights. No waiver of any default
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or breach of this Agreement shall be deemed a continuing waiver or a waiver of
any other breach or default.
23. Governing Law; Forum. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the State of Delaware,
except that body of law relating to choice of laws. Except as otherwise provided
in Paragraph 16 hereof, any action, suit or proceeding with respect to this
Agreement and the respective rights, remedies, duties and liabilities of the
parties hereunder shall be brought in the courts of the State of New York
located in New York, New York or in the United States District Court for the
Southern District of New York, and by execution and delivery of this Agreement,
each party accepts for itself, generally and unconditionally, the jurisdiction
of such courts. The parties hereto irrevocably waive any objection that they may
now or hereafter have to the commencement of any such action, suit or proceeding
in such courts.
24. Invalidity. If any clause, paragraph, section or part of
this Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any court of competent jurisdiction, such provision shall be
ineffective but shall not in any way invalidate or affect any other clause,
paragraph, section or part of this Agreement.
25. Further Assurances. Each of the parties shall execute such
documents and take such other actions as may be reasonably requested by the
other party to carry out the provisions and purposes of this Agreement in
accordance with its terms.
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26. Attorneys' Fees. If any action, suit or proceeding is
filed by any party to enforce or rescind this Agreement or otherwise with
respect to the subject matter of this Agreement, the party prevailing on an
issue shall be entitled to recover with respect to such issue, in addition to
costs, reasonable attorneys' fees incurred in preparation or in prosecution or
defense of such action, suit or proceeding as fixed by the arbitrator or trial
court, and if any appeal is taken from the decision of the trial court,
reasonable attorneys' fees as fixed on appeal.
IN WITNESS WHEREOF, the parties hereto have caused this
Personal Services Agreement to be duly executed as of the day and year first
above written.
GST USA, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
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(Title)
GST TELECOM INC.
By: /s/ Xxxxxx Xxxxxxxxxx
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(Title)
/s/ Xxxxxxx Xxxxx
-----------------------------------------
XXXXXXX XXXXX
THE FOREGOING AGREEMENT IS
CONSENT TO AND ACKNOWLEDGED:
GST TELECOMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
--------------------------------
(Title)
By: /s/ Xxxx Xxxxx
--------------------------------
(Title)
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