EXHIBIT 10
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EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as
of December 5, 1997, between EXECUTIVE TELECARD, LTD., a Colorado corporation
with principal offices located in Denver, Colorado (the "Company"), and
XXXXXXXXXXX X. XXXXX, XX (the "Executive").
WHEREAS, the Executive is currently serving as the interim Chief
Executive Officer of the Company;
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions for the employment relationship of the Executive
with the Company.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Executive is employed as the Chairman and
Chief Executive Officer of the Company for a period commencing on the date
hereof and ending on December 31, 2000. As the Chairman and Chief Executive
Officer of the Company, the Executive shall render executive, policy, and other
management services to the Company of the type customarily performed by persons
serving in such capacities. The Executive shall be responsible for strategic
planning, day to day operations, profitability, and growth. The Executive's
duties shall also include the supervision of all aspects of finance, legal
matters, planning, operations, marketing, sales, and personnel and shareholder
relations. All Company employees shall be subject to the Executive's orders and
direction. The Executive shall also perform such duties as the Board of
Directors may from time to time reasonably direct. During the term of this
Agreement, there shall be no material increase or decrease in the duties and
responsibilities of the Executive otherwise than as provided herein, unless the
parties otherwise agree in writing.
2. Location of Services. During the term of this agreement,
the Executive shall perform services at the Company's various offices
(particularly its principal office in Denver, Colorado), at an office in the
Washington, D.C. metropolitan area established for the Executive as provided
herein or at such other locations as the Executive reasonably determines are
necessary or convenient in order to perform the services hereunder.
Commencing on January 1, 1998 and during the term of this
Agreement, the Company shall provide the Executive with and pay (or reimburse
the Executive for, as applicable) all rent and other costs associated with an
office in the Washington, D.C. metropolitan area. The Executive shall be
entitled to use,
and be reimbursed for under this paragraph, the office at 0000 Xxxxxxxxxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. (or at such other location to which such office
is moved) leased by a company affiliated with the Executive and the secretarial
or administrative assistant(s) based at such office; provided, however, that if
less than 100% of the use of such office and such assistant(s) are devoted to
matters relating to the Executive's employment with the Company, the Executive
shall pro rate such costs between the Company and all other uses, based upon the
Executive's reasonable estimates of relative usage.
The Company shall provide the Executive with and pay (or
reimburse the Executive for, as applicable) all rent and other costs associated
with a furnished apartment in the Denver, Colorado metropolitan area.
The Executive Committee of the Company shall have the right to
review the reasonableness of the office and apartment reimbursement amounts from
time to time, in its discretion.
3. Salary. The Company shall pay the Executive an annual
salary equal to $200,000, with such increases as may be determined by the Board
of Directors in its discretion ("Base Salary"). The Base Salary of the Executive
shall not be decreased at any time during the term of this Agreement from the
amount then in effect, unless the Executive otherwise agrees in writing.
Participation in deferred compensation, discretionary bonus retirement, and
other employee benefit plans and in fringe benefits shall not reduce the Base
Salary. The Base Salary shall be payable to the Executive not less frequently
than monthly.
4. Bonuses. The Executive shall be eligible to earn
annual bonuses during each fiscal year or portion (but not less than one fiscal
quarter) thereof (a "Bonus Period") that he remains an executive employee of the
Company. For each Bonus Period the Board of Directors and the Executive shall
adopt financial performance targets expressed in gross revenues and EBITDA
(earnings before interest, taxes, depreciation and amortization) (unless
different performance measures are agreed upon in writing by the Company and the
Executive). If such targets are met or exceeded for such Bonus Period, the
Executive shall earn a bonus equal to 50% of the Base Salary in effect as of the
end of such Bonus Period. If between 70% and 100% of such targets are met for
such Bonus Period (averaging the percentages of achievement), the Executive
shall earn a bonus equal to the percentage of such target that was met
multiplied by 50% of the Base Salary in effect as of the end of such Bonus
Period. In the event that a Bonus Period is other than a fiscal year, the
financial performance targets for the applicable fiscal year(s) shall be pro
rated based upon the number of days in the Bonus Period. An amount equal to each
bonus earned under this paragraph shall be set aside by the Company in a
separate interest-bearing account (which shall be subject to the claims of
general creditors of the Company) within 90 days after the end of each Bonus
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Period, and all accrued interest shall become part of such bonus. Such bonus
(with accrued interest) shall become payable to the Executive on the earlier of
the date that is 15 days after termination of Executive's employment under this
Agreement by the Company and January 15, 2001, at which time it shall be paid in
a single lump sum; provided, however, that if any portion of such lump sum
payment would be subject to the deduction disallowance rule of Section 162(m) of
the Internal Revenue Code of 1986, or its successor, then such portion instead
shall be payable immediately after the start of the next calendar year. The
Board of Directors may, in its sole discretion, award additional or greater
bonuses to the Executive based upon achievement of other Company objectives
during the Bonus Period, including without limitation the Company exceeding 100%
of one or both of the financial performance targets.
5. Participation in Employee Benefit Plans. The Executive
shall be entitled to participate, on the same basis as other executive employees
of the Company, in any stock option, stock purchase, pension, thrift,
profit-sharing, group life insurance, medical coverage, education, or other
retirement or employee pension or welfare plan or benefits that the Company has
adopted or may adopt for the benefit of its employees. The Executive shall be
entitled to participate in any fringe benefits which are now or may be or become
applicable to the Company's executive employees generally. The Executive shall
promptly be reimbursed for any expenses which he may incur in connection with
his services hereunder in accordance with the Company's normal reimbursement
policies as established from time to time.
6. Stock Options. The Executive shall be granted options
to purchase an aggregate of 500,000 shares of the Company's common stock in
consideration of the Executive's acceptance of employment hereunder and in
consideration of the Executive relinquishing all prior stock option grants from
the Company. The exercise prices and vesting of such new options shall be as
follows:
(i) options to purchase 50,000 shares shall have an exercise
price equal to $2.32 (the fair market value at December 5, 1997, the time of
grant), and shall vest immediately.
(ii) options to purchase 50,000 shares shall have an
exercise price equal to $2.32 per share, and shall vest on the first anniversary
of the date hereof, subject only to continued employment as of such date.
(iii) options to purchase 100,000 shares shall have an
exercise price equal to $2.32 per share, and shall vest on the first anniversary
of the date hereof, subject to achievement of the financial performance targets
determined under (or in the same manner as provided in) Section 4 of this
Agreement for the period commencing on January 1, 1998 and ending on December
31, 1998; if such targets are met or exceeded for such period, all such options
shall vest; if between 70% and 100% of such targets are met for such period
(averaging the percentages of
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achievement), options shall vest with respect to the number of shares equal to
the percentage of such target that was met multiplied by 100,000 shares.
(iv) options to purchase 50,000 shares shall have an
exercise price equal to $3.50 per share, and shall vest on the second
anniversary of the date hereof, subject only to continued employment as of such
date.
(v) options to purchase 100,000 shares shall have an
exercise price equal to $3.50 per share, and shall vest on the second
anniversary of the date hereof, subject to achievement of the financial
performance targets determined under (or in the same manner as provided in)
Section 4 of this Agreement for the period commencing on January 1, 1999 and
ending on December 31, 1999; if such targets are met or exceeded for such
period, all such options shall vest; if between 70% and 100% of such targets are
met for such period (averaging the percentages of achievement), options shall
vest with respect to the number of shares equal to the percentage of such target
that was met multiplied by 100,000 shares.
(vi) options to purchase 50,000 shares shall have an
exercise price equal to $4.50 per share, and shall vest on the third anniversary
of the date hereof, subject only to continued employment as of such date.
(vii) options to purchase 100,000 shares shall have an
exercise price equal to $4.50 per share, and shall vest on the third anniversary
of the date hereof, subject to achievement of the financial performance targets
determined under (or in the same manner as provided in) Section 4 of this
Agreement for the period commencing on January 1, 2000 and ending on December
31, 2000; if such targets are met or exceeded for such period, all such options
shall vest; if between 70% and 100% of such targets are met for such period
(averaging the percentages of achievement), options shall vest with respect to
the number of shares equal to the percentage of such target that was met
multiplied by 100,000 shares.
Each of the options will have a term of five years from December
5, 1997. To the extent eligible, the options will be issued as incentive stock
options within the meaning and subject to the limitations of Section 422 of the
Internal Revenue Code. Once an option vests, it will remain vested and the
Executive will be permitted to exercise the option for the remainder of the five
year term of the option, without regard to termination of employment or the
reasons therefor. If the Company terminates the Executive's employment other
than "termination for cause," as defined below, options that are not yet vested
will vest to the extent that the Company achieves the applicable target(s) for
the period in which such termination occurs. If during the term of this
Agreement there is a "change in control" of the Company, as defined below, and
in connection with or within two years after such change of control the Company
terminates the Executive's employment other than "termination for cause," all of
the options shall vest in full
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to the extent and at such time that such options would have vested if the
Executive had remained employed for the remainder of the term of this Agreement.
7. Standards. The Executive shall perform the Executive's
duties and responsibilities under this Agreement in accordance with such
reasonable standards as may be established from time to time by the Board of
Directors. The reasonableness of such standards shall be measured against
standards for executive performance generally prevailing in the Company's
industry.
8. Voluntary Absences; Vacations. The Executive shall be
entitled, without loss of pay, to be absent voluntarily for reasonable periods
of time from the performance of the duties and responsibilities under this
Agreement. All such voluntary absences shall count as paid vacation time, unless
the Board of Directors otherwise approves. The Executive shall be entitled to
annual paid vacation of at least four weeks per year or such longer period as
the Board of Directors of the Company may approve. The timing of paid vacations
shall be scheduled in a reasonable manner by the Executive.
9. Disability. If the Executive shall become disabled or
incapacitated to the extent that the Executive is unable to perform the
Executive's duties and responsibilities hereunder, the Executive shall be
entitled to receive disability benefits of the type provided for other executive
employees of the Company.
10. Termination of Employment.
(a) The Board of Directors may terminate the Executive's
employment at any time, subject to payment of the compensation described below.
(b) In the case of any termination by the Board of Directors
other than "termination for cause" as defined below, or in the case of any
termination by the Executive after a material breach of this Agreement by the
Company ("termination with good reason"), the Executive shall continue to
receive, for one year commencing on the date of such termination (the "Severance
Period"), full Base Salary, any bonus that is earned after the termination of
employment, and all other benefits and compensation that the Executive would
have been entitled to under this Agreement in the absence of termination of
employment (collectively, the "Severance Amount"). The Severance Amount shall
not be reduced by any compensation which the Executive may receive for other
employment with another employer after termination of employment with the
Company. If during the term of this Agreement there is a "change in control" of
the Company, and in connection with or within two years after such change of
control the Company terminates the Executive's employment other than termination
for cause, the Company shall be obligated, concurrently with such termination,
to pay the Severance Amount in a single lump sum cash payment to the Executive.
If the Company fails to make
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timely payment of any portion of the Severance Amount, the Executive shall be
entitled to reimbursement for all reasonable costs, including attorneys' fees,
incurred by the Executive in taking action to collect such amount or otherwise
enforce this Agreement. In addition, the Executive shall be entitled to interest
on the amounts owed to him under this Agreement at the rate of 5% above the
prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), compounded
monthly, for the period from the date of employment termination until payment is
made to the Executive.
(c) The Executive shall have no right to receive
compensation or other benefits from the Company for any period after termination
for cause by the Company or termination by the Executive other than termination
with good reason, except for any vested retirement benefits to which the
Executive may be entitled under any qualified employee pension plan maintained
by the Company and any deferred compensation to which the Executive may be
entitled.
(d) The term "termination for cause" shall mean termination
by the Company because of the Executive's personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses), or material
breach of any provision of this Agreement.
(e) A "change in control," for purposes of this Agreement,
shall be deemed to have taken place if: (i) any person becomes the beneficial
owner of 20% or more of the total number of voting shares of the Company; (ii)
any person becomes the beneficial owner of 10% or more, but less than 20% of the
total number of voting shares of the Company, if the Board of Directors makes a
determination that such beneficial ownership constitutes or will constitute
control of the Company; (iii) any persons (other than persons named as proxies
solicited on behalf of the Board of Directors) hold revocable or irrevocable
proxies, as to the election or removal of two or more directors of the Company,
for 25% or more of the total number of voting shares of the Company; (iv) any
person has commenced a tender or exchange offer, or entered into an agreement or
received an option, to acquire beneficial ownership of 20% or more of the total
number of shares of the Company; or (v) as the result of, or in connection with,
any cash tender or exchange offer, merger, or other business combination, sale
of assets or contested election, or any combination of the foregoing
transactions, the persons who were directors of the Company before such
transaction shall cease to constitute at least two-thirds of the Board of
Directors of the Company or any successor corporation. For purposes of this
paragraph, a "person" includes an individual, corporation, partnership, trust or
group acting in concert, and a "beneficial owner" shall have the meaning used in
Rule 13d-3 under the Securities Exchange Act of 1934.
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11. Restrictive Covenants.
(a) During the employment of the Executive under this
Agreement and for a period of one year after termination of such employment
other than a termination by the Company without cause, the Executive shall not
at any time (i) compete on his own behalf or on behalf of any other person or
entity, with the Company or any of its affiliates within all territories in
which the Company does business with respect to the business of the Company or
any of its affiliates as such business shall be conducted on the date hereof or
during the employment of the Executive under this Agreement; (ii) solicit or
induce, on his own behalf or on behalf of any other person or entity, any
employee of the Company or any of its affiliates to leave the employ of the
Company or any of its affiliates; or (iii) solicit or induce, on his own behalf
or on behalf of any other person or entity, any customer of the Company or any
of its affiliates to reduce its business with the Company or any of its
affiliates.
(b) The Executive shall not at any time during or subsequent
to his employment by the Company, on his own behalf or on behalf of any other
person or entity, disclose any proprietary information of the Company or any of
its affiliates to any other person or entity other than on behalf of the Company
or in conducting its business, and the Executive shall not use any such
proprietary information for his own personal advantage or make such proprietary
information available to others for use, unless such information shall have come
into the public domain other than through unauthorized disclosure.
(c) The ownership by the Executive of not more than 5% of a
corporation, partnership or other enterprise shall not constitute a violation
hereof.
(d) If any portion of this Section 11 is found by a court of
competent jurisdiction to be invalid or unenforceable, but would be valid and
enforceable if modified, this Section 11 shall apply with such modifications
necessary to make this Section 11 valid and enforceable. Any portion of this
Section 11 not required to be so modified shall remain in full force and effect
and not be affected thereby. The Executive agrees that the Company shall have
the right of specific performance in the event of a breach by the Executive of
this Section 11.
12. No Assignments. This Agreement is personal to each of
the parties hereto. No party may assign or delegate any rights or obligations
hereunder without first obtaining the written consent of the other party hereto.
However, in the event of the death of the Executive all rights to receive
payments hereunder shall become rights of the Executive's estate.
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13. Other Contracts. The Executive shall not, during the term of
this Agreement, have any other paid employment other than with a subsidiary of
the Company, except with the prior approval of the Board of Directors.
14. Amendments or Additions; Action by Board of Directors. No
amendments or additions to this Agreement shall be binding unless in writing and
signed by all parties hereto. The prior approval by a majority vote of the full
Board of Directors shall be required in order for the Company to authorize any
amendments or additions to this Agreement, to give any consents or waivers of
provisions of this Agreement, or to take any other action under this Agreement
including any termination of employment with or without cause.
15. Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
17. Governing Law. This Agreement shall be governed by the laws
of the State of Colorado (other than the choice of law rules thereof).
18. Prior Agreements. This Agreement supersedes all prior
agreements between the parties hereto relating to the subject matter hereof,
including all prior agreements granting stock options to the Executive. From and
after the date of execution of this Agreement by each of the parties hereto,
neither of the parties hereto shall have any further obligations under such
prior agreements, except that the Company shall continue to be obligated to pay
all cash compensation presently owing to the Executive with respect to the
quarter ending December 31, 1997, which funds shall be used by the Executive to
unwind certain arrangements and pay certain expenses necessary for the Executive
to make the commitments provided for herein.
EXECUTIVE TELECARD, LTD.
By: /s/ Xxxxxxx X. Xxxxxxxx
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/s/ Xxxxxxxxxxx X. Xxxxx, XX
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XXXXXXXXXXX X. XXXXX, XX
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