EMPLOYMENT AGREEMENT
---------- ---------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 5th day of September, 1996 between Tel-Save, Inc. ("Company"), a
Pennsylvania corporation and a wholly-owned subsidiary of Tel-Save Holdings,
Inc. ("Holdings"), and Xxxxxx X. Xxxxxxxxx, III ("Employee").
Preliminary Statement
----------- ---------
WHEREAS, Company desires to employ Employee, and Employee desires to be
employed by Company; and
WHEREAS, Company and Employee desire to enter into this Agreement which
sets forth the terms and conditions of said employment.
1. Employment. Company agrees to employ Employee, and Employee accepts
such employment and agrees to serve Company, on the terms and conditions set
forth herein. Except as otherwise specifically provided herein, Employee's
employment shall be subject to the employment policies and practices of Company
in effect from time to time during the Term of Employee's employment hereunder
(including without limitation its practices as to reporting and withholding).
2. Term of Agreement. The term of Employee's employment hereunder shall
commence on October 1, 1996 (the "Effective Date") and shall continue in effect
for a period of five years thereafter, except as hereinafter provided ("Term").
3. Position and Duties. Except as may otherwise be agreed upon between
Company and Employee, Employee shall perform such duties and responsibilities of
Executive Vice President-Marketing and Corporate Developments or such duties and
responsibilities as may be reasonably assigned or delegated to him from time to
time, including without limitation service as an employee, officer or director
of Company and affiliates of Company without additional compensation. References
in this Agreement to Employee's employment with Company shall be deemed to refer
to employment with Company or an affiliate. Employee shall perform his duties
and responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner. Employee shall devote substantially all of
his working time and efforts to the business and affairs of Company; provided,
however, that nothing in this Agreement shall preclude the Employee from (i)
engaging in charitable activities and community affairs and (ii) managing his
personal investments and affairs.
4. Compensation and Related Matters.
4.1 Base Salary. During the Term of his employment hereunder,
Company shall pay to Employee an annualized base salary
of not less than $210,000, subject to review from time to time by Company's
Board of Directors ("Base Salary"). Base Salary shall be paid in accordance with
Company's usual and customary payroll practices.
4.2 Benefit Plans and Arrangements. Employee shall be entitled
to participate in and to receive benefits under Company's employee benefit plans
and arrangements (including bonus plans) as are made available to the Company's
senior executives in effect during the Term of his employment hereunder, which
may be altered from time to time at the discretion of Company.
4.3 Perquisites. During the Term of his employment hereunder,
Employee shall be entitled to receive fringe benefits as are made available to
the Company's senior executives.
4.4 Expenses. Company shall promptly reimburse Employee for
all normal out-of-pocket expenses related to Company's business that are
actually paid or incurred by him in the performance of his services under this
Agreement and that are incurred, reported and documented in accordance with
Company's policies. In addition, during the Term of his employment hereunder,
the Company agrees to provide Employee with an automobile, as the Company shall
determine, and the Company shall keep such automobile fully insured in
accordance with the Company's practices for similarly situated employees.
4.5 Relocation of Employee.
(a) The Company shall pay Employee's reasonable
moving expenses incurred in connection with Employee's move from his current
residence in Ridgewood, New Jersey ("Old Residence") to a new residence in
either the Princeton, New Jersey or New Hope, Pennsylvania areas ("New
Residence"). Employee shall obtain the Company's prior approval for any single
moving expenditure in excess of $1,000.
(b) (i) Subject to the limitation in Section
4.5(b)(iv), upon the consummation of the sale of Employee's Old Residence, the
Company agrees to pay Employee the amount of money equal to the difference
between the purchase price that Employee paid for such residence and the sale
price that Employee received in connection with the sale of such residence.
(ii) Subject to the limitation in Section
4.5(b)(iv), in the event that and so long as the Employee owns both a New
Residence and his Old Residence during the period commencing on the date hereof
and terminating nine months thereafter ("Transition Period"), the Company shall
reimburse the Employee for the greater of (i) his monthly mortgage for his New
Residence and (ii) his monthly mortgage payment for his Old Residence, provided,
however, that the Company shall reimburse the Employee only for one such
mortgage payment each month during the Transition Period.
(iii) Subject to the limitation of Section
4.5(b)(iv), to the extent that Employee has not purchased the New Residence, the
Company shall provide the Employee with a two-bedroom rental residence, as the
Company shall determine during the Transition Period.
(iv) Notwithstanding the foregoing, the
Company's aggregate liability to Employee pursuant to this Section 4.5(b) shall
not exceed fifty thousand dollars ($50,000.00).
4.6 Stock Options. (a) Employee shall be granted an option to
purchase 400,000 shares of common stock of Holdings (the "Option") in accordance
with the Stock Option Agreement attached hereto as Exhibit A. The Option shall
have an exercise price equal to $22.25 which is equal to the fair market value
of the common stock of Holdings on the date hereof. The Option shall be subject
to and conditional upon the Option receiving (i) the approval of the Board of
Directors of Holdings and (ii) the affirmative vote of a majority of all
outstanding shares of Holdings at the next annual meeting of the stockholders of
Holdings ("Stockholder Approval") and the Option shall be null and void if such
approval is not obtained. The Option shall be exercisable in installments, as
follows: (i) 133,333 shares of common stock may be purchased on the first
anniversary of the date hereof, (ii) 133,333 shares of common stock may be
purchased on the second anniversary of the date hereof and (iii) 133,334 shares
of common stock may be purchased on the third anniversary of the date hereof.
(b) Company agrees to file with the
Securities and Exchange Commission a Registration Statement on Form S-8 (or if
unavailable, a registration statement on Form S-3) to register the shares
issuable upon exercise of the Option under the Securities Act of 1933
("Securities Act") and any applicable state securities or "Blue Sky" laws on or
before the first anniversary of the date hereof. Notwithstanding the foregoing,
the Company shall be entitled to postpone for a reasonable period of time the
filing or the effectiveness of such registration statement if the Board of
Directors of the Company shall determine in good faith that such filing or
effectiveness would be materially detrimental to the Company's business
interest.
4.7 Signing Bonus. In consideration of Employee's Agreement to
become employed by Company, Company shall pay Employee $400,000 at the signing
hereof.
4.8 Change of Control. In the event of a "change in control"
of Holdings occurs, Employer shall pay Employee an amount equal to the
difference between $2,000,000 and the sum of (a) the aggregate "spread" upon the
Employee's prior exercise(s) of the Option, if any, and (b) the amount of the
spread on the Option on the date of the change in control, if any, assuming
Employee exercised the Option. For purposes of this paragraph 4.8: (A)
"change in control" of Holdings shall have been deemed to occur if (z) Xxxxxx
Xxxxxxxx ceases for any reason to be Chairman of the Board and Chief Executive
Officer of Holdings and the Company or (y) any of the events listed in paragraph
2(a) of the Option shall have occurred; provided, however, that the foregoing
shall not apply to a change in status of Xxxxxx Xxxxxxxx in connection with any
transaction or series of transactions currently referred to by the Company as
"Project Vineyard" so long as Xxxxxx Xxxxxxxx retains the title of either
Chairman of the Board or Chief Executive Officer of Holdings and the Company
thereafter; and (B) "spread" means the difference between the fair market value
(which shall be deemed to be the closing price of the common stock of Holdings
on the relevant date) of the shares with respect to which the Option is
exercised and the aggregate exercise price paid.
5. Termination. The Term of Employee's employment hereunder may be
terminated under the following circumstances:
5.1 Death. The Term of Employee's employment hereunder
shall terminate upon his death.
5.2 Disability. Company may terminate the Term of Employee's
employment hereunder as a result of Employee's physical or mental incapacity in
accordance with Company's disability policy.
5.3 Cause. (a) Upon written notice, Company may terminate the
Term of Employee's employment hereunder for Cause. For purposes of this
Agreement, Company shall have "Cause" to terminate Employee's employment
hereunder upon (i) material breach of any material provision of this Agreement;
(ii) willful misconduct as an employee of Company in connection with
misappropriating any funds or property of Company or attempting to willfully
obtain any personal profit from any transaction in which Employee has an
interest which is adverse to the interests of Company; or (iii) gross neglect or
unreasonable refusal to perform the duties assigned to Employee under or
pursuant to this Agreement.
5.4 By Employee.
(i) Employee may terminate the Term of his
employment hereunder upon sixty days prior written notice to Company, provided
that, upon the giving of such notice by Employee, Company may establish an
earlier date for the termination of the Term and such termination under this
Section 5.4.
(ii) Employee may terminate employment hereunder
for Good Reason immediately and with notice to Company. "Good reason" for
termination by Employee shall include, but is not limited to, the following:
(a) Material breach of any provision
of this Agreement by Company, which breach shall not have been cured by Company
within thirty (30) days of receipt of written notice of said material breach;
(b) Failure to maintain Employee in
a position commensurate with that referred to in Section 3 of this Agreement; or
(c) The assignment to Employee of any
duties inconsistent with the Employee's position, authority, duties or
responsibilities as contemplated by Section 3 of this Agreement, or any other
action by Company which results in a diminution of such position, authority,
duties or responsibilities.
5.5 Without Cause. Company may otherwise terminate the Term of
Employee's employment at any time upon written notice to Employee.
6. Compensation In the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the Term of this Agreement, the Company shall pay the Employee compensation as
set forth below:
6.1 By Employee for Good Reason; By Company Without Cause. In
the event that the Employee's employment hereunder is terminated: (i) by the
Employee for good reason or (ii) by the Company without Cause, then (A) the
Company shall continue to pay and provide Employee his compensation and benefits
as set forth in Section 4 in the same manner as before termination, and for a
period of time ending on the earlier of the date when the Term of this Agreement
would otherwise have expired in accordance with Section 2 of this Agreement and
the second anniversary of the date of such termination and (B) fifty percent
(50%) of the outstanding stock options granted to Employee which are unvested
shall immediately vest and Employee shall have the right to exercise any vested
stock options during the period ending on the second anniversary of the date of
such termination or for the remainder of the exercise period; if less.
6.2 By Company for Cause; By Employee Without Cause. In the
event that the Company shall terminate the Employee's employment hereunder for
Cause pursuant to Section 5.3 hereof or Employee shall terminate his employment
hereunder without Good Reason, all compensation and benefits, as specified in
Section 4 of this Agreement, heretofore payable or provided to the Employee
shall cease to be payable or provided, except for salary and benefits which may
have been earned and are due and payable but which have not been paid as of the
date of termination and reimbursements for expenses which may have been
incurred, reported and documented but which have not been paid as of the date of
termination.
6.3 Death. In the event of Employee's death the Company shall
not be obligated to pay Employee or his estate or beneficiaries any compensation
except for salary and benefits which may have been earned and are due and
payable but which have not been paid as of the date of termination and
reimbursements for expenses which may have been incurred, reported and
documented but which have not been paid as of the date of termination; provided,
however, that upon termination due to death, all outstanding stock options
granted to the Employee which are unvested shall immediately vest and the
Employee's estate or beneficiaries as the case may be, shall have the right to
exercise any vested stock options during the period ending on the second
anniversary of the date of such termination or, for the remainder of the
exercise period, if less.
6.4 Disability. In the event of Employee's disability, the
Company shall not be obligated to pay Employee or his estate or beneficiaries
any compensation except for: (a) salary and benefits which may have been earned
and are due and payable but which have not been paid as of the date of
termination; (b) reimbursement for expenses which may have been incurred,
reported and documented but which have not been paid as of the date of
termination; and (c) the Company, at its option, either will pay Employee (i)
$36,000 per year until Employee reaches the age of 65 or (ii) a lump sum equal
to the present value of the amount to be paid pursuant to Section 6.4(c)(i)
above. Upon termination due to disability fifty percent (50%) of the outstanding
stock options granted to the Employee which are unvested shall immediately vest
and the Employee or his estate or beneficiaries, as the case may be shall have
the right to exercise any vested stock options during the period ending on the
second anniversary of the date of such termination or for the remainder of the
exercise period, if less.
6.5 No Mitigation. In the event of any termination of
employment under Section 5, the Employee shall be under no obligation to seek
other employment; provided, however, to the extent that Employee does obtain
other employment subsequent to the termination of Employee's employment
hereunder, Company's obligations under this Agreement shall terminate.
7. Unauthorized Disclosure. Employee shall not, without the prior
written consent of Company, disclose or use in any way, either during the
Employee's employment with Company or thereafter, except as required in the
course of such employment, any confidential business or technical information or
trade secret acquired in the course of such employment, whether or not conceived
of or prepared by him, which is related to any service or business of Company or
any Company affiliate; provided, that the foregoing shall not apply to (i)
information which is not unique to the Company or which is generally known to
the industry or the public other than as a result of Employee's breach of this
covenant, (ii) information known to the Employee prior to the Effective Date, or
(iii) information which Employee is required to
disclose to or by any governmental or judicial authority; provided, however, if
Employee should be required in the course of judicial or administrative
proceedings to disclose any information Employee shall give Company prompt
written notice thereof so that Company may seek an appropriate protective order
and/or waive in writing compliance with the confidentiality provisions of this
Agreement. If, in the absence of a protective order or the receipt of a waiver
by the Company, Employee is nonetheless, in the written opinion of its counsel,
compelled to disclose information to a court or tribunal or otherwise stand
liable for contempt or suffer other serious censure or penalty, Employee may
disclose such information to such court or tribunal without liability to any
other party hereto.
8. Tangible Items. All files, records, documents, manuals, books,
forms, reports, memoranda, studies, data, calculations, recordings,
correspondence, in whatever form they may exist, and all copies, abstracts and
summaries of the foregoing and all physical items related to the business of
Company and its affiliates, other than merely personal items, whether of a
public nature or not, and whether prepared by Employee or not, are and shall
remain the exclusive property of Company and its affiliates and shall not be
removed from their premises, except as required in the course of employment by
Company, without the prior written consent of Company, and the same shall be
promptly returned by Employee on the termination of Employee's employment with
Company or at any time prior thereto upon the request of Company.
9. Inventions and Patents. Employee agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to Company's
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by or at the
direction of Employee while employed by Company will be owned by Company.
Employee also agrees to promptly perform all reasonable actions (whether before,
during or after the Term) necessary to establish and confirm such ownership (to
the extent of such ownership).
10. Certain Restrictive Covenants. For a period ending six (6) months
after the earlier of the Employee's termination of employment hereunder or the
Term Employee agrees that, he will not act either directly or indirectly as a
partner, officer, director, substantial stockholder or employee, or render
advisory or other services for, or in connection with, or become interested in,
or make any substantial financial investment in any firm, corporation, business
entity or business enterprise competitive with the business of Company, except
with the express written consent of the Board of Directors of Company. Employee
further agrees that in the event of the termination of his employment under
Section 5, for a period of one year thereafter, he will not employ or offer to
employ, call on, solicit, actively interfere with Company's or any Company
affiliate's relationship with, or
attempt to divert or entice away, any employee of Company or any Company
affiliate.
11. Employee Representations. Employee hereby represents and warrants
to Company that (i) the execution, delivery and performance of this Agreement by
Employee does not and will not conflict with, breach, violate or cause a default
under any contract, agreement, instrument, order, judgment or decree to which
Employee is a party or by which he is bound, (ii) except as disclosed to Company
in writing prior to the execution of this Agreement, Employee is not a party to
or bound by any employment agreement, noncompete agreement or confidentiality
agreement with any other person or entity, and (iii) upon the execution and
delivery of this Agreement by Company, this Agreement shall be the valid and
binding obligation of Employee, enforceable in accordance with its terms.
12. Company Representations. The Company represents and warrants (i)
that it is duly authorized and empowered to enter into this Agreement, (ii) that
the performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization and (iii) upon
the execution and delivery of this Agreement by the Employee, this Agreement
shall be the valid and binding obligation of the Company, enforceable in
accordance in accordance with its terms.
13. Remedies. Employee acknowledges that the restrictions and
agreements contained in this Agreement are reasonable and necessary to protect
that legitimate interests of Company, and that any violation of this Agreement
will cause substantial and irreparable injury to Company that would not be
quantifiable and for which no adequate remedy would exist at law and agrees that
injunctive relief, in addition to all other remedies, shall be available
therefor.
14. Effect of Agreement on Other Benefits. Except as specifically
provided in this Agreement, the existence of this Agreement shall not be
interpreted to preclude, prohibit or restrict the Employee's participation in
any other employee benefit or other plans or programs in which he currently
participates.
15. Rights of Executive's Estate. If the Employee dies prior to the
payment of all amounts due and owing to him under the terms of this Agreement,
such amounts shall be paid to such beneficiary or beneficiaries as the Employee
may have last designated in writing filed with the Secretary of the Company or,
if the Employee has made no beneficiary designation, to the Employee's estate.
Such designated beneficiary or the executor of his estate, as the case my be,
may exercise all of the Employee's rights hereunder. If any beneficiary
designated by the Employee shall predecease the Employee, the designation of
such beneficiary shall be deemed revoked, and any amounts which would have been
payable to such beneficiary shall be paid to the Employee's
estate. If any designated beneficiary survives the Employee, but dies before
payment of all amounts due hereunder, such payments shall, unless the Employee
has designated otherwise, be made to such beneficiary's estate. In the event of
the Employee's death or judicial determination of his incompetence, reference in
this Agreement to the Employee shall be deemed where appropriate, to refer to
his beneficiary, estate or other legal representative.
16. Severability. It is the intent and understanding of the parties
hereto that if, in any action before any court or agency legally empowered to
enforce this Agreement, any term, restriction, covenant, or promise is found to
be unreasonable and for that reason unenforceable, then such term, restriction,
covenant, or promise shall not thereby be terminated but that it shall be deemed
modified to the extent necessary to make it enforceable by such Court or agency
and, if it cannot be so modified, that it shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such modification or amendment in any event to apply only with respect to the
operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
17. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when received if delivered in person or
by overnight courier or if mailed by United States registered mail, return
receipt requested, postage prepaid, to the following addresses:
If to Employee:
Xx. Xxxxxx X. Xxxxxxxxx, III
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
If to Company:
Tel-Save, Inc.
0000 Xxxxx 000
Xxx Xxxx, Xxxxxxxxxxxx 00000
Attn: President
Either party may change its address for notices by written notice to the other
party in accordance with this Section 17.
18. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Employee and Company. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. The validity, interpretation,
construction and performance of this
Agreement shall be governed by the laws of Pennsylvania relating to contracts
made and to be performed entirely therein.
19. Headings. The headings in this Agreement are inserted for
convenience only and shall have no significance in the interpretation of this
Agreement.
20. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, personal representatives and
successors, including without limitation any affiliate to which Company may
assign this Agreement. Employee may not assign or transfer his rights to
compensation and benefits, except by will or operation of law and, except as
provided in Section 15 above.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first written above.
Tel-Save, Inc.
By:
------------------------------
Xxxxxx Xxxxxxxx
Chairman and Chief Executive Officer
---------------------------------
Xxxxxx X. Xxxxxxxxx, III
