EXHIBIT 6.17
Employment Agreement with Xxxxxx X. Xxxxxxxxxxx
EMPLOYMENT AGREEMENT
This Agreement is entered into effective this lst day of October, 1999 (the
"Effective Date"), by and among Global Telephone Communication, Inc., a
Nevada corporation, (hereafter referred to as the "Employer") and XXXXXX X.
XXXXXXXXXXX (hereafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Employer is a corporation engaged in the telecommunications
business and desires to employ the Employee; and
WHEREAS, the Employee is willing to accept such employment on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. POSITION AND DUTIES. Employer hereby agrees to employ Employee on the
terms and conditions set forth herein in the position of Chief Executive
Officer. The Board of Directors may appoint Employee to additional corporate
offices. Employee shall use his best efforts and such time as may be required
to perform the duties of those positions as established by the Board of
Directors and the By-Laws of Employer. Employee may concurrently with this
Agreement continue to perform consulting services in the telecommunications
industry so long as the duties to be performed under his consulting
agreements (i) do not require Employee to use or to reveal trade secrets or
confidential information of Employer as those terms are defined in Subsection
8(a) below and (ii) do not prevent Employee from performing his duties under
this Agreement in a satisfactory manner. Employee shall report directly to
the Board of Directors.
2. TERM.
a. Unless renewed by the mutual agreement of the Employer and
Employee, Employer shall employ Employee for the period
beginning on the Date and ending on the third anniversary of
the Effective Date (the "Employment Period"); provided that
the Employment Period shall terminate prior to such third
anniversary (i) upon Employee's resignation, death, mental or
physical disability (as determined by the Board in its good
faith judgment pursuant to Section 7 below), (ii) by action
taken by Employer at any time prior to such third anniversary
for Cause (as defined below) or without Cause, (iii) by action
taken by Employee at time prior to such third anniversary for
"Good Reason" (as defined below) or (iv) upon the Employee's
election to convert the third year of the Employment Period
into a consultancy arrangement as provided for in Section 9
below.
b. If the Employment Period is terminated (other than in
accordance with item (iv) in subsection a above) (i) by the
Employer without Cause, or (ii) by the Employee for Good
Reason, Employee shall be entitled to receive his Base Salary
(as defined below) for the remainder of the Employment Period
in a lump sum within five business days of the date of
termination. The amounts payable pursuant to this paragraph
2(b) shall not be reduced by the amount of any compensation
Employee receives with respect to any other employment during
the remainder of the Employment Period. Termination of the
Employment Period pursuant to this subparagraph 2b shall
entitle Employee to outplacement services paid by Employer
which are consistent with his position and customary in the
Chicago market.
c. If the Employment Period is terminated by the Employer for
Cause or is terminated pursuant to clause (a)(i) above,
Employee shall be entitled to receive his Base Salary through
the date of termination, subject to the provisions of Section
7 below.
d. All of Employee's rights to fringe benefits, bonuses and
relocation reimbursements hereunder accruing after the date of
termination of the Employment Period shall (i) continue for
the remainder of the Employment Period if the termination is
pursuant to subsection (b) above and (ii) cease upon the date
of termination if termination is pursuant to subsection (c)
above. If (A) Employee is entitled to any fringe benefit
following the termination of the Employment Period and (B) the
Employee is ineligible to participate in the plan providing
such fringe benefits because he is no longer an employee,
Employer shall provide Employee a substitute fringe benefit or
cash payment to Employee that is economically equivalent
(including any "gross up" required so that the substitute
fringe benefit or the cash payment has the same after income
tax equivalence to Employee).
e. For purposes of this Agreement, "Cause" shall mean (i) a
"material breach" of this Agreement by Employee, (ii) a breach
of Employee's duty of loyalty to the Employer or any act of
dishonesty or fraud with respect to the Employer, (iii) the
conviction of Employee of a felony, a crime involving moral
turpitude or other act causing material harm to the Employer's
assets, standing or reputation. For the purposes of this
Agreement, a "material breach" shall be determined by a
majority of the Board (excluding Employee if he is a member of
the Board) as provided herein. The Board shall give Employee
written notice of the Board's concern over Employee's actions
or failure to act, specifying in detail the alleged breach and
the material effect of such breach on Employer and setting the
time and place for a meeting with the full board of directors
at a location within the United States. Employee shall have 15
days to prepare for such meeting with the Board, at which
meeting Employee may present any information on market
competitive conditions and any other factors bearing upon his
performance or disputing the facts related to the alleged
breach. Notwithstanding the above, general dissatisfaction
with Employee's job performance or a good faith conclusion by
the Board of Directors that Employee's performance is
substandard shall not constitute "Cause". Employer's sole
option if the Board of Director's conclusion is that
EMPLOYEE'S JOB PERFORMANCE IS SUBSTANDARD OR IF THERE IS
general dissatisfaction with Employee's job performance shall
be to discharge Employee without Cause.
f. For purposes of this Agreement, "Good Reason" shall mean
the occurrence of any of the following events at any time
prior to the end of the Employment Period: (i) any
non-payment, reduction or attempted reduction in Employee's
Base Salary (ii) the elimination of, or a material reduction
in, any fringe benefits required to be furnished to Employee
pursuant to Section 5 below or that are made available to
other employees but from which Employee is excluded (Provided,
however, that Good Reason shall not occur if Employer provides
to Employee a substitute fringe benefit or cash payment to
Employee
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that is economically equivalent (including any "gross up"
required so that the substitute fringe benefit or the cash
payment has the same after income tax equivalence to
Employee) to the eliminated, reduced or non-provided fringe
benefit; (iii) failure of Employer's stockholders to elect
and retain Employee as a member of the Board of Directors;
(iv) a material change in Employee's duties (including
status, office, title, reporting relationships or working
conditions), responsibilities, authority or duties (v)
relocation of Employee's office location after the Effective
Date, which the parties agree is Chicago, Illinois on the
Effective Date; (vi) failure of the Board of Directors to
adopt the recommendation of Employee as to the auditors for
Employer or outside legal counsel for Employer; (vii) failure
of the Board of Directors to implement changes to financial
statements or procedures recommended by either the auditors
or the outside legal counsel recommended by the Employee for
the purpose of bringing Employer into compliance with any
federal or state securities law or regulation and to maintain
such compliance; (viii) failure of any "Successor" (as
defined below) to assume, either by an enforceable agreement
or by operation of law, all of Employer's liabilities and
obligations to Employee under this Agreement or (ix) a
"Change of Control" (as defined below).
g. For purposes of this Agreement, "Successor" shall mean any
successor in interest to Employer by virtue of a Change in
Control, merger, consolidation or other business combination
involving Employer.
h. For purposes of this Agreement, "Change of Control" shall
mean either of the following events:
i. the sale, transfer or exchange of all or
substantially all of the assets of the Employer to
any person or entity other than a direct or indirect
majority-owned subsidiary of Employer;
ii. a 50% or greater change in the voting control of
Employer. Voting control shall be based upon an
assumption that all securities, warrants and options
to acquire voting shares of Employer are converted or
exercised. A TRANSFER OF SECURITIES, warrants or
options among existing stockholders and issuance of
additional securities, warrants or options to
existing stockholders shall not be considered a
change in the ownership for purposes of the
calculation. Provided, however, a "Change of Control"
shall occur upon the acquisition following the
Effective Date of 50% or more of the voting control
of Employer by any person, including existing
stockholder, (as defined in section 3 of the
Securities Exchange Act of 1934) or group, including
a group containing one or more existing stockholders,
(as defined in Rule 13d-5(b) of the Securities and
Exchange Commission) or the appointment of nominees
of such person or group to a MAJORITY OF THE SEATS ON
THE BOARD OF DIRECTORS OF EMPLOYER.
3. COMPENSATION. During and throughout the Employment Period, Employee
shall receive compensation for services performed hereunder by payment
of a base annual salary of no less than $360,000 (the "Base Salary").
The Base Salary to be paid the Employee hereunder shall be paid in
equal monthly or bi-weekly installments, as the Board of Directors of
the Employer shall determine. All salary and other cash compensation
shall be paid in U.S. Dollars and shall be subject to U.S., state and
local withholding taxes and payroll taxes.
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Employee shall be entitled to participate in any cash or stock bonus
plan that may be adopted by the Board after the Effective Date.
Immediately upon the execution of this Agreement, Employer shall pay to
Employee a signing bonus of $95,000 less all applicable withholding and
payroll taxes.
4. INCENTIVE STOCK OPTIONS. The Board of Directors shall have adopted
an incentive stock option plan that qualifies under Section 422A of the
Internal Revenue Code as soon as possible, but in no event later than
the Effective Date, and shall take all steps necessary to implement
said plan, including seeking stockholder approval of the plan,
reserving shares for issuance under the plan and, if necessary,
amending the certificate of incorporation to provide for sufficient
shares of authorized stock to be reserved and issued under the plan.
Subject to any required stockholder approval, Employer shall grant to
Employee options to acquire 1,000,000 shares of Employer's common stock
with a xxxxx xxxxx equal to 125% of fair market value of the common
stock at the time of the grant, said options to be fully vested as of
the date of the grant. Provided, however, that if the aggregate fair
market value of stock with respect to which said options are
exercisable for the first time by Employee in any one year exceeds
$100,000, the award of grants shall be staggered, the vesting schedule
shall be adjusted or the date of exercise shall be staggered, as
directed by Employee, so that the grant of options will not result in
exceeding the $100,000 limitation specified in Section 422(d) of the
Internal Revenue Code.
In the event that (i) Employer has not adopted the Incentive Stock
Option Plan and performed the other duties required by the preceding
paragraph by the Effective Date, or (ii) the fair market value of the
common stock causes part of the options to lose their status as
Incentive Stock Options because of the $100,000 limitation referenced
in the preceding paragraph then Employer shall, as directed by
Employee, issue as of the Effective Date fully vested warrants or
nonqualified stock options to Employee to purchase 1,000,000 shares of
Employer's common stock with an exercise price equal to 125% of the
fair market value of the common stock at the date of issue of the
warrants or non-qualified options.
5. BOARD SEATS-APPOINTMENTS-ADDITIONAL BENEFITS. During the Employment
Period, Employer shall use its best efforts to nominate Employee and
Xxxxxx X. Xxxx to its Board of Directors. Employee shall have the right
to propose the nomination of two additional outside directors which
Employer agrees to consider in good faith. The Employee shall be
entitled to participate, after any applicable waiting periods and
subject to any underwriting standards, in any cash or stock bonus
plans, any stock option plans, any employee welfare benefits plans or
any other fringe benefit plan, whether such plan is available to all
employees or available only to Key management personnel, which may from
time to time be established by the Board of Directors. Nothing herein
shall restrict or prohibit Employer's right to amend, terminate or
install any such plan. Notwithstanding the above, Employer shall pay
the full amount of Employee's (i) medical, dental, prescription drug,
and vision insurance premiums for family coverage (ii) any co-payments
and deductibles under such medical, dental, prescription drug, and
vision policies and (iii) basic group or individual term life
insurance. If Employer has no group medical, dental, prescription drug,
or vision insurance plan, Employer shall reimburse Employee for his
premium costs for his purchase of individual policies with family
coverage, in addition to reimbursement for copayments and deductibles.
The amount of life insurance to be paid for by Employer, the proceeds
of which shall be paid to beneficiaries designated by Employee, shall
be up to $250,000, the exact amount to be elected in writing by
Employee.
Employer shall use its reasonable best efforts to obtain Director and
Officer Liability Insurance in an expeditious manner.
Employer shall reimburse Employee no less frequently than once per
month for all necessary and reasonable travel and other expenses
incurred by Employee in furtherance of Employer's business. In order to
receive such reimbursement, Employee shall be required to furnish to
Employer such documentation as is required by the Internal Revenue
Service to permit Employer to deduct such
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reimbursement. Reimbursement shall also be subject to such reasonable
policies and procedures as are established by the Board of Directors
from time to time.
For all air travel required of Employee in the performance of his
duties hereunder, (i) Employee shall have the right to select a
recognized airline carrier of his choice, (ii) inter-continental air
travel tickets shall be no less than business class and (iii) domestic
air travel tickets shall be no less than coach with upgrade coupons.
6. VACATION. During each twelve months of employment, the Employee
shall be entitled to take up to four weeks vacation. Employee shall
schedule his vacation so as to create a minimum of disruption to the
business of the Employer. Employer shall pay to Employee cash in the
amount of one week's annual base salary for each week of allowed
vacation not taken by Employee during each twelve month period.
7. DISABILITY. In the event Employee shall become unable by reason of
mental or physical disability to continue the proper performance of his
duties hereunder on a full-time basis, payment of the Base Salary to
Employee under the terms of this Agreement shall continue until the
earlier of (i) Employee's receipt of disability benefits pursuant to
any disability insurance, or (ii) three (3) months from the date
Employee shall become unable by reason of such disability to continue
the proper performance of his duties hereunder on a full-time basis (in
either event, the "Date of Disability"). For purposes of termination of
the Employment Period, the Date of Disability shall be the date of
termination. After such period, Employee's rights to disability
benefits, if any, shall be dependent solely upon any existing employee
disability insurance plan, or amendments to any such disability
insurance plan which may be adopted by Employer from time to time. If
Employee is not satisfied with the level of disability benefits, if
any, provided by Employer, he is encouraged to procure his own personal
disability insurance.
8. NON DISCLOSURE-NON SOLICITATION. In consideration of and in exchange
for being employed, the payment of any severance pay and other good and
valuable considerations, Employee shall not, during the Employment
Period and thereafter:
a. use any of Employer's trade secrets or confidential
information or disclose any of Employer's trade secrets or
confidential information to anyone who is not under a
non-disclosure obligation to Employer. This non-disclosure and
non-use obligation shall continue with respect to each trade
secret and each item of confidential information until such
knowledge or information ceases to be a Trade Secret or
confidential information by virtue of its becoming known to
third parties under no non-disclosure obligation to Employer.
The term "trade secrets" and "confidential information" shall
mean information which is not generally known to the public
and which, if revealed to unauthorized persons, would be
detrimental to the reputation or business interests of
Employer and includes information relating to Employer's
business operations and structure, sales, METHODS, PRACTICES
AND TECHNIQUES, technical know-how, advertising or marketing
methods and practices, customer relationships and customer
lists (including customer names and addresses), and Employer's
relationships with suppliers, employees, customers, potential
customers, or other persons or entities doing business with
Employer.
In the event Employee so uses or discloses trade secrets or
confidential information in violation of this subsection (a),
then, in addition to any other remedy, Employer shall be
entitled to a temporary restraining order, temporary or
permanent injunction, specific performance, and other
equitable relief in addition to any other rights and remedies
which then may be available to Employer or its
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affiliates, without any showing of irreparable harm or damage
or the posting of any bond.
b. for a period of one year following termination of the
Employment Period, solicit customers, suppliers or other
entities having business relations with Employer or its
affiliates for the purpose of encouraging them to terminate
their relationships with Employer or its affiliates.
c. Encourage other employees of Employer or its affiliates to
terminate their employment with Employer or its affiliates.
Employee acknowledges and agrees that the foregoing restrictions are
reasonable restrictions for the protection of the goodwill and business
of the Employer, and that the foregoing restrictions do not place any
undue hardship on him.
Employee further acknowledges and agrees that the Employer's remedy at
law for any breach of the obligations set forth in this Section 8 would
be inadequate and that temporary and permanent injunctive relief may be
granted in any proceeding which may be brought to enforce the
provisions of this section without the necessity of proof of actual
damage. With respect to any such provision of this section finally
determined by a court of competent jurisdiction to be unenforceable, it
is agreed that such court shall have jurisdiction to reform this
section of this Agreement and such provision(s) so that it is
enforceable to the maximum extent permitted by law, and the parties
involved in such action agree to abide by such court's determination.
If such unenforceable provision cannot be reformed, such provision
shall be deemed to be severed from this agreement but every other
provision of this section shall remain in full force and effect.
9. CONSULTING AGREEMENT. At Employee's sole option, to be exercised by
Employee sending written notice to Employer prior to the second
anniversary of the Effective Date, Employee may elect to terminate the
Employment Period at the end of the second year of the Employment
Period and to be a consultant to the Company during the third year of
the Employment Period. The effects of such election by Employee shall
be as follows:
(i) Employee shall be deemed to have (a) terminated the
employment relationship AND RESIGNED AS AN OFFICER,
BOTH EFFECTIVE AS OF THE SECOND ANNIVERSARY OF the
Effective Date.
(ii) Employer shall no longer be required to use its best
efforts to secure for Employee a seat on the Board
of Directors.
(iii) Employee's non-solicitation obligation under
subsection 8(b) shall run for a two-year period
commencing on the second anniversary of the
Effective Date.
(iv) Employer and Employee shall enter into a written
consulting agreement, which shall include (A) the
economic benefits to Employee set forth in this
Agreement except to the extent fringe benefits
cannot be provided to Employee under group PLANS
ADOPTED BY EMPLOYER DUE TO EMPLOYEE'S ceasing to be
an employee, (B) granting to Employer the right to
terminate the payment of consulting fees for Cause
and (C) preserving Employer's right to seek
injunctive relief as set forth in this Agreement.
10. EMPLOYEE REPRESENTATIONS. Employee hereby represents and warrants
to the Employer 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) Employee is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity which prohibits or
restricts his ability to enter into this Agreement or perform his
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duties as contemplated hereunder, and (iii) upon the execution and delivery of
this Agreement by the Employer, this Agreement shall be the valid and binding
obligation of Employee, enforceable in accordance with its terms.
11. WAIVER. Failure by either party to insist upon strict compliance
with any of the terms and conditions of this Agreement shall not be
deemed a waiver of any such term or condition, nor shall any such
failure at any one or more times be deemed a waiver or relinquishment
at any other time of any right under the terms or conditions hereof.
12. BENEFIT.This Agreement shall inure to the benefit of and be binding
upon the heirs, legal representatives, successors or assigns of the
parties hereto.
13. ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto in respect of the subject
matter hereof and supersedes all prior and contemporaneous agreements
between the parties in connection with the subject matter of this
Agreement.
No modification of this Agreement shall be effective unless the same
shall be in a writing duly executed by both parties hereto.
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14. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, as such laws
apply to an employment agreement between an Illinois resident and a
corporation qualified to do business in Illinois. Any legal, equitable
or injunctive action brought by Employer to enforce its rights under
this Agreement shall be brought only in a court of appropriate
jurisdiction located within the state of Employee's primary residence
at the time such action is brought.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the Effective Date.
Global Telephone Communication, Inc.,
Employer
By:
Xxxxxx X. X. Xxxxxxxxxxx
Employee Print Name:
Its:
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