EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made this 1st day of
August, 1999 between COMMUNICATION TELESYSTEMS INTERNATIONAL, a California
corporation, having its principal office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (hereinafter referred to as "CTS" or the "Company")
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (hereinafter referred to as "Employee" and/or "▇▇▇▇▇▇").
This Agreement is made and entered into with reference to the
following facts:
WHEREAS, CTS and ▇▇▇▇▇▇ are parties to an employment agreement
dated December 16, 1993 (the "Existing Agreement");
WHEREAS, the parties desire to replace the Existing Agreement with
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT: ▇▇▇▇▇▇'▇ employment by CTS shall be governed by
the terms and conditions of this Agreement commencing as of August 1, 1999
(the "Commencement Date").
2. GENERAL DUTIES OF EMPLOYEE: Employee shall have the title of
Chief Executive Office of CTS. Employee shall perform such duties as
reasonably requested by CTS and, upon request, serve on the Board of
Directors of CTS and/or its subsidiaries.
3. COMPENSATION: As Employee's sole and complete compensation,
CTS will pay to Employee, subject to the conditions and limitations set forth
in this Agreement and all applicable withholding requirements and authorized
deductions, the following compensation:
(a) SALARY: CTS shall pay Employee a salary of FIFTY THOUSAND
DOLLARS ($50,000.00) per month.
(b) VACATION: Employee shall be entitled to twenty (20)
business days of vacation per year.
1
(c) EMPLOYEE BENEFITS: Employee shall participate in such
medical, dental, disability insurance and life insurance programs or plans
that are generally available to executives of CTS.
4. ADVANCES: CTS may, in its sole discretion, upon the written
request of Employee, make payments to Employee as advances on compensation
expected to become earned pursuant to this Agreement. Employee agrees that
each such advance constitutes a personal indebtedness of Employee to CTS,
repayable by Employee in full immediately upon demand by CTS, until such time
as the compensation on which the advance is made becomes fully earned.
5. TERMINATION OF EMPLOYMENT:
(a) DEATH OR DISABILITY: Employee's employment shall
terminate automatically upon Employee's death. If the Company reasonably
determines that the Disability of Employee has occurred (pursuant to the
definition of Disability set forth below), it may give to Employee written
notice of its intention to terminate Employee's employment. In such event,
Employee's employment with the Company shall terminate effective on the 90th
day after receipt of such notice by Employee, provided that, within the 90
days after such receipt, Employee shall not have returned to full-time
performance of his duties. For purposes of this Agreement, "Disability" shall
mean a physical or mental impairment which substantially limits a major life
activity of Employee and which renders Employee unable to perform the
essential functions of his position, even with reasonable accommodation which
does not impose an undue hardship on the Company.
(b) The Company may terminate Employee's employment for
"Cause". As used in this Section 5, the term "Cause" shall mean: (i) the
Employee's conviction of or entrance of a plea of guilty or nolo contendere
to a felony; or (ii) fraudulent conduct by the Employee in connection with
the business affairs of the Company or the theft, embezzlement, or other
criminal misappropriation of funds by the Employee from the Company; (iii)
the Employee's bad faith refusal to perform the duties of the Company's Chief
Executive Officer.
(c) OTHER THAN CAUSE OR DEATH OR DISABILITY: The Company may
terminate Employee's employment at any time without Cause upon ninety (90)
days' prior written notice to Employee.
2
(d) OBLIGATIONS OF THE COMPANY UPON TERMINATION:
(1) DEATH OR DISABILITY: If Employee's employment is
terminated by reason of Employee's Death or Disability, this Agreement shall
terminate without further obligations to Employee or his legal
representatives under this Agreement, other than for (a) payment of the sum
of (i) Employee's salary through the date of termination to the extent not
theretofore paid and (ii) any compensation previously deferred by Employee
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (i) and (ii) shall be hereinafter referred to as
the "Accrued Obligations"), which shall be paid to Employee or his estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the date
of termination; and (b) payment to Employee or his estate or beneficiary, as
applicable, of any amounts due pursuant to the terms of any applicable
welfare benefit plans.
(2) CAUSE: If Employee's employment is terminated by
the Company for "Cause", this Agreement shall terminate without further
obligation to Employee other than for the timely payment of Accrued
Obligations. If it is subsequently determined that the Company did not have
Cause for termination in any arbitration or other proceeding under this
Agreement, then the Company's termination shall be deemed to have been
"without Cause" under Paragraph 5(c) and the amounts payable under Paragraph
5(d)(3) of this Agreement for a termination other than for Cause, death, or
disability shall be the only amounts Employee may receive for his termination.
(3) OTHER THAN CAUSE OR DEATH OR DISABILITY: If the
Company terminates Employee's employment for other than Cause (as defined in
Section 5(b) hereof) or Death or Disability, or in the event of a
"Constructive Termination" of Employee's employment as defined below, this
Agreement shall terminate without further obligations to Employee other than
(a) the timely payment of Accrued Obligations, and (b) a lump sum cash
payment to Employee in an amount equal to (i) the amount of compensation that
Employee would have earned pursuant to Section 3(a) of this Agreement from
the date of such termination through July 31, 2002; plus (ii) the cost for
Employee to obtain benefits equivalent to those in effect pursuant to Section
3
3(c) of this Agreement at the time of such termination, from the date of such
termination through July 31, 2002. As used in this Section 5, the term
"Constructive Termination" shall mean: (i) a material reduction by the
Company in the kind or level of employee benefits to which the Employee was
entitled at the commencement of this Agreement with the result that the
Employee's overall benefits package is significantly reduced; (ii) the
relocation of the Employee to a facility or a location more than forty (40)
miles from the Employee's then present location, without the Employee's
express written consent; or (iii) the failure of the Company to obtain the
assumption of this agreement by any successor entity or (iv) any act or set
of facts or circumstances which would, under California case law or statute
constitute a constructive termination of the Employee.
6. COMPENSATION AFTER TERMINATION OF EMPLOYMENT: Except as
expressly provided in Section 5 of this Agreement and in any written option
plan or agreement, Employee shall have no further right to salary or any
other compensation after termination of Employee's employment with CTS,
irrespective of the time, manner or cause of such termination.
7. PLACE OF EMPLOYMENT: ▇▇▇▇▇▇'▇ primary place of employment for
CTS shall be at the Company's executive corporate offices, which are
presently located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇. During
the term of this Agreement, ▇▇▇▇▇▇ shall not be required to work at a
location outside of San Diego County, California, except for occasional
business travel consistent with past practices.
8. RECORDS TO REMAIN PROPERTY OF CTS: All records of CTS, and
all records and documents prepared or generated by Employee, CTS or any other
person or entity in connection with the performance of Employee under this
Agreement, including but not limited to account cards, invoice copies,
customer lists, leads and all documents containing the names or addresses of
or information relating to clients who have done business with CTS, are and
shall remain the property of CTS at all times during the term of Employee's
employment with CTS, and after termination of such employment for any reason.
None of such records, nor any part of them may be used by Employee either in
original form or in computerized, duplicated, or copied form except for the
purpose of conducting the business of CTS and the names,
4
addresses, and other information and data in such records are not to be
transmitted verbally, in writing, or in computerized form by Employee except
in the ordinary course of conducting business for CTS. All of said records or
any part of them are the sole proprietary information of CTS and shall be
treated by Employee as confidential information of CTS. In the event of the
termination of Employee's employment with CTS for any reason, Employee shall
return to CTS all such records and any copies or summaries thereof in
computerized, duplicated, copied or any other form.
9. LIMITATIONS ON EMPLOYEE'S USE OF PROPRIETARY INFORMATION:
During the term of Employee's employment with CTS, and for a period of
eighteen (18) months after the termination of Employee's employment with CTS,
irrespective of the time, manner or cause of such termination Employee shall
not, in any manner, directly or indirectly divulge, disclose or communicate
to any other person, firm or corporation, nor shall Employee use for his own
benefit other than in connection with the performance of Employee's duties
under this Agreement: (i) any of the names, addresses, telephone numbers of
or other data relating to carrier vendors or customers of CTS, prospective
customers of CTS or persons, firms or corporations to whom Employee may have
provided services in his capacity as a representative of CTS or to whom other
representatives of CTS have provided such services at any time; or (ii) any
of the records or documents referred to in Paragraph 8 of this Agreement.
Notwithstanding the foregoing, however, these limitations shall not apply to
information which: (i) was actually known to Employee prior to the
commencement of his employment with CTS; or (ii) is widely known among firms
engaged in CTS' business.
10. INVENTIONS: All improvements, discoveries, inventions,
designs, documents or other data related to the Company's business (whether
or not deemed patentable) conceived, developed, made, perfected, acquired, or
first reduced to practice, in whole or in part, during off-duty hours and
away from the Company's premises as well as in the regular course of
employment by Employee during development and research, of the Company or its
subsidiaries and affiliates shall be promptly disclosed to the Company, and
Employee shall hereby assign and transfer his right, interest and title
thereto and such improvements,
5
discoveries, inventions, designs, documents, or other data shall become the
property of the Company. During the term of Employee's employment and any
time thereafter, upon request and at the expense of the Company, Employee
will join and render reasonable assistance in any proceedings, and execute
any papers necessary to file and prosecute applications for, and to acquire,
maintain and enforce letters, patent, trademarks, registrations and/or
copyrights, both domestic and foreign, with respect to such improvements
discoveries, inventions, designs, documents, or other data as required for
vesting title to same in the Company.
11. ASSIGNMENT: Neither this Agreement nor any other benefits to
accrue hereunder shall be assigned or transferred by Employee, either in
whole or in part (except a transfer effective upon the death of Employee of
any payments due hereunder), without the written consent of CTS and any
purported assignment in violation hereof shall be void. This Agreement may be
assigned to and assumed by a successor to Company upon notice to Employee.
12 INDEMNITY: CTS and Employee shall have such indemnity rights and
obligations as provided by California law.
13. CHOICE OF LAW: This Agreement shall be construed under the laws of
the State of California without regard to choice of law principles.
14. PARTIAL INVALIDITY: If any term, provision, covenant, or condition
of this Agreement is held by a Court of competent jurisdiction to be invalid,
void or unenforceable, the rest of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated. In the
event any provision contained in Paragraphs 8, 9 or 10 of this Agreement
should ever be deemed to exceed the law in any respect, then the parties
hereto agree that such provision shall be amended automatically to provide
CTS with the maximum protection permitted by law.
15. ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties concerning the subject matter of this Agreement. It
supersedes all negotiations, statements, promises, or understandings, if any,
made prior to the execution of this Agreement. Any such negotiations,
promises,
6
or understandings shall not be used to interpret or constitute this
Agreement.
16. GENDER: As used in this Agreement, the masculine, feminine or
neuter gender, and the singular or plural number, shall each be deemed to
include the others whenever the context so indicates.
17. OUTSIDE EMPLOYMENT: During the term of Employee's employment with
CTS, Employee shall not engage in any other employment or outside business
activity without the prior written consent of CTD. The term "outside business
activity" shall not include (i) totally passive investments of any kind, with
the exception of investments in competitors of CTS which are not publicly
traded, or (ii) serving on the board of directors or as an occasional
consultant to a non-profit organization.
18. VENUE: The venue of any civil action, arbitration or other legal
proceeding between Employee, on one hand, and CTS and/or its officers,
directors and employees, on the other hand, arising out of or relating to
this Agreement, the employment of Employee by CTS, the termination of
Employee's employment with CTS, or any other dealings between Employee and
CTS, lies only in San Diego, California, and Employee and CTS waive any right
they may have under any statute or law to cause such action or proceeding to
be transferred to any other venue.
19. AMENDMENT AND WAIVER: The terms of this Agreement may be amended,
modified or eliminated, or the observance or performance of any term,
covenant or provision herein may be omitted or waived (either generally or in
a particular instance, and either prospectively or retroactively) only by a
writing signed by Employee and CTS. The waiver by CTS of any breach by
Employee of any term or provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
20. SURVIVAL OF PROVISIONS: The provisions contained in Paragraphs 8,
9, 10, 12, 16 and 23 of this Agreement, and the other provisions hereof to
the extent applicable, shall survive the termination of Employee's employment
with CTS.
21. INUREMENT: This Agreement shall be binding upon and inure to the
benefit of all heirs, assigns (to the extent permitted) and successors in
interest of the parties hereto.
22. HEADLINES: The titles and headlines herein are for convenience
only and shall not be
7
used to interpret this Agreement.
23. ARBITRATION: Any claim or controversy between Employee, on one
hand, and CTS and/or its officers, directors and employees, on the other
hand, arising out of or relating to this Agreement (including the Option
Agreement and other attachments hereto), the employment of Employee by CTS,
the termination of Employee's employment with CTS, or any other dealings
between Employee and CTS, shall be resolved by final and binding arbitration
before J.A.M.S./ENDISPUTE ("JAMS") in accordance with the then obtaining
Comprehensive Arbitration Rules and Procedures of JAMS, as modified herein.
The arbitrator may not limit, expand or otherwise modify the terms of this
Agreement and shall not have authority to award punitive or other
non-compensatory damages to either party. The award in such arbitration
proceeding may be entered in any Court specified in Paragraph 18 of this
Agreement.
24. INTERPRETATION: The contract rule of interpretation against the
drafter of a document shall not apply in any interpretation of this Agreement.
25. SECTION 280G PROVISIONS: Notwithstanding contained in this
Agreement to the contrary, to the extent that any payment or distribution of
any type to or for the Employee by the Company or any of its affiliates,
whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise (including, without limitation, any
accelerated vesting of stock options or restricted stock granted by the
Company pursuant to this Agreement or otherwise) (collectively, the "Total
Payments") is or will be subject to the excise tax imposed under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), then the total
Payments shall be reduced (but not below zero) (the "Reduction") so that the
maximum amount of the Total Payments (after the Reduction) shall be one
dollar($1.00) less than the amount which would cause the Total Payments to be
subject to the excise tax imposed by Section 4999 of the Code, provided that
the Total Payments shall only be reduced if the Reduction results in a
greater net benefit (after giving effect to all income, employment, excise,
and other taxes due) to the Employee than had the Reduction not been made.
Unless the Employee shall have given prior written notice to the Company to
effectuate a reduction in the Total Payments if such a reduction is required,
the Company
8
shall reduce or eliminate the Total Payments by first reducing or eliminating
any cash severance benefits, then by reducing or eliminating any accelerated
vesting of stock options, then by reducing or eliminating any accelerated
vesting of restricted stock, then by reducing or eliminating any other
remaining Total Payments. The preceding provisions of this Section shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Employee's rights and entitlements to any benefits or
compensation.
Any determination that Total Payments to the Employee must be reduced or
eliminated in accordance with the forgoing provisions of this Section and the
assumptions to be utilized in arriving at such determination, shall be made
by a nationally recognized accounting firm or consulting firm with experience
in such matters selected by the Company (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Employee
within fifteen (15) business days after the date such calculation is
requested by the Company or the Employee. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Employee shall appoint another
nationally recognized accounting or consulting firm with experience in such
matters to made the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. If a
Reduction to the Employee in accordance with the foregoing is necessary based
on the Accounting Firm's determination, the Accounting Firm shall furnish the
Employee with a written opinion that failure to limit the amount of the Total
Payments would result in the imposition of a tax under Section 4999 of the
Code and that the Employee's net benefits would be greater after the
Reduction than had the Reduction not otherwise been made. Any determination
by the Accounting Firm shall be binding upon the Company and the Employee. As
a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Total Payments to the Employee which will not have been made by
the Company should have been made ("Underpayment"). The Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
9
Underpayment shall be promptly paid by the Company to or for the benefit of
the Employee. In the event that any Total Payment made to the Employee shall
be determined by the Accounting Firm to result in the imposition of any tax
under Section 4999 of the Code and the Accounting Firm determines that the
Employee's net benefits would be greater after a Reduction, the amount of
such excess Total Payment shall be a loan from the Company to the Employee,
and the Employee shall promptly reimburse the Company for the amount of such
excess together with interest on such amount (at the same rate as is applied
to determine the present value of payments under Section 280G or any
successor thereto), from the date the reimbursable payment was received by
the Executive to the date the same is repaid to the Company.
IT IS SO AGREED:
EMPLOYEE:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
(Signature)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
(Print Name)
CTS:
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: President
---------------------------------
10