Employment Agreement - Talk America Holdings Inc. and Jeffrey Earhart
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 2nd day of October, 2001, between Talk America Holdings, Inc., a Delaware
corporation ("Company"), and Jeffrey Earhart ("Employee").
Preliminary Statement
---------------------
WHEREAS, Employee has been an employee of Company and Company desires
to continue to employ Employee and Employee desires to continue to be employed
by Company; and
WHEREAS, Company and Employee desire to enter into this Agreement that
sets forth the terms and conditions of said continued employment.
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby agree as
follows:
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
continue in effect for a period of three (3) years after the date hereof, except
as hereinafter provided (the "Term").
3. Position and Duties. Except as may otherwise be agreed upon between
Company and Employee, Employee shall perform such duties and have such
responsibilities as Senior Vice President - Customer Operations, and such other
duties and responsibilities consistent with the foregoing duties and
responsibilities as may be reasonably assigned or delegated to him from time to
time by the Company's Chief Executive Officer or the Company's Board of
Directors (the "Board"), including, without limitation, service as an employee,
officer or director of affiliates (as that term is defined in Rule 405 of the
Securities Act of 1933, as amended (the "Act")) of Company (the affiliates of
Company, "Affiliates") 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,
business like and efficient
<PAGE>
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; (ii) managing his personal investments and affairs,
subject to the limitations of Section 10 hereof; and (iii) acting as a director
of another corporation if the Chairman of the Board or the Chief Executive
Officer of Company shall have consented to Employee's accepting such
directorship.
4. Compensation and Related Matters.
4.1 Base Salary. During the Term, Company shall pay to
Employee an annualized base salary of not less than $230,000, subject to review
from time to time by the Board ("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, but not limited to, bonus plans) as are made
available to the Company's senior executive officers during the Term, which
employee benefit plans may be altered from time to time at the discretion of the
Board (collectively with the benefits referred to in Section 4.3, the
"Benefits"). Without limitation of the generality of the foregoing, the Benefits
shall include a minimum of three (3) weeks of paid vacation each calendar year,
which, if not used in its entirety in any year, may be carried over to the next
succeeding calendar year, provided that Employee shall not be entitled to more
than five (5) weeks of paid vacation in any calendar year. Employee acknowledges
and agrees that bonuses, annual or otherwise, are performance-based and
discretionary with the Company's Chief Executive Officer and the Board.
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 executive officers. In addition, during the Term, Company
will provide Employee with either an automobile or an allowance for an
automobile, as Company shall determine, and Company shall keep such automobile
fully insured in accordance with Company's practices for similarly situated
employees.
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.
5. Termination. The Term may be terminated under the following
circumstances:
5.1 Death. The Term shall terminate upon the Employee's death.
2
<PAGE>
5.2 Disability. Company may terminate the Term as a result of
Employee's physical or mental incapacity in accordance with Company's disability
policy (a "Disability").
5.3 Cause. Upon written notice, Company may terminate the Term
for Cause. For purposes of this Agreement, Company shall have "Cause" to
terminate Employee's employment hereunder upon (i) material breach by Employee
of any material provision of this Agreement if Employee fails to cure such
breach in the 30 day period following written notice specifying in reasonable
detail the nature of the breach; (ii) willful misconduct by Employee 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 that is adverse to the interests
of Company without prior written disclosure thereof to, and consent from, the
Board; or (iii) Employee's gross neglect or unreasonable refusal to perform the
duties assigned to Employee under or pursuant to this Agreement if Employee
fails to eliminate such neglect in the 30 day period following written notice
specifying in reasonable detail the nature of the gross neglect.
5.4 By Employee.
(i) Employee may terminate the Term upon sixty (60)
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 by Company to maintain Employee in a
position commensurate with that referred to in Section 3 of this Agreement;
(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
that results in a diminution of such position, authority, duties or
responsibilities; or
(d) The relocation of Company's offices at which
Employee is principally employed to a location more than 50 miles away from Palm
Habor, Florida or Company's requiring Employee to be based anywhere other than
Company's offices in Palm
3
<PAGE>
Habor/Tampa, Florida greater metropolitan area except for required travel on
Company's business to the extent substantially consistent with Employee's travel
obligations during the year preceding the date of this Agreement (including,
without limitation, periodic travel to and work at Company's executive offices
in Virginia).
5.5 Without Cause. Company may otherwise terminate the Term at
any time upon written notice to Employee.
6. Compensation In the Event of Termination. Except as otherwise
provided in Section 7.3, in the event that Employee's employment pursuant to
this Agreement terminates prior to the end of the Term of this Agreement,
Company shall make payments to Employee as set forth below:
6.1 By Employee for Good Reason; By Company Without Cause. In
the event that Employee's employment hereunder is terminated: (i) by Employee
for Good Reason or (ii) by Company without Cause, then Company shall (a) pay to
Employee all amounts due to Employee pursuant to any bonus that was due to
Employee as of the date of such termination, pursuant to the terms of such bonus
(a "Due Bonus"), (b) continue to pay and provide Employee the Base Salary and
Benefits to which Employee would be entitled hereunder in the manner provided
for herein for the period of time ending on the earlier of the date when the
Term would otherwise have expired in accordance with Section 2 hereof and the
second anniversary of the date of such termination, (c) reimburse Employee for
expenses that may have been incurred, but which have not been paid as of the
date of termination, subject to the requirements of Section 4.4 hereof and (d)
one hundred percent (100%) of the outstanding stock options granted to the
Employee that are unvested shall immediately vest and become exercisable.
6.2 By Company for Cause; By Employee Without Cause. In the
event that Company shall terminate 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 any Due Bonus and any Benefits
that may have been earned and are due and payable but that have not been paid as
of the date of termination and reimbursements for expenses that may have been
incurred, reported and documented but that have not been paid as of the date of
termination, subject to the requirements of Section 4.4 hereof.
6.3 Death. In the event of Employee's death, Company shall not
be obligated to pay Employee or his estate or beneficiaries any compensation
except for (a) any Due Bonus and any Benefits that may have been earned and are
due and payable but that have not been paid as of the date of termination and
reimbursements for expenses that may have been incurred, reported and documented
but that have not been paid as of the date of termination, (b) reimbursement of
expenses that may have been incurred, but that have not been paid as of the date
of death, subject to the requirements of Section 4.4 hereof, and (c) all
outstanding stock options granted
4
<PAGE>
to Employee that are unvested shall immediately vest and become exercisable and
Employee's estate or beneficiaries, as the case may be, shall have the right to
exercise any of such stock options during the period commencing on the date of
death and ending on the second anniversary of the date of such termination or
for the remainder of the period set forth in the option agreement applicable to
the option in question (the "Exercise Period"), if less.
6.4 Disability. In the event of Employee's Disability, Company
shall not be obligated to pay Employee or his estate or beneficiaries any
compensation except for: (a) any Due Bonus and any Benefits that may have been
earned and are due and payable but that have not been paid as of the date of
termination; and (b) reimbursement for expenses that may have been incurred,
reported and documented but that have not been paid as of the date of
termination, subject to the requirements of Section 4.4 hereof. Upon termination
due to Disability, fifty percent (50%) of the outstanding stock options granted
to Employee that are unvested shall immediately vest and become exercisable and
Employee or his estate or beneficiaries, as the case may be, shall have the
right to exercise any of such stock options during the period commencing on the
date of Disability and ending on the second anniversary of the date of the
Disability 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 or Section 7.3, 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 to continue to pay or provide Benefits under
this Agreement for the period from and after the date of commencement of such
other employment shall terminate.
7. Change in Control.
7.1 Change in Control. For purposes of this Agreement, "Change
in Control" shall be deemed to have occurred if:
7.1.1 any Person (as defined in Section 3(a)(9) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
Company or any Significant Subsidiary (as defined below), becomes the Beneficial
Owner (as defined in Rule 13d-3 under the Exchange Act; provided, that a Person
shall be deemed to be the Beneficial Owner of all shares that any such Person
has the right to acquire pursuant to any agreement or arrangement or upon
exercise of conversion rights, warrants, options or otherwise, without regard to
the 60-day period referred to in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Company or any Significant Subsidiary (as defined
below) representing 50% or more of the combined voting power of the Company's,
or such Significant Subsidiary's, as the case may be, then outstanding
securities;
7.1.2 during any period of two years, individuals who at the
beginning
5
<PAGE>
of such period constitute the Board and any new director (other than a
director designated by a person who has entered into an agreement with Company
to effect a transaction described in 7.1.3, 7.1.4 or 7.1.5) whose election by
the Board or nomination for election by stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, but excluding for this
purpose any such new director whose initial assumption of office occurs as a
result of either an actual or threatened election contest or other actual or
threatened solicitation of proxies or consents by or on behalf of an individual,
corporation, partnership, group, association or other entity other than the
Board, cease for any reason to constitute at least a majority of the Board of
either Company or a Significant Subsidiary;
7.1.3 the consummation of a merger or consolidation of Company
or any subsidiary of Company owning directly or indirectly all or substantially
all of the consolidated assets of Company (a "Significant Subsidiary") with any
other entity, other than a merger or consolidation that would result in the
holder(s) of voting securities of Company or a Significant Subsidiary
outstanding immediately prior thereto continuing to hold more than fifty percent
(50%) of the combined voting power of the surviving or resulting entity
outstanding immediately after such merger or consolidation;
7.1.4 the stockholders of Company approve a plan or agreement
for the sale or disposition of fifty percent (50%) or more of the consolidated
assets of Company in which case the Board shall determine the effective date of
the Change of Control resulting therefrom;
7.1.5 any other event occurs that the Board determines, in its
discretion, would materially alter the structure of Company or its ownership; or
7.1.6 a person other than Gabriel Battista is elected by the
Board to serve as the Company's principal executive officer.
7.2 Options Vesting. In the event of a Change in Control of Company,
all outstanding options granted to you by Company shall vest immediately and
become exercisable as to all shares then subject thereto that are not then
vested and exercisable.
7.3 Termination after Change in Control.
7.3.1 If a Change of Control shall occur during the Term of
this Agreement, the term of Employee's employment hereunder shall continue in
effect until the later of the first anniversary of the date of the Change in
Control and the date that the Term would otherwise have terminated without
regard to the extension in this sentence, except for earlier termination as
provided in Section 5 of this Agreement. The rights and obligations of Employee
and Company
6
<PAGE>
under this Agreement upon or after any termination of the Term shall survive any
such termination.
7.3.2 Notwithstanding the provisions of Section 6 hereof, if a
Change in Control has occurred and Employee's employment hereunder is terminated
within one year of such Change in Control: (i) by Employee for Good Reason or
(ii) by Company without Cause, then Company shall (a) pay to Employee the Base
Salary and Benefits through the date of termination plus all amounts due to
Employee pursuant to any Due Bonus; (b) pay to Employee, as severance pay, a
lump sum amount equal to the sum of (x) twenty-four months' Base Salary plus (y)
an amount equal to the average annual incentive bonus earned by Employee from
Company during the last four (4) completed fiscal years of Company preceding the
date of Change in Control, or if Employee was not an officer during any or all
of such prior four (4) fiscal years, the average of the incentives received
during the fiscal years when Employee was such an officer; (c) for a period of
two years after the date of termination, arrange to provide Employee with life,
disability, sickness and accident, health, vision and dental insurance benefits
substantially similar to those that Employee was entitled prior to the Change in
Control, as well as with the other fringe benefits and perquisites to which
Employee was entitled pursuant to Section 4.3; and (d) reimburse Employee for
expenses that may have been incurred, but which have not been paid as of the
date of termination, subject to the requirements of Section 4.4 hereof.
8. 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 (including, without
limitation of the generality of the foregoing, any and all information referred
to in Section 10 hereof), whether or not conceived of or prepared by him, that
is related to the actual or anticipated business, services, research and
development of Company or any of its Affiliates or to existing or future
products or services of Company or any of its Affiliates; provided, that the
foregoing shall not apply to (i) information that is not unique to Company or
that 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 date he first became an employee of Company or any of its Affiliates
(except insofar as it is part of the information that is the exclusive property
of Company as provided in Section 10), or (iii) information that 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 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.
9. Tangible Items. All files, records, documents, manuals, books,
forms, reports,
7
<PAGE>
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.
10. Inventions and Patents. Employee agrees that all inventions,
innovations, ideas, concepts, improvements, developments, methods, designs,
analyses, drawings, reports, and all similar or related information that relates
to the actual or anticipated business, services, research and development of
Company or any of its Affiliates or existing or future products or services of
Company or any of its Affiliates, tangible or intangible, and that are
conceived, developed or made by or at the direction of Employee while employed
by Company, and all rights to the results and proceeds of any thereof and all
now known and hereafter existing rights of every kind and nature throughout the
universe, in perpetuity and in all languages, pertaining to such results and
proceeds and all elements thereof for all now known and hereafter existing uses,
media and form will be owned exclusively by Company; and the foregoing is
inclusive of a full irrevocable and perpetual assignment to Company. Employee
acknowledges that there are, and may be, new uses, media, means and forms of
exploitation throughout the universe employing current and/or future technology
yet to be developed, and the parties specifically intend the foregoing full,
irrevocable and perpetual grant of rights to Company to include all such now
known and unknown uses, media and form of exploitation, throughout the universe.
Employee agrees to execute at any time upon the Company's request such further
documents or do such other acts (whether before, during or after the Term) as
may be required to evidence and/or confirm the Company's ownership of any or all
of the foregoing. The termination, completion or breach of this Agreement for
any reason and by either party shall not affect the Company's exclusive
ownership of any or all of the foregoing.
11. Certain Restrictive Covenants. For a period ending twelve (12)
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. 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 Affiliate's relationship with, or
attempt to divert or entice away, any employee of Company or any Affiliate.
8
<PAGE>
12. 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, non-compete 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.
13. Company Representations. 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 Company, enforceable in accordance
in accordance with its terms.
14. Remedies. Employee acknowledges that the restrictions and
agreements contained in this Agreement are reasonable and necessary to protect
the 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.
15. 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 Employee's participation in any
other employee benefit or other plans or programs provided to officers,
directors or employees of Company.
16. Rights of Executive's Estate. If 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 Employee may have
last designated in writing filed with the Secretary of Company or, if Employee
has made no beneficiary designation, to Employee's estate. Such designated
beneficiary or the executor of his estate, as the case may be, may exercise all
of Employee's rights hereunder. If any beneficiary designated by Employee shall
predecease Employee, the designation of such beneficiary shall be deemed
revoked, and any amounts that would have been payable to such beneficiary shall
be paid to Employee's estate. If any designated beneficiary survives Employee,
but dies before payment of all amounts due hereunder, such payments shall,
unless Employee has designated otherwise, be made to such beneficiary's estate.
In the event of Employee's death or judicial determination of his incompetence,
reference in this Agreement to Employee shall be deemed where appropriate, to
refer to his beneficiary, estate or other legal representative.
9
<PAGE>
17. 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.
18. 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:
Jeffrey Earhart
7738 Still Lakes Drive
Odessa, Florida 33556
If to Company:
Talk America Inc.
6805 Route 202
New Hope, Pennsylvania 18938
Attn: General Counsel
Either party may change its address for notices by written notice to the other
party in accordance with this Section.
19. 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.
20. Headings. The headings in this Agreement are inserted for
convenience only and shall have no significance in the interpretation of this
Agreement.
10
<PAGE>
21. 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.
22. 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.
TALK AMERICA INC.
By: /s/ Aloysius T. Lawn IV
--------------------------------
Name: Aloysius T. Lawn IV
Title: Executive Vice President
/s/ Jeffrey Earhart
---------------------------------------
Jeffrey Earhart
Employee
11