Employment Agreement - Tel-Save Inc., Tel-Save.com Inc. and Gary McCulla
As of January 5, 1999
Mr. Gary McCulla
3728 Windy Bush
New Hope, PA 18938
Dear Gary:
We are writing to confirm our agreements and understandings regarding the
terms of your continued employment under the Employment Agreement, dated as of
October 13, 1998 (the "Employment Agreement"), among you, as "Employee",
Tel-Save, Inc., as "Company", and Tel-Save.com, Inc. (formerly, Tel-Save
Holdings, Inc.), as "Holdings", from and after January 5, 1999 (the "Change
Date") (except as otherwise defined herein, capitalized terms shall be defined
as in the Employment Agreement):
1. From and after the Change Date, you, as "Employee" under the
Employment Agreement, will continue as an employee of Company, but you
shall have no duties or responsibilities, nor shall you have any
rights, except as specifically set forth herein and in the Employment
Agreement as hereby amended. Each of Sections 3, 4, 5 and 6 of the
Employment Agreement is hereby eliminated and shall be of no further
force and effect from and after the Change Date, except as and to the
extent specifically set forth elsewhere herein.
2. The "Term" of your employment under the Employment Agreement as
hereby amended shall commence on the Change Date and shall continue in
effect to, but not including, January 5, 2001, except as earlier
terminated as herein specifically provided.
3. The sole compensation payable to you pursuant to the Employment
Agreement (including, without limitation, Sections 4,6 and 10 thereof)
from and after the Change Date is $750,000 per year, payable for the
Term and in the same manner (equal periodic payments throughout the
year) as your base salary was paid to you pursuant to Section 4.1
before the Change Date. The aggregate amount payable to you pursuant
to this paragraph 3 will not exceed $1,500,000. Upon your death or a
"Change of Control" (as such term is defined in the Indenture, dated
as of December 10, 1997, relating to Company's 5% Convertible
Subordinated Notes due 2004), any balance of such compensation for the
Term not theretofore paid to you or on your behalf shall be paid to
you (or, in the case of your death, to your estate or beneficiaries)
in a lump sum and the Term shall thereupon
<PAGE>
terminate for all purposes of the Employment Agreement as hereby
amended.
4. The sole benefits and perquisites to which you will be entitled,
and Company will provide, pursuant to the Employment Agreement
(including, without limitation, Sections 4 and 6 thereof) from and
after the Change Date are: (a) health and medical benefits, during the
Term only, equal to the greater of (i) the health and medical benefits
provided to you immediately before the Change Date and (ii) the health
and medical benefits as are made available generally to the Company's
senior executives in effect during the Term; (b) maintenance, during
the Term and until the third anniversary of the last day of such Term,
by Company of director and officer insurance policies with benefits
equal to or greater than Company's director and officer insurance
policy in effect as of the Change Date; and (c) the continued use of
the 1998 Mercedes SL500 automobile leased by Company and used by you
as of the Change Date for the remainder of the term of the existing
lease of such automobile and the continued payment by Company of all
lease, insurance and other payments with respect to such automobile
for the remainder of such lease term ( it being expressly understood,
however, that you shall defend and hold Company harmless from all
claims, damages, litigation, liabilities and all matters whatsoever
regarding such automobile and your use thereof, except such as shall
be covered by insurance). In addition, at the end of the Term, Company
acknowledges that you will be entitled to such COBRA benefits as are
provided by law.
5. Except as specifically provided in paragraphs 4 and 5 of this
letter agreement and except for your entitlement, if any, to
indemnification and reimbursement by Company or Holdings arising out
of your having been an officer or director thereof, provided that you
hereby agree to cooperate with Company or Holdings to the extent
reasonably requested by Company or Holdings in any proceeding that may
give rise to any such indemnification, neither you nor your estate or
beneficiaries shall be entitled to any other payments, compensation,
perquisites or other benefits, from Company or Holdings or any
subsidiary thereof, under or by reason of the Employment Agreement or
otherwise and all such other payments, compensation, perquisites or
other benefits are hereby expressly waived by you (for yourself and
for your estate and your beneficiaries). Company shall withhold any
state, federal or other taxes that it may be required to withhold from
or with respect to any such payments, compensation, perquisites or
other benefits.
6. You will be entitled to no additional compensation for serving as
a director of Holdings. While you may, of course, resign as a director
of Holdings at any time, you hereby agree to resign as a director of
Holdings as and when requested by the Chairman of the Board of
Holdings, but not
<PAGE>
earlier than August 15, 1999. Furthermore, you agree that you will,
prior to your resignation as a director, vote in favor of the election
or nomination of your successor as a director or such other person as
shall have been designated as a nominee for director by Company's
Chairman of the Board.
7. The provisions of Section 10 of the Employment Agreement are
amended as follows: (a) the provisions thereof shall be for the Term
only and the "Restricted Period" therein shall be coterminous with the
Term, without regard to any conditions in the existing Section 10; (b)
you shall not be entitled to any compensation or other payments under
or otherwise by reason of such Section 10; and (c) you may, without
violation of the terms of such Section 10, also be employed by
Communications TeleSystems International d.b.a. WorldxChange
Communications during the Term without violation of the Employment
Agreement, as hereby amended, including Section 10 thereof.
8. You will make yourself available and shall cooperate, in each
case to the extent reasonably requested by Company or Holdings, in
respect of any litigation or other proceedings that arise out of or by
reason of the conduct of Company's or Holding's business or operations
during any time that you were a director or officer thereof, without
further compensation or payment except the payment of your reasonable
out-of-pocket costs and expenses in connection therewith.
9. Except as specifically provided herein, the Employment Agreement
shall continue in full force and effect.
10. The provisions of Sections 16 through (and including) 21 of the
Employment Agreement shall apply to this letter agreement as fully as
if set forth in full herein and the references therein to "this
Agreement" were a reference to this letter agreement.
If the foregoing correctly sets forth our agreements and understandings,
please so acknowledge by signing the enclosed copy of this letter agreement in
the space provided and returning it to us, whereupon this shall be a valid and
binding agreement by and among us.
<PAGE>
Very truly yours,
Tel-Save, Inc.
By:___________________________
Name
Title
Tel-Save.com, Inc.
By:___________________________
Name
Title
Accepted and agreed as of the date first above written:
---------------------------------
Gary McCulla