TERMINATION AND SEVERANCE AGREEMENT
This Termination and Severance Agreement ("Agreement") is made this 24th
day of July, 1998 between Communication TeleSystems International d/b/a
WorldxChange Communications, a California corporation (hereinafter referred to
as "CTS") and Holly Mead (hereinafter referred to as "Mead").
WHEREAS, Mead is currently employed by CTS;
WHEREAS, Mead has tendered her resignation which CTS has accepted; and
WHEREAS, Mead has requested the payment of severance benefits, which CTS
has agreed to on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto, and other valuable consideration, the receipt and sufficiency is
hereby acknowledged, the parties hereto agree as follows:
1. TERMINATION OF EMPLOYMENT: The termination of Mead's employment
with CTS, based upon Mead's voluntary resignation, shall be effective as of
July 31, 1998 (the "Termination Date").
2. PAYMENT OF WAGES: Mead acknowledges that she has previously
received payment from CTS for all amounts due and owing as wages for services
performed by Mead through and including July 31, 1998.
3. SEVERANCE PAYMENTS: CTS shall pay to Mead Five Hundred Seventy Four
Thousand Seven Hundred Fifty Dollars ($574,750) in severance benefits (the
"Severance
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Payments"), on the dates and in the amounts set forth in Exhibit "A" to this
Agreement. Notwithstanding anything to the contrary contained herein, however,
any Severance Payments which would otherwise be payable on or after August 1,
1999 and which have not already been paid to Mead, shall not be payable after
the closing of a "CTS Event" as defined below. The term "CTS Event" shall mean
a public offering of CTS stock or a merger in which shareholders of CTS common
stock receive stock which is publicly traded.
4. DEDUCTIONS: All payments made to Mead pursuant to this Agreement
shall be subject to any and all deductions and withholding requirements
required by law.
5. CONTINUING OBLIGATIONS OF MEAD: Mead agrees to the following
continuing obligations:
(a) For a period of twenty-four (24) months following the
Termination Date, Mead will not, for herself or on behalf of any other person,
firm, partnership or cooperation, directly or indirectly, call upon or serve
any Customers of CTS or its affiliates for the purpose of soliciting or
offered in the market place any products or services which are the same as or
substantially similar to those provided to customers by CTS or its affiliates.
For purposes of this Agreement "Customers of CTS" shall include but not be
limited to, all customers contacted, solicited or served by CTS or its
affiliates within twelve (12) months prior to the Termination Date.
(b) For a period of eighteen (18) months following the Termination
Date, Mead will not, directly or through another person or entity, for herself
or on behalf of any other person, firm, partnership or cooperation, directly
or indirectly seek to persuade any director, officer or employee of CTS to
discontinue that individuals status or employment with CTS, or employ or
engage as a consultant any person who was employed by CTS as of the
Termination Date.
(c) For a period of nine (9) months following the Termination Date,
Mead will not, directly or indirectly, alone or as an employee, independent
contractor of any type, partner, officer, director, creditor, stockholder, or
holder of any option or right to become a stockholder in any entity or
organization, (i) engage in the long distance telecommunications business in
the United States, Canada, Europe or Australia or (ii) engage in direct
competition with any other business operation
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actively conducted by CTS or its affiliates, and any business pertaining to
the sale, distribution, manufacture, marketing, production or provision or
products or services similar to or in competition with any products or
services produced, designed, manufactured, sold, distributed or rendered, as
the case may be, by CTS or its affiliates.
(d) For a period of nine (9) months following the Termination Date,
Mead shall not advance credit, lend money, furnish quarters or give advice,
directly or indirectly to any person, corporation or business entity of any
kind which is engaged in any business or operation described in sub-paragraph
5(c).
(e) Mead shall not in any way publicly disparage CTS or its
affiliates at any time.
(f) For a period of twenty four (24) months following the
Termination Date, Mead agrees to provide to CTS and its affiliates truthful
and complete cooperation including, but not limited to, appearance at
interviews and depositions at reasonable times in all regulatory and
litigation matters relating to CTS and her prior employment by CTS whether or
not such matters have been commenced at the time of such termination at no
additional compensation, provided however, that to CTS will reimburse Mead
for all reasonable expenses incurred in connection with such requested
cooperation.
(g) Notwithstanding the foregoing, nothing contained in Section
5(c) or (d) shall prevent Mead from investing in cooperate securities which
are traded on a nationally recognized stock exchange, so long as Mead own
less than 5% of the outstanding voting securities of the company involved.
(h) If any of the restrictions on competitive activities contained
in Section 5 of this Agreement shall for any reason be held by a court or
arbitration tribunal of competent jurisdiction to be excessively broad as to
duration, geographical scope, activity subject or otherwise, such
restrictions shall be construed so as to be enforceable to the extend
compatible with applicable law as it shall then exist; it begin understood
that by execution of this Agreement the parties hereto regard such
restrictions as reasonable and compatible with their respective rights and
expectations.
6. CESSATION OF PAYMENTS AND INJUNCTIVE RELIEF: In the event of any
breach or threatened breach my Mead of any of the provisions of Section 5 of
this Agreement, CTS shall
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be entitled to : (i) immediately terminate all further payment of the
Severance Payments and any other compensation or benefits that may be payable
under this Agreement; (ii) recover provable damages and reasonable attorney's
fees; and (iii) to an immediate injunction restraining Mead from committing
or continuing to commit a breach of such provisions without the need to show
or prove actual damages. In the event of Mead's breach or threatened breach of
any of the provisions of Section 5 of this Agreement, CTS shall not be
required to make any further Severance Payments to Mead, regardless of
whether CTS seeks or obtains injunctive relief under this paragraph and
regardless of whether such breach is subsequently cured.
7. RETURN OF PROPERTY: On or before the Termination Date, Mead shall
return to CTS all property of CTS, which shall include but not be limited to
all property in Mead's possession or under her control which was purchased or
reimbursed by CTS or its affiliates, and all records and documents belonging
to CTS or its affiliates, furnished to Mead by CTS or its affiliates or
generated by Mead or any other CTS employee or consultant in the course of
their employment or other activities on behalf of CTS or its affiliates.
8. INVENTIONS: Mead agrees that all improvements, discoveries,
inventions, designs, or other data relating to the business of CTS or its
affiliates (whether or not patentable) conceived, developed, made, perfected,
acquired, or first reduced to practice by Mead, in whole or part, during the
term of her employment with CTS, both during off-duty hours and away from the
premises of CTS as well as in the regular course of employment by Mead during
development and research, shall be and at all times remain the property of
CTS. Mead further agrees that, upon request by CTS at any time, she will join
and render assistance in any proceedings, and execute any papers necessary to
file and prosecute applications for, and to acquire, maintain and enforce,
letters, patents, 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
CTS. The provisions of this paragraph shall not, however, apply to any
invention that Mead developed entirely on her own time without using CTS's
equipment, supplies, facilities or trade secret information except for those
inventions that either: (i) relate at the time of conception
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or reduction or practice of the invention to the business of CTS, or actual
or demonstrably anticipated research or development of CTS; or (ii) result
for any work performed by Mead for CTS.
9. STOCK OPTIONS: Mead acknowledges and agrees that: (i) Exhibit "B"
to this Agreement contains a full, complete and accurate description of all
stock options granted to Mead by CTS and its affiliates (the "Stock Option
Grants"), including the number of options granted to Mead which will be
vested as of the Termination Date; (ii) all options previously granted to
Mead which have not vested as of the Termination Date will be forfeited; and
(iii) pursuant to the provisions of the 1996 Stock Option/Stock Issuance Plan
adopted by CTS (the "Plan"), the period for exercising stock options granted
to Mead under the Plan which have vested as of the Termination Date ("Plan
Options") shall be reduced to a three (3) month period commencing with the date
of Mead's cessation of service with CTS, after which such Plan Options shall
terminate and cease to be outstanding. In the event Mead desires to exercise
any or all of the Plan Options, CTS shall extend a full recourse a loan to
Mead for such purpose with a term of three (3) years, with interest at the
rate of ten percent (10%) per annum and principal and all accrued interested
payable at the end of the loan term, to be fully secured by all shares
acquired with the loan proceeds until such time as the loan is fully repaid.
In order to obtain such loan, Mead shall be required to execute a promissory
note and pledge agreement in form and substance satisfactory to CTS.
10. RELEASE: Except as to (i) such rights or claims as may be created
by this Agreement, and (ii) rights or claims relating to the Stock Option
Grants, Mead hereby releases and discharges CTS and its affiliates and their
respective agents, employees, partners, representatives, shareholders,
officers, directors, attorneys, insurers, affiliates, subsidiaries, and
predecessors and successors in interest from any and all claims, demands and
cause or causes of action here for or hereafter arising out of, connected
with or incidental to Mead's employment by CTS or any dealings between Mead
and CTS or its affiliates prior to the Termination Date, including but not
limited to, and without limiting the generality of the foregoing, any claims
for wages, vacation pay, expense reimbursement, or severance benefits. Mead
specifically waives the benefit of the provisions of Section 1542 of the
CIVIL CODE of the State of California, which provides as follows:
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"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN THIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY EFFECTED HIS
SETTLEMENT WITH THE DEBTOR".
The release granted by Mead shall apply to all claims, whether known or
unknown.
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.
12. CHOICE OF LAW: This Agreement is entered into in accordance with
and shall be governed by California law; provided that if any California law
shall dictate that the laws of another jurisdiction be applied in any
proceeding, such California law shall be superseded by this paragraph and the
remaining laws of California shall nevertheless be applied in such proceeding.
13. 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 invalided.
14. 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,
statement promises or understandings shall not be used to interpret or
constitute this Agreement.
15. GENDER AND NUMBER: As used in this Agreement, the masculine,
feminine or
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neuter gender, and the singular or plural number, shall each be deemed to
include the others whenever the context so indicates.
16. VENUE: The venue of any civil action, arbitration or other legal
proceeding between Mead, on one hand, and CTS and/or its officers, directors
and employees or its affiliates, on the other hand, arising out of or relating
to this Agreement, the employment of Mead by CTS, the termination of Mead's
employment with CTS, or any other dealings between Mead and CTS or its
affiliates, lies only in San Diego, California, and Mead 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.
17. 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 Mead and CTS. The waiver by CTS of any breach by Mead of any
term or provisions of this Agreement shall not be construed as a waiver of any
subsequent breach.
18. 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.
19. HEADLINES AND CONSTRUCTION: Both parties have been represented by
legal counsel and have cooperated in the drafting of this Agreement, which
shall not be construed against either party. The titles and headlines herein
are for convenience only and shall not be used to interpret this Agreement.
20. ARBITRATION: Any claim or controversy arising out of or relating to
this Agreement, the termination of Mead's employment with CTS or any dealings
between Mead, on one hand, and CTS or its affiliates and/or the officers,
directors, employees or agents of CTS, or its affiliates, on the other hand,
shall be settled before J.A.M.S./ENDISPUTE ("JAMS") in accordance
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with the then obtaining Comprehensive Arbitration Rules and Procedures of
JAMS, as modified herein. A single arbitrator shall be appointed directly by
JAMS (without input from the parties) within five (5) days after receipt of a
demand for arbitration from any party to this Agreement. The arbitrator may
not limit, expand or otherwise modify the terms of this Agreement. The award
in such arbitration proceeding may be entered in any Court of competent
jurisdiction specified in paragraph 16 of this Agreement.
21. DEFINITION OF CTS AFFILIATE: For purposes of this Agreement, the
term "affiliate(s)" shall mean and refer to any direct or indirect parent or
subsidiary corporation of CTS, as well as CTS Telcom, Inc., a Florida
corporation and WorldxChange Limited, a New Zealand corporation.
22. MODIFICATION OF AGREEMENT TO ACCOMPLISH POOLING TRANSACTION: In the
event it is determined at any time by the certified public accountants of CTS,
the certified public accountants of any acquiror of CTS or any regulatory
agency that any of the monetary or non-monetary consideration furnished or to
be furnished to Mead pursuant to this Agreement would preclude accounting for
a proposed transaction involving CTS as a "pooling of interests", then in such
event Mead shall be required to immediately restore such consideration and/or
take such other action as may be required by such accountants or regulatory
agency so that the proposed transaction may be accounted for as a "pooling of
interests".
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IT SO AGREED:
COMMUNICATION TELESYSTEMS INTERNATIONAL
BY: /s/ Edward S. Soren
------------------------------------
ITS: Chairman
-----------------------------------
/s/ Holly Mead
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HOLLY MEAD, INDIVIDUALLY
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EXHIBIT "A"
SCHEDULE OF SEVERANCE PAYMENTS
DATE AMOUNT
---- ------
August 1, 1998 $11,200.00*
August 7, 1998 $65,175.00
September 1, 1998 $26,375.00
October 1, 1998 $26,375.00
November 1, 1998 $26,375.00
December 1, 1998 $26,375.00
January 1, 1999 $76,375.00
February 1, 1999 $26,375.00
March 1, 1999 $26,375.00
April 1, 1999 $26,375.00
May 1, 1999 $26,375.00
June 1, 1999 $26,375.00
July 1, 1999 $26,375.00
August 1, 1999 $26,375.00
September 1, 1999 $26,375.00
October 1, 1999 $26,375.00
November 1, 1999 $26,375.00
December 1, 1999 $26,375.00
January 1, 2000 $26,375.00
*The August 1, 1998 payment in the amount of $11,200.00 was previously
advanced to Mead, and Mead acknowledges receipt and full payment thereof.
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EXHIBIT "B"
SCHEDULE OF STOCK OPTIONS
Number
Number of Shares
of Shares Exercise Vested at
Grant Date Type of Grant Granted Price Termination
- ---------- ------------- --------- -------- -----------
January 5, 1995 Letter Agreement 120,000 $0.4166 120,000
April 5, 1995 Letter Agreement 60,000 $0.6666 52,500
December 6, 1996 Corporate Plan 102,000 $5.00 51,000
December 1, 1997 Corporate Plan 30,000 $9.00 6,000
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TOTAL 229,500
NOTE: Share amounts and exercise prices listed take into account all stock
splits.
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