EXHIBIT 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, dated April 26, 2004, by and between
deltathree, Inc., a Delaware corporation (the "Company"), and Shimmy Zimels
("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive entered into an Executive Employment
Agreement, dated April 1, 1999
(inclusive of the most recent extension dated September 1, 2002), and both
parties wish to enter into a subsequent Executive Employment Agreement,
effectively extending the executive's employment; and
WHEREAS, the Company desires to enter into an agreement, effective as of
the date of this Agreement (the "Commencement Date") to set out the terms and
conditions of Executive's employment by the Company from and after the
Commencement Date; and
WHEREAS, the Executive desires to continue in the employment of the
Company from and after the Commencement Date under those terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Executive hereby agree as follows:
1. EMPLOYMENT.
(a) Agreement to Employ. Upon the terms and subject to the conditions of
this Agreement, the Company hereby employs Executive, and Executive hereby
accepts continued employment by the Company.
(b) Term of Agreement. Unless earlier terminated pursuant to Section 5
hereof, the period of this Agreement and the Executive's continued employment
hereunder (the "Agreement Term") shall commence as of the date hereof, (the
"Effective Date"), and shall expire on August 31, 2006; provided, however, that
the Agreement Term shall be automatically extended for the same duration on the
expiration date and on each expiration date thereafter (each an "Extension
Date"), unless written notice of non-extension is provided by either party to
the other party at least three (3) months prior to such anniversary, provided
that Executive provides notice of renewal six (6) months prior to the end of the
Agreement Term to the Compensation Committee.
The period commencing on the Commencement Date and ending on the earlier
of (i) the expiration of the Agreement, or (ii) the date of Executive's
termination of employment pursuant to Section 5(a) shall be referred to as the
"Employment Period".
2. POSITION AND DUTIES.
(a) In general. Executive shall be employed as Chief Executive Officer and
shall perform such duties and services, consistent with such position and their
current duties and services for the Company, and as may be assigned to them from
time to time by the Board of Directors. The duties of the Executive shall
include serving as an officer or director or otherwise performing services for
any "Affiliate" of the Company as requested by the Company. An "Affiliate" of
the Company means any entity that controls, is controlled by or is under common
control with the Company. Executive shall report to the Board of Directors.
(b) Full-time employment. During the Employment Period, Executive shall
devote their full business time to the services required of them hereunder,
except for time devoted to services required by them to be performed for any
"Affiliate" of the Company, vacation time and reasonable periods of absence due
to sickness, personal injury or other disability, and shall use their reasonable
best efforts, judgment, skill and energy to perform such services in a manner
consonant with the duties of their position and to improve and advance the
business and interests of the Company. Executive shall not be engaged in any
other business activity which, in the reasonable judgment of the Board of
Directors, conflicts with the duties of the Executive under this Agreement. In
such event, Executive shall receive five days' written notice to disengage from
such business activity. Executive may serve on the Board of Directors or on
advisory boards of other corporations which do not compete with the Company;
provided, however, that, in such case, (i) Executive shall provide the Company
with 5 days' written notice of any scheduled meeting of the Board of Directors
of such company and (ii) Executive shall be charged with 1/2 vacation day for
every four hours spent at such Board of Directors meeting during business hours.
Executive shall travel to such location or locations as may be requested by the
Company, or which Executive believes is necessary or advisable, in the
performance by Executive of their duties hereunder or to the extent appropriate
to improve and advance the interests of the Company and its Affiliates. There is
no formal disciplinary procedure, but Executive is expected at all times to
behave in a manner befitting their employment.
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3. COMPENSATION.
(a) Base Salary. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate of US$239,000; provided that,
Executive's annual base salary shall be increased as of January 1 of each year,
by an amount equal to the base salary then in effect, multiplied by the
percentage increase in the Cost of Living Index during the preceding year. The
"Cost of Living Index" means the consumer price index for all urban consumers in
the New York metropolitan area published by the Department of Labor, or if such
index is no longer available, such other generally available index measuring
changes in consumer purchasing power (in the New York metropolitan area or
nationally) designated by the Board of Directors. Any delay in increase in
Executive's annual base salary by reason of the unavailability of any such index
at the time any such increase shall otherwise be due shall be made up by a lump
sum payment promptly after the index becomes available. Executive's salary, as
adjusted for any increase in the Cost of Living Index, may be further increased
at the option and in the discretion of the Board of Directors (such salary, as
the same may be increased from time to time, is referred to herein as the "Base
Salary"). The Base Salary shall be payable in such installments (but not less
frequent than monthly) as the salaries of other executives of the Company are
paid.
(b) Performance Incentive Plan. During the Employment Period, Executive
shall be eligible to participate in the Company's 1999 Performance Incentive
Plan. The discretionary portion of the bonus shall be determined by the
Compensation Committee. If the Company shall amend or terminate the 1999
Performance Incentive Plan in a manner that would reduce the opportunity of
Executive to earn an incentive bonus as provided in the 1999 Performance
Incentive Plan, the Company shall provide a substitute arrangement so that
Executive's total bonus opportunity will not be materially reduced.
(c) Stock Incentive Plan. To the extent approved by the Compensation
Committee and the Board (including, the number of options awarded and other
specific terms of the award), Executive shall be granted stock option grants.
Such grants will be commensurate with Executive's position with the Company and
with stock options awarded to other senior executives of the Company (other than
grants made to other executives in connection with their initial employment with
the Company).
All Options shall become immediately exercisable in full in the event that
Executive's employment with the Company is terminated: (i) by the Company other
than for Cause, (ii) by Executive for Good Reason or (iii) by reason of the
death or Disability of the Executive; PROVIDED, HOWEVER, that if Executive's
employment is terminated for any reason prior to the 18 month anniversary of the
Commencement Date, only the exercisable portion of the Option, if any, shall
remain exercisable and any unvested portion of the Option shall not be
exercisable. The Option shall expire on the seven-year anniversary of the
Commencement Date.
Additionally, all Options shall become immediately exercisable in full
upon a Change in Control. The exercisable portion of the Option shall, following
any termination of Executive's employment (other than for Cause), remain
exercisable for the lesser of two years and the remaining term of the Option.
4. BENEFITS, PERQUISITES AND EXPENSES.
(a) Benefits. During the Employment Period, Executive shall be eligible to
participate in (i) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each group life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, (ii) each pension, profit sharing, retirement, deferred
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, on the same basis as
generally made available to other senior officers of the Company, (iii) all
other benefits sponsored or maintained by the Company, in each case, whether now
existing or established hereafter, on the same basis as generally made available
to other management level employees of the Company.
(b) Perquisites. During the Employment Period, Executive shall be entitled
to five weeks' paid vacation annually and shall also be entitled to receive such
perquisites as are generally provided to other senior officers of the Company in
accordance with the then current policies and practices of the Company.
Executive shall not be entitled to receive remuneration for unused vacation and
shall not be permitted to carry-over unused vacation to the following year,
unless Executive receives the written consent from the CFO prior to September
30th of such year.
(c) Business Expenses. During the Employment Period, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may require and
in accordance with the generally applicable policies and procedures of the
Company.
(d) Indemnification. The Company shall indemnify Executive and hold
Executive harmless from and against any claim, loss or cause of action arising
from or out of Executive's performance as an officer, director or employee of
the Company or any of its subsidiaries or affiliates or in any other capacity,
including any fiduciary capacity, in which Executive serves at the request of
the Company to the maximum extent permitted by applicable law and the Company's
Certificate of Incorporation and Bylaws in effect on the date hereof. If any
claim is asserted against Executive with respect to which Executive reasonably
believes in good faith he is entitled to indemnification, the Company shall
either defend Executive or, at its option, pay Executive's legal expenses (or
cause such expenses to be paid) on a quarterly basis, provided that Executive
shall reimburse the Company for such amounts, plus simple interest thereon at
the 90-day United States Treasury Bill rate as in effect from time to time,
compounded annually, if Executive shall be found by a court of competent
jurisdiction not to have been entitled to indemnification.
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5. TERMINATION OF EMPLOYMENT.
(a) Termination of the Employment Period. The Employment Period shall end
upon the earliest to occur of (i) a termination of Executive's employment on
account of Executive's death, (ii) a Termination due to Disability or
Retirement, (iii) a Termination for Cause, (iv) a Termination Without Cause, (v)
a Termination by Executive for Good Reason, (vi) a Termination by Executive
other than for Good Reason, or (vii) the expiration of the Term. The Company or
the Executive may initiate a termination in any manner permitted hereunder by
giving the other party written notice thereof (the "Termination Notice"). The
effective date (the "Termination Date") of any termination shall be deemed to be
the later of (i) in the case of a Termination Notice from Executive, 45 days
after the receipt by the Company of the Termination Notice, (ii) the date on
which the Termination Notice is given, or (iii) the date specified in the
Termination Notice; PROVIDED, HOWEVER, that in the case of the Executive's
death, the Termination Date shall be the date of death. Upon termination of
their employment for any reason, Executive will immediately resign from all
positions that he holds with the Company and its Affiliates.
(b) Payments Upon Certain Terminations.
(i) Termination Without Cause or Termination by Executive for Good
Reason. In the event that Executive's employment is terminated by the Company
Without Cause or by Executive for Good Reason, the Company shall pay Executive
their Earned Salary, Vested Benefits and a Severance Benefit (as such terms are
hereinafter defined). In addition, if Executive's employment terminates pursuant
to this subsection (i), the Company shall continue to provide to Executive the
welfare benefits (other than disability insurance) referred to in Section 4, or
substantially comparable benefits, until the earlier of (x) the date on which
Executive is eligible to obtain comparable benefits from other employment, (y)
the expiration of the Term or (z) one year.
(ii) Termination due to Death. In the event of the termination of
Executive's employment due to Executive's death, the Company shall pay
Executive's estate Executive's Earned Salary, Vested Benefits and a lump sum
payment equal to 12 months of Executive's Base Salary (at the rate in effect on
the date of their death).
(iii) Termination due to Disability or Retirement. In the event of
termination of Executive's employment by the Company due to Disability or a
Termination due to Retirement, the Company shall pay Executive their Earned
Salary and Vested Benefits, plus, in the event of termination due to Disability,
to the Executive or their estate their Base Salary at the Termination Date on a
monthly basis for 12 months following the month in which Executive's employment
is terminated. In the event that Executive's employment with the Company is
terminated due to Disability, Executive's benefits under this subsection (iii)
shall be reduced by the amount of any Company sponsored (and paid for)
disability benefits paid to Executive.
(iv) Termination by Executive Other Than for Good Reason. In the
event of a Termination by Executive other than for Good Reason, the Company
shall pay Executive their Earned Salary and Vested Benefits.
(v) Termination for Cause. In the event of a termination of
Executive's employment by the Company for Cause, the Company shall pay Executive
their Earned Salary and Vested Benefits.
(c) Timing of Payments. Earned Salary shall be paid in a single lump sum
as soon as practicable, but in no event later than the earlier of 60 days
following the end of the Employment Period or the day such Earned Salary would
have been payable under the Company's normal payroll practices. Vested Benefits
shall be payable in accordance with the terms of the plan, policy, practice,
program, contract or agreement under which such benefits have accrued except as
otherwise expressly modified by this Agreement. Severance Benefits shall be paid
in a single lump sum 5 days prior to the Termination Date.
(d) Retention of monies owed. The Company may at any time during
Executive's employment or upon their termination for any reason deduct and
retain from any monies owed by it to Executive any sum properly paid by it or
any Affiliate to, on behalf or at the request of Executive or due to it from
Executive including, but not limited to, unauthorized expenses or excess
vacation.
(e) Definitions. The following capitalized terms have the following
meanings:
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"Change in Control" means the occurrence of (i) a sale or other
disposition of stock of the Company, such that the then current largest
shareholder is no longer the largest shareholder, (ii) any merger, consolidation
or reorganization following which those persons who are members of the Board of
Directors of the Company immediately prior to the closing of such transaction
constitute less than one half of the membership of the board of directors of the
surviving entity immediately following the closing of such transaction, (iii) a
transaction pursuant to which more than 50% of the total value of the assets of
the Company and its consolidated subsidiaries are transferred and the transferee
of such assets is not a subsidiary of the Company, or a company controlled by
the Company, (iv) a complete liquidation of the Company, (v) the Company ceases
to be publicly owned, i.e, its shares cease to be traded in any public market,
or (vi) the Company announces a change in control to the SEC for a material
change in the Company (and will specifically exclude treating the current
majority shareholder owning less than 50% of the Company as a Change in Control,
regardless of the SEC's current or future regulations defining this as a Change
in Control).
"Earned Salary" means any Base Salary earned, but unpaid, for
services rendered to the Company on or prior to the date on which the Employment
Period ends.
"Normal Retirement Age" means the first day of the month following
Executive attaining age 65.
"Severance Benefit" means an amount equal to Executive's annual Base
Salary as in effect immediately prior to the Termination Date.
"Termination due to Disability" means a termination of Executive's
employment by the Company because Executive has been incapable of substantially
fulfilling the positions, duties, responsibilities and obligations set forth in
this Agreement because of physical, mental or emotional incapacity resulting
from injury, sickness or disease for a period of (i) at least six consecutive
months or (ii) more than nine months in any twelve month period. Any question as
to the existence, extent or potentiality of Executive's disability upon which
Executive and the Company cannot agree shall be determined by a qualified,
independent physician selected by the Company and reasonably acceptable to
Executive. The determination of any such physician shall be final and conclusive
for all purposes of this Agreement. Executive or their legal representative or
any adult member of their immediate family shall have the right to present to
such physician such information and arguments as to Executive's disability as
he, she or they deem appropriate, including the opinion of Executive's personal
physician.
"Termination due to Retirement" means termination of employment by
Executive other than for Good Reason, or termination of Executive's employment
by the Company other than a Termination for Cause, on or after Executive's
Normal Retirement Age.
"Termination for Cause" means a termination of Executive's
employment by the Company due to (i) Executive's conviction of a felony or the
entering by Executive of a plea of nolo contendere with respect to a charged
felony, (ii) Executive's gross negligence, recklessness, dishonesty, or fraud,
willful malfeasance or willful misconduct in the performance of the services
contained in this Agreement; (iii) a willful failure without reasonable
justification to comply with a reasonable written order of the Board of
Directors or the CEO; or (iv) a willful and material breach of Executive's
duties or obligations under this Agreement, including, without limitation,
Executive's failure to devote full business time to the Company in accordance
with Section 2(b) of this Agreement. Notwithstanding the foregoing, a
termination shall not be treated as a Termination for Cause unless the Company
shall have delivered a written notice to Executive stating that it intends to
terminate their employment for Cause and specifying the factual basis for such
termination, and the event or events that form the basis for the notice, if
capable of being cured, shall not have been cured within 30 days of the receipt
of such notice.
"Termination Without Cause" means any termination by the Company of
Executive's employment hereunder other than (i) a Termination due to Disability,
(ii) a Termination due to Retirement or (iii) a Termination for Cause.
"Termination for Good Reason" means a termination of Executive's
employment by Executive within 90 days following (i) a reduction in Executive's
annual Base Salary and/or bonus opportunity; (ii) a material reduction in
Executive's positions, duties, responsibilities or reporting lines from those
described in Section 2 hereof; (iii) a material change in Executive's work
location; (iv) a Change in Control; or (v) a material breach of this Agreement
by the Company. Notwithstanding the foregoing, a termination shall not be
treated as a Termination for Good Reason (x) if Executive shall have consented
in writing to the occurrence of the event giving rise to the claim of
Termination for Good Reason or (y) unless Executive shall have delivered a
written notice to the Company within 30 days of their having actual knowledge of
the occurrence of one of the events specified in clause (i), (ii) or (iii) above
stating that he intends to terminate their employment for Good Reason and
specifying the factual basis for such termination, and such event, if capable of
being cured, shall not have been cured within 30 days of the receipt of such
notice
"Termination Without Good Reason" means any termination by Executive
of Executive's employment hereunder other than (i) a termination due to
Executive's death, (ii) a Termination due to Retirement, (iii) a Termination for
Good Reason, or (iv) a Termination due to Disability.
"Vested Benefits" means amounts which are vested or which Executive
is otherwise entitled to receive under the terms of or in accordance with any
plan, policy, practice or program of, or any contract or agreement with, the
Company, including the Option (to the extent provided in Section 3(c)), at or
subsequent to the date of their termination without regard to the performance by
Executive of further services or the resolution of a contingency and expenses
incurred prior to termination of employment that are reimbursable under Section
4(c).
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(f) Full Discharge of Company Obligations. The amounts payable to
Executive pursuant to this Section 5 following termination of their employment
(including amounts payable with respect to Vested Benefits) shall be in full and
complete satisfaction of Executive's rights under this Agreement and any other
claims he may have in respect of their employment by the Company or any of its
subsidiaries or Affiliates. Such amounts shall constitute liquidated damages
with respect to any and all such rights and claims and, upon Executive's receipt
of such amounts, the Company shall be released and discharged from any and all
liability to Executive in connection with this Agreement or otherwise in
connection with Executive's employment with the Company and its subsidiaries and
Affiliates, other than Executive's rights to indemnification under Section 4(d).
6. AGREEMENT NOT TO COMPETE WITH COMPANY
(a) During the Employment Period and for a period of twelve months
thereafter (the "Applicable Period"), Executive shall not directly or indirectly
own, manage, operate, finance, join, control, advise, consult, render services
to, have an interest or future interest or participate in the ownership,
management, operation, financing or control of, or be employed by or connected
in any manner with any Competing Business (other than as a holder of common
stock of the Company, and not in excess of 1% of the outstanding voting shares
of any other publicly traded company). "Competing Business" means the business
of internet telephony and web telephony communication services engaged in by the
Company in any country where the Company or an Affiliate conducts such business
at any time during the Term. Any opportunity directly or indirectly related to
any business engaged in by the Company, its subsidiaries and Affiliates of which
Executive becomes aware during the Term shall be deemed a corporate opportunity
of the Company, and Executive shall promptly make such opportunity available to
the Company.
(b) If, during the period of twelve months after expiration of the
Employment Period, Executive proposes to engage directly or indirectly in what
may be a Competing Business, Executive shall so notify the Company in a writing
which shall fully set forth and describe in detail the nature of the activity
which may be a competitive Business, the names of the companies or other
entities with or for whom such activity is proposed to be engaged in by
Executive or by an Affiliate of Executive (the "Section 6 Notice"). If, within
30 days after receipt by the Company of a Section 6 Notice, the Company shall
fail to notify Executive that it deems the proposed activity to be a Competitive
Business, then Executive shall be free to engage in the activities described in
the Section 6 Notice without violation of Section 6(a). If, however, the Company
notifies Executive that the proposed activities constitute a Competitive
Business, then (i) Executive shall not engage in such Competitive Business
during the twelve month period following expiration of the Employment Period,
and (ii) the Company shall pay Executive, during such twelve month period, in
equal monthly installments, an amount equal to their highest Base Salary;
PROVIDED that the amount payable under this Section 6(b) shall be reduced by the
amount of Severance Benefit that Executive is receiving for such period.
7. CONFIDENTIAL INFORMATION
(a) Without the prior written consent of the Company, Executive shall not
disclose at any time during the Employment Period or any time thereafter any
Confidential Information (as defined below) to any third person other than in
the course of fulfilling Executive's responsibilities under this Agreement
unless such Confidential Information has been previously disclosed to the public
by the Company or an Affiliate or is in the public domain (other than by reason
of Executive's breach of the provisions of this paragraph).
(b) "Confidential Information" is any non-public information pertaining to
the Company or an Affiliate. "Confidential Information" includes not only
information disclosed by the Company or an Affiliate to Executive, but
non-public information developed, created or learned by Executive during the
course of or as a result of Executive's employment with the Company.
"Confidential Information" specifically includes non-public information and
documents concerning the Company's and its Affiliates' methods of doing
business; research, telecommunications technology, its actual and potential
clients, transactions and suppliers (including the Company's or an Affiliate's
terms, conditions and other business arrangements with them); client or
potential client or transaction lists and billing; advertising, marketing and
business plans and strategies (including prospective or pending licensing
applications or investments in license holders or applicants); profit margins,
goals, objectives and projections; compilations, analyses and projections
regarding the Company, its Affiliates or any of its clients or potential clients
or their businesses; trade secrets; salary, staffing, management organization or
employment information; information relating to members of the Board of
Directors and management of the Company or an Affiliate; files, drawings or
designs; information regarding product development, marketing plans, sales plans
or manufacturing plans; operating policies or manuals, business plans, financial
records or packaging design; any other non-public financial, commercial,
business or technical information relating to the Company, or an Affiliate may
receive belonging to others who do business with any of them; or any non-public
information pertaining to the Company or an Affiliate, any of their businesses
or the business or personal affairs how any of them conducts its or their
business or affairs.
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(c) Nothing herein shall prevent the disclosure by Executive of any
information required by an order of a court having competent jurisdiction or
under subpoena from a government agency, PROVIDED that, if Executive receives a
request for the disclosure of any Confidential Information pursuant to court
process or by a government agency, Executive shall promptly (and at the latest
within five business days but not less than three days prior to the date
Executive is required to respond to the request) notify the Company of that
request and cooperate to the maximum extent authorized by law with the Company
in protecting the Company's and it Affiliates' interest in maintaining the
confidentiality of any Confidential Information. The Company will reimburse
Executive for reasonable out-of-pocket costs or expenses incurred by Executive
in connection with their cooperation with the Company and its Affiliates
hereunder.
8. NO DISPARAGING COMMENTS
Each of the parties hereto agrees not to make disparaging or derogatory
comments about the other party, members of the Board or Affiliates, or members
of the Board of Affiliates, except to the extent required by law, and then only
after consultation with the other party to the maximum extent possible in order
to maintain goodwill for each of the parties.
9. RETURN OF COMPANY PROPERTY
Promptly (and at the latest within ten business days) following
Executive's termination of services, Executive shall:
(i) return to the Company all documents, records, notebooks, computer
diskettes and tapes and anything else containing the Company's
Confidential Information (as defined above), and any other property
or Confidential Information of the Company or its Affiliates,
including all copies thereof in Executive's possession, custody or
control, and
(ii) delete from any computer or other electronic storage medium owned by
Executive any of the proprietary or Confidential Information of the
Company or its Affiliates.
10. NO SOLICITING OR HIRING COMPANY EMPLOYEES
During the Employment Period and for a one-year period thereafter,
Executive shall not directly or indirectly induce any employee of the Company or
any Affiliate, other than Executive's secretary or personal assistant, to
terminate employment with such entity, and during the Employment Period and for
a six-month period thereafter, shall not directly or indirectly, either
individually or as owner, agent, employee, consultant or otherwise, employ or
offer employment to any person who is or was employed by the Company or any
Affiliate as an employee.
11. CONTINUING OBLIGATIONS FOLLOWING TERMINATION
Executive agrees that their obligations and restrictions with respect to
noncompetition, confidentiality, Company property, nondisparagement and
nonsolicitation, and the Company obligations to indemnify Executive under
Section 4(d), will continue to apply following the termination of Executive's
relationship regardless of the manner in which their relationship with the
Company is terminated, whether voluntarily, for Cause, for Good Reason, without
Cause or otherwise.
12. ARBITRATION OF ALL DISPUTES
(a) Any dispute, controversy or claim between the Executive and the
Company or any of its officers, directors, employees or shareholders (who are
expressly made third-party beneficiaries of this agreement) arising out of,
relating to or in connection with this agreement, or the breach, termination or
validity thereof, shall be finally resolved by binding and non-appealable
arbitration, before a single arbitrator selected by the procedure set forth
below, conducted in New York, New York.
(b) Either party may commence an arbitration proceeding by giving written
notice to the other party of its desire to arbitrate.
(c) The single arbitrator (the "Arbitrator") shall be selected from among
the New York City members of the New York Regional Panel of Distinguished
Neutrals (the "Panel") of the Center for Public Resources ("CPR") by mutual
agreement of the parties, or if the parties are unable to agree, by the
following means:
(A) The Company, on one hand, and Executive on the other hand,
shall simultaneously exchange lists each containing the names of five
members of their choice of the Panel who have indicated a willingness to
serve.
(B) If a single name appears on both lists, that individual
shall be appointed.
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(C) If more than one name appears on both parties' lists, the
Arbitrator shall be selected from the common names by mutual agreement of
the parties or by the toss of a coin.
(D) If the lists contain no names in common, each party shall
strike four names from the other party's list and the Arbitrator shall be
selected from the remaining two names by mutual agreement of the parties
or by the toss of a coin.
(E) If the CPR ceases to have a Panel or it is otherwise
impossible to select the Arbitrator from the Panel as contemplated by this
Agreement, the Arbitrator shall be selected by the President of the CPR in
the manner that the President deems closest to satisfying the purposes of
this Section, or, if such person is unable to do so, by the President of
the Association of the Bar of the City of New York.
(d) The Arbitrator, after appropriate consultation with the parties, shall
(i) determine, in their sole discretion, the rules governing the arbitration
proceeding, including whether and to what extent the parties shall have any
right to pre-hearing discovery or other forms of disclosure, the manner of
presentation of arguments and/or evidence before or at any hearing, whether and
to what extent formal rules of evidence shall govern the proceeding and the
parties' rights following the proceeding, and (ii) be governed in exercising
such discretion by the goal of reaching a fair and reasonable decision in an
expeditious and efficient manner while endeavoring to streamline the process and
avoid undue litigation costs.
(e) The Arbitrator shall assess the costs of the proceeding (including the
prevailing party's reasonable attorney's fees) on any unsuccessful party to the
extent the Arbitrator concludes that such party is unsuccessful, unless he or
she concludes that (i) matters of equity or important considerations of fairness
dictate otherwise or (ii) in the case of Executive, the Arbitrator determined
that Executive acted reasonably and in good faith in pursuing all of the claims
asserted by them in such arbitration.
(f) The Arbitrator shall be required to state their decision in writing
and may, but shall not be required to, elaborate on the reasons for such
decision.
(g) The arbitrator(s) shall have the authority upon application by a party
to direct specific performance, including preliminary or interim specific
performance pending the final resolution of the arbitration, of any portion of
this agreement. The parties expressly consent to the jurisdiction and power of
any federal or state court in New York to enforce the terms of such a direction
upon application by a party. If the arbitrator(s) have not yet been appointed,
the parties may obtain injunctive or other appropriate relief from a court to
enforce the terms of this agreement pending the appointment of the arbitrator(s)
who shall thereafter have full power to continue, modify or vacate the terms of
any injunctive relief ordered by the court.
(h) Notwithstanding the terms of this agreement that provide that New York
law shall govern, the arbitration and the provisions in this agreement dealing
with arbitration shall be governed exclusively by the United States (Federal)
Arbitration Act, 9 U.S.C. ss.ss. 1-16, and judgment on or enforcement of the
award or any direction for specific performance rendered by the arbitrators may
be entered by any court having jurisdiction thereof or having jurisdiction over
the relevant party or assets of such party.
(i) If, notwithstanding the parties' agreement to arbitrate, any issue is
presented to a court for decision, the parties hereby waive any right to trial
by jury.
(j) The parties agree that any dispute between the parties and the
arbitration itself shall be kept confidential and that the existence of the
arbitration and any element of it (including but not limited to any pleading,
brief or other document submitted or exchanged, any testimony or other oral
submission, and any award) shall not be disclosed except to the arbitrator(s),
the CPR Institute for Dispute Resolution, the parties, their counsel and any
person necessary to the conduct of the proceeding, except as may be lawfully
required in judicial proceedings relating to the arbitration or otherwise.
13. NO PUNITIVE OR EMOTIONAL DAMAGES
The parties hereto agree that neither the Executive nor the Company will
be entitled to seek or obtain punitive, exemplary or similar damages of any kind
from the other or, in the case of Executive, from the Company's officers,
directors, employees or shareholders, or to seek or obtain damages or
compensation for emotional distress, as a result of any dispute, controversy or
claim arising out of, relating to or in connection with this Agreement, or the
performance, breach, termination or validity thereof. Nothing herein shall
preclude an award of compensatory or punitive damages against any other third
party.
14. INJUNCTIVE RELIEF TO AVOID IRREPARABLE INJURY
(a) Executive acknowledges and agrees that the individualized services and
capabilities that he will provide to the Company under this Agreement are of a
personal, special, unique, unusual, extraordinary and intellectual character.
(b) Executive acknowledges and agrees that because the internet telephony
and web communications industry is globally integrated and that its constituent
companies are dependent for their survival on protection of their confidential
information which is highly advanced and technical and on carefully developed
knowledge of customer systems and requirements, the restrictions in this
agreement are reasonable to protect the Company's rights under this Agreement
and to safeguard the Company's and it Affiliates' Confidential Information.
(c) Executive acknowledges and agrees that the covenants and obligations
of Executive with respect to noncompetition, nonsolicitation, confidentiality
and Company property relate to special, unique and extraordinary matters and
that a violation of any of the terms of such covenants and obligations will
cause the Company and its Affiliates irreparable injury for which adequate
remedies are not available at law. Executive therefore agrees that the Company
shall be entitled to an order of specific performance, injunction, restraining
order or such other interim or permanent equitable relief (without the
requirement to post bond) restraining Executive from committing any violation of
the covenants and obligations contained in this Agreement. Executive
acknowledges and agrees that if any one or more of any part of such restrictions
shall be rendered or judged invalid or unenforceable, such restriction or part
shall be deemed to be severed from this Agreement and such invalidity or
unenforceability shall not in any way affect the validity of the remaining
provisions.
(d) These injunctive remedies are cumulative and are in addition to any
other rights and remedies the Company may have at law or in equity.
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15. AUTOMATIC AMENDMENT BY COURT ORDER AND INTERIM ENFORCEMENT
(a) If the Arbitrator(s) or a court determines that, but for the
provisions of this paragraph, any part of this agreement is illegal, void as
against public policy or otherwise unenforceable, the relevant part will
automatically be amended to the extent necessary to make it sufficiently narrow
in scope, time and geographic area to be legally enforceable. All other terms
will remain in full force and effect.
(b) If the Executive raises any question as to the enforceability of any
part or terms of this agreement, including, without limitation, the provisions
relating to noncompetition, nonsolicitation, confidentiality and Company
property, the Executive specifically agrees that he will comply fully with this
Agreement unless and until the entry of an arbitral award to the contrary.
16. NOTICES
All notices and other communications required or permitted hereunder shall
be sufficiently given if (a) delivered personally, (b) sent by facsimile
transmission (with confirmation received), (c) sent by a nationally-recognized
air courier assuring overnight delivery, or (d) mailed (by registered or
certified mail, return receipt requested and postage prepaid) as follows:
If to the Executive, to the Executive at:
Shimmy Zimels
75 Broad Street
31th Floor
New York, NY 10004
If to the Company, to the Company at
deltathree, Inc.
75 Broad St
31th Floor
New York, NY 10004
Attention: Corporate Counsel
or to such other address as shall be furnished by notice from time to time by
one party hereto to the other party. Any such communication shall be deemed to
have been given, (i) in the case of personal delivery, on the date of delivery,
(ii) in the case of delivery by air courier, on the first business day following
the day on which such communication was posted, and (iii) in the case of
mailing, on the third business day following the day on which such notice was
posted.
17. SOLE AND ENTIRE UNDERSTANDING; AMENDMENTS
The entire understanding and agreement between the Company and Executive
have been incorporated into this Agreement. There are no other agreements,
promises, representations, understandings or inducements by the Company to
Executive or Executive to the Company other than those specifically set forth in
this Agreement. This Agreement may not be altered, amended or added to except in
a single writing signed by the Company and the Executive.
18. WAIVER OF BREACH
A waiver or breach of any provision of this Agreement shall not constitute
or operate as a waiver of any other breach of such provision or of any other
provision, and any failure to enforce any provision hereof shall not operate as
a waiver of such provision or of any other provision.
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19. HEADINGS
The headings of sections in this Agreement are for convenience only, are
not a part of this Agreement and shall not affect the construction of the
provisions of this Agreement.
20. ARM'S LENGTH
(a) This Agreement was entered into at arm's length, without duress or
coercion, and is to be interpreted as an agreement between parties of equal
bargaining strength. Both the Company and the Executive agree that this
Agreement is clear and unambiguous as to its terms, and that no parole or other
evidence will be used or admitted to alter or explain the terms of this
Agreement, but that it will be interpreted based on the language within its four
corners in accordance with the purposes for which it is entered into.
(b) The parties hereto expressly agree that any rule or contractual
interpretation, as applied under California law or anywhere else, that would
allow parole or extrinsic evidence to attempt to show fraud in the inducement or
duress to contradict the plain, unambiguous terms of this Agreement shall not
apply to this Agreement and its performance and enforcement. This provision is a
material part of this Agreement and, should any party try to introduce evidence
contrary to this provision, any other party shall be entitle to consider it a
breach and to rescind this contract in full.
21. SUCCESSORS AND ASSIGNS
(a) This Agreement will inure to the benefit of, and will be binding upon,
the Company, its successors and assigns and upon the Executive and their heirs,
successors and assigns; provided, however, that, because this is an Agreement
for personal services, the Executive cannot assign any of their obligations
under this Agreement to anyone else.
(b) This Agreement may be executed in counterparts, in which case each of
the two counterparts will be deemed to be an original and the final counterpart
shall be deemed to have been executed in New York, New York.
22. NEW YORK LAW GOVERNS
Any questions or other matters arising under this Agreement, whether of
validity, interpretation, performance or otherwise, will therefore be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be wholly performed in New York, without reference to
principles of conflicts or choice of law under which the law of any other
jurisdiction would apply.
IN WITNESS WHEREOF, this Agreement has been executed by Executive and then
by the Company in New York, New York, on the dates shown below, but effective as
of the date and year first above written.
Date: April 28, 2004 By: /s/ Shimmy Zimels
-------------------------------
Executive
deltathree, Inc.
Date: April 28, 2004 By: /s/ Paul C. White
-------------------------------
Title: Chief Financial Officer
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