EXHIBIT
10.3
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (“Agreement”) is made and entered into as of
the 14th day of July, 2005, between Talk America Holdings, Inc., a
Delaware corporation (“Talk America”) and Patrick
O’Leary (“Employee”), and amends and supersedes
that certain Employment Agreement dated January 1, 2004 between
LDMI Telecommunications, Inc., a Michigan corporation and a
wholly-owned subsidiary of Talk America (“Company”) and
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). Employee and Company agree that the
Employee Severance Retention Agreement between LDMI
Telecommunications, Inc. and Patrick O’Leary dated July 12,
2005 shall remain in full force and effect (a copy of which is
attached hereto).
2.
Term of Agreement
. The term of Employee’s
employment hereunder shall continue in effect for a period of
eighteen (18) months after the date hereof, except as hereinafter
provided (the “Term”). Notwithstanding the foregoing,
on or about the twelve-month anniversary of the date of this
Agreement, Employee and Company agree to meet and discuss whether
it is mutually acceptable to extend the term of this Agreement and
the terms, if any, of any such extension.
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 Executive Vice President -
Business Services of Talk America, 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 either Talk America’s Chief Executive
Officer or the Board of Directors of Talk America, 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 Talk America (
collectively, “Affiliates”) without additional
compensation. References in this Agreement to Employee’s
employment with Company shall be deemed to refer to employment with
Company. Employee shall perform his duties and responsibilities to
the best of his abilities in a diligent, trustworthy, business like
and efficient 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 Talk America 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 $350,000 (“Base
Salary”). Base Salary shall be paid in accordance with
Company’s usual and customary payroll practices.
4.2
Benefit Plans and Arrangements .
(a) Employee shall be entitled to participate in
and to receive benefits under employee benefit plans and
arrangements as are made available to Talk America’s senior
executive officers during the Term, which employee benefit plans
may be altered from time to time at the discretion of the Board of
Talk America (collectively, 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.
(b)
Notwithstanding the foregoing, for
the balance of 2005, Employee shall be entitled to bonuses under
bonus plan(s) established by Company. Employee shall be eligible to
receive during the balance of 2005 a cash bonus under
Company’s bonus plan based upon achievement by Employee of
goals and objectives (the “Bonus Objectives”) to be
established and determined by the Compensation Committee and Chief
Executive Officer of Talk America, which Bonus Objectives shall be
provided quarterly in writing to Employee and reviewed with
Employee. Employee acknowledges and agrees that bonuses, annual or
otherwise, are performance-based and discretionary with the Board
of Directors of Talk America or a Committee thereof.
4.3
Expenses . Company shall promptly reimburse Employee for
all normal and reasonable 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.
4.4 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 an automobile, as Company shall determine,
and Company shall keep such automobile fully insured in accordance
with Company’s practices for similarly situated
employees.
(a) Grant of Options . It is Talk America’s intention that
Employee shall be granted options to purchase 75,000 shares of Talk
America Common Stock after such time as the shareholders of Talk
America approve the 2005 Incentive Plan at its Annual Meeting of
Stockholders on July 25, 2005 in accordance with a stock option
agreement in substantially the form thereof attached hereto as
Exhibit A. The Option shall have an exercise price equal to the
closing price of the Talk America Common Stock on the date of grant
per share and shall expire on the fifth anniversary of the date
hereof or ninety (90) days after your employment with the Company
is terminated for any reason, and shall vest and become
exercisable, subject to accelerated vesting in the event of a
Change in Control (defined as provided below) of Talk America, on
the first anniversary of the date hereof. In the event of a Change
in Control of Talk America, the Option shall vest and become
exercisable as to all shares then subject thereto that are not then
vested and exercisable. For purposes of this Agreement,
“Change in Control” shall be deemed to have occurred
if:
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any Person (as
defined in Section 3(a)(9) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”)), other than Talk
America, 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 Talk
America or any Significant Subsidiary (as defined below)
representing 50% or more of the combined voting power of Talk
America’s, or such subsidiary’s, as the case may be,
then outstanding securities;
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during any
period of two years, individuals who at the beginning of such
period constitute the Board of Talk America and any new director
(other than a director designated by a person who has entered into
an agreement with Talk America to effect a transaction described in
clauses (i), (iii), or (iv) of this Section 2(a)) whose election by
the Board of Talk America 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 of Talk America, cease for any reason to constitute at least
a majority of the Board of either Talk America or a Significant
Subsidiary;
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the
consummation of a merger or consolidation of Talk America or any
subsidiary of Talk America owning directly or indirectly all or
substantially all of the consolidated assets of Talk America ( a
“Significant Subsidiary”) with any other entity, other
than a merger or consolidation which would result in the voting
securities of Talk America or a Significant Subsidiary outstanding
immediately prior thereto continuing to represent more than fifty
percent (50%) of the combined voting power of the surviving or
resulting entity outstanding immediately after such merger or
consolidation;
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any other event
occurs which the Board of Talk America etermines, in its
discretion, would materially alter, the structure of Talk America
or its ownership.
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(b)
Registration Statement
. Talk America will file with the
Securities and Exchange Commission and any applicable state
securities regulatory authorities a Registration Statement on Form
S-8 (or if unavailable, a registration statement on Form S-3) to
register the shares issuable upon exercise of the Option under the
Act and any applicable state securities or "Blue Sky" laws as soon
as practicable after the date hereof. Notwithstanding the
foregoing, Talk America shall be entitled to postpone for a
reasonable period of time the filing or the effectiveness of such
registration statement if the Board of Talk America shall determine
in good faith that such filing or effectiveness would be materially
detrimental to the Talk America's business interests.
5.
Termination
. The Term may be terminated under
the following circumstances:
5.1
Death . The Term shall terminate upon the
Employee’s death.
5.2
Disability
. If Employee becomes physically or
mentally disabled during the term hereof so that he is unable to
perform services required of him pursuant to this Agreement for an
aggregate of six (6) months in any twelve (12) month period (a
“Disability”), Company, at its option, may terminate
Employee’s employment hereunder.
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; (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; or (iv)
conviction or plea of nolo contendere by Employee to a felony or a
misdemeanor involving moral turpitude.
(i)
Employee may terminate employment
hereunder for any reason (other than Good Reason) 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 title and position commensurate with that referred to
in Section 3 of this Agreement without Employee’s express
written consent; or
(c)
The assignment to Employee of any
duties inconsistent with the Employee’s title and position as
contemplated by Section 3 of this Agreement, or any other action by
Company that results in an unreasonable diminution of
Employee’s position, authority, duties or responsibilities
without Employee’s express written consent.
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 (other than health care coverage which is
addressed in Section 6.1(e) below) to which Employee would be
entitled hereunder in the manner provided for herein for the period
of time ending with the Term, (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 ,(d) one hundred percent (100%) of the
outstanding stock options granted to the Employee that are unvested
shall immediately vest and become exercisable and (e) continue to
pay and provide Employee the health care coverage (including
reimbursing Employee for the cost of purchasing COBA health care
continuation coverage) to which Employee would be entitled
hereunder in the manner provided for herein for the period of time
ending on the second anniversary of the date of termination
(“Health Coverage Period”) or the COBRA coverage
period, if shorter than the Health Coverage Period.
6.2 By Company for Cause; By Employee Without Good
Reason . 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 (a) any Base Salary,
Due Bonus and 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) reimbursements for expenses that may have been incurred,
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 Base Salary, 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 death, (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 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 first anniversary of the date of such
termination (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 Base
Salary, 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
such Disability; and (b) reimbursement for expenses that may have
been incurred but that have not been paid as of the date of
Disability, 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, 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.
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, including Talk America, or to
existing or future products or services of Company or any of its
Affiliates, including Talk America; 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 Talk America 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.
8.
Tangible Items
. All files, records, documents,
manuals, books, forms, reports, 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, including Talk America, 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, including Talk America, and shall not
be removed from their premises, except as required in the course of
employment by Company or its Affiliates, including Talk America,
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, its Affiliates, including
Talk America, or at any time prior thereto upon the request of
Company.
9.
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, including Talk America, or existing or
future products or services of Company or any of its Affiliates,
including Talk America, 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&
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