General Counsel Employment Agreement

EMPLOYMENT AGREEMENT


EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1, 1999, is made by and between DESTIA COMMUNICATIONS, INC., a Delaware corporation, having its principal office at 95 Route 17 South, Paramus, New Jersey 07652 ("Destia") and Mr. Richard Shorten ("Executive").


WHEREAS, Destia desires to employ Executive and Executive desires to provide services to Destia;


NOW, THEREFORE, in consideration of the premises and of the other mutual covenants and conditions contained herein and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, Destia and Executive agree as follows:


SECTION 1. Employment and Term. (a) Destia hereby employs Executive commencing as of the date hereof (the "Commencement Date"). The initial term of Executive's employment shall be two years, subject to earlier termination as specified herein (the "Employment Term"). Any renewal or extension of the Employment Term and this Agreement shall be subject to the mutual agreement of Executive and Destia, subject to Section 8 hereof.


(b) Executive shall be employed as a Senior Vice President and General Counsel of Destia, with powers and duties consistent with such position, for the duration of the Employment Term. During the term of Executive's employment by Destia, Executive shall report to the President of Destia.


(c) Executive shall be employed at the headquarters of Destia in the New York metropolitan area.


SECTION 2. Full-Time Employment. (a) During Executive's employment by Destia, Executive shall devote Executive's entire business time, energy and skill to the performance of Executive's duties hereunder and to the business of Destia. Executive shall faithfully and diligently perform such duties, shall adhere to the instructions of the Chief Executive Officer, President and Board of Directors of Destia and shall use his best efforts to promote the interests of Destia consistent with the foregoing. Executive shall adhere to all corporate policies of Destia and, to the extent applicable to Executive's duties hereunder, Destia's subsidiaries and affiliates. Executive shall not, directly or indirectly, alone or as a member of any partnership, or as an officer, director or executive of any other corporation, partnership or other organization, be actively engaged in or concerned with any other duties or pursuits which interfere with the performance of his duties hereunder, or which may be inimical to or contrary to the best interests of Destia.


2


(b) Executive represents and warrants that he is free to be employed by Destia upon the terms contained in this Agreement and that he is not a party to any employment contract or restrictive covenant or other arrangement which could reasonably be expected to prevent, interfere with or hinder, or be deemed to be breached by, full performance of his duties hereunder.


SECTION 3. Compensation. (a) Base Salary. For all services rendered by Executive in any capacity during Executive's employment under this Agreement, including, without limitation, service as an executive, officer, or member of any committee of Destia or any of its subsidiaries or affiliates, Destia agrees to pay or cause to be paid to Executive a base salary at the rate of not less than $180,000 per annum, payable in equal installments in accordance with the prevailing salary payment practices of Destia in effect from to time (the "Base Salary"). Executive's Base Salary shall be subject to review and increase on an annual basis based upon changes in Executive's performance, title, job description or responsibilities. In the event that sickness or accident disability payments under Destia's insurance programs shall become payable to Executive in respect of any period of Executive's employment hereunder the salary installment payable to Executive hereunder in respect of his Base Salary on the next succeeding salary installment payment date shall be an amount computed by subtracting (i) the amount of such disability payments which shall have become payable during the period between such date, from (ii) the salary installment otherwise payable to Executive hereunder in respect of his Base Salary on such date.


(b) Bonus. Executive shall be entitled to receive an annual bonus payment from Destia to be awarded and payable in accordance with Destia's bonus program for senior executives. Executive's annual target bonus shall be 50% of Executive's base salary. Destia's bonus program for senior executives shall provide that Executive shall be entitled to a bonus payment in excess of such amount for superior performance. Any bonus in excess of the aforementioned amounts shall be paid at the sole discretion of the Board of Directors of Destia and shall be made to the extent, at such time and in such amount as determined by the Board of Directors of Destia in its sole discretion.


(c) Incentive Compensation. In addition to the other compensation hereunder, the Company has granted to Executive in accordance with Destia's 1996 Flexible Incentive Plan (the "Plan"), certain options to acquire common stock of Destia. The terms of the vesting and exercise of such options shall be governed by the Incentive Stock Option Agreements entered into by Executive and Destia and the terms of the Plan.


(d) Benefits. Executive shall be entitled to participate in medical, dental, life insurance and other benefits (collectively, the "Benefits") in accordance with the prevailing policies of Destia for executive employees.


SECTION 4. Vacation. Executive shall be entitled to an annual vacation of three weeks (without deduction in salary or other compensation or Benefits). Such vacation shall be taken at such time or times as may be convenient to the operations of Destia and shall be consistent with the


3


prevailing vacation policies of Destia. Within 10 days of the termination or expiration of the Employment Term, any accrued but unused vacation earned by Executive shall be paid to Executive at the rate of Executive's base salary at the time of termination or expiration of the Employment Term.


SECTION 5. Reimbursement for Expenses. Executive is authorized to incur reasonable and necessary traveling expenses and other reasonable and necessary traveling expenses and other reasonable and necessary disbursements for or on behalf of Destia in the performance of Executive's duties during Executive's employment under this Agreement in accordance with Destia's prevailing expense incurrence policies. Destia will reimburse Executive for all such expenses in accordance with its prevailing expense reimbursement policies upon presentation of a properly itemized account of such expenditures and the business reasons for such expenditures. In addition, Executive shall be entitled to an additional payment of $1000 per month for automotive, garage, insurance and related expenses, together with a tax "gross-up" payment to cover any additional income, medicare or other tax expense to Executive arising from the expense reimbursements set forth in this Section 5.


SECTION 6. Termination of Employment By Destia. (a) Termination. Executive shall be subject to dismissal from his position as an executive of Destia at any time and with or without Cause. The effect of any termination of the employment of Executive with Cause is set forth in Section 8(a) hereof. The effect of any termination of the employment of Executive without Cause is set forth in Section 8(d) hereof.


(b) Definition of Cause. The term "Cause" shall be defined to include: (i) any wilful breach by Executive of the performance of any of his duties pursuant to this Agreement; (ii) any wilful breach by Executive of any other obligation under this Agreement; (iii) any attempt by Executive to secure any personal profit in connection with the business of Destia, other than as expressly provided for in this Agreement; (iv) failure by Executive to devote sufficient business time to the affairs of Destia; (v) material breach by Executive of any of the representations or warranties contained in this Agreement; (vi) activities of Executive inimical to the best interests of Destia; provided, however, that such activities shall not include mistakes in business judgment made in good faith; (vii) conviction of, or a plea of nolo contendere to, a felony or any act of fraud, whether or not related to the affairs of Destia; (viii) subject to Sections 6(c) and 6(d) below, death or disability of Executive; and (ix) any other insubordination, dishonesty, moral turpitude or other misconduct that, in the absence of any agreement in writing between the parties hereto, would entitle Destia to terminate Executive's employment in accordance with its prevailing employment policies; provided further, however, that in the event of actions allegedly constituting Cause pursuant to clauses (i), (ii), (iv), (v) or (vi) that are susceptible to cure, Destia shall provide Executive with no less than thirty (30) days' notice of such deficiencies prior to any termination as a result there of and during such prior notice period shall afford Executive the opportunity to remedy such deficiencies to Destia's reasonable satisfaction.


(c) Termination by Reason of Incapacity. In the event that Executive suffers a disability which prevents him from substantially performing his duties under this Agreement for a period of at


4


least sixty (60) calendar days within a 365-calendar day period (whether consecutive or non-consecutive) (a "Disability"), Destia shall have the right to dismiss Executive upon ten (10) calendar days written notice. In the event of any dispute between Destia and Executive as to whether Executive has suffered a Disability, the determination of whether Executive has suffered a Disability shall be made by an independent physician selected by Destia, and the decision of such physician shall be binding upon Destia and Executive.


(d) Termination by Death. In the event Executive dies during the Employment Term, this Agreement shall terminate automatically, such termination to be effective on the date of Executive's death.


SECTION 7. Termination of Employment By Executive. The employment of Executive under this Agreement shall be deemed to have been terminated by Executive for "Good Reason" if Executive voluntarily terminates employment following the occurrence of a material breach by Destia of any of its obligations under this Agreement; provided, however, that Executive shall provide written notice of s ...