EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of
________________, 2004 by XFone USA, Inc., a Mississippi corporation (the
"Employer"), and Xxx Xxxxxxx, an individual (the "Executive").
RECITALS
The Executive is currently the Executive Vice President and Chief
Marketing Officer and a principal shareholder of WS Telecom, Inc. and its wholly
owned subsidiaries eXpeTel Communications, Inc. and Gulf Coast Utilities, Inc.
(collectively the "Company"). Concurrently with the execution and delivery of
this Agreement, the Company is being merged with and into the Employer pursuant
to and in accordance with that certain Agreement and Plan of Merger dated
________________, 2004 among the Company, the Employer, XFone, Inc. (the
"Parent") and the Executive and Xxxx Xxxxxxx (the "Merger Agreement"). The
Executive's continued employment with the Employer after the merger and the
Employee's execution of this Agreement is a condition to the consummation of the
merger pursuant to the Merger Agreement by the Employer and the Parent. The
Employer agrees to employ the Executive, and the Executive wishes to accept such
continued employment, upon the terms and conditions set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
"AGREEMENT"--this Employment Agreement, as amended from time to time.
"AGGREGATE TRANSACTION CONSIDERATION" shall mean the total amount of cash
and the fair market value as calculated for purposes of the transaction of all
other property paid in connection with the transaction, but not including any
amounts paid in connection with employment, consulting or similar agreements
entered into in connection with the transaction.
"BASIC COMPENSATION"--Salary and Benefits.
"BENEFITS"--as defined in Section 3.1(b).
"BOARD OF DIRECTORS"--the board of directors of the Employer.
"CONFIDENTIAL INFORMATION" means any and all of the following with respect
to the Employer, its Parent, the Company as predecessor to the Employer or any
of their affiliates:
(a) trade secrets concerning the business and affairs of the Employer, its
Parent, the Company as predecessor to the Employer or any of their affiliates,
product specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
past, current, and planned research and development, current and planned
manufacturing or distribution methods and processes, customer lists, current and
anticipated customer requirements, price lists, market studies, business plans,
computer software and programs (including object code and source code), computer
software and database technologies, systems, structures, and architectures (and
related formulae, compositions, processes, improvements, devices, know-how,
inventions, discoveries, concepts, ideas, designs, methods and information, any
other confidential or proprietary information or data), and any other
information, however documented, that is a trade secret within the meaning of
any applicable federal or state laws; and
(b) information concerning the business and affairs of the Employer, its
Parent, the Company as predecessor to the Employer or any of their affiliates
(which includes but is not limited to historical financial statements, financial
projections and budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key personnel, personnel
training and techniques and materials, interconnect agreements, supply sources,
marketing, production or merchandising systems or plans), however documented;
and
(c) notes, analysis, compilations, studies, summaries, and other material
prepared by or for the Employer, its Parent, the Company as predecessor to the
Employer or any of their affiliates containing or based, in whole or in part, on
any information included in the foregoing.
"EFFECTIVE DATE"--the date stated in the first paragraph of the Agreement.
"EXECUTIVE INVENTION"--any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period with Employer or its predecessor, the Company, or a period that includes
a portion of the Employment Period, that relates in any way to, or is useful in
any manner in, the business then being conducted or proposed to be conducted by
the Employer, and any such item created by the Executive, either solely or in
conjunction with others, following termination of the Executive's employment
with the Employer, that is based upon or uses Confidential Information.
"EXCESS PROFIT" shall mean, with respect to any Employment Year, the
Pre-Tax Income for such Employment Year minus five percent (5%) of the Net Sales
Revenue for such Employment
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Year (excluding Net Sales Revenue attributable to acquisitions occurring on or
after the Effective Date).
"EMPLOYMENT PERIOD"--the term of the Executive's employment under this
Agreement, and as used herein the term "Employment Year" means each twelve month
period occurring during the employment period and "Employment Year 1" shall mean
the first twelve months of employment from the Effective Date and "Employment
Year 2" shall mean the 12 month period following Employment Year 1 and
"Employment Year 3" shall mean the 12 month period following Employment Year 2.
"FISCAL YEAR"--the Employer's fiscal year, as it exists on the Effective
Date or as changed from time to time.
"FOR CAUSE"--as defined in Section 6.2.
"FOR GOOD REASON"--as defined in Section 6.3.
"INCENTIVE COMPENSATION"--as defined in Section 3.2.
"NET SALES REVENUE" shall mean the gross sales revenue for the Employer
reduced by any account receivable for such sales revenue which is more than 150
days old.
"PARENT COMMON STOCK" shall mean shares of the common stock of Parent.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.
"POST-EMPLOYMENT PERIOD"--as defined in Section 8.2.
"PRE-TAX INCOME" shall mean the Employer's income from ordinary business
operations (which will not include capital gains and other extraordinary income
or gains and will not be reduced by extraordinary losses), less expenses, and
other charges (except such expenses, and charges attributable to capital gains
and other extraordinary income or gains excluded from the definition of "pre-tax
income"), all as reflected on the Employer's books, and will be calculated
without taking the payment of such Incentive Compensation into account for any
purpose. The "Pre-tax Income" will be determined by the certified public
accounting firm regularly engaged by the Employer, and such determination will
be binding on the Employer and the Executive.
"PROPRIETARY ITEMS"--as defined in Section 7.2(a)(iv).
"SALARY"--as defined in Section 3.1(a).
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2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Executive, and the Executive hereby
accepts employment by the Employer, upon the terms and conditions set forth in
this Agreement.
2.2 TERM
Subject to the provisions of Section 6, the term of the Executive's
employment under this Agreement will be three years, beginning on the Effective
Date and ending on the third anniversary of the Effective Date.
2.3 DUTIES
The Executive will have such duties as are assigned or delegated to the
Executive by the Board of Directors or Chairman of the Board, and will initially
serve as Executive Vice President and Chief Marketing Officer of the Employer.
The Executive will devote his entire business time, attention, skill, and energy
exclusively to the business of the Employer, will use his best efforts to
promote the success of the Employer's business, and will cooperate fully with
the Board of Directors in the advancement of the best interests of the Employer.
If the Executive is elected as a director of the Employer or as a director or
officer of any of its affiliates, the Executive will fulfill his duties as such
director or officer without additional compensation.
3. COMPENSATION
3.1 BASIC COMPENSATION
(a) Salary. The Executive will be paid an annual salary of $100,800.00 for
Employment Year 1; $103,825.00 for Employment Year 2 and $106,940.00 for
Employment Year 3 (the "Salary"), which will be payable in equal periodic
installments according to the Employer's customary payroll practices, but no
less frequently than monthly, and shall be subject to all applicable withholding
and other applicable taxes as required by law.
(b) Benefits. The Executive will, during the Employment Period, be
permitted to participate in such life insurance, hospitalization, major medical,
and other Executive benefit plans of the Employer that may be in effect from
time to time, to the extent the Executive is eligible under the terms of those
plans (collectively, the "Benefits"). In addition, the Employer shall pay to the
Employee a seven hundred dollar ($700.00) automobile allowance per month.
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3.2 INCENTIVE COMPENSATION
The Executive shall be eligible to earn additional incentive compensation
("Incentive Compensation") as set forth below:
(a) Employment Year 1. Subject to fulfilling the requirements as set forth
below, the Employer shall pay the Executive within 90 days of the end of
Employment Year 1 Incentive Compensation equal to the greater of the following:
(i) $50,000 if during Employment Year 1, Net Sales Revenue
(excluding Net Sales Revenue attributable to acquisitions occurring
on and after the Effective Date) of the Employer exceed by
$2,000,000 or more the Net Sales Revenue for the twelve month period
prior to the Effective Date and there is at least $150,000 of
Pre-Tax Income for Employment Year 1; OR
(ii) $100,000 if during Employment Year 1, Net Sales Revenue
(excluding Net Sales Revenue attributable to acquisitions occurring
on and after the Effective Date) of the Employer exceed by
$4,000,000 or more the Net Sales Revenue for the twelve month period
prior to the Effective Date and there is at least $400,000 of
Pre-Tax Income for Employment Year 1; OR
(iii) An amount equal to one-sixth (1/6) of the Excess Profit for
Employment Year 1 if during Employment Year 1 the Net Sales Revenue
(excluding Net Sales Revenue attributable to acquisitions occurring
on and after the Effective Date) of the Employer exceed by
$7,000,000 or more the Net Sales Revenue for the twelve month period
prior to the Effective Date.
(b) Employment Year 2. Subject to fulfillment of the requirements as set
forth below, the Employer shall pay the Executive within 90 days of the end of
Employment Year 2 Incentive Compensation equal to the greater of the following:
(i) $100,00 if during Employment Year 2, Net Sales Revenue
(excluding Net Sales Revenue attributable to acquisitions occurring
on and after the Effective Date) of the Employer exceed by
$4,000,000 or more the Net Sales Revenue for Employment Year 1 and
there is at least $400,000 of Pre-Tax Income for Employment Year 2;
OR
(ii) An amount equal to one-sixth (1/6) of the Excess Profit for
Employment Year 2 if during Employment Year 2 the Net Sales Revenue
(excluding Net Sales Revenue attributable to acquisitions occurring
on and after the Effective Date) of the Employer exceed by
$7,000,000 or more the Net Sales Revenue for Employment Year 1.
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(c) Employment Year 3. Subject to fulfillment of the requirements as set
forth below, the Employer shall pay the Executive within 90 days of the end of
Employment Year 3 Incentive Compensation equal to the following:
(i) An amount equal to one-sixth (1/6) of the Excess Profit for
Employment Year 3 if during Employment Year 3 the Net Sales Revenue
(excluding Net Sales Revenue attributable to acquisitions occurring
on and after the Effective Date) of the Employer exceed by
$7,000,000 or more the Net Sales Revenue for Employment Year 2.
Any Incentive Compensation paid pursuant to this Section 3.2 shall be
subject to all withholdings and other applicable taxes as required by law.
3.3 PARENT STOCK OPTION COMPENSATION
On the first business day of Employment Year 1, the Executive shall be
granted and issued options for 300,000 shares of restricted Parent Common Stock
(50,000 of which shall be attributable to Employment Year 1, 100,000 of which
shall be attributable to Employment Year 2, and 150,000 of which shall be
attributable to Employment Year 3) (the "Options"). The Options shall vest as
follows: Options for 50,000 shares of restricted Parent Stock shall vest 3 years
from the grant date, options for 100,000 shares of restricted Parent Stock shall
vest 4 years from the grant date and options for 150,000 shares of restricted
Parent Stock shall vest 5 years from the grant date. The stock options shall
provide for a five (5) year term from the vesting date, a strike price that is
10% above the closing price of the Parent Common Stock on the date of issue of
the Options.
3.4 ACQUISITION BONUS
For any acquisition of an existing business made by Employer during the
Employment Period, then the Executive shall receive upon closing of the
acquisition warrants for restricted Parent Common Stock with a value equal to
0.666% of the Aggregate Transaction Consideration of the acquisition. The value
of the warrants shall be calculated one day prior to the closing of the
acquisition assuming a 90% volatility of the underlying Parent Common Stock
pursuant to the Black Scholes option - pricing model and shall vest six months
from the date of issue. The warrants shall be convertible on a one-to-one basis
into common stock with a term of five years, a strike price that is 10% above
the closing price of the Parent Common Stock one day prior to the closing date
of the acquisition.
4. FACILITIES AND EXPENSES
The Employer will furnish the Executive office space, equipment, supplies,
and such other facilities and personnel as the Employer deems necessary or
appropriate for the performance of the Executive's duties under this Agreement.
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5. VACATIONS AND HOLIDAYS
The Executive will be entitled to three weeks' paid vacation each
Employment Year in accordance with the vacation policies of the Employer in
effect for its executive officers from time to time. Vacation must be taken by
the Executive at such time or times as approved by the Chairman of the Board or
Chief Executive Officer. The Executive will also be entitled to the paid
holidays set forth in the Employer's policies. Up to five vacation days during
any Employment Year that are not used by the Executive during such Employment
Year may be used in any subsequent Employment Year.
6. TERMINATION
6.1 EVENTS OF TERMINATION
The Employment Period, the Executive's Basic Compensation, Incentive
Compensation, any Parent Stock Options which have not vested, and Parent Stock
Warrants which have not vested and any and all other rights of the Executive
under this Agreement or otherwise as an Executive of the Employer will terminate
(except as otherwise provided in this Section 6):
(a) upon the death of the Executive;
(b) for cause (as defined in Section 6.2), immediately upon notice from
the Employer to the Executive, or at such later time as such notice may specify;
or
(c) for good reason (as defined in Section 6.3) upon not less than thirty
days' prior notice from the Executive to the Employer.
(d) upon termination of employment by Executive for any reason other than
for good reason (as defined in Section 6.3).
6.2 DEFINITION OF "FOR CAUSE"
For purposes of Section 6.1, the phrase "for cause" means: (a) the
Executive's breach of this Agreement which remains uncorrected for 30 days
following notice from the Employer; (b) the Executive's failure to adhere to any
written Employer policy if the Executive has been given a reasonable opportunity
to comply with such policy or cure his failure to comply (which reasonable
opportunity must be granted during the ten-day period preceding termination of
this Agreement); (c) the appropriation (or attempted appropriation) of a
material business opportunity of the Employer, including attempting to secure or
securing any personal profit in connection with any transaction entered into on
behalf of the Employer; (d) the misappropriation (or attempted misappropriation)
of any of the Employer's funds or property; or (e) the conviction of, the
indictment for (or its procedural equivalent), or the entering of a guilty plea
or plea of no contest with
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respect to, a felony, the equivalent thereof, or any other crime with respect to
which imprisonment is a possible punishment.
6.3 DEFINITION OF "FOR GOOD REASON"
For purposes of Section 6.1, the phrase "for good reason" means any of the
following: (a) The Employer's material breach of this Agreement which is not
cured within 30 days from the date of notice from the Executive; or (b) the
requirement by the Employer that the Executive be based anywhere other than in
the State of Mississippi without the Executive's consent.
6.4 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer will be
obligated to pay the Executive (or, in the event of his death, his designated
beneficiary as defined below) only such compensation as is provided in this
Section 6.4, and in lieu of all other amounts and in settlement and complete
release of all claims the Executive may have against the Employer. For purposes
of this Section 6.4, the Executive's designated beneficiary will be such
individual beneficiary or trust, located at such address, as the Executive may
designate by notice to the Employer from time to time or, if the Executive fails
to give notice to the Employer of such a beneficiary, the Executive's estate.
Notwithstanding the preceding sentence, the Employer will have no duty, in any
circumstances, to attempt to open an estate on behalf of the Executive, to
determine whether any beneficiary designated by the Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any person or entity purporting to act as the
Executive's personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to locate or
attempt to locate any beneficiary, personal representative, or trustee.
(a) Termination by the Executive for Good Reason. If the Executive
terminates this Agreement for good reason, the Employer will pay the Executive
the Executive's Salary for the remainder of the term of this Agreement (the
"Remainder Term") as and when such salary would otherwise become due and
payable. The Executive shall have the right to retain any Parent Stock Warrants
previously granted pursuant to Section 3.4 and such Parent Stock Warrants shall
immediately vest, but the Executive shall not have the right to any future
Parent Stock Warrants as provided in Section 3.4 or any Incentive Compensation
as provided in Section 3.2 for the Employment Year during which such termination
occurs or any subsequent Employment Year. The Executive shall have the right to
retain the options attributable as provided in Section 3.3 hereof for the
Employment Year during which such termination occurs and any prior year and such
options shall vest immediately, but the Employee shall not be entitled to retain
the options attributable to any Employment Year subsequent to the Employment
Year during which such termination occurred and such options shall expire.
Notwithstanding the preceding sentence, if the Executive obtains other
employment prior to the end of the Remainder Term, he must promptly give notice
thereof to the Employer, and the Salary payments under this Agreement for any
period after the Executive obtains other employment will be reduced by the
amount of the cash compensation received and to be
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received by the Executive from the Executive's other employment for services
performed during such period.
(b) Termination by the Employer for Cause or Termination by Executive
without Good Reason. If the Employer terminates this Agreement for cause or the
Executive terminates his employment for any reason other than for good reason
(as defined in Section 6.3), the Executive will be entitled to receive his
Salary only through the date such termination is effective, and will not be
entitled to any Incentive Compensation, Parent Stock Options or Parent Stock
Warrants for the Employment Year during which such termination occurs or any
subsequent Employment Year and any Parent Stock Options granted to the Executive
pursuant to Section 3.3 that have not vested and any Parent Stock Warrants
granted to the Executive whether or not vested pursuant to Section 3.4 shall be
cancelled.
(c) Termination upon Death. If this Agreement is terminated because of the
Executive's death, the Executive will be entitled to receive his Salary through
the end of the calendar month in which his death occurs, but will not be
entitled to receive any Incentive Compensation, Parent Stock Options pursuant to
Section 3.3 or Parent Stock Warrants pursuant to Section 3.4 for the Employment
Year during which his death occurs or any subsequent Employment Year and any
Parent Stock Options granted to the Executive pursuant to Section 3.3 that have
not vested and any Parent Stock Warrants granted to the Executive whether or not
vested pursuant to Section 3.4 hereof shall be cancelled.
(d) Benefits. The Executive's accrual of, or participation in plans
providing for, the Benefits will cease at the effective date of the termination
of this Agreement, and the Executive will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans. The Executive will only
receive, as part of his termination pay pursuant to this Section 6, any payment
or other compensation for any vacation, holiday, sick leave, or other leave
unused on the date the notice of termination is given under this Agreement if
the termination is due to the death of Executive or termination by the Executive
for Good Reason per Section 6.3.
6.5 TERMINATION DAMAGES PAYABLE BY EXECUTIVE
The Executive and the Employer agree that it is impossible to determine
with any reasonable accuracy the amount of the prospective damages to the
Employer if the Executive's employment is terminated for any reason other than
death or for good reason (as defined in Section 6.3) by the Executive (such
termination referred to in this paragraph as "Executive Termination Without
Cause"). In the event of any Executive Termination Without Cause, the Executive
agrees to pay as liquidated damages to the Employer an amount equal as follows:
(a) If the Executive Termination Without Cause occurs during Employment
Year 1, then the Executive shall immediately pay to the Employer an amount equal
to $171,000.00.
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(b) If the Executive Termination Without Cause occurs during Employment
Year 2, then the Executive shall immediately pay to the Employer an amount equal
to $114,000.00.
(c) If the Executive Termination Without Cause occurs during Employment
Year 3, then the Executive shall immediately pay to the Employer an amount equal
to $57,000.00.
7. NON-DISCLOSURE COVENANT; EXECUTIVE INVENTIONS; NON- COMPETE
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that (a) during the Employment Period and his
prior employment period with the Employer's predecessor, the Company, and as a
part of his employment with the Employer and its predecessor, the Company, the
Executive was and will continue to be afforded access to Confidential
Information; (b) public disclosure of such Confidential Information could have
an adverse effect on the Employer and its business; (c) because the Executive
possesses substantial technical expertise and skill with respect to the
Employer's business, the Employer desires to obtain exclusive ownership of each
Executive Invention, and the Employer will be at a substantial competitive
disadvantage if it fails to acquire exclusive ownership of each Executive
Invention; (d) the Parent and Employer have each required that the Executive
make the covenants in this Section 7 as a condition to the merger pursuant to
the Merger Agreement; and (e) the provisions of this Section 7 are reasonable
and necessary to prevent the improper use or disclosure of Confidential
Information and to provide the Employer with exclusive ownership of all
Executive Inventions.
7.2 AGREEMENTS OF THE EXECUTIVE
In consideration of the compensation and benefits to be paid or provided
to the Executive by the Employer under this Agreement, the Executive covenants
(in addition to but not in lieu of the covenants given under that certain
Confidentiality, Non-Solicitation and Work-For-Hire Agreement dated 6/11/02
which the Executive agrees shall continue in favor of the Employer) as follows:
(a) Confidentiality.
(i) During and following the Employment Period, the Executive will
hold in confidence the Confidential Information and will not
disclose it to any person except with the specific prior written
consent of the Employer or except as otherwise expressly permitted
by the terms of this Agreement.
(ii) Any trade secrets of the Employer will be entitled to all of
the protections and benefits under any applicable federal or state
trade secret law and any other applicable law. If any information
that the Employer deems to be a trade secret is found by a court of
competent jurisdiction not to be a trade secret for purposes of this
Agreement, such information will, nevertheless, be considered
Confidential
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Information for purposes of this Agreement. The Executive hereby
waives any requirement that the Employer submit proof of the
economic value of any trade secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions applies to
any part of the Confidential Information that the Executive
demonstrates was or became generally available to the public other
than as a result of a disclosure by the Executive.
(iv) The Executive will not remove from the Employer's premises
(except to the extent such removal is for purposes of the
performance of the Executive's duties at home or while traveling, or
except as otherwise specifically authorized by the Employer) any
document, record, notebook, plan, model, component, device, or
computer software or code, whether embodied in a disk or in any
other form (collectively, the "Proprietary Items"). The Executive
recognizes that, as between the Employer and the Executive, all of
the Proprietary Items, whether or not developed by the Executive,
are the exclusive property of the Employer. Upon termination of this
Agreement by either party, or upon the request of the Employer
during the Employment Period, the Executive will return to the
Employer all of the Proprietary Items in the Executive's possession
or subject to the Executive's control, and the Executive shall not
retain any copies, abstracts, sketches, or other physical embodiment
of any of the Proprietary Items.
(b) Executive Inventions. Each Executive Invention will belong exclusively
to the Employer. The Executive acknowledges that all of the Executive's writing,
works of authorship, and other Executive Inventions are works made for hire and
the property of the Employer, including any copyrights, patents, or other
intellectual property rights pertaining thereto. If it is determined that any
such works are not works made for hire, the Executive hereby assigns to the
Employer all of the Executive's right, title, and interest, including all rights
of copyright, patent, and other intellectual property rights, to or in such
Executive Inventions. The Executive covenants that he will promptly:
(i) disclose to the Employer in writing any Executive Invention;
(ii) assign to the Employer or to a party designated by the
Employer, at the Employer's request and without additional
compensation, all of the Executive's right to the Executive
Invention for the United States and all foreign jurisdictions;
(iii) execute and deliver to the Employer such applications,
assignments, and other documents as the Employer may request in
order to apply for and obtain patents or other registrations with
respect to any Executive Invention in the United States and any
foreign jurisdictions;
(iv) sign all other papers necessary to carry out the above
obligations; and
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(v) give testimony and render any other assistance in support of the
Employer's rights to any Executive Invention.
7.3 DISPUTES OR CONTROVERSIES
The Executive recognizes that should a dispute or controversy arising from
or relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained in
secrecy and will be available for inspection by the Employer, the Executive, and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that: (a) the services to be performed by him
under this Agreement are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the Employer's business is currently regional in
scope and its products are marketed or may be marketed throughout the States of
Mississippi, Alabama, Louisiana, Georgia, Tennessee, Florida, Kentucky, North
Carolina or South Carolina (the "Restricted Area"); (c) the Employer competes
with other businesses that are or could be located in any part of the Restricted
Area; (d) the Parent and Employer have each required that the Executive make the
covenants set forth in this Section 8 as a condition to the merger under the
Merger Agreement; and (e) the provisions of this Section 8 are reasonable and
necessary to protect the Employer's business.
8.2 COVENANTS OF THE EXECUTIVE
In consideration of the acknowledgments by the Executive, and in
consideration of the compensation and benefits to be paid or provided to the
Executive by the Employer, the Executive covenants that he will not, directly or
indirectly:
(a) during the Employment Period, except in the course of his employment
hereunder, and during the Post-Employment Period, directly or indirectly, either
for himself or for any partnership, limited liability company, individual,
corporation, joint venture or any other entity or person "participate in" (as
defined below) any business (including, without limitation, any division, group
or franchise of a larger organization) which engages in the "Telecommunications
Business" in the Restricted Area. For purposes of this Agreement,
"Telecommunications Business" shall mean the business of providing any type of
telecommunication services or internet access services to any person or customer
within the Restricted Area, including, without limitation, local, long distance,
broadband, dial up data services, wireless, DSL, Voice-over-Internet Protocol
(VoIP) and any other service or product being offered or provided by the
Employer or the Parent or any of their respective
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affiliates. For purposes of this Agreement, the term "participate in" shall
include, without limitation, having any direct or indirect interest in any
corporation, partnership, limited liability company, joint venture or other
entity, whether as a sole proprietor, owner, shareholder, partner, member,
manager, joint venturer, creditor or otherwise, or rendering any direct or
indirect service or assistance to any individual corporation, partnership,
limited liability company, joint venture and other business entity (whether as a
director, officer, manager, supervisor, Executive, agent, consultant or
otherwise). Notwithstanding the foregoing, nothing in this Section 8.2(a) shall
prohibit Executive from owning not more than five percent (5%) of the debt or
equity securities of a publicly traded corporation which may compete with the
Employer or the Parent.
(b) whether for the Executive's own account or for the account of any
other person, at any time during the Employment Period and the Post-Employment
Period, solicit business of the same or similar type being carried on by the
Employer or its Parent or any of their affiliates, from any person known by the
Executive to be a customer of the Employer or its Parent or any of their
affiliates, whether or not the Executive had personal contact with such person
during and by reason of the Executive's employment with the Employer;
(c) whether for the Executive's own account or the account of any other
person (i) at any time during the Employment Period and the Post-Employment
Period, solicit, employ, or otherwise engage as an Executive, independent
contractor, or otherwise, any person who is or was an Executive of the Employer
at any time during the Employment Period or in the period of employment with the
Employer's predecessor or in any manner induce or attempt to induce any
Executive of the Employer to terminate his employment with the Employer; or (ii)
at any time during the Employment Period and for the Post-Employment Period,
interfere with the Employer's relationship with any person, including any person
who at any time during the Employment Period or the period of employment with
the Employer's predecessor was an Executive, contractor, supplier, or customer
of the Employer or its predecessor; or
(d) at any time during or after the Employment Period, disparage the
Employer or its Parent or any of their affiliates or any of their respective
shareholders, directors, officers, Executives, or agents.
For purposes of this Section 8.2, the term "Post-Employment Period" means
the two (2) year period beginning on the date of termination of the Executive's
employment with the Employer.
If any covenant in this Section 8.2 is held to be unreasonable, arbitrary,
or against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time, or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Executive.
The period of time applicable to any covenant in this Section 8.2 will be
extended by the duration of any violation by the Executive of such covenant.
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The Executive will, while the covenant under this Section 8.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. The Employer may notify
such employer that the Executive is bound by this Agreement and, at the
Employer's election, furnish such employer with a copy of this Agreement or
relevant portions thereof.
(e) If at any time during the Employment Period and the Post-Employment
Period, Executive desires to participate in an activity that he believes might
be prohibited by this Section 8.2, such person may request in writing (a
"Clarification Request") a determination by Employer as to whether such proposed
activity would violate this Section 8.2. Employer shall respond in writing to
such Clarification Request (a "Clarification Response") within thirty (30) days
of receipt thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Executive acknowledges that the injury that would be suffered by the
Employer as a result of a breach of the provisions of this Agreement (including
any provision of Sections 7 and 8) would be irreparable and that an award of
monetary damages to the Employer for such a breach would be an inadequate
remedy. Consequently, the Employer will have the right, in addition to any other
rights it may have, to obtain injunctive relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Employer will not be obligated to post bond or other security
in seeking such relief. Without limiting the Employer's rights under this
Section 9 or any other remedies of the Employer, if the Executive breaches any
of the provisions of Section 7 or 8, the Employer will have the right to cease
making any payments otherwise due to the Executive under this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS
The covenants by the Executive in Sections 7 and 8 are essential elements
of this Agreement, and without the Executive's agreement to comply with such
covenants, the Parent and Employer would not have consummated the merger under
the Merger Agreement and the Employer would not have entered into this Agreement
or employed or continued the employment of the Executive. The Employer and the
Executive have independently consulted their respective counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Employer.
The Executive's covenants in Sections 7 and 8 are independent covenants
and the existence of any claim by the Executive against the Employer under this
Agreement or otherwise, or against the Parent, will not excuse the Executive's
breach of any covenant in Section 7 or 8.
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If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE
(a) The Executive represents and warrants to the Employer that the
execution and delivery by the Executive of this Agreement do not, and the
performance by the Executive of the Executive's obligations hereunder will not,
with or without the giving of notice or the passage of time, or both: (a)
violate any judgment, writ, injunction, or order of any court, arbitrator, or
governmental agency applicable to the Executive; or (b) conflict with, result in
the breach of any provisions of or the termination of, or constitute a default
under, any agreement to which the Executive is a party or by which the Executive
is or may be bound.
(b) The Employer represents and warrants to the Executive that the
execution and delivery by the Employer of this Agreement do not, and the
performance by the Employer of the Employer's obligations hereunder will not,
with or without the giving of notice or the passage of time, or both: (a)
violate any judgment, writ, injunction, or order of any court, arbitrator, or
governmental agency applicable to the Employer; or (b) conflict with, result in
the breach of any provisions of or the termination of, or constitute a default
under, any agreement to which the Employer is a party or by which the Employer
is or may be bound.
9.4 OBLIGATIONS CONTINGENT ON PERFORMANCE
The obligations of the Employer hereunder, including its obligation to pay
the compensation provided for herein, are contingent upon the Executive's
performance of the Executive's obligations hereunder.
9.5 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
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This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
9.7 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
XFone, Inc.
Xxxxxxxxx Xxxxx
000 Xxxx Xxxx
Xxxxxx, X000XX
Xxxxxx Xxxxxxx
Attention: Xxx Xxxxxxxxx
Telephone: x00 000-000-0000
Facsimile: x00 000-000-0000
Email: xxx@xxxxx.xxx
with a copy to:
The Oberon Group, LLC
00 Xxxxxxx Xxx., 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxx@xxxxxxxxxxx.xxx
Xxxxxxx Xxxxxx Winter & Stennis, P.A.
000 Xxxxx Xxxxx Xxxxxx (39202)
P. O. Xxx 000
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx
Telephone: 000-000-0000
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Facsimile: 601-949-4804
Email: xxxxxxx@xxxxxxxxxxxxx.xxx
If to the Executive:
Xxx Xxxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Telephone: (H) 000-000-0000
(B) 000-000-0000 Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxx.xxx
9.8 ENTIRE AGREEMENT; AMENDMENTS
This Agreement, the Merger Agreement, and the documents executed in
connection with the Merger Agreement, contain the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, between the parties hereto with
respect to the subject matter hereof. This Agreement may not be amended orally,
but only by an agreement in writing signed by the parties hereto.
9.9 GOVERNING LAW
This Agreement will be governed by the laws of the State of Mississippi
without regard to conflicts of laws principles.
9.10 JURISDICTION
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against either of the
parties in the courts of the State of Mississippi, or, if it has or can acquire
jurisdiction, in any of the United States District Courts in Mississippi, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on either party anywhere in the world.
9.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
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9.12 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
9.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
9.14 WAIVER OF JURY TRIAL
THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH
RESPECT TO THIS AGREEMENT.
9.15 IRREVOCABLE PROXY FROM EXECUTIVE
As a condition to the employment of the Executive, the Executive shall
have entered into an Irrevocable Proxy in form reasonably satisfactory to Parent
in which the Executive agrees to irrevocably appoint Xxx Xxxxxxxxx or such other
party designated by Parent as proxy to vote the Executive's Parent Common Stock
or any Parent Common Stock issued to or acquired hereafter by the Executive
whether from the exercise of any of the Parent Stock Warrants or any other stock
options or warrants granted hereafter or otherwise until such time as the
Executive sells such Parent Common Stock.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date above first written above.
EMPLOYER: EXECUTIVE:
XFone USA, Inc.
By:________________________________ ________________________________________
Xxx Xxxxxxxxx, President Xxx Xxxxxxx, Individually
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