EMPLOYMENT AGREEMENT
This
Employment Agreement dated as of November 15, 2006 (this “Agreement”),
by
and between OTELCO INC., a Delaware corporation (the “Company”)
and
XXXX X. XXXXX (the ‘Employee”).
WHERE
AS,
the
Company and the Employee desire to enter into this Agreement.
NOW
THEREFORE,
in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section
1. Effective
Date; Termination.
This
Agreement shall become effective on the date first written above (the
“Effective
Date”).
Section
2. Employment
Period.
Subject
to Section
4,
the
Company hereby agrees to employ the Employee, and the Employee hereby agrees
to
be employed by the Company, in accordance with the terms and provisions of
this
Agreement, for the period from the Effective Date through the Termination Date
(the “Employment
Period”).
Section
3. Terms
of Employment.
(a)
Duties
and Position.
During
the Employment Period, the Employee shall serve as Vice President and General
Manager-Mid-Missouri. As such, the Employee shall have duties and
responsibilities commensurate with such position and such other duties and
responsibilities as may from time to time be assigned to or vested in the
Employee by the Company’s Board of Directors (the “Board”)
or the
Chief Executive Officer.
(b)
Full
Time.
During
the Employment Period, and excluding any periods of vacation and sick leave
to
which the Employee is entitled, the Employee agrees to devote his full business
time and efforts, to the best of his ability, experience and talent, to the
business and affairs of the Company. During the Employment Period, it shall
not
be a violation of this Agreement for the Employee to serve on corporate, civic
or charitable boards or committees or manage personal investments (including
serving as a member of boards of directors or similar bodies of entities not
engaged in competition with the Company (as determined by the Board in its
reasonable discretion)), in each case, so long as such activities do not
interfere with the performance of the Employee’s responsibilities as an employee
of the Company in accordance with this Agreement.
(c)
Compensation.
(i)
Base
Salary.
During
the Employment Period, the Employee shall receive an annual base salary of
$106,500 which Annual Base Salary shall be subject to annual increase by an
amount equal to at least the increase in the cost of living, if any, between
the
date of the immediately preceding increase and the date of each such adjustment,
based upon the Consumer Price Index for the Birmingham, Alabama MSA, or if
that
index is discontinued, a similar index prepared by a department or agency of
the
United States government (as so adjusted, the “Annual
Base Salary”).
The
Annual Base Salary shall be paid in accordance with the customary payroll
practices of the Company, subject to withholding and other payroll
taxes.
(ii)
Bonus.
For
each fiscal year during the Employment Period, the Employee will be entitled
to
receive a bonus (the “Bonus”)
of up
to 25% of the Annual Base Salary. The Bonus shall be based upon the Company
achieving operating and/or financial goals to be established by the Board or
any
duly appointed committee thereof in good faith, in its sole
discretion.
(iii)
Benefits.
During
the Employment Period, the Employee shall be entitled to participate in all
incentive (including any long term incentive plan), savings and retirement
plans, practices, policies and programs applicable generally to other employees
of the Company and shall be eligible for participation in and shall receive
all
benefits under welfare benefit plans, practices, policies and programs provided
by the Company to the extent applicable generally to other employees of the
Company. In addition, the Employee will be entitled to coverage under any
directors’ and officers’ liability insurance maintained by the
Company.
(iv)
Automobile.
During
the Employment Period, the Company shall provide the Employee with the use
of a
Company automobile (or, at the Company’s option, shall lease an automobile for
the Employee’s use) and shall reimburse the Employee for all reasonable expenses
incurred by the Employee in connection with the use and maintenance of such
automobile.
(v)
Expenses.
The
Employee shall be entitled to receive reimbursement for all reasonable expenses
incurred by the Employee during the Employment Period in connection with the
performance of his duties hereunder, in accordance with the policies, practices
and procedures of the Company as in effect from time to time.
(vi)
Vacation
and Holidays.
During
the Employment Period, the Employee shall be entitled to up to 5 weeks paid
vacation per year in accordance with the policies of the Company applicable
to
other employees of the Company generally.
Section
4. Termination
of Employment.
(a)
Death
or Disability.
The
Employee’s employment shall terminate automatically upon the Employee’s death or
Disability. For purposes of this Agreement, “Disability”
shall
mean the Employee’s inability to perform his duties and obligations hereunder
for any 90 days during a period of 180 consecutive days due to mental or
physical incapacity as determined by a physician selected by the Company or
its
insurers.
(b)
Termination
by the Employee.
The
Employee may terminate his employment with the Company at any time, without
prior notice.
(c)
Termination
by the Company.
The
Company may terminate the Employee’s employment with the Company at any time,
with or without Cause and without prior notice. “Cause”
will
mean that any of the following will have occurred: (i) the Employee has been
convicted of a felony, stolen funds or otherwise engaged in fraudulent conduct,
(ii) the Employee has engaged in willful misconduct or has been grossly
negligent, in each case, which has been materially injurious to the Company,
(iii) the Employee has failed or refused to comply with directions of the Board
that are reasonably consistent with the Employee’s current position, or (iv) the
Employee has breached the terms of this Agreement. “Without
Cause”
shall
mean a termination by the Company of the Employee’s employment during the
Employment Period for any reason other than a termination based upon Cause,
death or Disability.
Section
5. Obligations
of the Company upon Termination.
(a)
Without
Cause.
If,
during the Employment Period, the Company shall terminate the Employee’s
employment Without Cause, then the Company will provide the Employee with the
following severance payments and/or benefits:
(i)
The
Company shall pay to the Employee a lump sum in the amount of the Employee’s
accrued but unpaid Annual Base Salary through the Termination Date
(“Accrued
Obligations”);
(ii)
The
Employee, if applicable, and members of his family shall be entitled to continue
their participation in the Company’s welfare and benefit plans (the
“Benefits”)
until
the Termination Date;
(iii)
The
Company shall pay to the Employee a lump sum in the amount of 1/2 of his Annual
Base Salary; and
(iv)
The
Company shall pay to the Employee a lump sum amount equal to the Bonus the
Employee would have received had he remained employed by the Company through
the
end of the fiscal year in which the termination occurred, pro rated for the
number of days Employee was employed by the Company during such fiscal year,
to
be paid at the same time that similar bonuses are paid to the Company’s other
employees.
(b)
Cause;
by the Employee; Death or Disability.
If the
Employee’s employment shall be terminated by the Company for Cause, by the
Employee for any reason, or due to death or Disability, then the Company shall
have no further payment obligations to the Employee (or his heirs or legal
representatives) other than for (i) payment of Accrued Obligations and (ii)
the
continuance of Benefits through the Termination Date.
(c)
Condition:
Remedies.
The
Employee acknowledges and agrees that, (a) the Company’s obligations to make
payments under Section
5(a)
will be
conditioned on the Employee executing and delivering a customary general release
in form and substance reasonably satisfactory to the Company.
Section
6. Nondisclosure
and Nonuse of Confidential Information.
(a)
The
Employee shall not disclose or use at any time, either during the Employment
Period or thereafter, any Confidential Information (as hereinafter defined)
of
which the Employee is or becomes aware as a consequence of or in connection
with
his employment with a Company, whether or not such information is developed
by
him, except (i) to the extent that such disclosure or use is in furtherance
of
the Employee’s performance in good faith of his duties as President of the
Company or (ii) to the extent required by law or legal process; provided
that (A)
the Employee agrees to provide the Company with prompt written notice of any
such law or legal process and to assist the Company, at the Company’s expense,
in asserting any legal challenges to or appeals of such law or legal process
that the Company in its sole discretion pursues, and (B) in complying with
any
such law or legal process, the Employee shall limit his disclosure only to
the
Confidential Information that is expressly required to be disclosed by such
law
or legal process. The Employee will take all commercially reasonable steps
to
safeguard Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft. The Employee shall deliver to the Company at the
termination of the Employment Period, or at any time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes and software
and
other documents and data (and copies thereof) relating to the Confidential
Information or the Work Product (as hereinafter defined) of the Company which
the Employee may then possess or have under his control.
(b)
The
Employee agrees that all Work Product belongs in all instances to the Company.
The Employee will promptly disclose such Work Product to the Board and perform
all actions reasonably requested by the Board (whether during or after the
Employment Period) to establish and confirm the Company’s ownership of the Work
Product (including, without limitation, the execution and delivery of
assignments, consents, powers of attorney and other instruments) and to provide
reasonable assistance to the Company (whether during or after the Employment
Period), at the Company’s sole expense, in connection with the prosecution of
any applications for patents, trademarks, trade names, service marks or reissues
thereof or in the prosecution or defense of interferences relating to any Work
Product. The Employee recognizes and agrees that the Work Product, to the extent
copyrightable, constitutes works for hire under the copyright laws of the United
States.
(c)
“Confidential
Information”
means
information that is not generally known to the public and that is used,
developed or obtained by the Company in connection with its business, including,
but not limited to, information, observations and data obtained by the Employee
while employed by the Company or any predecessors thereof (including those
obtained prior to the date of this Agreement) concerning (i) the business or
affairs of the Company and its Affiliates and (ii) products, services, fees,
costs, pricing structures, analyses, drawings, photographs and reports, computer
software (including operating systems, applications and program listings),
data
bases, accounting and business methods, inventions, devices, new developments,
methods and processes (whether patentable or unpatentable and whether or not
reduced to practice), customers and clients and customer and client lists,
all
technology and trade secrets, and all similar and related information in
whatever form. Confidential Information will not include any information that
(A) is or becomes generally available to the public other than through
disclosure by the Employee in violation of this Section
6,
(B) was
provided to the Employee prior to the date hereof a non-confidential basis
from
a Person who was not otherwise bound by a confidentiality agreement or duty
with
the Company or an Affiliate thereof, or (C) becomes available to the Employee
on
a non-confidential basis from a Person who is not otherwise bound by a
confidentiality agreement or duty with the Company or its Affiliates or is
not
otherwise prohibited from transmitting the information to the
Employee.
(d)
“Work
Product”
means
all inventions, innovations, improvements, technical information, systems,
software developments, methods, designs, analyses, drawings, reports, service,
marks, trademarks, trade names, trade dress, logos and all similar or related
information (whether patentable or unpatentable) which relates to the Company’s
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by the Employee
(whether or not during usual business hours and whether or not alone or in
conjunction with any other person) during the Employment Period together with
all patent applications, letters patent, trademark, trade name and service
xxxx
applications or registrations, copyrights and reissues thereof that may be
granted for or upon any of the foregoing.
Section
7. Non-Compete
and Non-Solicit.
(a)
The
Employee acknowledges that, in the course of his employment with the Company,
he
has become familiar, or will become familiar, with the Company’s and its
Affiliates’ trade secrets and with other confidential information concerning the
Company and its Affiliates and that his services have been and will be of
special, unique and extraordinary value to the Company and its Affiliates.
Therefore, the Employee agrees that, during the Employment Period and for 6
months thereafter (the “Restricted
Period”),
he
shall not directly or indirectly (i) engage, within the Restricted Territory,
in
any telephone or communications business, including, but not limited to,
incumbent local exchange carrier, long distance telephone business, cable
television, Internet access, or other business that the Company’ or any of its
Affiliates’ is engaged in during the Employee’s employment by the Company (the
“Company
Business”),
(ii)
compete or participate as agent, employee, consultant, advisor, representative
or otherwise in any enterprise engaged in a business which has any operations
engaged in the Company Business within the Restricted Territory; or (iii)
compete or participate as a stockholder, partner, member or joint venturer,
or
have any direct or indirect financial interest, in any enterprise which has
any
material operations engaged in the Company Business within the Restricted
Territory; provided,
however,
that
nothing contained herein will prohibit the Employee from (A) owning, operating
or managing any business, or acting upon any business opportunity, after
obtaining approval of a majority of the Board; or (B) owning no more than five
percent (5%) of the equity of any publicly traded entity with respect to which
the Employee does not serve as an officer, director, employee, consultant or
in
any other capacity other than as an investor. The term "Restricted
Territory"
means
all states within the United States in which the Company or any of its
Affiliates conducts or is pursuing or analyzing plans to conduct Company
Business as of the Termination Date.
(b)
As a
means reasonably designed to protect Confidential Information, the Employee
agrees that, during the period commencing on the Effective Date and ending
on
the expiration of the Restricted Period, he will not (i) solicit or make any
other contact with, directly or indirectly, any customer of the Company or
any
of its Affiliates as of the date that the Employee ceases to be employed by
the
Company with respect to the provision of any service to any such customer that
is the same or substantially similar to any service provided to such customer
by
the Company or its Affiliates or (ii) solicit or make any other contact with,
directly or indirectly, any employee of the Company or any of its Affiliates
on
the date that the Employee ceases to be employed by the Company (or any person
who was employed by the Company or any of its Affiliates at any time during
the
three-month period prior to the Termination Date) with respect to any
employment, services or other business relationship.
Section
8. Remedies.
The
Employee acknowledges that irreparable damage would occur in the event of a
breach of the provisions of Section
6
or
Section
7
by the
Employee. It is accordingly agreed that, in addition to any other remedy to
which its is entitled at law or in equity, the Company will be entitled to
an
injunction or injunctions to prevent breaches of such sections of this Agreement
and to enforce specifically the terms and provisions of such
sections.
Section
9. Definitions.
“Accrued
Obligations”
has
the
meaning set forth in Section
5(a)(i).
“Affiliate”
means,
with respect to any Person, any other Person that is controlled by, controlling
or under common control with, such Person. Notwithstanding anything to the
contrary contained herein, with respect to the Company, the term “Affiliate”
will include, without limitation, each Person with an ownership interest in
the
Company (and each member, stockholder or partner of each such Person), each
Person in which the member of the Company (and each member, stockholder or
partner of each such Person) holds or has the right to acquire, collectively,
more than 25% of the voting equity interests.
“Agreement”
has
the
meaning set forth in the Caption.
“Annual
Base Salary”
has
the
meaning set forth in Section
3(c)(i).
“Benefits”
has
the
meaning set forth in Section
5(a)(ii).
“Board”
has
the
meaning set forth in Section
3(a).
“Bonus”
has
the
meaning set forth in Section
3(c)(ii).
“Business
Day”
means
any day that is not a Saturday, Sunday, legal holiday or other day on which
banks are required to be closed in New York, New York.
“Cause”
has
the
meaning set forth in Section
4(c).
“Company”
has
the
meaning set forth in the Caption.
“Company
Business”
has
the
meaning set forth in Section
7(a).
“Confidential
Information”
has
the
meaning set forth in Section
6(c).
“Disability”
has
the
meaning set forth in Section
4(a).
“Effective
Date”
has
the
meaning set forth in Section
1.
“Employment
Period”
has
the
meaning set forth in Section
1.
“Employee”
has
the
meaning set forth in the Caption.
“Person”
means
an individual, partnership, corporation, limited liability company, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
“Restricted
Period”
has
the
meaning set forth in Section
7(a).
“Restricted
Territory”
has
the
meaning set forth in Section
7(a).
“Termination
Date”
means
the effective date of the termination of the Employee’s employment with the
Company, for any reason, by any party, or by death or Disability.
“Without
Cause”
has
the
meaning set forth in Section
4(c).
“Work
Product”
has
the
meaning set forth in Section
6(d).
Section
10. General
Provisions.
(a)
Severability.
It is
the desire and intent of the parties hereto that the provisions of this
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting
the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn
so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating
the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
(b)
Entire
Agreement.
This
Agreement embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof. This Agreement supersedes
and
preempts any prior understandings, agreements or representations by or among
the
parties, written or oral, which may have related to the subject matter hereof
in
any way.
(c)
Survival.
Notwithstanding anything to the contrary contained herein, the provisions of
Section
6,
Section
7
and
Section
8
shall
survive the termination of this Agreement.
(d)
Counterparts.
This
Agreement may be executed in separate counterparts, each of which is deemed
to
be an original and all of which taken together constitute one and the same
agreement.
(e)
Successors
and Assigns; Beneficiaries.
This
Agreement is personal to the Employee and without the prior written consent
of
the Company shall not be assignable by the Employee other than by will or the
laws of descent and distribution. This Agreement shall inure to the benefit
of
and be enforceable by the Employee’s heirs and legal representatives and the
successors and assigns of the Company. The Company reserves the right to assign
this Agreement in whole or in part to any of its Affiliates and upon any such
assignment, the term “Company” will be deemed to be such Affiliate
(f)
Governing
Law.
THIS
AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK
TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE
OF
NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT,
EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(g)
Waiver
of Jury Trial.
EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT MATTER
HEREOF.
(h)
Amendment
and Waiver.
The
provisions of this Agreement may be amended and waived only with the prior
written consent of the Employee and the Company and no course of conduct or
failure or delay in enforcing the provisions of this Agreement shall be
construed as a waiver of such provisions or affect the validity, binding effect
or enforceability of this Agreement or any provision hereof.
(i)
Notices.
All
notices, requests, demands, claims, consents and other communications which
are
required or otherwise delivered hereunder shall be in writing and shall be
deemed to have been duly given if (i) personally delivered or transmitted by
electronic mail, (ii) sent by nationally recognized overnight courier, (iii)
mailed by registered or certified mail with postage prepaid, return receipt
requested, or (iv) transmitted by facsimile (with a copy of such transmission
concurrently transmitted by registered or certified mail with postage prepaid,
return receipt requested), to the parties hereto at the following addresses
(or
at such other address for a party as shall be specified by like
notice):
(j)
If to
the Board or the Company, to:
000
Xxxxx
Xxxxxx Xxxx
Xxxxxxx,
Xxxxxxx 00000
Attention:
Xxxxxxx Xxxxxx
Telephone
No: 000-000-0000
Facsimile
No: (000) 000-0000
with
a
copy to:
Xxxxxx
& Xxxxxxx LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxxx, Esq.
Telephone
No: (000) 000-0000
Facsimile
No: (000) 000-0000
(b)
if to
the Employee to:
Xxxx
X.
Xxxxx
000
Xxxxxx Xxxxxx
Xxxxx
Xxxxx, XX 00000
Telephone
No: 000-000-0000
Facsimile
No: 000-000-0000
or
to
such other address as the party to whom such notice or other communication
is to
be given may have furnished to each other party in writing in accordance
herewith. Any such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered or transmitted by electronic mail,
with receipt acknowledgment by the recipient by return electronic mail, (ii)
when sent, if sent by facsimile on a Business Day during normal business hours
(or, if not sent on a Business Day during normal business hours, on the next
Business Day after the date sent by facsimile), (iii) on the next Business
Day
after dispatch, if sent by nationally recognized, overnight courier guaranteeing
next Business Day delivery, and (iv) on the 5th
Business
Day following the date on which the piece of mail containing such communication
is posted, if sent by mail.
(k)
Descriptive
Headings.
The
descriptive headings of this Agreement are inserted for convenience only and
do
not constitute a part of this Agreement.
(l)
Construction.
Where
specific language is used to clarify by example a general statement contained
herein, such specific language shall not be deemed to modify, limit or restrict
in any manner the construction of the general statement to which it relates.
The
language used in this Agreement shall be deemed to be the language chosen by
the
parties to express their mutual intent, and no rule of strict construction
shall
be applied against any party.
(m)
Nouns
and Pronouns.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice-versa.
[signature
page follows]
IN
WITNESS WHEREOF,
the
parties hereto have executed this Employment Agreement as of the date first
written above.
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By:
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/s/
Xxxxxx X. Xxxxxx, Xx.
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Name:
Xxxxxx X. Xxxxxx, Xx.
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Title:
CFO
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EMPLOYEE
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/s/
Xxxx X. Xxxxx
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XXXX
X. XXXXX
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