EXHIBIT 10.1
EMPLOYMENT AGREEMENT
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THIS AGREEMENT is made and entered into as of October 15, 1999, by and between
ELCOTEL, INC. (hereinafter referred to as the "Company"), a Delaware
corporation, and XXXXXXX X. XXXXX (hereinafter referred to as the "Executive").
R E C I T A L S
WHEREAS, the Company desires to employ the Executive, and the Executive is
desirous of accepting such employment by the Company, upon the terms and
conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. Subject to the satisfaction of the conditions set forth in
this Section 1, the Company agrees to employ the Executive, and the Executive
agrees to render his services to the Company, as its President and Chief
Executive Officer, during the Term (as defined below). Following the next
shareholder meeting of the Company, the Executive shall be appointed to serve as
a member as the Board of Directors of the Company. The Executive shall render
his services at the direction of the Board of Directors of the Company at the
Company's principal executive offices. The Executive agrees to use his best
efforts to promote and further the business, reputation and good name of the
Company and the Executive shall promptly and faithfully comply with all
instructions, directions, requests, rules and regulations made or issued from
time to time by the Company.
2. TERM. The term of employment pursuant to this Agreement (the "Term")
shall commence on October 15, 1999 and continue until October 11, 2002; provided
that either party may terminate this Agreement by providing the other with 30
days prior written notice of such termination. Notwithstanding the foregoing,
this Agreement may be terminated by the Company in the event that "Cause" for
such termination exists as provided in Section 7 below. In the event the Company
terminates this Agreement or the Executive's employment other than for Cause,
the Company shall pay the Executive Severance Compensation as provided in
Section 3(c) hereof. In the event (a) the Company terminates this Agreement or
the Executive's employment for Cause, or (b) the Executive terminates this
Agreement or his employment for any reason, the Executive shall not be entitled
to any Severance Compensation or other compensation of any kind following the
effective date of such termination.
3. COMPENSATION. As full and complete compensation for all the Executive's
services hereunder, the Company shall pay the Executive the compensation
described below.
(A) CASH COMPENSATION.
(i) During the Term, the Company shall pay the Executive an
annual base salary of $250,000 ("Base Salary"). In the event this
Agreement is terminated prior to the expiration
of the Term, the Company shall pay to the Executive, in addition to any
Severance Compensation payable under Section 3(c), any accrued but
unpaid Base Salary through the termination date.
(ii) In addition to the Base Salary, during the Term, the
Company shall pay to the Executive an annual bonus (a "Bonus") in an
amount up to 50% of the Executive's Base Salary during the relevant
bonus period as the board of directors of the Company shall determine
in its discretion, provided that the Bonus for the First Bonus Period
(as defined below) shall be not less that 25% of the Executive's Base
Salary during such First Bonus Period. A Bonus shall be paid (x) for
the period from the beginning of the Term through December 31, 2000
(the "First Bonus Period"), (y) for the 2001 calendar year, and (z) for
the period from January 1, 2002 through the end of the Term. In the
event this Agreement or the Executive's employment is terminated by the
Company or by the Executive for any reason, the Executive shall not be
entitled to any Bonus Compensation for the period in which such
termination occurs.
(B) EQUITY COMPENSATION.
(i) Concurrently with the execution and delivery of this
Agreement, the Company shall issue to the Executive, as compensation
and without cost to the Executive, options (the "Options") to purchase
539,988 shares of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"), representing 4% of the shares of Common Stock
that are currently issued and outstanding. Such Options shall be issued
pursuant to a 1999 Stock Option Plan. The Options shall have an
exercise price per share equivalent to the average closing price of the
Company's Common Stock during the 20 business days prior to the
execution of this Agreement. The Options shall vest and become
exercisable as follows: 15,000 shares shall vest on the last day of
each month during the first 24 months of the Term and 14,999 shares
shall vest on the last day of each month during the next 12 months of
the Term. In all cases the Options shall be subject to termination as
provided below. The Executive shall have the right to exercise any
vested Options at any time prior to October 15, 2004 and any Options
not exercised within such deadline shall be deemed terminated and void.
The Executive shall be entitled to exercise any vested Options through
a "cashless exercise" in a broker escrow or other arrangement set forth
in the 1999 Stock Option Plan, provided that such transaction does not
adversely affect the Company.
(ii) In the event this Agreement or the Executive's employment
is terminated (x) by the Company for Cause, or (y) by the Executive for
any reason, the Options shall cease vesting as of the date that the
Company or the Executive provides notice of such termination, and any
unvested Options shall immediately terminate and become void. In the
event this Agreement or the Executive's employment is terminated by the
Company other than for Cause, the Options shall vest as and to the
extent provided in Section 3(c) hereof.
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(iii) Notwithstanding anything to the contrary otherwise
contained herein except as may be provided in Section 3(b)(iv), if at
any time during the Term the Company shall, by stock dividend, stock
split, combination, reclassification or exchange, or through merger,
consolidation or otherwise, change its shares of Common Stock into a
different number, kind or class of shares or other securities or
property, then the Board of Directors shall arrange for a successor or
surviving corporation, if any, to grant replacement options, or to
adjust the number of shares covered by the Options and the price of
each share. The determination of the Board of Directors shall be
conclusive.
(iv) Notwithstanding anything to the contrary otherwise
contained herein, if at any time during the Term, there shall be a
Change of Control (as defined below) all unvested Options shall
immediately vest in their entirety. For purposes of this provision, the
occurrence of any one or more of the following events shall be deemed
to be a "Change of Control":
(A) If any transaction occurs whereby
substantially all of the assets of the Company are
transferred, exchanged or sold to a non-affiliated third party
other than in the ordinary course of business;
(B) If a merger or consolidation involving
the Company occurs and the stockholders of the Company
immediately before such merger or consolidation do not own
immediately after such merger or consolidation at least fifty
percent (50%) of the outstanding common stock of the surviving
entity or the entity into which the common stock of the
Company is converted; or
(C) If any person (including, without
limitation, any individual, partnership or corporation), other
than Fundamental Management Corporation and its affiliates or
other than Wexford Management LLC and its affiliates, becomes
the owner, directly or indirectly, of securities of the
Company or its successor (or a parent company thereof)
representing thirty-five (35%) or more of the combined voting
power of the Company's or its successor's (or a parent's, as
the case may be) securities then outstanding.
(C) SEVERANCE COMPENSATION.
In the event the Company terminates this Agreement or the
Executive's employment other than for Cause, the Company shall pay to
the Executive as Severance Compensation $250,000, provided that in the
event the remainder of the Term is less than 12 months, such Severance
Compensation shall be prorated for the remainder of the Term. For
example, if the Company terminates this Agreement other than for Cause
with 8 months remaining in the Term, the Company shall pay the
Executive Severance Compensation of $166,667. The Executive shall also
receive as Severance Compensation (i) an immediate vesting of those
Options that would have vested during the 12 months after such
termination, or such lesser period through the end of the Term, if the
Executive's employment had not been terminated, and (ii) continuation
of medical benefits for the lesser of 12 months or the remainder of the
Term.
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4. NO OTHER COMPENSATION. Except as otherwise expressly provided herein,
or in any other written document executed by the Company and the Executive, no
other compensation or other consideration shall become due or payable to the
Executive on account of the services rendered hereunder. The Company shall have
the right to deduct and withhold from the compensation payable to the Executive
hereunder any amounts required to be deducted and withheld under the provisions
of any statute, regulation, ordinance, order or any other amendment thereto,
heretofore or hereafter enacted, requiring the withholding or deduction of
compensation.
5. BENEFITS.
(a) MEDICAL & 401K BENEFITS. The Company agrees that the Executive shall be
entitled to participate in any retirement, 401K, disability, medical, pension,
profit sharing, group insurance, or any other plan or arrangement, or in any
other benefits now or hereafter generally available to executives of the
Company, in each case to the extent that the Executive shall be eligible under
the general provisions thereof, provided that the Company shall waive any
waiting period for participation in any such plan to the extent permitted under
the plan.
(b) RELOCATION EXPENSES. The Company shall pay the Executive $40,000 as
reimbursement for moving and relocation expenses incurred by him and his
immediate family in connection with his relocation to Sarasota and his temporary
living expenses in Sarasota prior to such relocation.
6. RELOCATION. The Executive agrees to relocate to Sarasota, Florida no
later than December 31, 2000. Prior to such relocation the Executive agrees that
he shall rent a temporary residence in Sarasota and reside there in connection
with the performance of his duties under this Agreement.
7. TERMINATION FOR CAUSE. The Company, by written notice to the Executive,
may immediately terminate this Agreement and the Executive's employment
hereunder for Cause. As used herein, a termination by the Company "for Cause"
shall mean that the Executive has (i) failed or refused to perform a material
part of his duties hereunder, (ii) materially breached the provisions of
Sections 8, 9 or 10 hereof, (iii) acted fraudulently or dishonestly in his
relations with the Company, (iv) committed larceny, embezzlement, conversion or
any other act involving the misappropriation of Company funds or assets in the
course of his employment, or (v) been indicted or convicted of any felony or
other crime involving an act of moral turpitude.
8. CONFIDENTIAL INFORMATION.
(a) Executive agrees that he will not at any time or place during his
employment or after termination of such employment directly or indirectly
disclose to any person or firm other than Company or make, use or sell any
records, ideas, files, drawings, documents, improvements, equipment, customer
lists, sales and marketing techniques and devices, formulas, specifications,
research, investigations, developments, inventions, processes and data, and
without limiting the
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generality of the foregoing, anything not within the public domain (ideas in the
process of being disclosed to customers shall not be considered in the public
domain), belonging to Company, whether or not patentable or copyrightable, other
than for the sole and exclusive benefit of Company, without the prior written
consent of Company. Executive agrees that both during the course of his
employment with Company and thereafter he will keep confidential from persons
not associated with Company any and all Proprietary Information, special
techniques, and trade secrets of Company. Upon termination of his employment for
any reason whatsoever, Executive agrees to return to Company any property
belonging to it, including but not limited to any and all records, notes,
drawings, specifications, programs, data and other materials, and copies
thereof, pertaining to Company's business and generated or received by Executive
in the course of his employment duties with Company.
(b) Executive agrees that during the course of his employment with the Company
and for one year thereafter he will not directly or indirectly entice or hire
away or in any other manner persuade an employee, consultant, dealer or customer
of Company to discontinue that person's or firm's relationship with or to
Company as an employee, consultant, dealer or customer, as the case may be.
(c) Executive agrees that he will not, during the course of his employment with
the Company and for one year thereafter, engage in any employment or business
activity in which it might reasonably be expected that confidential Proprietary
Information or trade secrets of Company obtained by the Executive during the
course of his employment with Company would be utilized.
(d) The Executive recognizes and agrees that his violation of any terms
contained in paragraphs (a), (b), or (c) of this Section 8 will cause
irreparable damage to Company, the amount of which will be impossible to
estimate or determine. Therefore, Executive further agrees that Company shall be
entitled, as a matter of course, to an injunction restraining any violation or
further violation of any such covenant or covenants by Executive, his employees,
partners, agents or associates, such right to an injunction to be cumulative and
in addition to any other remedies, at law or otherwise, which Company might
have. Company hereby waives any right to require a bond in connection with
obtaining such an injunction. Executive further agrees that his violation of any
of the terms of paragraphs (a), (b), or (c) of this Section 8 during the course
of his employment with Company shall be a cause for his termination without
notice of any rights of the Executive under this Agreement. Such covenants shall
be severable, and if the same be held invalid by reason of length of time, area
covered, or activity covered, or any or all of them, shall be reduced to the
extent necessary to cure such invalidity.
9. COVENANT NOT TO COMPETE WITH COMPANY. Executive further covenants and
agrees that:
(a) During the course of his employment with Company and for one year
thereafter, Executive shall not undertake any employment or financial
involvement with, or assistance of, any person, firm, association, partnership,
corporation or enterprise which is engaged in the manufacture, design, marketing
or sale of pay phones or in any other business in which the Company is engaged
or has
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current plans to engage as of the date of termination of employment.
(b) Executive recognizes and agrees that his violation of any terms contained
in paragraph (a) of this Section 9 will cause irreparable damage to Company the
amount of which will be impossible to estimate or determine. Therefore,
Executive further agrees that Company shall be entitled, as a matter of course,
to an injunction restraining any violation or further violation of any such
covenant or covenants by Executive, his employees, partners, agents or
associates, such right to an injunction to be cumulative and in addition to any
other remedies, at law or otherwise, which Company might have. Company hereby
waives any right to require a bond in connection with obtaining such an
injunction. Executive further agrees that his violation of any of the terms of
paragraph (a) of this Section 9 during the course of his employment with Company
shall be a cause for his termination without notice of any rights of Executive
under this Agreement. Such covenants shall be severable, and if the same be held
invalid by reason of length of time, area covered, or activity covered, or any
or all of them, shall be reduced to the extent necessary to cure such
invalidity.
10. PROPRIETARY INFORMATION. Unless otherwise expressly agreed by Company
in writing, any inventions, ideas, reports, discoveries, developments, designs,
improvements, inventions, formulas, processes, techniques, "know-how," data, and
other creative ideas concerning the manufacture, design, marketing or sale of
pay phones or relating to any other business in which the Company is engaged or
has plans to engage (all of the foregoing to be hereafter referred to as
"Proprietary Information"), whether or not patentable or registrable under
copyright or similar statutes, hereinafter generated by Executive either alone
or jointly with others in the course of his employment hereunder with Company
relating or useful to the manufacture, design, marketing or sale of pay phones
by the Company or any other business in which the Company is engaged or has
plans to engage, shall be the sole property of Company. Executive hereby assigns
to Company any rights which he may acquire or develop in such Proprietary
Information. Executive shall cooperate with Company in patenting or copyrighting
any such Proprietary Information, shall execute any documents tendered by
Company to evidence its ownership thereof, and shall cooperate with Company in
defending and enforcing its rights therein. Executive's obligations under this
Section 10 to assist Company in obtaining and enforcing patents, copyrights, and
other rights and protections relating to such Proprietary Information in any and
all countries shall continue beyond the termination of his employment. Company
agrees to compensate Executive at a reasonable rate for time actually spent by
Executive at Company's request on such assistance after termination of
Executive's employment with Company. If Company is unable, after reasonable
effort, to secure Executive's signature on any document or documents needed to
apply for or prosecute any patent, copyright, or right or protection relating to
such Proprietary Information, whether because of the Executive's physical or
mental incapacity or for any other reason whatsoever, Executive hereby
irrevocably designates and appoints Company and its duly authorized officers and
agents as Executive's agent and attorney-in-fact, to act for and on his behalf
to execute and file any such application or applications and to do all other
lawfully permitted acts to further the prosecution and issuance of patents,
copyrights, or similar protections thereon with the same legal force and effect
as if executed by Executive.
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11. INDEMNIFICATION. Executive shall be indemnified by the Company with
respect to claims made against him as a director, officer and/or employee of the
Company and as a director, officer and/or employee of any subsidiary of the
Company to the fullest extent permitted by the Company's certificate of
incorporation, by-laws and the General Corporation Law of the State of Delaware.
12. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing (including facsimile, telegraphic, telex or cable
communication) and shall be deemed to have been duly given when delivered by
hand, faxed or mailed, certified or registered mail, return receipt requested
and postage prepaid:
If to the Company: Elcotel, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx, Chief Financial Officer
Fax No.: 000-000-0000
If to the Executive: Xxxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxxxx
Xxxx Xxxxxx, XX 00000
Fax No.: 000-000-0000
13. APPLICABLE LAW. This Agreement was negotiated and entered into within
the State of Florida. All matters pertaining to this Agreement shall be governed
by the laws of the State of Florida applicable to contracts made and to be
performed wholly therein. Nothing in this Agreement shall be construed to
require the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any material present or
future statute, law, governmental regulation or ordinance as a result of which
the parties have no legal right to contract or perform, the latter shall
prevail, but in such event the provision(s) of this Agreement affected shall be
curtailed and limited only to the extent necessary to bring it or them within
the legal requirements.
14. ENTIRE AGREEMENT; MODIFICATION; CONSENTS AND WAIVERS. This Agreement
contains the entire agreement of the parties with respect to the subject matter
hereof and supersedes any and all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter hereof. No
interpretation, change, termination or waiver of or extension of time for
performance under any provision of this Agreement shall be binding upon any
party unless in writing and signed by the party intended to be bound thereby.
Except as otherwise provided in this Agreement, no waiver of or other failure to
exercise any right under or default or extension of time for performance under
any provision or this Agreement shall affect the right of any party to exercise
any subsequent right under or otherwise enforce said provision or any other
provision hereof or to exercise any right or remedy in the event of any other
default, whether or not similar.
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15. SEVERABILITY. The parties acknowledge that, in their view, the terms of
this Agreement are fair and reasonable as of the date signed by them, including
as to the scope and duration of post-termination activities. Accordingly, if any
one or more of the provisions contained in this Agreement shall for any reason,
whether by application of existing law or law which may develop after the date
of this Agreement, be determined by an arbitrator or court of competent
jurisdiction to be excessively broad as to scope of activity, duration or
territory, or otherwise unenforceable, the parties hereby jointly request such
court to construe any such provision by limiting or reducing it so as to be
enforceable to the maximum extent in favor of the Company compatible with
then-applicable law. If any one or more of the terms, provisions, covenants or
restrictions of this Agreement shall nonetheless be determined by an arbitrator
or court of competent jurisdiction to be invalid, void or unenforceable, then
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
16. ASSIGNMENT. The Company may, at its election, assign this Agreement or
any of its rights hereunder. This Agreement may not be assigned by the
Executive.
17. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
18. ARBITRATION. The parties agree to submit any controversy, claim or
dispute of whatever nature arising between them, including without limitation,
those arising out of or relating to this Agreement or the construction,
interpretation, performance, breach, termination, enforceability or validity of
this Agreement or the arbitration provisions contained in this Agreement, for
determination solely by binding arbitration, in Tampa, Florida by one arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall base his or her award or decision on
applicable law and judicial precedent, shall include in such award or decision
the findings of fact and conclusions of law upon which the award or decision is
based and shall not grant any relief or remedy that a court could not grant
under applicable law. The parties agree to be conclusively bound by the award or
decision of such arbitrator. Judgment on the award or decision rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Employee and
the Company each hereby waive any and all rights to request or receive punitive
damages in connection with any action or proceeding related to the subject
matter of this Agreement. Employee and the Company each hereby waive all right
to trial by jury in any action or proceeding to enforce or defend any rights
under this Agreement.
19. SURVIVAL. The provisions of Sections 8 through 18 of this Agreement
shall survive any expiration or termination of this Agreement.
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IN WITNESS WHEREOF, that parties hereto have executed this Employment
Agreement as of the date first above written.
ELCOTEL, INC.
BY: /S/ C. XXXXXXX XXXXX
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Name: C. Xxxxxxx Xxxxx
Title: Chairman
XXXXXXX X. XXXXX
/S/ XXXXXXX X. XXXXX
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XXXXXXX X. XXXXX
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