EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT (this “Agreement”), effective as of August 12, 2005 (“Effective
Date”), between Oblio Telecom, Inc., a Delaware corporation (the “Company”),
which is wholly-owned by Ventures-National Incorporated, a Utah corporation
(“Parent”) and Xxxxx Xxxxxx (the “Employee”).
WHEREAS,
the Board of Directors of the Company (the “Board”) has determined that it is in
the best interests of the Company and its shareholders to employ the Employee
in
the position set forth below, and the Employee desires to serve in that
capacity.
NOW,
THEREFORE, in consideration of the foregoing premises, the Company and Employee
hereby agree as follows:
1. Employment
Period.
The
Company shall employ the Employee, and the Employee shall serve the Company,
on
the terms and conditions set forth in this Agreement, for the period commencing
on the date hereof and three years after such date (the “Initial Term” and,
together with any subsequent term of Employment, the “Employment Period”);
provided that the term of employment hereunder will automatically be renewed
for
successive one-year terms (each such term a “Renewal Term”) unless either party
shall, at least 30 days before such date, provide written notice to the other
party that the Employment Period will not be extended.
2. Position
and Duties.
(a) The
Employee shall serve as Chief Executive Officer of the Company, reporting
to the
Board, with such duties and responsibilities as are customarily assigned
to such
position, and such other duties and responsibilities not inconsistent therewith
as may be assigned to him from time to time by the Board.
(b) During
the Employment Period, and excluding any periods of vacation and sick leave
to
which the Employee is entitled, the Employee shall devote his full-time efforts
to the business and affairs of the Company and use his best efforts to carry
out
such responsibilities faithfully and efficiently. It shall not be considered
a
violation of the foregoing for the Employee to (i) serve on corporate, civic
or
charitable boards or committees, (ii) deliver lectures or fulfill speaking
engagements, (iii) manage personal investments, (iv) engage in other business
activities, so long as such activities do not materially interfere with the
performance of his responsibilities as an employee of the Company in accordance
with this Agreement or violate the provisions of Section 8 of this
Agreement.
(c) Employee
shall not be required to change his domicile to perform his duties.
Telecommuting is permitted when away from the office on vacation or business
travel; from his place of residence; when on personal business; however while
in
the Dallas area, Executive will report to the office a minimum of four (4)
days
per week.
3. Compensation.
(a) Base
Salary.
During
the first contract year of the Initial Term, the Employee shall receive an
annual base salary (the “Annual Base Salary”) of $175,000. Employee will receive
an annual salary review by the Board, or an authorized committee thereof,
on
each anniversary of the Effective Date. The Annual Base Salary shall be payable
in accordance with the Company’s payroll practices as in effect from time to
time. The Board or an authorized committee thereof may increase the Annual
Base
Salary above the foregoing amounts at its discretion.
(b) Bonus.
To the
extent permitted in that certain Credit and Security Agreement, dated as
of
August 12, 2005 among the Company, each of its direct and indirect subsidiaries
signatory thereto, and CAPITALSOURCE FINANCE LLC, a Delaware limited liability
company, in addition to the Annual Base Salary, the Employee shall be entitled
to an annual bonus based upon the Company’s EBIDTA (the “Bonus”). Not later than
July 22 of each year during the Employment Period, the Company’s Chief Financial
Officer shall prepare and deliver to the Employee a certificate (the “CFO
Certificate”) setting forth a calculation of the Company’s net earnings, before
depreciation, interest, taxes and amortization for the twelve full months
ending
on May 31 of such year (“Annual EBIDTA”). In the event the Annual EBIDTA shall
equal or exceed the target EBIDTA as set forth below, the Employee shall
be
entitled to receive a cash bonus as set forth on Schedule I hereto. The Bonus
amount shall be due and payable to the Employee within 30 days of the date
of
the CFO Certificate.
Year
Target
Ended EBIDTA
August
31, 2006 $11,500,000
August
31, 2007 $14,250,000
August
31, 2008 $16,250,000
For
Renewal Terms, if any, the target EBIDTA and amount of bonus payable shall
be
negotiated in good faith between the Company and the Employee.
(c) Benefits.
During
the Employment Period, the Employee and the Employee’s direct family shall be
entitled to participate in all benefit programs of the Company or Parent
provided to executives of similar rank, including, but not limited to, health
insurance coverage, as well as all welfare benefit plans, practices, policies
and programs provided by the Company or Parent, including, but not limited
to
any comprehensive dental plan, retirement plans and profit sharing programs
the
Company or Parent may provide to other employees from time to time.
(d) Expenses.
During
the Employment Period, the Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in carrying
out the Employee’s duties under this Agreement, provided that the Employee
complies with the policies, practices and procedures of the Company for
submission of expense reports, receipts and similar documentation of such
expenses.
(e) Vacation.
During
the Employment Period, the Employee shall be entitled to paid vacation and
other
fringe benefits, in each case on such terms and conditions as are determined
by
the Board or authorized committee thereof and set forth on Schedule II
hereto.
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4. Termination
of Employment.
(a) Death
or Disability.
The
Employee’s employment shall terminate automatically upon the Employee’s death
during the Employment Period. The Company shall be entitled to terminate
the
Employee’s employment because of the Employee’s Disability during the Employment
Period. “Disability” means that (i) the Employee has been unable, for a period
of six months, or for a total of sixty (60) days in any given one year period,
to perform the Employee’s duties under this Agreement, as a result of physical
or mental illness or injury, and (ii) a physician selected by the Company
or its
insurers, and acceptable to the Employee or the Employee’s guardian or legal
representative, has determined that the Employee’s incapacity is total and
permanent. A termination of the Employee’s employment by the Company for
Disability shall be communicated to the Employee by written notice, and shall
be
effective on the 30th day after receipt of such notice by the Employee (the
“Disability Effective Date”), unless the Employee is able to, and does, return
to full-time performance of the Employee’s duties before the Disability
Effective Date.
(b) By
the Company.
(A) The
Company may terminate the Employee’s employment during the Employment Period for
Cause or without Cause. “Cause” means:
(i) Employee
having, in the reasonable judgment of the Company, committed an act which
if
prosecuted and resulting in a conviction would constitute a fraud, embezzlement,
or any felonious offense (specifically excepting simple misdemeanors not
involving acts of dishonesty and all traffic violations);
(ii) the
Employee’s theft, embezzlement, misappropriation of or intentional and malicious
infliction of damage to the Company’s property or business
opportunity;
(iii)
the
Employee’s repeated abuse of alcohol, drugs or other substances as determined by
an independent medical physician; or
(iv) the
Employee’s engagement in gross dereliction of duties, refusal to perform
assigned duties consistent with his position, his knowing and willful breach
of
any material provision of this Agreement continuing after written notice
from
the Company or repeated violation of the Company’s written policies after
written notice.
(B) A
termination of the Employee’s employment by the Company for Cause shall be
effectuated by giving the Employee written notice (“Notice of Termination for
Cause”) of the termination, setting forth the conduct of the Employee that
constitutes Cause. Termination of employment by the Company for Cause shall
be
effective on the date when the Notice of Termination for Cause is given,
unless
the notice sets forth a later date (which date shall in no event be later
than
60 days after the notice is given). Employee will be immediately advised
of any
allegations of conduct covered by clause (A) above and will be provided a
period
of fifteen (15) days from the date of the written notice to defend himself
against such allegations and to take any appropriate remedial action. If
Employee shows that the allegations are untrue or takes appropriate remedial
action to address the allegations, the Company will not terminate the Employee’s
employment for Cause.
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(C) A
termination of the Employee’s employment by the Company without Cause shall be
effected by giving the Employee written notice of the termination at least
6
months (180 days) prior to the termination date.
(c) By
the
Employee.
(A) The
Employee may terminate employment with or without Good Reason. “Good Reason”
means:
(i) the
assignment to the Employee of any duties inconsistent in any respect with
paragraph (a) of Section 2 of this Agreement, other than actions that are
not
taken in bad faith and are remedied by the Company within thirty (30) days
after
receipt of notice thereof from the Employee;
(ii) any
failure by the Company to comply with any provision of Section 3 of this
Agreement, other than failures that are not taken in bad faith and are remedied
by the Company within thirty (30) days after receipt of notice thereof from
the
Employee;
(iii)
the
occurrence of a Non-Negotiated Change in Control of the Company (as defined
below); or
(iv) the
Company’s material breach of this Agreement
For
purposes of this Agreement, “Non-Negotiated Change in Control” means any one or
more of the following occurrences:
(x) Any
individual, corporation (other than the Company, any trustees or other
beneficiary holding securities under any employee benefit plan of the Company,
or any Company owned, directly or indirectly, by the stockholders of the
Company
in substantially the same proportions as their ownership of stock of the
Company), partnership, trust, association, pool, syndicate, or any other
entity
or any group of persons acting in concert becomes the beneficial owner (within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of
securities of the Company possessing more than fifty percent (50%) of the
voting
power for the election of directors of the Company;
(y) There
shall be consummated any consolidation, merger, or other business combination
involving the Company or the securities of the Company in which holders of
voting securities of the Company immediately prior to such consummation own,
as
a group, immediately after such consummation, voting securities of the Company
(or, if the Company does not survive such transaction, voting securities
of the
entity surviving such transaction) having less than fifty percent (50%) of
the
total voting power in an election of directors of the Company (or such other
surviving corporation); or
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(z) There
shall be consummated any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially
all,
of the assets of the Company (on a consolidated basis) to a party which is
not
controlled by or under common control with the Company.
(d) A
termination of employment by the Employee for Good Reason shall be effectuated
by giving the Company written notice (“Notice of Termination for Good Reason”)
of the termination, setting forth the conduct of the Company that constitutes
Good Reason. A termination of employment by the Employee for Good Reason
shall
be effective on the fifth business day following the date when the Notice
of
Termination for Good Reason is given, unless the notice sets forth a later
date
(which date shall in no event be later than 30 days after the notice is
given).
(e) A
termination of the Employee’s employment by the Employee without Good Reason
shall be effected by giving the Company written notice of the termination
at
least thirty (30) days prior to the termination date.
(f) Notwithstanding
anything in this Agreement to the contrary, in no event will any amount which
otherwise would be payable under or pursuant to this Agreement be payable
to
Employee to the extent such amount, together with all other amounts payable
and
benefits provided to Employee under or pursuant to this Agreement and/or
under
any other plan(s), agreements and/or arrangement(s) arising out of Employee’s
employment relationship with Company and/or any direct or indirect subsidiary
of
Company (including without limitation any such amounts payable by any affiliate
of Company or any acquirer of any of the stock or assets of Company or any
affiliate of such acquirer), if paid to Employee, would result in Employee
receiving an “excess parachute payment” for purposes of Section 280G of the
Internal Revenue Code of 1986, as amended. The determination of whether a
payment under or pursuant to this Agreement would result in Employee receiving
an excess parachute payment (but for the provisions of this Section 4) shall
be
made by counsel for Company reasonably selected by Company and acceptable
to
Employee, after consultation with Company’s independent auditor
(g) No
Waiver.
The
failure to set forth any fact or circumstance in a Notice of Termination
for
Cause or a Notice of Termination for Good Reason shall not constitute a waiver
of the right to assert, and shall not preclude the party giving notice from
asserting, such fact or circumstance in an attempt to enforce any right under
or
provision of this Agreement.
(h) Date
of Termination.
The
“Date of Termination” means the date of the Employee’s death, the Disability
Effective Date, the date on which the termination of the Employee’s employment
by the Company for Cause or by the Employee for Good Reason is effective,
or the
date on which the Company gives the Employee notice of a termination of
employment without Cause or the Employee gives the Company notice of a
termination of employment without Good Reason, as the case may be.
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5. Obligations
of the Company upon Termination.
(a) Termination
for Reasons Other Than for Cause, Death or Disability, or Good
Reason.
If,
during the Employment Period, the Company terminates the Employee’s employment,
for any reason other than for Cause, Death or Disability, or the Employee
terminates his employment for Good Reason, the Company shall (i) pay the
Employee’s accrued but unpaid portion of the Annual Base Salary (the “Accrued
Obligations”) to the Employee in a lump sum in cash within thirty (30) days
after the Date of Termination, (ii) continue to pay the Annual Base Salary
and
Bonus for the remainder of the Employment Period, and (iii) provide the benefits
listed under Section 3 for the remainder of the Employment Period.
(b) Termination
as a Result of Employee’s Death or Disability.
If the
Employee’s employment is terminated by reason of the Employee’s death or
Disability during the Employment Period, (i) the Company shall pay the Accrued
Obligations to the Employee or the Employee’s estate or legal representative, as
applicable, in a lump sum in cash within thirty (30) days after the Date
of
Termination, and (ii) the Company shall pay when originally due any Bonus
due to
the Employee, pro rated for the period until the Date of Termination, to
the
Employee or the Employee’s estate or legal representative.
(c) Termination
for Cause or Other than for Good Reason.
If the
Employee’s employment is terminated by the Company for Cause during the
Employment Period, or if the Employee terminates his employment during the
Employment Period other than for Good Reason, the Company shall pay Employee
the
Accrued Obligations.
6. Non-exclusivity
of Rights.
Nothing
in this Agreement shall prevent or limit the Employee’s continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies for which the Employee may qualify, nor,
subject to paragraph (f) of Section 4, shall anything in this Agreement limit
or
otherwise affect such rights as the Employee may have under any contract
or
agreement with the Company or any of its affiliated companies. Vested benefits
and other amounts that the Employee is otherwise entitled to receive under
any
plan, policy, practice or program of, or any contract or agreement with,
the
Company or any of its affiliated companies on or after the Date of Termination
shall be payable in accordance with such plan, policy, practice, program,
contract or agreement, as the case may be, except as explicitly modified
by this
Agreement.
7. Covenant
of Employee.
(a) Employee
recognizes that the services to be performed by him pursuant to this Agreement
are special, unique and extraordinary. The parties confirm that it is reasonably
necessary for the protection of the Company’s goodwill that Employee agree, and
accordingly, Employee does hereby agree and covenant (the “Covenant Not to
Compete”), that Employee will not, directly or indirectly, except for the
benefit of the Company:
(i) become
an
officer, director, more than 2% stockholder, partner, associate, employee,
owner, proprietor, agent, creditor, independent contractor, co-venturer or
otherwise, or be interested in or associated with any other corporation,
firm or
business engaged in the Territory (as hereinafter defined) in the same or
any
similar business competitive with that of the Company (including the Company’s
present and future subsidiaries and affiliates) as such business shall exist
on
the day hereof and during the Employment Period; or
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(ii) solicit,
cause or authorize, directly or indirectly, to be solicited for or on behalf
of
himself or third parties from parties who were customers of the Company
(including the Company’s present and future subsidiaries and affiliates) at any
time during the Employment Period, any business similar to the business
transacted by the Company with such customer; or
(iii) accept
or
cause or authorize, directly or indirectly, to be accepted for or on behalf
of
himself or third parties, business from any such customers of the Company
(including the Company’s present and future subsidiaries and affiliates) that is
similar to the business transacted by the Company with such customer;
or
(iv) solicit,
or cause or authorize, directly or indirectly, to be solicited for employment
for or on behalf of himself or third parties, any persons who were at any
time
during the Employment Period hereunder, employees of the Company (including
the
Company’s present and future subsidiaries and affiliates) (except for general
solicitations made to the public at large); or
(v) employ
or
cause or authorize, directly or indirectly, to be employed for or on behalf
of
himself or third parties, any such employees of the Company (including the
Company’s present and future subsidiaries and affiliates); or
(vi) use
the
tradenames, trademarks, or trade dress of any of the products of the Company
(including the Company’s present and future subsidiaries and affiliates); or any
substantially similar tradename, trademark or trade dress likely to cause,
or
having the effect of causing, confusion in the minds of manufacturers,
customers, suppliers and retail outlets and the public generally.
The
solicitation or acceptance of orders outside the Territory for shipment to,
or
delivery in, any of part of the Territory shall constitute doing business
in the
Territory in violation of this Covenant.
Employee
acknowledges his intention that the Company shall have the broadest possible
protection of the value of the business in the Territory consistent with
public
policy, and it will not violate the intent of the parties if any court should
determine that, consistent with established precedent of the forum state,
the
public policy of such state requires a more limited restriction in geographical
area or duration of the aforesaid covenant not to compete, contained in an
appropriate decree.
(b) The
term
of Employee’s Covenant Not to Compete with the Company as set forth in this
Section 7, shall commence on the date of Employee’s last day of employment with
the Company, pursuant to this Agreement or otherwise, regardless of the reason
for the termination of such employment, and shall terminate two years
thereafter. The term of this Covenant Not to Compete as it relates to Employee
under this Section is referred to hereinafter as “Employee’s Term.”
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(c) The
territory
of this Agreement shall consist of all states in which the Company conducts
business during the Employment Period (collectively, the
“Territory”).
(d) Breach
by
Employee of Covenant Not to Compete
(i) The
parties confirm that of primary importance to the Company is the agreement
by
Employee not to be an officer, director, stockholder, partner, associate,
employee, owner, proprietor, agent, creditor, independent contractor,
co-venturer or otherwise, or be interested in or associated with any other
corporation, firm, business or entity which competes with the Company’s business
during the Employment Period. The parties further confirm that damages resulting
from a breach of the Covenant Not to Compete contained herein may be difficult
to calculate and insufficient to remedy the injury resulting from such breach,
particularly with respect to any ongoing or prospective breach. Accordingly,
the
Company shall be entitled, in addition to any other right and remedy it may
have
at law or in equity, to a preliminary and permanent injunction, without the
posting of any bond or other security, enjoining or restraining Employee,
as the
case may be, from any violation or threatened violation of this Covenant
Not to
Compete. If any of the restrictions contained herein shall be deemed to be
unenforceable by reason of the extent, duration or geographical scope thereof,
or otherwise, then the court making such determination shall have the right
to
reduce such extent, duration, geographical scope, or other provisions hereof,
and in its reduced form this Covenant Not to Compete shall then be enforceable
in the manner contemplated hereby.
(ii) Nothing
contained in this Section shall be construed as prohibiting the Company from
pursuing any other remedies available to it for any such breach or threatened
breach, including recovery of damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation.
8. Confidentiality;
Return of Property
(a) The
Employee acknowledges that during the Employment Period he will receive
confidential information from the Company, the Parent and subsidiaries of
the
Company (each a “Relevant Entity”). Accordingly, the Employee agrees that during
the Employment Period and thereafter, the Employee and his affiliates shall
not,
except in the performance of his obligations to the Company hereunder or
as may
otherwise be approved in advance by the Company, directly or indirectly,
disclose or use (except for the direct benefit of the Company) any confidential
information that he may learn or has learned by reason of his association
with
any Relevant Entity. Upon termination of this Agreement, the Employee shall
promptly return to the Company any and all properties, records or papers
of any
Relevant Entity, that may have been in his possession at the time of
termination, whether prepared by the Employee or others, including, but not
limited to, confidential information and keys. For purposes of this Agreement,
“confidential information” includes all data, analyses, reports,
interpretations, forecasts, documents and information concerning a Relevant
Entity and its affairs, including, without limitation with respect to clients,
products, policies, procedures, methodologies, trade secrets and other
intellectual property, systems, personnel, confidential reports, technical
information, financial information, business transactions, business plans,
prospects or opportunities, (i) that the Company reasonably believes are
confidential or (ii) the disclosure of which could be injurious to a Relevant
Entity or beneficial to competitors of a Relevant Entity, but shall exclude
any
information that (x) the Employee is required to disclose under any applicable
laws, regulations or directives of any government agency, tribunal or authority
having jurisdiction in the matter or under subpoena or other process of law,
(y)
is or becomes publicly available prior to the Employee’s disclosure or use of
the information in a manner violative of the second sentence of this Section
8(a), or (z) is rightfully received by Employee without restriction or
disclosure from a third party legally entitled to possess and to disclose
such
information without restriction (other than information that he may learn
or has
learned by reason of his association with any Relevant Entity). For purposes
of
this Agreement, “affiliate” means any entity that, directly or indirectly, is
controlled by, or under common control with, the Employee. For purposes of
this
definition, the terms “controlled” and under common control with” means the
possession, direct or indirect, of the power to direct or cause the direction
of
the management and policies of such person, whether through the ownership
of
voting stock, by contract or otherwise.
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(b) Injunction.
Notwithstanding any other provisions of this Agreement, Employee acknowledges
and agrees that in the event of a violation or threatened violation of any
of
the provisions of this Section 8, Employer shall have no adequate remedy
at law
and shall therefore be entitled to enforce each such provision by temporary
or
permanent injunctive or mandatory relief obtained in any court of competent
jurisdiction without the necessity of proving damage or posting any bond
or
other security, and without prejudice to any other remedies that may be
available at law or in equity.
9. Successors.
(a) This
Agreement is personal to the Employee and, without the prior written consent
of
the Company, shall not be assignable by the Employee otherwise 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 legal representatives.
(b) This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns.
10. Miscellaneous.
(a) This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Texas, without reference to principles of conflict of laws.
The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified except
by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All
notices and other communications under this Agreement shall be in writing
and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
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If
to the
Employee:
Xxxxx
Xxxxxx
0000
Xxxxxx Xxxx
Xxxxxxx,
XX 00000
If
to the
Company:
Oblio
Telecom, Inc.
000
Xxxxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
or
to
such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 10. Notices and communications
shall be effective when actually received by the addressee.
(c) The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.
If any provision of this Agreement shall be held invalid or unenforceable
in
part, the remaining portion of such provision, together with all other
provisions of this Agreement, shall remain valid and enforceable and continue
in
full force and effect to the fullest extent consistent with law.
(d) Notwithstanding
any other provision of this Agreement, the Company may withhold from amounts
payable under this Agreement all federal, state, local and foreign taxes
that
are required to be withheld by applicable laws or regulations.
(e) The
failure of the Employee or the Company to insist upon strict compliance with
any
provision of, or to assert any right under, this Agreement shall not be deemed
to be a waiver of such provision or right or of any other provision of or
right
under this Agreement.
(f) The
Employee and the Company acknowledge that this Agreement supersedes any other
agreement between them concerning the subject matter hereof.
(g) This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, and which together shall constitute one
instrument.
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IN
WITNESS WHEREOF, the Employee has hereunto set the Employee’s hand and, pursuant
to the authorization of its Board, the Company has caused this Agreement
to be
executed in its name on its behalf, all as of the day and year first above
written.
| OBLIO TELECOM, INC. | ||
| |
|
|
| By: | /s/ | |
|
Xxxxxx Xxxxxxx |
||
| Chief Financial Officer | ||
| EMPLOYEE | ||
| |
|
|
| By: | /s/ | |
|
Xxxxx Xxxxxx |
||
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