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EXHIBIT 10.5
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AND NONCOMPETITION AGREEMENT (this "Agreement") is
entered into as of August 13, 1999 between PentaStar Communications, Inc., a
Delaware corporation (the "Employer") and Xxxxxxx X. Xxxxx, (the "Employee").
RECITALS
The Employer desires to employ the Employee, and the Employee desires
to be employed by the Employer.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties agree as
follows:
I. DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms will have the meanings set forth below:
1.1 "Access" means the stock and assets of DMA Ventures, Inc. (d/b/a
Access Communications) acquired by Employer as of the date of the IPO;
1.2 "Affiliate" means, with respect to any person: a) any person in
which such person holds an equity or profits interest; b) any person
controlling, controlled by or under common control with such person; c) any
director, executive officer, partner or trustee of such person; d) any spouse or
adult child of such person; or e) any trust in which a substantial portion of
the beneficial interest is held by any of the foregoing persons.
1.3 "Base Compensation" means a salary at the rate of $10,000 per
month.
1.4 "Bonus Plan" means the bonus plan to be adopted by Employer whereby
Employee is entitled to receive five-percent of the earnings derived from
Access, before interest, taxes and amortization expense, on an annual basis
during the Employee's employment under the terms and conditions of the plan.
1.5 "Business" means: a) the businesses conducted or planned to be
conducted by the Employer or any Affiliate of the Employer, as of the date of
this Agreement or conducted by the Employer or any Affiliate of the Employer at
any time during the Employee's employment by the Employer; b) any portion of the
business conducted by any Person whose business is acquired by the Employer or
any Affiliate of the Employer, whether by acquisition of stock, assets or
otherwise, at any time (i) within the one-year period prior to the closing date
of such acquisition or (ii) during the Employer's employment by the Employer;
and c) any other businesses related to business access to local telephone
service, long distance service, Internet service and wireless service providers.
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1.6 "Change of Control" means: a) the Employer sells all or
substantially all of its assets in a single transaction or series of related
transactions to a non-Affiliate; b) the stockholders of Employer sell all or
substantially all of the outstanding stock of Employer in a single transaction
or series of related transactions to a non-Affiliate of Employer; or c) Employer
is merged with a non-Affiliated entity and is not the survivor of such merger.
1.7 "Commencement Date" means the date on or after the date of this
Agreement on which the Employee actually commences full-time employment with the
Employer. The Commencement Date shall be the date upon which the IPO occurs.
1.8 "IPO" means the successful completion of an initial public offering
of the Employer's stock.
1.9 "Person" means any natural person, corporation, trust, partnership,
limited liability company, joint venture, unincorporated organization,
government or governmental agency, or other entity.
II. EMPLOYMENT TERMS AND CONDITIONS
2.1 Employment. The Employer agrees to employ the Employee, and the
Employee agrees to serve the Employer, subject to the terms and conditions set
forth in this Agreement.
2.2 Compensation.
a) For the Employee's full-time performance of services, the
Employee shall be paid the Base Compensation on regular monthly paydays. Unless
this Agreement has been previously terminated, Base Compensation shall begin to
accrue on the date of the IPO, with the first such monthly payment due on the
last day of the month in which the IPO occurs in respect of that month.
b) Employee shall be eligible to participate in the Bonus Plan
under the terms and conditions of that plan.
2.3 Additional Benefits. The Employer shall provide to the Employee
individual coverage in a group medical/health insurance plan. The Employer may
provide the Employee with the opportunity to participate in any profit sharing
plan that the Employer may establish under the terms of that plan.
2.4 Expense Reimbursement. Upon submission to the Employer of
documentation reasonably satisfactory to it, the Employer will reimburse the
Employee for all reasonable business-related expenses and reasonable
transportation, hotel, meal and other travel expenses reasonably incurred by
Employee on business travel away from the Employer's principal office, all in
accordance with policies of the Employer established from time to time by the
Employer.
2.5 Services. The Employee will be initially employed in the position
of Regional Manager. The Employee shall have as his primary business focus the
performance of services
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to Employer. The Employee shall report to and be subject to the direction of the
Employer, and will perform such additional or different duties as the Employer
may designate from time to time.
2.6 Term of Employment. The term of employment shall be for the lesser
of five years from the IPO or until a Change of Control. However, this Agreement
and the Employee's employment under this Agreement shall be terminable
immediately, without prior notice, for Cause. The Employee's employment shall
terminate on the first to occur of the Employee's termination, resignation,
death or disability (meaning that the Employee has become disabled to an extent
which substantially impairs the Employee's ability to perform the Employee's
obligations under this Agreement, with or without reasonable accommodation). The
Employee's disability due to illness or injury for an aggregate of 30 days or
less during any 12-month period shall not be deemed a disability that
substantially impairs the Employee's ability to perform the Employee's
obligations under this Agreement. For purposes of this Agreement, "Cause" for
termination exists if the Employee: a) has been convicted of, or pleads guilty
or nolo contendere to, a felony; b) is grossly negligent in the exercise of the
Employee's authority or the performance of the Employee's duties; c) willfully
engages in any activity which is contrary to the best interest of the Employer
or any of its subsidiaries; d) willfully violates or disregards instructions
from the Employer; or e) fails to devote his full efforts and working time to
the business of the Employer, or if the Employee or any of his Affiliates
breaches any provision of Article III of this Agreement.
III. NONCOMPETITION; CONFIDENTIALITY
3.1 Noncompetition.
a) The Employee covenants and agrees that for a period which
is the greater of three years from the IPO or one year after the Employee's
employment with the Employer terminates ("Noncompete Period"), neither the
Employee nor any of the Employee's Affiliates will, directly or indirectly,
either by providing financial assistance or through any manner of ownership, or
as a director, officer, employee, consultant, principal, agent or otherwise,
engage in any activity anywhere in the United States that is competitive with
the Business; provided, however, that nothing is this Agreement will prohibit
the Employee or the Employee's Affiliates from "beneficially owning" (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
equity securities or interest of or in another corporation, partnership, joint
venture, business trust or other business organization or association engaged in
an activity that, if engaged in by the Employee or the Employee's Affiliates,
would be prohibited by the first clause of this sentence, so long as the equity
securities or interest so owned by the Employee and the Employee's Affiliates
(including any such equity securities or interest owned by any "associate" of
the Employee and the Employee's Affiliates within the meaning of Rule 12b-2
under the Securities Exchange Act of 1934, as amended) do not represent, in the
aggregate, more than five-percent (5%) of the profits or interest in the issuer
thereof.
b) The Employee and the Employer intend that the covenant
contained in Section 3.1a) be deemed to be a series of separate covenants made
by the Employee, one for each state of the United States and similar political
subdivisions of other countries. Except for the geographical coverage, the terms
of each such separate covenant contained in Section 3.1a) will be deemed to be
identical to the terms of the covenant contained in Section 3.1a).
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3.2 No Competitive Hiring. During the Noncompete Period the Employee
will not, and will cause each of the Employee's Affiliates not to attempt to
solicit, solicit or assist others in any attempt to solicit for employment any
employee or officer of the Employer or any Affiliate of the Employer (except any
employee whose employment by such Employer or Affiliate has terminated) without
the Employer's prior written consent.
3.3 Corporate Opportunities. During the Noncompete Period, the Employee
will, and will cause the Employee's Affiliates to, promptly refer to the
Employer any information or inquiry concerning any opportunity involving the
Business.
3.4 Confidential Information. The Employee acknowledges that
information, observations and data obtained by the Employee concerning the
Business or the business or affairs including customer lists and contacts of the
Employer, or any of its respective Affiliates (the "Confidential Information")
are confidential information, trade secrets and the property of the Employer.
The Employee and the Employee's Affiliates will not disclose to any unauthorized
person or use any Confidential Information without the prior written consent of
the Employer for the personal gain of the Employee or any of the Employee's
Affiliates; provided however, that such restriction on disclosure shall not
apply if the disclosure was made by the Employee in the direct pursuit of the
business interests of the Employer. Nothing herein shall prevent the disclosure
of Confidential Information (i) which becomes generally known to and available
for use by the public other than as a result of disclosure by any person or
entity owing a duty of confidentiality to the Employer or (ii) as may be
required by applicable law, regulation or order of any governmental agency or
court of competent jurisdiction. Immediately upon termination of the Employee's
employment with the Employer, the Employee will deliver to the Employer all
memoranda, notes, plans, records, reports, and other documents and information
(and all copies thereof in any form) relating to the Confidential Information,
the Business or the business and affairs of the Employer, which the Employee may
then possess or have under the Employee's control.
3.5 Inventions. For purposes of this Section 3.5, "Invention" means any
invention, improvement, discovery or idea useable by and of benefit to the
Business (whether patentable or not, and including those which may be subject to
copyright protection) generated, conceived or reduced to practice by the
Employee alone or in conjunction with others, during or after normal business
hours, whether before or during the term of this Agreement, and all associated
rights to patents, copyrights and applications therefor. The Employee agrees
promptly to disclose to the Employer all Inventions. All Inventions shall be the
exclusive property of the Employer and hereby are assigned to the Employer. The
Employee will, at the Employer's reasonable expense, provide the Employer with
all assistance it requires to protect, perfect and use its rights to and its
interest in Inventions anywhere in the world and to vest in the Employer such
rights and interest.
IV. MISCELLANEOUS
4.1 Specific Performance. The Employer and the Employee acknowledge and
agree that any breach of the Employee's covenants set forth in Articles III
hereof will result in irreparable damage to the Employer for which there will be
no adequate remedy at law. Therefore, the Employer and the Employee agree that
the Employer may in its sole discretion
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seek an order enjoining any breach of such covenants, without prejudice to any
other right or remedy to which the Employer may be entitled at law or in equity.
4.2 Arbitration. Any disputes arising under this Agreement, except
those involving claims for specific performance or other equitable relief for
any breach of Article III, shall be submitted to binding arbitration under the
Rules of the American Arbitration Association. The arbitration shall be
conducted only in Denver, Colorado before a single arbitrator selected by the
Employee and the Employer, or, if they are unable to agree on an arbitrator,
before a panel of three arbitrators, one selected by the Employee, one selected
by the Employer and a third selected by the other arbitrators. The award of the
arbitrators shall be final and binding and judgment on the award may be entered
by any court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO
ARTIBRATE SHALL BE SPECIFICALLY ENFORCEABLE.
4.3 Attorneys' Fees and Costs. The prevailing party or parties in any
arbitration or in any other action to enforce this Agreement shall be entitled
to all reasonable costs and expenses, including attorneys' fees, incurred in
connection therewith.
4.4 Binding Contract. The mutual reliance by the Employer and the
Employee upon the existence of this Agreement shall constitute sufficient
consideration for the validity and enforceability of each of its provisions.
4.5 Severability. The Employer and the Employee agree that the terms of
this Agreement, and in particular the restrictions on the Employee set forth in
Article III, are reasonable and fair in light of the transactions contemplated
hereby. Whenever possible, each provision of this Agreement will be interpreted
so as to be fully effective and valid under applicable law. In the event that
any provision of this Agreement shall be determined to be unenforceable in any
respect as written, such provision shall be deemed to have been automatically
modified to the minimum extent necessary to make it enforceable and the
provision shall be enforced as so modified. If any provision contained in this
Agreement is determined to be void or unenforceable in whole or in part or is so
modified, it shall not be deemed to affect or impair the validity of any other
provision contained in this Agreement.
4.6 Waiver and Amendment. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Employee and by the Secretary for the Employer. No waiver by any party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver shall be effective unless set forth in writing and
signed by the party against whom such waiver is asserted, and if the party
against who in such waiver is asserted is the Employer, no waiver shall be
effective unless agreed to by the board of directors of Employer.
4.7 Assignment. This Agreement shall inure to the benefit of and be
enforceable by the Employer and its successors and assigns, including, without
limitation, any limited liability company or corporation formed by the Employer
or the general partners of the Employer, but shall not be assignable or
delegable in whole or in part by the Employee.
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4.8 Headings. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
4.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one agreement.
4.10 Complete Agreement. This Agreement embodies the complete agreement
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by the parties, written or oral,
which may relate to the subject matter hereof.
4.11 CHOICE OF LAW. EXCEPT FOR THE FEDERAL ARBITRATION ACT, WHICH SHALL
APPLY TO SECTION 4.2, THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF
THE STATE OF COLORADO.
4.12 Termination. This Agreement shall terminate if the Agreement and
Plan of Merger dated the date hereof, to which Employer and Employee are
parties, shall terminate.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
date first above written.
EMPLOYEE PentaStar Communications, Inc.
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxxxxx
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(Print name)
Its: President
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