EXHIBIT 10.4
ELCOTEL, INC.
Employment Agreement of Xxxxxxx X. Xxxxxxxx
Agreement (this "Agreement") dated as of the 10th day of
December, 1998 by and between Elcotel, Inc. (the "Company") and
Xxxxxxx X. Xxxxxxxx ("Employee") upon the following terms and conditions:
1. Term: This Agreement shall commence on December 10th,
1998 and shall continue until either party terminates this Agreement by
giving the other party at least 60 days prior written notice or until
sooner terminated as provided in this Agreement.
2. Employment. Employee shall be employed by the Company
and he shall devote his full business time to carrying out the
responsibilities of his position with the Company. Employee's position
with the Company on the date of this Agreement shall be Senior Vice
President, Administration & Finance.
3. Salary: During the term of this Agreement, the salary
paid to Employee shall not be less than One Hundred Twenty Five Thousand
Dollars ($125,000.00) per year, and shall be subject to annual review for
merit or other increases in the sole discretion of the board of directors
of the Company.
4. Benefits: Employee shall be entitled to the same
benefits as are made available to the Company's other senior executives
and on the same terms and conditions as such executives (the
"Benefits").
5. Bonuses: Employee shall be entitled to receive such
annual bonus, if any, as the board of directors of the Company or the
Compensation Committee of the board determines or has approved prior to
the date hereof through the Company's Incentive Compensation Plan (the
"Bonus").
6. Stock Options:
(a) Employee shall be eligible for additional stock
option grants to purchase shares of the Company's common stock pursuant
to the Company's stock option plans. Employee shall retain all options
previously granted and unexercised.
(b) All of Employee's stock options shall immediately
vest in their entirety in the event of a Change of Control (as defined
below). In addition, in the event of a termination by the Company of
Employee's employment (including by 60 days prior written notice pursuant
to Section 1) other than for Cause (in accordance with Section 9(a) of
this Agreement) or upon the death or disability of Employee (in
accordance with Section 9(d) of this Agreement), all of Employee's
employee stock options shall continue in effect for 30 days, and in the
case of Employee's stock options outstanding under the Technology Service
Group, Inc. 1994 Omnibus Stock Plan, 60 days, after the effective date of
such termination except that (x) for all options granted after the date
of this Agreement and for all other existing options that can be amended
without increasing the exercise price in order to maintain incentive
stock option status for federal income tax purposes, shall continue in
effect until the termination of such option in accordance with its terms
absent any termination of employment but not to exceed one year from the
date of termination of employment and (y) for all options to which (x)
does not apply, shall, if not exercised within such 30 day or 60 day
period, be automatically extended until the termination of such option in
accordance with its terms absent any termination of employment but not to
exceed one year from the date of termination of employment.
(c) The occurrence of any one or more of the following
events shall be deemed to be a "Change of Control":
(i) 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;
(ii) 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
(iii) 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.
7. Business Expenses: Employee shall be reimbursed (in
accordance with Company policy from time to time in effect) for all
reasonable business expenses incurred by him in the performance of his
duties.
8. Indemnification: Employee shall be indemnified by the
Company with respect to claims made against him as an officer and/or
employee of the Company and as an 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.
9. Termination By the Company: Employee's employment may
be terminated by the Company only as provided below:
(a) For Cause: For Cause (as defined below) by
written notice to Employee and payment to him of salary accrued, but not
paid through the date of termination; provided however -
(i) If the nature of such Cause involves
dishonesty, fraud or serious moral turpitude, such termination
shall be effective upon the giving of such notice.
(ii) If the nature of such Cause does not involve
dishonesty, fraud or serious moral turpitude, such termination
shall be effective upon the expiration of thirty (30) days after
the giving of such notice unless within such thirty-day period,
Employee has cured the basis of such Cause, or if a cure is not
possible within a thirty-day period, if he has diligently and in
good faith commenced to effect such cure.
(b) Without Cause: Without Cause by prior written
notice of termination given to Employee and by compliance with the
following:
(i) The Company shall pay to Employee his salary
accrued, but not paid through the date of termination and shall pay
to Employee his salary and provide, at the Company's expense, the
Benefits (excluding participation in the Company's 401(k) plan and
any other benefits to which COBRA does not apply) for a period of
(x) six months from the date of termination of employment and
thereafter (y) until such date that the Employee locates employment
comparable to his employment with the Company at the date of
termination of employment but not beyond the date that is twelve
months from the date of termination of employment. If the
Employee's employment is terminated without Cause during a fiscal
year effective on a date that is on or after 6 months after the
beginning of such fiscal year, then the Company shall pay to
Employee in a lump sum within 30 days after the termination of
employment the Pro Rata portion of the Employee's bonus from the
Company with respect to the fiscal year prior to the termination of
employment; provided however with respect to a termination of
employment without Cause that is effective during the fiscal year
ending March 31, 1999, the Company shall pay to Employee on or
before June 30, 1999 the Pro Rata portion of the Employee's bonus
from the Company with respect to the fiscal year ending March 31,
1999, such bonus (but not the Pro Rata portion thereof) shall be
calculated as if he had been employed through the end of such
fiscal year. Pro Rata shall mean the number of days from the
beginning of the Company's fiscal year during which the termination
of employment occurred up to and including the date of termination
of employment divided by 365 days.
(ii) If without Employee's written consent, (x)
there is a material reduction in Employee's responsibilities or a
reduction in his salary or (y) Employee is required to perform his
duties (other than for normal travel, consistent with performance
of his services hereunder) from a geographic location other than
the area consisting of Sarasota, Florida, and its surrounding
counties, the reduction or requirement may, at Employee's option by
notice given to the Company within ninety (90) days after the date
of such reduction or requirement, be treated by him as a notice of
termination of his employment by the Company without Cause.
(c) Termination on 60 Days Notice: If the Company
terminates this Agreement by 60 days prior written notice pursuant to
Section 1 and if Employee's employment is thereafter terminated by the
Company without Cause, such termination shall be treated as a termination
without Cause pursuant to Section 9(b) and Employee's stock options shall
be subject to the provisions of Section 6(b). The obligations of the
Company contained in this Section 9(c) shall survive the termination of
this Agreement by the Company pursuant to Section 1.
(d) Death or Permanent Disability: Upon the
death or permanent disability of Employee, but only after providing him
with salary accrued through the effective date of death or disability.
(e) Definition of "Cause": "Cause" for
purposes of termination by the Company shall be defined as (i) any act or
acts by Employee of dishonesty or fraud or that constitute serious moral
turpitude; or (ii) misconduct of a material nature or a material breach
in connection with the performance by him of his responsibilities
hereunder that Employee knew or should have known would be materially
detrimental to the Company or its business.
10. Termination By Employee:
(a) Employee may terminate his employment under this
Agreement by reason of a breach hereof by the Company on twenty (20) days
prior written notice to the Company, if such breach is not cured within
such twenty day period.
(b) Employee may also terminate his employment
under this Agreement by giving the Company at least sixty (60) days prior
written notice of termination.
11. 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 (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 Employee 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, shall be the sole property of Company.
Employee hereby assigns to Company any rights which he may acquire or
develop in such Proprietary Information. Employee 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. Employee's obligations under this Section 11 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 Employee at a reasonable rate for time
actually spent by Employee at Company's request on such assistance after
termination of Employee's employment with Company. If Company is unable,
after reasonable effort, to secure Employee'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 Employee's physical or mental incapacity or for any other
reason whatsoever, Employee hereby irrevocably designates and appoints
Company and its duly authorized officers and agents as Employee'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 Employee.
12. Covenants Not To Disclose Confidential Information.
(a) Employee agrees that he will not at any time or
place during his employment or for three years 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 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.
Employee agrees that both during the course of his employment with
Company and for three years 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, Employee 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 Employee in the course of his employment duties
with Company.
(b) Employee agrees that during the course of his
employment with the Company and the Restricted Period (as defined in
Section 13) 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) Employee agrees that he will not, during the
course of his employment with the Company and the Restricted Period (as
defined in Section 13), 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 Employee during
the course of his employment with Company would be utilized.
(d) The Employee recognizes and agrees that his
violation of any terms contained in paragraphs (a), (b), or (c) of this
Section 12 will cause irreparable damage to Company, the amount of which
will be impossible to estimate or determine. Therefore, Employee 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 Employee, 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. Employee further agrees that his violation
of any of the terms of paragraphs (a), (b), or (c) of this Section 12
during the course of his employment with Company shall be a cause for his
termination without notice of any rights of the Employee 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.
13. Covenant Not To Compete Unreasonably With Company.
Employee further covenants and agrees that:
(a) During the course of his employment with Company
and the Restricted Period, Employee 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. "Restricted
Period" shall mean (i) if this Agreement is terminated For Cause, one
year; (ii) if this Agreement is terminated by the Company without Cause
or by either party by 60 days prior written notice pursuant to Section 1,
the time period following termination of employment during which the
Employee is entitled to receive salary and Benefits, but not to exceed
one year; and (iii) if this Agreement terminates for any other reason,
there shall be no Restricted Period.
(b) Employee recognizes and agrees that his violation
of any terms contained in paragraph (a) of this Section 13 will cause
irreparable damage to Company the amount of which will be impossible to
estimate or determine. Therefore, Employee 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
Employee, 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. Employee further agrees that his
violation of any of the terms of paragraph (a) of this Section 13 during
the course of his employment with Company shall be a cause for his
termination without notice of any rights of Employee 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.
14. Notices: Notices that are required or permitted
hereunder shall be given by hand delivery, by delivery to a courier
service providing next day delivery and proof of receipt, or by facsimile
transmission (except to Employee), as follows:
If to the Company at: Elcotel, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: President
Facsimile: 000-000-0000
If to Employee, to his most recent residence address on the
books of the Company, or, to such other address of a party as to which
that party shall notify the other parties in the manner provided herein.
15. Proration: To the extent that proration is not
otherwise provided for in this Agreement, all amounts payable to Employee
under this Agreement shall be deemed earned on a daily basis and shall be
prorated based on a 365-day year.
16. Entire Agreement, etc.:
(a) This Agreement contains the entire understanding
of the parties except as otherwise expressly contemplated herein; shall
not be amended except by written agreement of the parties signed by each
of them; shall be binding upon and inure to the benefit of the parties
and their successors, personal representatives and assigns; and shall
supersede and replace all prior employment agreements between the
parties.
(b) No representation, affirmation of fact, course of
prior dealings, promise or condition in connection herewith not
incorporated herein shall be binding on the parties.
(c) No waiver of any term or condition contained
herein shall be binding upon the parties unless made in writing and
signed by the party to be bound thereby.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first set forth above.
EMPLOYEE:
ELCOTEL, INC.
/s/ Xxxxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxx
----------------------- By:--------------------------
Xxxxxxx X. Xxxxxxxx Xxxxxx X. Xxxx, President
