TOUCH TONE AMERICA, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
January 16, 1997 by and between Touch Tone America, Inc. ("Employer" or "TTA"),
and Xxxxx X. Xxxxxxx ("Employee").
Employer is party to a transaction pursuant to which it will be the
survivor of a merger with SVV Sales, Inc. d/b/a Arcada Communications (the
"Merger").
Pursuant to the terms of the Merger, Employee will be named President and
Chief Executive Officer of TTA.
The parties wish to enter into this Agreement to memorialize the terms upon
which the Employee will provide services to TTA.
For good and valuable consideration, the receipt and sufficiency of which
we hereby acknowledge, the parties agree as follows:
1. TERM OF AGREEMENT. Employer and Employee agree that the Employee will
be employed by TTA commencing on the effective date of the Merger (the
"Effective Time") until December 31, 1999, unless employment is sooner
terminated as provided herein. This Agreement shall be automatically renewed
for succeeding terms of one (1) year, unless at least ninety (90) days prior to
the expiration of any term, either party gives written notice to the other of
that party's intention not to renew this Agreement.
2. POSITION AND DUTIES
2.1 Employer and Employee agree that Employee will be employed as the
President and Chief Executive Office of TTA and that, in this capacity,
Employee's responsibilities will include providing overall leadership and
management of TTA, subject to the approval and oversight of the Board of
Directors.
2.2 It is further agreed and understood that, as the President and
Chief Executive Officer of Employer, the hours which Employee is required to
work will vary considerably and will sometimes be more than forty (40) hours per
week. It is understood and agreed that such work in excess of forty (40) hours
per week is a regular and normal part of Employee's responsibilities for which
he is compensated, and does not in any way constitute overtime for which
Employee is entitled to receive additional compensation.
2.3 Employee agrees to devote his full-time efforts to his duties
with Employer and further agrees that Employee will not directly or indirectly
engage or participate in
any activities while employed with Employer that would conflict with the best
interests of Employer.
2.4 Employee's obligation to devote his full-time attention and
energy to the business of Employer shall not be construed as preventing Employee
from investing his assets so long as any such investment will not require any
services on the part of Employee in the operation of the affairs of the
company(ies) or business(es) in which such investment(s) is (are) made.
3. EMPLOYER'S COVENANTS
3.1 Employer agrees to furnish Employee with such equipment,
employees and services as are necessary to perform Employee's obligations under
this Agreement. Employer shall also pay for Employee's membership dues in
professional organizations, the reasonable costs of any seminar attendance or
continuing education requirements of Employee's profession and Employee's
subscriptions to a reasonable number of professional journals.
3.2 Employer agrees to reimburse Employee for all reasonable business
expenses incurred by Employee while on Employer's business. Employee shall
maintain such records as will be necessary to enable Employer to properly deduct
such items as business expenses when computing Employer's federal income tax.
4. COMPENSATION
4.1 For all services rendered by Employee under this Agreement
(exclusive of directors' fees, if any), Employer shall pay Employee a base
salary of One Hundred and Fifty Thousand Dollars ($150,000) per year. Employee
shall be paid this salary on a bi-weekly basis, minus all lawful and agreed upon
payroll deductions.
4.2 The base salary set forth in Section 4.1 above shall be reviewed
annually by the Employer and may be increased by such amount as the Employer
shall, in its sole discretion, determine; provided, however, that such base
salary shall, at a minimum, be increased annually on each anniversary of the
Effective Time by an amount equal to the proportionate increase in the Consumer
Price Index (as hereinafter defined) during the twelve (12) calendar months
immediately preceding the month in which such anniversary date occurs. For
purposes hereof, "Consumer Price Index" shall mean the U.S. City Average for All
Urban Consumers (1982-84=100) issued monthly by the Bureau of Labor Statistics
of the United States Department of Labor, or any successor index thereto
appropriately adjusted.
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5. BONUS AND OPTIONS
5.1 DISCRETIONARY BONUSES. It is understood that Employer's earnings
depend largely upon the performance and productivity of Employee. Therefore,
Employer shall periodically, but not less frequently than annually, review
Employee's services rendered and, in the sole discretion of the Board of
Directors of TTA, may award bonuses in an amount which will recognize Employee's
contributions to profits during that period.
5.2 OPTIONS. As of the date of the first meeting of the Compensation
Committee of the Board of Directors of TTA after the Effective Time, TTA shall
grant to the Employee options (the "Options") to purchase an aggregate of
100,000 shares of common stock of TTA ("Common Stock") (as such number shall be
appropriately adjusted to take into account stock splits, stock dividends and
similar events in respect of the Common Stock), under and subject to the terms
of any stock option plan then in effect (the "Option Plan"), at an exercise
price equal to the closing bid and asked price of the Common Stock, as quoted on
the Nasdaq SmallCap market on the date of grant. The Options shall be ten (10)
year options and shall become exercisable and vest as to 33-1/3 of such shares
on each of the first, second and third anniversaries of the date of grant
thereof. It is understood and agreed by the Employee and the Employer that the
Options shall otherwise be in all respects subject to the terms and conditions
of the Option Plan, if any, and the certificate representing such options, which
terms and conditions shall include acceleration of exercisability and vesting of
the Options upon the occurrence of certain change of control events.
6. FRINGE BENEFITS
6.1 Employer and Employee agree that, during the term of this
Agreement, Employee shall be entitled to participate in all fringe benefits and
incentive compensation plans as may be authorized and adopted from time to time
by the Employer and for which Employee is eligible, including, for example, any
pension plan, profit sharing plan, disability plan, medical plan, group life
insurance plan, or other employee benefit plans.
6.2 SICK LEAVE. Employee shall be entitled to a reasonable number of
paid sick leave days during each calendar year of employment. In determining
what is a reasonable number of days, the Employer shall take into consideration
previous periods of disability, the number of days of sick leave taken in the
current year and preceding years, and other factors it deems pertinent.
Employer shall be the sole party to determine the reasonableness of Employee's
number of sick leave days.
6.3 AUTOMOBILE EXPENSE. Employee shall be provided an automobile by
Employer or, if Employee so chooses, Employer shall provide the Employee with an
automobile allowance of $900 per month. Employer shall reimburse Employee for,
or pay on behalf of the Employee, at Employer's election, all insurance, fuel,
repair and maintenance expenses relating to such automobile incurred by Employee
during the term hereof (including any extensions
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thereof) and shall, in connection therewith, provide to Employee one or more
gasoline charge cards for use by Employee during the term hereof (and any
extensions thereof).
6.4 INSURANCE. In the event this Agreement is terminated, Employer,
upon the request of Employee, shall assign to Employee any insurance policy
owned by Employer under which Employee is the insured and which is assignable by
the policy terms; provided, however, that if any such policy has a cash
surrender value, Employee shall pay the then cash surrender value of such policy
to Employer in exchange for its assignment to Employee under this section. Any
conversion rights which Employee may have under the terms of any such insurance
policy shall survive any termination of this Agreement.
6.5 VACATION. Employee shall be entitled to four (4) weeks' paid
vacation per calendar year.
7. CONFIDENTIAL INFORMATION. It is understood and agreed that as a
result of Employee's employment with TTA, Employee will be acquiring and making
use of confidential information about Employer's business as well as financial
information about TTA. Employee agrees that he will respect the confidences of
Employer and will not at any time during or within three (3) years following the
period of his employment with TTA, directly or indirectly divulge or disclose
for any purpose whatsoever or use for his own benefit, any confidential
information that has been obtained by or disclosed to Employee as a result of
his employment with TTA. Employee may also have signed or be asked to sign an
additional agreement regarding confidential information, including trade secrets
and inventions. In the event that the provisions of this agreement conflict
with the provisions of that additional agreement, Employee understands that he
must adhere to the more restrictive agreement.
8. COVENANT NOT TO COMPETE. In view of the unique value to TTA of
Employee's services and because of the confidential information to be obtained
by or disclosed to Employee as described above, Employee agrees as follows:
8.1 That during his employment with TTA, and for a period of six (6)
months after termination of such employment by Employee, Employee will not
directly or indirectly, as principal, owner, employee, or agent, engage within
the United States in any business that is competitive with business of TTA, or
that business described in the prospectus contained in any registration
statement filed by TTA under the Securities Act of 1933 at any time during the
initial year of this Agreement.
8.2 That during his employment with TTA, and for a period of six (6)
months after termination of such employment by Employee, he will not directly or
indirectly solicit for employment or employ any employee of TTA.
8.3 That during his employment with TTA, and for a period of six (6)
months after termination of such employment by Employee, he will not, directly
or indirectly, solicit business from any customers of TTA.
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8.4 That if Employee violates any of the provisions of this Section 8
or section 7, Employer and Employee both realizing the difficulty in
establishing the amount of actual damages incurred by TTA as the result of such
a breach, TTA shall be entitled to liquidated damages in an amount equal to
Employee's then current yearly salary if still employed by TTA, or if no longer
employed by Employer, the amount of Employee's yearly salary at the time of his
termination, plus any bonus paid during the previous twelve (12) months, plus
interest at the rate of twelve percent (12%) per annum from the date of the
breach of any of these subsections or section 7 until payment is received by
TTA. It is understood and agreed that this remedy is in addition to, and not a
limitation on, any injunctive relief or other rights or remedies to which
Employer is or may be entitled to under law.
9. TERMINATION. This Agreement shall be terminated upon the occurrence
of any one of the following events:
9.1 Death of Employee.
9.2 If Employee shall have been incapacitated from illness, accident
or other disability and unable to perform his normal duties hereunder for a
cumulative period of six (6) months in any period of twelve (12) consecutive
months, upon Employer or Employee giving the other party not less than thirty
(30) days' written notice. In the event of such termination, Employee shall be
entitled to: (a) all benefits due Employee under any accident, sickness,
disability, health or hospitalization plan or insurance policy of Employer then
in effect; and (b) compensation under this agreement for a period of one (1)
year following the effective date of Employee's termination. The payments in
respect to this subsection shall be made in twelve (12) installments.
9.3 Expiration of this Agreement or expiration of any renewal or
extension thereof.
9.4 Immediately by Employer for cause. For purposes of this
subsection, "cause" includes, but is not necessarily limited to, the following:
(a) breach by Employee of any material provision of this Agreement; (b) material
violation by Employee of any statutory or common law duty of loyalty to
Employer; or (c) personal or professional conduct of Employee, which, in the
reasonable and good faith judgment of the Board of Directors of Employer injures
or tends to injure the reputation of Employer or otherwise adversely affects the
interests of Employer. Such conduct may include, but is not limited to,
dishonesty, chronic absenteeism, alcoholism, drug addiction, and conviction of a
felony or misdemeanor involving moral turpitude.
9.5 Upon the cessation of business by Employer.
9.6 Upon the retirement of Employee.
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10. EFFECT OF TERMINATION. Upon termination of Employee's employment with
TTA, Employer agrees to pay Employee all salary, fringe benefits, bonuses or
other remuneration which are due and owing to Employee as of the date of
termination, less legal deductions or offsets Employee may owe to Employer for
such items as salary advances or loans. Employee agrees that his signature on
this Agreement constitutes his authorization for all such deductions, upon
termination of Employee's employment with TTA. Upon the termination of
Employee's employment with TTA, Employee agrees to return to TTA all of
Employer's property of any kind which may be in Employee's possession. In the
event of termination of this Agreement, the noncompetition and confidentiality
provisions provided in sections 7 and 8 above, shall continue in full force and
effect according to their terms.
11. CONSTRUCTION OF AGREEMENT
11.1 ESSENTIAL TERMS AND MODIFICATION OF AGREEMENT. It is understood
and agreed that the terms and conditions described in this Agreement constitute
the essential terms and conditions of the employment arrangement between
Employer and Employee, all of which have been voluntarily agreed upon. Employer
and Employee agree that there are no other essential terms or conditions of the
employment relationship that are not described within this Agreement, and that
any change in the essential terms and conditions of this Agreement will be
written down in a supplemental agreement which shall be signed by both Employer
and Employee before it is effective.
11.2 SEVERABILITY. The invalidity of all or any part of any section
of this Agreement shall not render invalid the remainder of this Agreement or
the remainder of such section. In the event a court of competent jurisdiction
should decline to enforce any provision of any section of this Agreement, such
section shall be reformed to the extent necessary in the judgment of such court
to make such provision of such section enforceable to the maximum extent which
the court shall find enforceable.
11.3 NOTICES. Any notice hereunder shall be sufficient if in writing
and delivered to the party or sent by certified mail, return receipt requested
and addressed as follows:
a. If to Employer:
Touch Tone America, Inc.
0000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
b. If to Employee:
Xxxxx Xxxxxxx
__________________________
__________________________
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Either party may change the address herein specified by giving to the other,
written notice of such change.
11.4 GOVERNING LAW. This Agreement is made and shall be construed
and performed under the laws of the State of Washington.
11.5. VENUE AND ATTORNEYS' FEES. A breach of any of the terms of this
Agreement shall entitle the aggrieved party to xxx for breach of the Agreement.
In such case, venue shall be in King County, Washington. In the event it is
necessary for either party to institute suit in connection with this Agreement
or its breach, the prevailing party in said suit or proceeding shall be entitled
to reimbursement for its reasonable costs and attorney's fees incurred.
11.6 WAIVER OF AGREEMENT. The waiver by Employer of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver by Employer of any subsequent breach by Employee.
11.7 CAPTIONS. The captions and headings of the sections of this
Agreement are for convenience and reference only and are not to be used to
interpret or define the provisions hereof.
11.8 ASSIGNMENT AND SUCCESSORS. The rights and obligations of
Employer under this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of Employer. The rights and obligations of Employee
hereunder are nonassignable. Employer may assign its rights and obligations to
any entity in which Employer, or a company affiliated to Employer, has a
majority ownership interest.
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Executed on the date first written above and commencing at the Effective
Time.
EMPLOYEE: TOUCH TONE AMERICA, INC.:
/s/ Xxxxx Xxxxxxx /s/ Xxxxxxx Xxxxxx
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By Xxxxxxx Xxxxxx
Its President
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