EXHIBIT 10.19
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made effective as of
April 1, 1997, between Xxxxxxx X. Xxxxxx ("Employee") and EqualNet Holding
Corp., a Texas corporation ("Employer").
1. EMPLOYMENT. Employee shall be retained as Executive Vice President and Chief
Operating Officer to perform such specific duties and have such responsibilities
as the Employer's President and Chief Executive Officer will, from time to time,
establish. As Executive Vice President and Chief Operating Officer, Employee
shall be responsible for the day-to-day operation of the Employer and its
subsidiaries (collectively, the "Company") and will have reporting to him the
Vice Presidents which head each of the Company's operating departments (i.e.,
Customer Service, Information Systems, Network Operations and Finance).
2. TERM OF EMPLOYMENT. Employee's employment in this position shall commence on
April, 1997, and shall continue thereafter for a term of approximately two years
ending March 31, 1999.
3. COMPENSATION AND BENEFITS.
(a) As compensation for his services hereunder during the term of
this Agreement, the Employee shall be paid wages at the rate of
$170,000 per year for each year during the term of this
Agreement (the "Salary"). All payments of the Salary shall be
paid in accordance with the usual payroll practices of the
Employer subject to all appropriate withholdings or deductions
required by law or by Employer's established policies. Employer
may increase the Salary at Employer's sole discretion but shall
not reduce the Salary below the annual rate established by this
Agreement.
(b) Employer agrees to offer to Employee an annual performance bonus
beginning on January 1, 1998, and on an annual basis thereafter.
Employer and Employee will negotiate and agree upon the
parameters of this performance bonus. They currently anticipate
that the performance bonus will be based upon Employer's
performance in relationship to the annual budgets that Employee
will prepare and will be in an amount not to exceed 33 and 1/3
percent of Employee's base pay as outlined in 3(a) above,
assuming Employee achieves 100 percent of the to-be-determined
bonus criteria objectives.
(c) During the term of the Employee's employment under this
Agreement, the Employee also shall be entitled to receive the
following:
i. health insurance benefits and participation in the
Employer's other benefit plans (other than any stock
option or similar plan(s)) to such extent as determined
by the Board of Directors of the Employer;
ii. 25 days of combined vacation and sick days for use at
the Employee's discretion ("Choice Days") and all
holidays for which the Employer is not open for
business;
iii. reimbursement of reasonable expenses related to the
performance of his duties hereunder; provided, however,
that in order to be reimbursed the Employee must submit
vouchers or other satisfactory evidence of such
expenses; and
iv. the benefits summarized on EXHIBIT A attached hereto.
No cash payments shall be made to the Employee for Choice Days
not taken, nor shall Choice Days accumulate from year to year,
except that if any Choice Days remain unused on the expiration
of 60 calendar days following the anniversary date of the
Employee's employment with the Employer, a cash equivalent of up
to a maximum of five Choice Days shall be contributed to the
Employer's 401(k) Plan. Any remaining unused Choice Days shall
be forfeited.
(d) Employer and Employee agree that upon surrender of Employee's
option agreements listed on EXHIBIT B hereto, Employer will
grant to Employee options for an equal number of shares of
Common Stock, $.01 par value per share, of Employer (the "Common
Stock") at an exercise price equal to the fair market value of
the Common Stock on the date of such grant and with similar
terms as the options surrendered, except that upon a change of
control of Employer, all of such options will immediately vest.
4. CONFIDENTIAL INFORMATION AND DISCOVERIES OF THE EMPLOYER.
(a) The Employee has access to confidential information of the
Employer, including, but not limited to, corporate books and
records, financial information, personnel information, lists of
customers and suppliers, processes or dealings, patents,
inventions, discoveries, information, data, programs, know-how,
knowledge, and other trade secrets ("CONFIDENTIAL INFORMATION").
"Confidential Information" shall also include but is not limited
to confidential evaluations of, and the confidential use or
non-use by the Employer or any subsidiary thereof of, technical
or business information not in the public domain.
To ensure the continued secrecy of the Confidential Information,
the Employee agrees that he will not at any time during the term
of this Agreement or thereafter, until such Confidential
Information comes into the public domain other than as a result
of actions taken by the Employee, divulge such Confidential
Information to any person or entity or use such Confidential
Information himself outside of his employment by the Employer.
During the term of this Agreement, the Employee shall not make,
other than for the benefit of the Employer, any notes or
memoranda relating to any matter within the scope of the
business of the Employer or concerning any of its dealings or
affairs, nor shall the Employee use or permit to be used any
such notes or memoranda, other than for the benefit of the
Employer. Upon the termination of the term of this Agreement,
the Employee shall not take from the Employer, or otherwise
retain, and shall surrender to the Employer, any such
Confidential Information and any records, files, notes,
memoranda, or other documents, or copies thereof, relating to
the business or affairs of the Employer.
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The obligations of this Section 4(a) shall not apply to
Confidential Information that: (i) at the time of the Employee's
employment by the Employer was in the public domain; (ii) is or
becomes generally available in the public domain other than
pursuant to a breach by the Employee of his obligations under
this Section 4(a); or (iii) the Employee can show was acquired,
or is acquired after the date of this Agreement, from a third
party and such third party did not obtain such Confidential
Information from the Employer subject to or in violation of
obligations similar to those set forth in this Section 4(a).
(b) Any and all inventions, discoveries, processes, methods,
designs, programs and/or know-how, whether or not patentable,
that the Employee may conceive or make, either jointly or alone,
during the term of this Agreement and: (i) for which the
Employer provided equipment, supplies, facilities, or
Confidential Information; or (ii) that was developed on or
partially on the Employer's time; or (iii) that relates to the
Employer's current business or business that the Employer is
planning to develop or to the Employer's actual or planned
research or development or that results from any work performed
by the Employee for the Employer, shall be the sole and
exclusive property of the Employer (collectively, referred to as
an "EMPLOYER INVENTION"). The Employee shall promptly disclose
to the Employer all Employer Inventions that he may conceive or
make, alone or with others, during the term of his employment by
the Employer, and that directly or indirectly are based on his
knowledge of the information or the actual or anticipated
business or interests of the Employer or any of its
subsidiaries.
Without further compensation, but at the Employer's expense, the
Employee shall give all testimony and execute all patent
applications, rights or priority, assignments and other
documents and in general do all lawful things requested of the
Employee by the Employer to enable the Employer to obtain,
maintain and enforce protection of such ideas, inventions and
discoveries, and any improvements or modifications therein, for
and in the name of the Employer, or its nominee, in all
countries of the world. However, should the Employee render any
of these services following termination of the Term of
Agreement, the Employee shall be compensated at a rate of
$100.00 per hour and shall be reimbursed for reasonable
out-of-pocket expenses incurred in rendering the services.
5. NON-COMPETITION.
(a) Employee acknowledges that he has had and during the Term of
Agreement the Employer has agreed to provide to him, and he has
and shall receive from the Employer special knowledge. Employee
acknowledges that included in the special knowledge received is
the Confidential Information identified in Section 4 above.
Employee acknowledges that this Confidential Information is
valuable to the Employer and, therefore, its protection and
maintenance constitutes a legitimate interest to be protected by
the Employer by the enforcement of this covenant not to compete.
Therefore, Employee agrees that during the term of this
Agreement and for a period commencing upon the
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termination of Employee's engagement hereunder and ending upon
the second anniversary thereof, unless otherwise extended
pursuant to the terms hereof, Employee will not, directly or
indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder (other than as the owner of less
than five percent of the equity securities of a business
entity), corporate officer, director, or in any other individual
or representative capacity, engage or participate in any
business that is engaged in the sale or marketing of long
distance telephone service within the United States of America
or within any other geographic area of the world where the
Employer engages or proposes at the time of the termination of
the Term of Agreement to engage in business (the "Restricted
Area"). Employee represents to the Employer that the enforcement
of the restriction contained in this Section 5 would not be
unduly burdensome to Employee and that Employee agrees to be
bound by this covenant not to compete in order to induce the
Employer to pay the Employee's compensation during the term of
this Agreement in the amount set forth in Section 3 hereof.
(b) Employee agrees that a breach or violation of this covenant not
to compete by Employee shall entitle the Employer, as a matter
of right, to an injunction issued by any court of competent
jurisdiction as set forth in Section 8 hereof. Such right to an
injunction shall be cumulative and in addition to, and not in
lieu of, any other remedies to which the Employer may show
itself justly entitled. Further, during any period in which
Employee is in breach of this covenant not to compete, the time
period of this covenant shall be extended for an amount of time
that Employee is in breach hereof.
(c) In addition to the restrictions set forth in paragraph 5(a) of
this Section 5, Employee shall not for a period commencing upon
the termination of the term of this Agreement and ending upon
the second anniversary thereof, either directly or indirectly,
(i) make known to any person, firm or corporation that is
engaged in the sale or marketing of long distance telephone
service, the names and addresses of any of the customers or
agents of the Employer or contacts of the Employer or any other
information pertaining to such persons, (ii) call on, solicit or
take away, or attempt to call on, solicit or take away, any of
the customers or agents of the Employer within the Restricted
Area on whom Employee called or with whom Employee became
acquainted during Employee's association with the Employer,
whether for Employee or for any other person, firm or
corporation within any state in which Employer is conducting or
has conducted its business during the term of the Agreement or
(iii) recruit or hire or attempt to recruit or hire, directly or
by assisting others, any employee, agent or consultant of the
Employer or any of its affiliates.
(d) The representations and covenants contained in this Section 5 on
the part of Employee will be construed as ancillary to and
independent of any other provision of this Agreement, and the
existence of any claim or cause of action of Employee against
the Employer or any officer, director, or shareholder of the
Employer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the
Employer of the covenants of the Employee contained in this
Section 5.
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In addition, the provisions of this Section 5 shall continue to
be binding upon Employee in accordance with its terms,
notwithstanding the termination of the term of this Agreement
for any reason.
(e) If Employee violates any covenant contained in this Section 5
and the Employer brings legal action for injunctive or other
relief, the Employer shall not, as a result of the time involved
in obtaining the relief, be deprived of the benefit of the full
period of any such covenant. Accordingly, the covenants of
Employee contained in this Section 5 shall be deemed to have
durations as specified above, which periods shall commence upon
the termination of the term of this Agreement and shall be
extended for the amount of time between the termination of the
term of this Agreement and the date of entry by a court of
competent jurisdiction of a final judgment enforcing such
covenants.
(f) The parties to this Agreement agree that the limitations
contained in this Section 5 with respect to geographic area,
duration and scope of activity are reasonable. However, if any
court shall determine that the geographic area, duration or
scope of activity of any restriction contained in this Section 5
is unenforceable, it is the intention of the parties that such
restrictive covenant set forth herein shall not thereby be
terminated but shall be deemed amended to the extent required to
render it valid and enforceable.
6. TERMINATION.
(a) The term of this Agreement and Employee's obligations to
Employee hereunder may be terminated by the Employer upon the
occurrence of any of the following events:
i. if the Employer gives written notice to the Employee of
its intent to terminate this Agreement for Cause (as
defined below), with the date of termination to be
specified in such notice;
ii. if the Employee notifies Employer of his intent to
terminate his employment hereunder;
iii. the death of the Employee; or
iv. if, for a continuous period of 90 calendar days, or for
more than 120 calendar days in any 365 day calendar
period, excluding any authorized Choice Days or
authorized leave of absence, the Employee
(1) is absent or,
(2) is expected to be absent from his employment or
is otherwise unable to perform his duties, as
reasonably determined by a disinterested
physician selected by the Board of Directors,
by reason of illness, injury, or mental or physical
disability;
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provided that, in the case set forth in Section
4.2(iv)(b), the Employer shall continue to pay the
employee his salary and provide him and his dependents
with coverage under his existing medical insurance
policies until the earlier to occur of (i) ninety (90)
days after the date of termination and (ii) the
Employee's disability policy begins to pay benefits to
Employee.
For purposes of this Section 6(a), "CAUSE" shall mean:
(a) if the Employee is guilty of any willful misconduct
or neglect in the discharge of his duties hereunder,
provided that notice thereof has been given to employee;
(b) if the Employee is convicted of or pleads guilty or
nolo contendere to any act of moral turpitude, other
than an offense that in the opinion of the Board of
Directors does not affect the Employee's position as an
employee; or (c) if the Employee violates any material
provision of Sections 4, 5 or 7 of this Agreement.
(b) Employer may terminate this Agreement at any time prior to March
31, 1999, without Cause; provided that upon any such termination
Employee shall receive as severance pay an amount equal to
eighteen (18) months of Salary and bonus, if any has been earned
as provided herein and Employee shall have the right to remain
covered by the Employer's medical insurance policies, if any,
pursuant to the terms hereof (subject to the earlier termination
of such medical insurance benefits upon the provision of similar
insurance benefits by a subsequent employer), although any and
all other benefits would cease.
(c) Employee may terminate this agreement if (i) Employer materially
breaches any of the provisions in this Agreement, (ii) a change
of control of the Employer occurs or (iii) Employer materially
changes Employee's duties. If Employee terminates this agreement
as provided in this paragraph 6(c) then, provided that Employee
is not materially at fault, Employee shall not be liable to
Employer for any damages as a result thereof and shall not be
bound by the provisions of Section 5 of this agreement.
Additionally, Employee shall receive as severance pay an amount
equal to eighteen (18) months of the Salary and bonus, if any
has been earned, as provided for herein. The Salary will be paid
by Employer to Employee pursuant to regular payroll cycles upon
termination and said bonus, if any has been earned, will be paid
quarterly for six consecutive quarters as provided herein. For
purposes of this paragraph 6(c), the term "change of control of
Employer" shall mean the consummation of any event or series of
events that results in (i) Employer's consolidation with, or
merger with or into, any other entity if in connection with such
consolidation or merger, all or part of the Common Stock shall
be changed into or exchanged for stock or other securities of
any other entity or cash or any other property, (ii) Employer's
selling or otherwise transferring (or one or more of its
subsidiaries selling or otherwise transferring) to a person or
person or entity or entities, in one or more transactions or a
series of related transactions, assets that constitute 50% or
more of the assets of the Company or assets that provide or
previously provided 50% or more of the consolidated revenues of
the Company or (iii) a person or entity, together with its
affiliates, acquiring 50% or more of the outstanding capital
stock of Employer.
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7. AGREEMENT NOT TO SOLICIT. To induce the Employer to enter into this
Agreement, the Employee agrees, during the term of the Term of Agreement, and
for a period of two years after the termination of this Agreement pursuant to
Section 6 for any reason, not to, directly or indirectly, for his own account or
for the account of others, employ any of the Employer's employees or induce any
of the Employer's employees to leave their employment, nor will the Employee in
any other way interfere with the employee relations of the Employer.
8. REMEDIES. The Employee acknowledges that the provisions of Sections 4, 5 and
7 are reasonable and necessary for the protection of the Employer and that the
Employer will be irrevocably damaged if such provisions are not specifically
enforced. Accordingly, in the event of breach or threatened breach of the
provisions of Sections 4, 5 or 7 it is understood and agreed that the Employer
shall be entitled to injunctive relief (without bond or other security being
required) as well as any and all other applicable remedies at law and in equity.
Should a court of competent jurisdiction declare any of these provisions
unenforceable due to an unreasonable restriction of duration or geographical
area, or for any other reason, such court shall have the express authority of
the parties to this Agreement to reform such provisions and/or to grant the
Employer any and all other relief, at law or in equity, reasonably necessary to
protect the interests of the Employer. The Employee expressly acknowledges that
(i) he has been represented by separate legal counsel in connection with the
negotiation of this Agreement who has explained the legal effects of these
provisions and (ii) he considers these provisions to be reasonable.
9. NOTICES. Any notice, request or other communication to be given by any party
to this agreement shall be in writing and be sent by certified mail, postage
prepaid, addressed to the parties as follows:
If to Employer: EqualNet Holding Corp.
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: President and Chief Executive Officer
If to Employee: Xxxxxxx X. Xxxxxx
00000 Xxxxx Xxx
Xxxx, Xxxxx 00000
or mailed to such other address as the parties respectively may designate by
notice given in a like manner and any such notice, request or other
communication shall be deemed to have been given when mailed as described above.
10. WAIVER OF BREACH. The waiver by Employee or Employer of any breach of any
provision of this Agreement by Employer or Employee respectively shall not
operate or be construed as a waiver by Employee or Employer of any subsequent
breach by Employer or Employee respectively.
11. ENTIRE AGREEMENT. All prior negotiations and agreements between the parties
to this agreement with respect to the matters herein contained are superseded by
this agreement and there are no representations, warranties, understandings or
agreements other than those expressly set forth in this agreement.
12. AMENDMENT. This agreement may be amended only by a written instrument signed
by all parties hereto.
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13. PRESERVATION OF BUSINESS; FIDUCIARY RESPONSIBILITY. The Employee shall use
his best efforts to preserve the business and organization of the Employer, to
keep available to the Employer the services of its employees and to preserve the
business relations of the Employee shall not commit any act that might
reasonably be expected to injure the Employer. The Employee shall observe and
fulfill proper standards of fiduciary responsibility attendant upon his service
and office.
14. ASSIGNMENTS. The rights and obligations of the Employee hereunder are
personal to him, and no such rights, benefits, duties or obligations shall be
subject to voluntary or involuntary alienation, assignment or transfer.
15. EFFECT OF AGREEMENT. This Agreement shall be binding upon the Employee and
his heirs, executors, administrators and legal representatives and upon the
Employer and its successors and any permitted assigns.
16. GOVERNING LAW. This agreement and all claims or disputes relating to it or
arising out of it, as well as its making, performance and interpretation, shall
be governed by the laws of the State of Texas without giving effect to the
choice of law principles.
17. WAIVER OF BREACH. The waiver by either party hereto of a breach of any
provision of this Agreement by the other party hereto shall not operate or be
construed as a waiver by such party of any subsequent breach of such other
party.
18. SEVERABILITY. If any provision of this Agreement is declared unenforceable
by a court of last resort, such declaration shall not affect the validity of any
other provision of this Agreement.
19. CONSTRUCTION. The headings contained in this Agreement are for reference
purposes only and shall not affect this Agreement in any manner whatsoever.
Wherever required by the context, any gender shall include any other gender, the
singular shall include the plural, and the plural shall include the singular.
20. TIME FOR PERFORMANCE. If the time for performance of any obligation set
forth in this Agreement falls on a Saturday, Sunday, or legal holiday,
compliance with such obligation on the next business day following such
Saturday, Sunday, or legal holiday shall be deemed acceptable.
21. EXECUTION. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original but all of which shall be deemed one
instrument. The Employee acknowledges that he has read this Agreement and he
understands that executing this Agreement is a condition of his employment by
the Employer.
IN WITNESS THEREOF, the parties have executed this agreement on the
date above set forth.
EQUALNET HOLDING CORP.
By: /S/ XXXX XXXXXXX /S/ XXXXXXX X. XXXXXX
Xxxx X. Xxxxxxx Xxxxxxx X. Xxxxxx
President and CEO Employee
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EXHIBIT A
HEALTH AND WELFARE BENEFITS SUMMARY
o Group comprehensive medical, dental, and term life insurance. Premiums
for Employee and his dependents are paid in full by Employer.
o Long term disability insurance.
o Term life insurance in the amount of $250,000.00.
A-1
EXHIBIT B
Option to purchase 45,000 shares of the common stock of EqualNet Holding Corp.
at a per share exercise price of $2.50.
B-1
