EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, effective this 1st day of April, 2001
("Effective Date"), between ePHONE Telecom, Inc. (the "Company") and Xxxxxxx
Xxxxxxxxxxxx (the "Executive").
WITNESSETH
WHEREAS, the Company wishes to retain the Executive to provide the
services hereinafter set forth; and
WHEREAS, the Executive is willing to provide services to the Company
upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the promises and the mutual
agreements contained herein, intending to be legally bound, the parties agree as
follows:
1. DEFINITIONS
The following words and terms shall have the meanings set forth below
for the purposes of this Agreement:
1.1. Affiliates. "Affiliates" of the Company, or a person "affiliated"
with the Company, are any persons or entities which, directly or indirectly,
through one or more intermediaries, controls or are controlled by or are under
common control with, the persons or entities specified.
1.2. Base Salary. "Base Salary" shall have the meaning set forth in
Section 3.1 hereof.
1.3. Cause.
1.3.1. Termination of the Executive's employment for
"Cause" shall mean termination because of the Executive's: (a) failure to follow
the directives of the Board of Directors which failure is not cured, in the
reasonable judgment of the Board of Directors, within thirty (30) days after
written notice given to the Executive by the Board of Directors; (b) conduct
which, if proven, would constitute a crime involving breach of professional
ethics or moral turpitude or a felony of any type; (c) violation of any company
policy or other conduct which injures the business or reputation of the Company;
(d) conduct which compromises the Executive's ability to perform his job duties;
(e) failure of the Executive to perform to the best of his abilities a
substantial portion of the Executive's duties and responsibilities assigned or
delegated, which failure is not cured, in the reasonable judgment of the Board
of Directors, within thirty (30) days after written notice given to the
Executive by the Board of Directors; (f) material breach of any provision of
this Agreement.
1.3.2. Cause shall be determined in good faith by the
affirmative vote of a majority of the whole Board of Directors of the Company
(excluding the Executive if he is a member of the Board) only after the
Executive has been provided a reasonable opportunity to make a presentation to
the Board of Directors which presentation may be with counsel.
1.4. Change in Control of the Company. "Change in Control of the
Company" shall mean a change in control that is of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor thereto, whether or not the Company is registered under
the Exchange Act; provided that, without limitation, such a change in control
shall be deemed to have occurred if any person or entity other than the
Executive, the Company, or any of its Affiliates or associates, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing fifty-one
percent (51%) or more of the combined voting power of the Company's then
outstanding securities.
1.5. Date of Termination. "Date of Termination" shall mean (i) if
the Executive's employment is terminated by reason of the Executive's death, the
date of the Executive's death, (ii) if the Executive's employment is terminated
for Cause or Disability, the date specified in the Notice of Termination, and
(iii) if the Executive's employment is terminated for any other reason, the date
on which a Notice of Termination is given or as specified in such Notice.
1.6. Disability. Termination of the Executive's employment based
on "Disability" shall mean termination of the Executive's employment because he
is unable to perform the essential functions of his position with or without
accommodation due to a disability (as such term is defined in the Americans with
Disabilities Act) for six (6) months in the aggregate during any twelve (12)
month period. This definition and this Section 1.6 shall be interpreted and
applied consistently with the Americans with Disabilities Act, the Family and
Medical Leave Act, and other applicable law.
1.7. Notice of Termination. With the exception of termination due
to the Executive's death, any purported termination of the Executive's
employment by the Company for any reason or by the Executive for any reason,
shall be communicated by a written "Notice of Termination" to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
dated notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated, (iii) specifies a Date of
Termination, which shall be not less than thirty (30) days after such Notice of
Termination is given, except in the case of the Company's termination of
Executive's employment for Cause, for which the Date of Termination may be the
date of the notice; and (iv) is given in the manner specified in Section 9.2
hereof.
1.8. Qualifying Termination. A "Qualifying Termination" shall mean a
termination of the Executive's employment by the Executive for any reason which
occurs on the effective date of a Change of Control of the Company or within six
(6) full calendar mnths following the effective date of a Change of Control of
the Company
2. EMPLOYMENT
2.1. Agreement and Term. The Company hereby employs the Executive
and the Executive hereby accepts said employment and agrees to render services
to the Company on the terms and conditions set forth in this Agreement. The term
of this Agreement shall commence on April 1, 2001, and shall continue from that
date until April 1, 2004 ("Expiration Date") unless terminated earlier by either
the Company or the Executive as hereinafter provided. If either the Company or
the Executive does not wish to renew this Agreement when it expires, or if
either the Company or the Executive wishes to renew this Agreement on different
terms than those contained herein, it or he shall give written notice of such
intent to the other party at least sixty (60) days prior to the Expiration Date.
In the absence of such notice, this Agreement shall be renewed on the same terms
and conditions contained herein for a term of one (1) year from the Expiration
Date. The parties expressly agree that designation of a term and renewal
provisions in this Agreement does not in any way limit the right of the parties
to terminate this Agreement at any time as hereinafter provided.
2.2. Duties. During the term of this Agreement, the Executive
shall devote his full working time and attention and use his best efforts to
further the interests of the Company. The Executive shall perform such services
for the Company as is consistent with his position and as directed, from time to
time, by the Company. The Executive's initial title shall be President and Chief
Operating Officer. During the term of this Agreement the Executive may use such
titles as assigned and approved by the Company. The Executive shall not, during
the term of the Agreement, be employed or involved in any other business
activity, whether or not such activity is pursued for gain, profit or other
pecuniary advantage, except for volunteer services for or on behalf of such
religious, educational, non-profit and/or other charitable organization as
Executive may wish to serve.
3. COMPENSATION AND BENEFITS
3.1. Base Salary. The Company shall pay the Executive an initial base
salary of fifteen thousand dollars ($15,000) per month (one hundred and eighty
thousand dollars ($180,000) per year) ("Base Salary") until the Company's
earnings before taxes, depreciation and amortization and excluding acquisitions
("EBTDA"), as determined in accordance with generally accepted accounting
principles and consistent with the Company's past practices ("EBTDA"), exceeds
two hundred and fifty thousand dollars ($250,000) for the year 2001, at which
time the Company shall increase the Executive's Base Salary to two hundred and
fifty thousand dollars ($250,000) per year. Thereafter, the Company will review
the Executive's Base Salary and December 31 of each year of the term of the
Agreement.
3.2. Incentive Bonus. In addition to Base Salary, for the year ending
December 31, 2001, the Executive shall be eligible for the incentive bonus
described in Exhibit A, attached hereto and incorporated by reference as if
fully set forth herein. For each year thereafter, the Company shall establish
the criteria by which the Executive shall be eligible for an incentive bonus on
or before January 31st of each year of the term of the Agreement.
3.3. Signing Bonus. The Executive shall be entitled to a signing bonus
of twenty-five thousand dollars ($25,000), payable on or before March 31, 2001.
3.4. Stock Options. The Executive shall be eligible to participate in
any stock option plan established by the Board of Directors for Executives of
the Company in accordance with the terms of the Company's stock option plan and
the Executive's stock option agreement.
3.5. Withholding. All payments required to be made by the Company
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Company may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
3.6. Personnel Policies & Benefit Plans. Except as otherwise provided
herein, the Executive's employment shall be subject to the personnel policies
which apply generally to the Company's employees as the same may be interpreted,
adopted, revised or deleted from time to time, during the term of
this Agreement, by the Company in its sole discretion. During the term of the
Agreement, the Executive shall be entitled to participate in any Company benefit
plans on the same basis as other executive level employees of the Company. The
Company reserves the right to change, alter, or terminate benefits, plans and
carriers in its sole direction. All matters of eligibility for coverage or
benefits under any health, hospitalization, life, disability, or other insurance
plan, program or policy shall be determined in accordance with the provisions of
the plan, program, or policy; the Company shall not be liable to the Executive,
his/her family, heirs, executors, or beneficiaries, for any payment payable or
claimed to be payable under any such benefit plan, program, or policy.
4. SUPPORT AND EXPENSES
4.1. Office. The Company shall provide the Executive with secretarial
services and furnished offices in the Herndon, Virginia area, and in such other
location, if any, in which the Executive hereafter agrees to perform services on
behalf of the Company, all of which shall be consistent with the Executive's
duties and sufficient for the efficient performance of those duties.
4.2. Expenses. The Company shall reimburse the Executive or otherwise
provide for or pay for all pre-approved reasonable expenses incurred by
Executive in furtherance of, or in connection with the business of the Company,
subject to such reasonable documentation and other limitations as may be
established by the Board of Directors.
5. TERMINATION
5.1. Termination Due to Death. If the Executive's employment is
terminated by reason of the Executive's death, compensation pursuant to Section
3.1 of this Agreement shall expire effective the date of the Executive's death.
The entitlement of any beneficiary of the Executive to benefits under any
benefit plan shall be determined in accordance with the provisions of such plan.
5.2. Termination Due to Disability. The Company shall be entitled to
terminate the Executive's employment and this Agreement at any time due to the
Executive's Disability. If the Executive's employment is terminated due to
Disability, compensation pursuant to Section 3.1. of this Agreement shall
terminate effective the Date of Termination.
5.3. Termination by the Company for Cause. The Company shall be
entitled to terminate the Executive's employment and this Agreement at any time
for Cause. If the Executive's employment is terminated by the Company for Cause,
compensation pursuant to Section 3.1. of this Agreement shall terminate
effective the Date of Termination. The entitlement of the Executive to benefits
under any benefit plan shall be determined in accordance with the provisions of
such plan.
5.4.Termination by the Company Other Than for Death, Disability, or
Cause. The Company shall be entitled to terminate the Executive's employment and
this Agreement at any time for any reason. If the Executive's employment is
terminated by the Company for reasons other than death, Disability, or Cause,
and if the Executive executes a general release with language acceptable to the
Company on or before the effective Date of Termination and complies with the
provisions of Section 5.8 of this Agreement, the Company shall pay the Executive
an amount equal to twelve (12) months of the Executive's Base Salary in a lump
sum payable within fifteen (15) business days following the effective date of
such release or, as mutually agreed between the Company and the Executive, in
twelve (12) equal monthly installments. The Company shall not be required to pay
any amount under this Section unless the Executive executes a general release in
a form acceptable to the Company and such release becomes effective.
5.5 Termination by the Executive. The Executive shall be entitled to
terminate his employment and this Agreement at any time for any reason. If the
Executive terminates his employment compensation described in Section 3.1 of
this Agreement shall expire as of the Date of Termination. The entitlement of
the Executive to benefits under any benefit plan shall be determined in
accordance with the provisions of such plan.
5.6. Qualifying Termination. The Executive shall be entitled to
terminate his employment and this Agreement for a Change in Control. In the
event of a Qualifying Termination, the Executive shall be entitled to the
benefits described in Section 5.4 of this Agreement.
5.7. Cooperation with Company After Termination of Employment.
Following termination of the Executive's employment for any reason, the
Executive shall fully cooperate with the Company in all matters relating to the
winding up of pending work on behalf of the Company including, but not limited
to, any litigation in which the Company is involved, and the orderly transfer of
any such pending work to other Executives of the Company as may be designated by
the Company.
5.8. Termination by Mutual Consent. Notwithstanding any of the
foregoing provisions of this Section 5, if at any time during the course of this
Agreement the parties by mutual consent decide to terminate it, they shall do so
by separate agreement setting forth the terms and conditions of such
termination.
6. CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
The parties hereto have entered into a Confidentiality and Non-Competition
Agreement attached hereto as Exhibit B which may be amended by the parties from
time to time. The provisions of the Confidentiality and Non-Competition
Agreement are intended by the parties to survive and do survive termination or
expiration of this Employment Agreement.
7. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES
7.1. No Conflict of Interest. The Executive warrants that he is not, to
the best of his knowledge and belief, involved in any situation that might
create, or appear to create, a conflict of interest with loyalty to or duties
for the Company.
7.2. Notification of Materials or Documents from Other Employers. The
Executive further warrants that he has not brought and will not bring to the
Company or use in the performance of responsibilities at the Company any
materials or documents of a former employer that are not generally available to
the public, unless he has obtained express written authorization from the former
employer and the Company for their possession and use.
7.3. Notification of Other Post-Employment Obligations. The Executive
also understands that, as part of his employment with the Company, the Executive
is not to breach any obligation of confidentiality that he has to former
employers, and agrees to honor all such obligations to former employers during
employment with the Company. The Executive warrants that he is subject to no
employment agreement or restrictive covenant preventing full performance of
duties under this Agreement.
7.4. Indemnification For Breach. In addition to other remedies which
the Company might have for breach of this Agreement, the Executive agrees to
indemnify and hold the Company harmless from any breach of the provisions of
this Section 7.
8. ARBITRATION
8.1. Exclusive Remedy. The parties recognize that litigation in federal
or state courts or before federal or state administrative agencies of disputes
arising out of the Executive's employment with the Company or out of this
Agreement, with the exception of Section 6, may not be in the best interests of
either the Executive or the Company, and may result in unnecessary costs,
delays, complexities, and uncertainty. The parties agree that any dispute
between the parties arising out of or relating to the Executive's employment, or
to the negotiation, execution, performance or termination of this Agreement or
the Executive's employment, including, but not limited to, any claim arising out
of this Agreement, claims under Title VII of the Civil Rights Act of 1964, as
amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act
of 1967, the Americans With Disabilities Act of 1990, Section 1981 of the Civil
Rights Act of 1966, as amended, the Family Medical Leave Act, the Executive
Retirement Income Security Act, and any similar federal, state or local law,
statute, regulation, or any common law doctrine, whether that dispute arises
during or after employment with the exception of any dispute arising out of or
related to Sections 6 and 8, shall be resolved by arbitration in the Washington,
DC metropolitan area, in accordance with the National Employment Arbitration
Rules of the American Arbitration Association, as modified by the provisions of
this Section 8. The parties each further agree that the arbitration provisions
of this Agreement shall provide each party with its exclusive remedy, and each
party expressly waives any right it might have to seek redress in any other
forum, except as otherwise expressly provided in this Agreement. By election of
arbitration as the means for final settlement of all claims, the parties hereby
waive their respective rights to, and agree not to, xxx each other in any action
in a Federal, State or local court with respect to such claims, but may seek to
enforce in court an arbitration award rendered pursuant to this Agreement. The
parties specifically agree to waive their respective rights to a trial by jury,
and further agree that no demand, request or motion will be made for trial by
jury.
8.2. Notice and Selection of Arbitrator. Within thirty (30) days after
the occurrence of an event giving rise to a dispute subject to this provision,
the aggrieved party shall provide the other party with a detailed written
statement of all facts pertaining to the dispute and shall permit the other
party thirty (30) days within which to investigate and consider the facts and to
resolve the matter informally. Thereafter, an aggrieved party who wishes to
proceed to arbitration shall have an additional ninety (90) days within which to
so notify the other party in writing. This notice shall include a clear, concise
statement of the facts, the issues to be resolved by the arbitrator and the
desired remedy. Within ten (10) days after delivery of a written notice
requesting arbitration, the Company will contact the Executive, or his
designated representative, to select an arbitrator. If the parties cannot agree
on an arbitrator, they shall select an arbitrator from a list provided by the
American Arbitration Association in accordance with its rules.
8.3. Witnesses and Documents. Fourteen (14) days prior to the
arbitration hearing, the parties shall exchange a list of witnesses to be called
and a list of the documents they intend to introduce into evidence at the
hearing.
Upon request, the Company will supply to the Executive a copy of the
Executive's personnel file, including any internal, non-privileged memoranda
which may be relevant to the dispute. All such files and documents will be
maintained in a confidential manner by the Executive, shall be used only for
preparation of the arbitration case, and shall be returned to the Company at the
close of the hearing.
8.4. Arbitration Procedure. In the arbitration proceeding, each party
shall be entitled to retain its own counsel, to present evidence and
cross-examine witnesses, to purchase a stenographic record of the proceedings,
and to submit post-hearing briefs. The opinion and award of the arbitrator shall
be requested by the parties within forty-five (45) days of the submission of the
post-hearing briefs, which shall be due thirty (30) days from the close of the
arbitration.
8.5. The Executive's Remedies. If the arbitrator finds that the
Executive was terminated in violation of law or this Agreement, the parties
agree that the arbitrator acting hereunder shall be empowered to provide the
Executive with equitable and/or legal remedies, including compensatory damages
and back pay. "Back pay" shall include all forms of compensation payable to the
Executive by the Company, the cost of all fringe benefits, and prejudgment
interest at the rate of ten percent (10%) per annum on such claims.
8.6. Arbitrator's Authority. In reaching her/her decision, the
arbitrator shall have no authority to add to, detract from, or otherwise modify
any provision of this Agreement. The arbitrator shall submit with the award a
written opinion which shall include findings of fact and conclusions of law.
Judgment upon the award rendered by the arbitrator may be entered in any court
having competent jurisdiction.
8.7. Effect of Arbitrator's Decision: Arbitrator's Fees. The decision
of the arbitrator shall be final and binding between the parties as to all
claims which were or could have been raised in connection with the dispute, to
the full extent permitted by law. The arbitrator's fees and expenses and all
administrative fees and expenses associated with the filing of the arbitration
shall be paid by the Company, provided however that at the Executive's request
he may pay up to one-half (1/2) the fees and expenses.
8.8.Indemnification. The parties agree that in the event that either
party breaches this arbitration agreement and attempts to resolve in court
claims covered by this provision, the breaching party will indemnify the other
party for all legal costs and attorney's fees incurred to defend such action in
court and to enforce the provisions of the arbitration clause.
8.9. Continuing Nature of Agreement to Arbitrate. The parties
acknowledge and agree that their obligations under this arbitration agreement
survive the termination of this Agreement and continue after the termination of
the employment relationship between the Executive and the Company.
9. GENERAL PROVISIONS
9.1. Assignment. The Company may assign this Agreement and its
rights and obligations hereunder in whole, but not in part, to any Company or
other entity with or into which the Company may hereafter merge or consolidate
or to which the Company may transfer all or substantially all of its assets, if
in any such case said Company or other entity shall by operation of law or
expressly in writing assume all obligations of the Company hereunder as fully
as if it had been originally made a party hereto, but may not otherwise assign
this Agreement or its rights and obligations hereunder. The Executive may not
assign or transfer this Agreement or any rights or obligations hereunder.
9.2. Notice. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by certified
or registered mail, return receipt requested, postage prepaid, if to the
Company, addressed to its corporate headquarters at the time notice is given,
"Attention Board of Directors"; if to the Executive, addressed to his home
address as listed in the Company's records at the time notice is given.
9.3. Amendment and Waiver. No provision of this Agreement may be
amended or waived unless (i) such amendment or waiver is in writing and signed
by each of the parties hereto.
9.4. Non-Waiver of Breach. No failure by either party to declare a
default due to any breach of any obligation under this Agreement by the other,
nor failure by either party to act quickly with regard thereto, shall be
considered to be a waiver of any such obligation, or of any future breach.
9.5. Severability. In the event that any provision or portion of this
Agreement, with the exception of Sections 2 and 3, shall be determined to be
invalid or unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and effect.
9.6. Governing Law. To the extent not preempted by Federal law, the
validity and effect of this Agreement and the rights and obligations of the
parties hereto shall be construed and determined accordance with the law of the
Commonwealth of Virginia.
9.7. Entire Agreement. This Agreement contains all of the terms
agreed upon by the Company and the Executive with respect to the subject matter
hereof and supersedes all prior agreements, arrangements and communications
between the parties dealing with such subject matter, whether oral or written.
9.8. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the transferees, successors and assigns of the Company,
including any Company or Company with which the Company may merge or
consolidate.
9.9. Headings. Numbers and titles to Sections hereof are for
information purposes only and, where inconsistent with the text, are to be
disregarded.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date and year first written above.
The Company: ePHONE Telecom, Inc.
--------------------------
By:
Title:
The Executive:
--------------------------
Xxxxxxx Xxxxxxxxxxxx
EXHIBIT A
INCENTIVE BONUS PLAN FOR 2001
The Executive shall be eligible for an incentive bonus for the calendar year
ending December 31, 2001 based on the Company's achievement of the following net
sales:
Net Sales: Incentive Bonus Amount
---------- ----------------------
Between $2,500,000 and $5,000,000: $20,000
Between $5,000,001 and $7,500,000 $25,000
Between $7,500,001 and $10,000,000 $30,000
Over $10,000,001 $45,000
The amount of the Company's Net Sales shall be determined for the year ending
December 31, 2001 in accordance with generally accepted accounting principles
and consistent with the Company's past practices. For purposes of this Incentive
Bonus Plan, Net Sales shall be defined as Gross Sales Less Returns and shall not
include any amounts for sales derived by acquisitions. The amount of Net Sales
shall be determined by the Company in its sole discretion and such determination
shall be final, binding, and conclusive. The entire Incentive Bonus, if any,
shall be payable within thirty (30) days of the Company's receipt of its
year-end audited financial report. The Executive must be employed by the Company
at the time the Incentive Bonus is payable in order to be eligible for the
Incentive Bonus.
In the event the Executive's employment is terminated pursuant to Section 5.1,
5.2, 5.4, 5.6 or 5.9 of this Agreement prior to the date the Incentive Bonus is
payable, the amount of the Incentive Bonus, if any, will be prorated for the
number of days that Executive was employed during the fiscal year.
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