Exhibit 10.1

 

EMPLOYMENT AGREEMENT BETWEEN ETS PAYPHONES, INC. AND JEFFREY E. FENNELL

 

THIS AGREEMENT is made effective as of the 28th day of January, 2005 (the
“Commencement Date”), between ETS Payphones, Inc., a Delaware corporation (the
“Company”), and Jeffrey E. Fennell (the “Executive”).

 

INTRODUCTION

 

The Company and the Executive desire to enter into an employment agreement
embodying the terms and conditions of Executive’s employment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             Definitions

 

(a)           “Affiliate” means any person, firm, corporation, partnership,
association or entity that, directly or indirectly or through one or more
intermediaries, controls, is controlled by or is under common control with the
Company.

 

(b)           “Applicable Period” means the period of the Executive’s employment
hereunder and for one (1) year after termination of his employment with the
Company.

 

(c)           “Area” means the United States of America.

 

(d)           “Business of the Company” means the business of the management and
operation of payphones, as such business existed on the date of Executive’s
termination of employment.

 

(e)           “Cause” means any of the following events which is reasonably
determined by the Board of Directors of the Company to have occurred: (i)
willful and continued failure (other than such failure resulting from his
incapacity during physical or mental illness) by the Executive to substantially
perform his duties with the Company or an Affiliate; (ii) conduct by the
Executive that amounts to willful misconduct or gross negligence which causes
material harm to the Company; (iii) any act by the Executive of fraud,
misappropriation, dishonesty, embezzlement or similar conduct against the
Company or an Affiliate; (iv) conviction of the Executive for a felony or any
other crime involving moral turpitude; or (v) illegal drug use by the Executive.

 

(f)            “Change in Control”.   For purposes of this Agreement, a Change
in Control of the Company shall have occurred if (i) any Person (as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) as
modified and used in Sections 13(d) and 14 (d) of the Exchange Act, other than
(1) the Company, (2) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (3) any underwriter temporarily holding
securities pursuant to an offering of such securities, or (4) any corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportion as their ownership of the Company’s common
stock), 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
more than 33-1/3% of the combined voting power of the Company’s then outstanding
voting securities; (ii) as a result of, or in connection with, any cash tender
or exchange offer, merger, consolidation or other business combination, or
contested election, or any combination of the foregoing transactions (a
“Transaction”), the persons who were directors of the Company (or the nominees
of the Board of Directors to replace such directors in the event that such
director does not stand for reelection) immediately before the Transaction shall
cease to constitute a majority of the Board of Directors of the Company or any
successor to the Company, or the persons who were stockholders of the Company
immediately before the Transaction shall cease to own at least 50% of the
outstanding voting stock of the Company or any successor to the Company; (iii)
any sale or other disposition (in one or a series of transactions) of all or
substantially all of the Company’s assets; or (iv) approval by shareholders of a
complete liquidation or dissolution of the Company.

 

1

--------------------------------------------------------------------------------

 

(g)           “Company Information” means Confidential Information and Trade
Secrets.

 

(h)           “Competing Business” means any person, firm, corporation, joint
venture or other business entity which is engaged in the Business of the Company
(or any aspect thereof) within the Area.

 

(i)            “Confidential Information” means data and information relating to
the Business of the Company (which does not rise to the status of a Trade
Secret) which is or has been disclosed to the Executive or of which the
Executive became aware as a consequence of or through its relationship to the
Company and which has value to the Company and is not generally known to its
competitors.  Confidential Information shall not include any data or information
that has been voluntarily disclosed to the public by the Company (except where
such public disclosure has been made by the Executive without authorization) or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means.  The provisions in this Agreement
restricting the use of Confidential Information shall survive for a period of
one (1) year following termination of this Agreement.

 

(j)            “Disability” means a physical or mental condition which prevents
Executive from performing the regular duties of his employment for any period in
excess of the period of short-term disability or salary continuation under the
Company’s short-term disability plan or policy, or if none, a continuous period
of three months or an aggregate of three months in any twelve month period.

 

(j)            “Good Reason” means the occurrence of any of the following events
which is not corrected by the Company within thirty (30) days after the
Executive’s written notice to the Company of the same:  (i) the nature of
Executive’s duties or the scope of his responsibilities are materially modified
without the Executive’s written consent; (ii) the Executive is required to
report to a different position without the Executive’s written consent;  or
(iii) a material breach of the Agreement by the Company.

 

Additionally, for purposes of Section 4(c), if Executive terminates his
employment within 30 days of a Change in Control, it shall be considered a
termination for Good Reason.

 

(k)           “Invention” means any discovery, whether or not patentable,
including, but not limited to, any useful process, method, formula, technique,
machine, manufacture, composition of matter, algorithm or computer program, as
well as improvements thereto, which is new or which Executive has a reasonable
basis to believe may be new.  The definition of “Invention” under this Agreement
is not limited to the definition of that term under the United States patent
laws.

 

(m)          “Subject Invention” means any Invention which is conceived by or
first practiced by Executive, whether alone or in a joint effort with others,
during Executive’s employment by the Company, whether prior to or following
execution of this Agreement, which (i) may be reasonably expected to be used in
a product of the Company or a product similar to a Company product; (ii) results
from work that Executive has been assigned as part of Executive’s duties as an
employee of the Company; (iii) is in an area of technology which is the same as
or substantially related to the areas of technology with which Executive is
involved in the performance of Executive’s duties as an employee of the Company;
or (iv) is useful, or which Executive reasonably expects may be useful, in any
manufacturing or product design process of the Company.

 

(n)           “Trade Secrets” means information including, but not limited to,
technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or suppliers
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.

 

(o)           “Work” means a copyrightable work of authorship, including without
limitation, any technical descriptions for products, user’s guides,
illustrations, advertising materials, computer programs (including the contents
of read only memories) and any contribution to such materials.

 

2

--------------------------------------------------------------------------------

 

2.             Terms and Conditions of Employment.

 

(a)           Employment.  The Company hereby employs the Executive as its
Senior Vice President and Chief Operating Officer and the Executive accepts
employment with the Company subject to the terms and conditions hereof.  The
Executive shall have such authority and responsibilities and perform such duties
as shall be assigned to the Executive from time to time by the Chief Executive
Officer and Board of Directors of the Company.

 

(b)           Exclusivity.  Throughout the Executive’s employment hereunder, the
Executive shall devote substantially all the Executive’s time, energy and skill
during regular business hours to the performance of the duties of the
Executive’s employment (vacations and reasonable absences due to illness
excepted), shall faithfully and industriously perform such duties, and shall
diligently follow and implement all management policies and decisions of the
Company.

 

3.             Compensation.

 

(a)           Base Salary.  In consideration for the Executive’s services
hereunder, the Company shall pay to the Executive an initial annual base salary
in the amount of $134,500 Executive’s annual base salary shall be reviewed at
least annually by the Company, and the Company may increase the Executive’s
annual base salary in its discretion.  The Company shall pay an annual base
salary in accordance with the normal payroll payment practices of the Company
and subject to such deductions and withholdings as law or policies of the
Company, from time to time in effect, require.

 

(b)           Annual Bonus.  In addition to the annual base salary payable under
Section 3(a) hereof, the Executive shall be entitled to an annual bonus for each
fiscal year of the Company beginning on or after January 1, 2005 in an amount
determined by the Chief Executive Officer of the Company.

 

(c)           Benefits.  In addition to the annual base salary, bonus, and other
benefits payable to the Executive hereunder, the Executive shall be entitled to
such benefits as currently exist for executives of the Company.

 

(d)           Expenses.  The Executive shall be entitled to be reimbursed in
accordance with the policies of the Company, as adopted and amended from time to
time, for reasonable and necessary expenses incurred by the Executive in
connection with the performance of the Executive’s duties of employment
hereunder; provided, however, the Executive shall, as a condition of such
reimbursement, submit verification of the nature and amount of such expenses in
accordance with the reimbursement policies from time to time adopted by the
Company.

 

4.             Term, Termination and Termination Payments.

 

(a)           Term.  The term of this Agreement (the “Term”) shall commence as
of the Commencement Date of this Agreement and shall end on the fourth
anniversary of the Commencement Date; provided, however, that the Term may be
renewed if the Executive and Company agree.

 

(b)           Termination.  This Agreement and the Executive’s employment by the
Company hereunder may only be terminated (i) by mutual agreement of the
Executive and the Company; (ii) by the Executive upon not less than one month’s
prior notice to the Company; (iii) by the Company without Cause; (iv) by the
Company for Cause; or (v) upon expiration of the Term.  This Agreement shall
also terminate immediately upon the death or the Disability of the Executive. 
Notice of termination by either the Company or the Executive shall be given in
writing and shall specify the basis for termination and the effective date of
termination.

 

(c)           Effect of Termination.  Upon termination of this Agreement and the
Executive’s employment hereunder, the Company shall have no further obligation
to the Executive or the Executive’s estate with respect to this Agreement,
except for payment of salary and bonus amounts, if any, accrued pursuant to
Section 3(a) or 3(b) hereof and unpaid at the date of termination; provided,
however, that if the Company terminates the Executive’s employment without Cause
during the Term or if the Executive terminates his employment for Good Reason
during the Term, the Company shall pay the Executive a lump sum equal to one (1)
times his annual base salary, based on the Executive’s base salary as of the
date of termination and shall continue medical insurance for the Executive and
his dependents on the same terms as exist on the date of termination for a
period of one (1) year. After that one year period, Executive shall be entitled
to elect eighteen months of continuation coverage under COBRA.  Nothing

 

3

--------------------------------------------------------------------------------

 

contained herein shall limit or impinge any other rights or remedies of the
Company or the Executive under any other agreement or plan to which the
Executive is a party or of which the Executive is a beneficiary.

 

(d)           Survival.  The covenants of the Executive in Sections 5, 6, 7, and
8 hereof shall survive the termination of this Agreement and the Executive’s
employment hereunder and shall not be extinguished thereby.

 

5.             Agreement Not to Solicit Customers.

 

The Executive agrees that commencing on the Commencement Date and continuing
through the Applicable Period, he will not, either directly or indirectly, on
the Executive’s own behalf or in the service of or on behalf of others, solicit
or divert, or attempt to solicit or divert, to a Competing Business, any
individual or entity which was an actual or actively sought prospective client,
customer of the Company, or distributor of the Company’s products or services
and with whom the Executive had material contact during the Executive’s last 2
year(s) of employment with the Company.

 

6.             Agreement Not to Solicit Employees.

 

The Executive agrees that commencing on the Commencement Date and continuing
through the Applicable Period, he will not, either directly or indirectly, on
the Executive’s own behalf or in the service of or on behalf of others, solicit,
divert, or attempt to solicit, divert, to any Competing Business in the Area any
person employed by the Company or an Affiliate, whether or not such employee is
a full-time employee or a temporary employee of the Company or an Affiliate and
whether or not such employment is pursuant to written agreement and whether or
not such employment is for a determined period or is at will.

 

7.             Ownership and Protection of Proprietary Information.

 

(a)           Confidentiality.  All Confidential Information and Trade Secrets
and all physical embodiments thereof received or developed by the Executive
while employed by the Company are confidential to and are and will remain the
sole and exclusive property of the Company.  Except to the extent necessary to
perform the duties assigned to him by the Company, the Executive will hold such
Confidential Information and Trade Secrets in trust and strictest confidence,
and will not use, reproduce, distribute, disclose or otherwise disseminate the
Confidential Information and Trade Secrets or any physical embodiments thereof
and may in no event take any action causing or fail to take the action necessary
in order to prevent, any Confidential Information and Trade Secrets disclosed to
or developed by the Executive to lose its character or cease to qualify as
Confidential Information or Trade Secrets.

 

(b)           Return of Company Property.  Upon request by the Company, and in
any event upon termination of the employment of the Executive with the Company
for any reason, the Executive will promptly deliver to the Company all property
belonging to the Company, including, without limitation, all Confidential
Information and Trade Secrets (and all embodiments thereof) then in the
Executive’s custody, control or possession.

 

(c)           Survival.  The covenants of confidentiality set forth herein will
apply on and after the date hereof to any Confidential Information and Trade
Secrets disclosed by the Company or developed by the Executive prior to or after
the date hereof.  The covenants restricting the use of Confidential Information
will continue and be maintained by the Executive for a period of one (1) year
following the termination of this Agreement. The covenants restricting the use
of Trade Secrets will continue and be maintained by the Executive following
termination of this Agreement for so long as permitted by the Georgia Trade
Secrets Act of 1990, O.C.G.A. § 10-1-760, et seq.

 

8.             Inventions.

 

(a)           Executive agrees that all Subject Inventions and all patent and
other intellectual property and trade secret rights in and to Subject Inventions
will become the property of the Company, and Executive hereby irrevocably
assigns to the Company all of Executive’s rights to all Subject Inventions.

 

(b)           Executive agrees that if Executive has conceived or reduced to
practice or if Executive conceives or reduces to practice an Invention during
the term of Executive’s employment with the Company,

 

4

--------------------------------------------------------------------------------

 

Executive will promptly provide a written description of the Invention and all
other requested information to the Company adequate to allow evaluation for a
determination as to whether the Invention is a Subject Invention.

 

(c)           If, upon commencement of Executive’s employment with the Company,
Executive has previously conceived any Invention or acquired any ownership
interest in any Invention, which: (i) is Executive’s property, or of which
Executive is a joint owner with another person or company; (ii) is not described
in any issued patent as of the commencement of Executive’s employment with the
Company; and (iii) would be a Subject Invention if such Invention was made while
a Company employee; then Executive must provide the Company with a written
description of the Invention on Exhibit A, in which case the written description
(but no rights to the Invention) shall become the property of the Company; or
(ii) provide the Company with the license described in Section 8(d) of this
Agreement.

 

(d)           If Executive has previously conceived or acquired any ownership
interest in an Invention described above in Section 8(c) and Executive elects
not to disclose the same to the Company as provided above, then Executive hereby
grants to the Company a nonexclusive, paid up, royalty-free license to use and
practice the Invention, including a license under all patents to issue in any
country which pertain to the Invention.

 

(e)           Executive owns no patents, either individually or jointly with
others, except those described on Exhibit A.

 

9.             Patent Applications.

 

(a)           Executive agrees that should the Company elect to file an
application for patent protection, whether in the United States or in any
foreign country, on a Subject Invention of which Executive was an inventor,
Executive will execute all necessary documentation relating to the patent
applications, including formal assignments to the Company.

 

(b)           Executive further agrees that Executive will cooperate with
attorneys or other persons designated by the Company by explaining the nature of
any Subject Invention for which the Company elects to file an application for
patent protection, reviewing applications and other papers and providing any
other cooperation required for prosecution of the patent applications.  The
Company will be responsible for all expenses incurred for the preparation and
prosecution of all patent applications on Subject Inventions assigned to the
Company.

 

10.          Copyrights.

 

(a)           Executive agrees that any Works created by Executive in the course
of Executive’s duties as an employee of the Company are subject to the “Work for
Hire” provisions contained in Sections 101 and 201 of the United States
Copyright Law, Title 17 of the United States Code.  All right, title and
interest to copyrights in all Works that have been or will be prepared by
Executive within the scope of Executive’s employment with the Company will be
the property of the Company.  Executive acknowledges and agrees that, to the
extent the provisions of Title 17 of the United States Code do not vest in the
Company the copyrights to any Works, Executive hereby assigns to the Company all
right, title and interest to copyrights which Executive may have in the Works.

 

(b)           Executive must disclose to the Company all Works referred to in
Section 10(a) and will execute and deliver all applications, registrations, and
documents relating to the copyrights to the Works and will provide assistance to
secure the Company’s title to the copyrights in the Works.  The Company will be
responsible for all expenses incurred in connection with the registration of all
such copyrights that it decides to register.

 

(c)           Executive has no ownership rights in any Works except those
described on Exhibit A.

 

5

--------------------------------------------------------------------------------

 

11.          Contracts or Other Agreements with Former Employer or Business.

 

The Executive hereby represents and warrants that he is not subject to any
employment agreement or similar document, except as previously disclosed and
delivered to the Company, with a former employer or any business with which the
Executive has been associated, which on its face prohibits the Executive during
a period of time which extends through the Commencement Date from any of the
following: (i) competing with, or in any way participating in a business which
competes with the Executive’s former employer or business; (ii) soliciting
personnel of such former employer or business to leave such former employer’s
employment or to leave such business; or (iii) soliciting customers of such
former employer or business on behalf of another business.

 

12.          Remedies.

 

The Executive agrees that the covenants and agreements contained in Sections 5,
6, 7 and 8 hereof are of the essence of this Agreement; that each of such
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company and the Business of the Company; that the Company is
engaged in and throughout the Area in the Business of the Company; that
irreparable loss and damage will be suffered by the Company should the Executive
breach any of such covenants and agreements; that each of such covenants and
agreements is separate, distinct and severable not only from the other of such
covenants and agreements but also from the other and remaining provisions of
this Agreement; that the unenforceability of any such covenant or agreement
shall not affect the validity or enforceability of any other such covenant or
agreements or any other provision or provisions of this Agreement; and that, in
addition to other remedies available to it, the Company shall be entitled to
specific performance of this Agreement and to both temporary and permanent
injunctions to prevent a breach or contemplated breach by the Executive of any
of such covenants or agreements.

 

13.          No Set-Off.

 

The existence of any claim, demand, action or cause of action by the Executive
against the Company, or any Affiliate of the Company, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of any of its rights hereunder.

 

14.          Notice.

 

All notices, requests, demands and other communications required hereunder shall
be in writing and shall be deemed to have been duly given if delivered or if
mailed, by United States certified or registered mail, prepaid to the party to
which the same is directed at the following addresses (or at such other
addresses as shall be given in writing by the parties to one another):

 

If to the Company:

 

ETS Payphones, Inc.

 

 

Suite G

 

 

1490 Westfork Drive

 

 

Lithia Springs, Georgia 30122

 

 

Attn: Chief Executive Officer

 

 

 

With a copy to:

 

Brian Gannon, Esq.

 

 

Seyfarth Shaw LLP

 

 

One Peachtree Pointe

 

 

Suite 700

 

 

Atlanta, Georgia 30309

 

Notices delivered in person shall be effective on the date of delivery.  Notices
delivered by mail as aforesaid shall be effective upon the third calendar day
subsequent to the postmark date thereof.

 

6

--------------------------------------------------------------------------------

 

15.          Miscellaneous.

 

(a)           Assignment.  This Agreement will be binding on the assignees of
the Company and may be assigned by the Company to any Affiliate, legal successor
to the Company or an Affiliate, or to an entity which purchases all or
substantially all of the assets of the Company or an Affiliate. Otherwise,
neither this Agreement nor any right of the parties hereunder may be assigned or
delegated by any party hereto without the prior written consent of the other
party.

 

7

--------------------------------------------------------------------------------

 

In the event the Company assigns this Agreement as permitted by this Agreement,
the “Company” as defined herein will refer to the assignee and the Executive
will not be deemed to have terminated employment hereunder until the Executive
terminates employment from the assignee.

 

(b)           Waiver.  The waiver by the Company of any breach of this Agreement
by the Executive shall not be effective unless in writing, and no such waiver
shall constitute the waiver of the same or another breach on a subsequent
occasion.

 

(c)           Governing Law.  This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Georgia.  The parties agree
that any appropriate state or federal court located in Fulton County, Georgia
shall have jurisdiction of any case or controversy arising under or in
connection with this Agreement and shall be a proper forum in which to
adjudicate such case or controversy.  The parties consent to the jurisdiction of
such courts.

 

(d)           Entire Agreement.  This Agreement embodies the entire agreement of
the parties hereto relating to the subject matter hereof and supersedes all oral
agreements, and to the extent inconsistent with the terms hereof, all other
written agreements.

 

(e)           Amendment.  This Agreement may not be modified, amended,
supplemented or terminated except by a written instrument executed by the
parties hereto.

 

(f)            Severability.  Each of the covenants and agreements hereinabove
contained shall be deemed separate, severable and independent covenants, and in
the event that any covenant shall be declared invalid by any court of competent
jurisdiction, such invalidity shall not in any manner affect or impair the
validity or enforceability of any other part or provision of such covenant or of
any other covenant contained herein.

 

(g)           Captions and Section Headings.  Except as set forth in Section 1
hereof, captions and section headings used herein are for convenience only and
are not a part of this Agreement and shall not be used in construing it.

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Company and the Executive have each executed and
delivered this Agreement as of the date first shown above.

 

 

 

COMPANY:

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

[CORPORATE SEAL]

 

 

 

 

 

 

 

 

 

EMPLOYEE:

 

 

 

 

 

/s/ Jeffrey Fennell

 

 

 

 

 

 

Jeffrey E. Fennell, Senior Vice President and Chief Operating Officer

 

--------------------------------------------------------------------------------

 

Exhibit A

 

NONE

 

--------------------------------------------------------------------------------