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