Document:

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                                                                   EXHIBIT 10.40

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into this 31st day of July 2002, but
is effective for all purposes as of the Commencement Date (as hereinafter
defined), by and between FullNet Communications, Inc. (the "Company"), an
Oklahoma corporation, and Timothy J. Kilkenny ("Kilkenny"), an individual.

                                   WITNESSETH:

         WHEREAS, the Company and Kilkenny desire to enter into a long-term
employment agreement on the terms and conditions hereinafter provided;

         NOW, THEREFORE, for and in consideration of the conditions herein below
to be performed on the part of the respective parties hereto, and in
consideration of the mutuality thereof, the parties hereto agree as follows:

         1. Term of Employment. The Company hereby agrees to employ Kilkenny as
Chairman of the Board and Chief Executive Officer of the Company, and Kilkenny
hereby accepts such employment and agrees to serve the Company as its Chairman
of the Board and Chief Executive Officer. The term of employment under this
Agreement shall commence on January 1, 2002 (the "Commencement Date), and shall
continue through December 31, 2004; provided, however, the term of this
agreement shall automatically be extended for additional one-year terms, unless
either party give notice of termination to the other on or before June 30 in the
year of termination, commencing June 30, 2004 ("Period of Employment").

         2. Duties. Substantially all of the duties and responsibilities of
Kilkenny, subject to such travel as the duties of Kilkenny hereunder may
reasonably require, shall be performed by Kilkenny at and from the corporate
offices of the Company in Oklahoma City, Oklahoma.

         2.1 Time and Best Efforts. During the term of employment hereunder,
         Kilkenny shall be a full-time employee and shall devote his time,
         attention, skill, energy and best efforts as a full-time employee to
         the duties assigned to him from time to time as Chairman of the Board
         and Chief Executive Officer by the Board of Directors of the Company,
         which duties shall be of the general character referred to in Section
         2.2, and shall, but without obligation hereunder, serve the Company in
         the other executive officer positions to which he may be elected or
         appointed by the Board of Directors of the Company, subject to
         acceptance by Kilkenny of such other executive officer position or
         positions. Notwithstanding the foregoing, Kilkenny may (i) engage in
         other business pursuits or other endeavors which do not conflict with
         his ability to perform his duties on a best efforts basis to the
         business interests of the Company and (ii) become a director of other
         corporations and engage in charitable, civic and other similar
         pursuits; provided, however, that such other business pursuits or other
         endeavors do not interfere with his devoting his best efforts to his
         duties to the Company or violate the duty of loyalty and care which
         Kilkenny has to the Company by reason of this Agreement or in his
         capacity as an executive officer of the Company.

         2.2 Supervision. As an employee and Chairman of the Board and Chief
         Executive Officer of the Company (and other executive officer positions
         held by Kilkenny), Kilkenny shall be responsible for the general
         management of the business operations of the Company which shall be
         subject to the overall supervision and instructions of the Board of
         Directors of the Company.

EMPLOYMENT AGREEMENT PAGE 1
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         3. Compensation and Other Benefits. During the Period of Employment,
the Company shall pay or provide to Kilkenny, and Kilkenny shall be entitled to
receive or have maintained for his benefit, for his services such compensation
as the Board of Directors shall fix from time to time, but not less than the
following amounts and benefits:

         3.1 Regular Compensation. The salary paid by the Company to Kilkenny
         under this Section 3.1 shall be not less than $6,250 per month, such
         monthly salary shall be subject to not less than a five percent (5%)
         increase, on each January 1 during the Period of Employment, based upon
         the monthly compensation paid Kilkenny during the month of December
         immediately preceding the applicable January 1. Payment of such salary
         shall be made in installments in accordance with the Company's
         compensation payments to its other employees. Salary paid in accordance
         with this Section 3.1 shall be considered Kilkenny's "regular
         compensation."

         3.2 Bonus Compensation. In addition to regular compensation, Kilkenny
         shall be eligible for annual bonuses that are not guaranteed and are to
         be determined by the Company's Board of Directors.

         3.3 Grant of Stock Options. From time to time the Company may grant
         stock options to its executive officers as determined by the Board of
         Directors (or the Compensation Committee and/or Stock Option Committee
         established by the Board of Directors). To the extent that stock
         options are granted by the Board of Directors (or the Compensation
         Committee and/or Stock Option Committee established by the Board of
         Directors) to its executive officers, Kilkenny shall be deemed to be a
         member of the group to which stock options are granted, and his stock
         option grants shall be determined in the same manner as are the stock
         option grants of other executives in the group. In no event shall this
         Agreement have any effect upon the stock options granted to Kilkenny
         prior to the date of execution of this Agreement.

         3.4 Entertainment, Travel and Similar Expense Reimbursement. Kilkenny
         is hereby authorized to incur reasonable expenses for the promotion of
         the Company's business, including entertainment, travel, lodging,
         meals, and similar expenses, and he shall be reimbursed therefore, by
         the Company upon his presentation of itemized accounts of such
         expenditures.

         3.5 Health, Dental, and Disability Insurance Arrangements and Programs.
         The Company shall provide to Kilkenny (including coverage of the
         dependents of Kilkenny) health, medical, dental, and disability
         insurance benefits comparable to those provided to the executive
         officers of the Company either as a group or individually.

         3.6 Vacation and Leave; Holidays. Kilkenny shall be entitled to (i)
         vacation leave with pay (at his regular compensation rate at the time
         such vacation leave is taken) during each calendar year of the Period
         of Employment, and (ii) reasonable periods of sick leave with pay (at
         his regular compensation rate at the time such sick leave is taken)
         commensurate with his position, in accordance with Company policy as
         established by the Board of Directors. Any annual vacation leave not
         taken by Kilkenny during a calendar year shall accumulate, and, at the
         option of Kilkenny, he may elect to receive his vacation compensation
         (at his regular compensation rate at the time of such election) in lieu
         of taking vacation leave. Kilkenny shall be entitled to all paid
         holidays observed by the Company.

         3.7 Automobile and Cellular Phone. At Kilkenny's sole option, the
         Company shall (i) pay to Kilkenny an automobile allowance of seven
         hundred dollars ($700) per month, payable on the first day of each
         month, or (ii) the use of a Company owned or leased automobile, the
         make and model to be selected and determined in Kilkenny's sole
         discretion and pay all costs and expenses

EMPLOYMENT AGREEMENT PAGE 2
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         of operation, including without limitation insurance (in such amounts
         as mutually agreed upon by Kilkenny and the Company), gasoline,
         repairs, maintenance. Furthermore, and the Company shall provide to
         Kilkenny, at the sole cost and expense of the Company, a cellular phone
         to assist Kilkenny in the performance of his duties and
         responsibilities as an executive officer and employee of the Company.

         3.8 Life Insurance. The Company shall provide to Kilkenny and maintain
         term insurance, at the Company's sole cost and expense, covering the
         life of Kilkenny in the face amount of $500,000 (the "Life Insurance
         Policy"), the proceeds of which shall be payable to such beneficiary
         that Kilkenny shall designate or, in the event of failure to designate
         a named beneficiary, shall be payable to the estate of Kilkenny. Upon
         expiration of the Period of Employment, the Company shall assign and
         transfer to Kilkenny, without any payment therefore by Kilkenny, the
         Life Insurance Policy in the event ownership thereof is not maintained
         in the name of Kilkenny.

         3.9 No Limitation on Other Obligations of Company. No regular
         compensation or bonus compensation payment or the providing of any
         other compensation benefits to Kilkenny pursuant to this Agreement
         shall in any way limit or reduce any other obligation of the Company to
         Kilkenny as an employee of the Company. Kilkenny shall be entitled to
         participate in and receive benefits under any employee benefit plan or
         arrangement made available by the Company (both as of the effective
         date of this Agreement as well as in the future) to its employees or to
         any executive officer of the Company.

         3.10 Employment Termination. In the event of (i) a termination (as
         defined below) of Kilkenny's employment with the Company prior to the
         end of the Period of Employment, or (ii) termination of Kilkenny's
         employment at the end of the Period of Employment, the Company shall
         pay or provide the following:

                  3.10.1 Lump Sum Payment of Regular Compensation and Bonus
                  Compensation. The Company shall pay to Kilkenny (i) in a lump
                  sum an amount equal to the regular compensation payments for
                  the remainder of the Period of Employment at the salary rate
                  of regular compensation as provided in Section 3.1 to which
                  Kilkenny would have been entitled if Kilkenny had remained in
                  the employ of the Company for the remainder of the Period of
                  Employment, (ii) the automobile allowance, in such amount and
                  payable in accordance with and as provided by Section 3.7
                  during the remainder of the Period of Employment, and (iii)
                  payment of the insurance premiums on the policies of insurance
                  required to be maintained by the Company in accordance with
                  and as provided by Sections 3.8 and 4.1 during the remained of
                  the Period of Employment. The lump sum payment pursuant to (i)
                  of this Section 3.10.1 shall be paid to Kilkenny on or before
                  the date of termination of Kilkenny's employment pursuant to
                  Section 3.10.

                  3.10.2 Incentive Compensation and Stock Options. The Company
                  shall provide Kilkenny with the following (or the value
                  thereof):

                           (i) incentive compensation (including, but not
                           limited to, the right to receive and exercise stock
                           options and stock appreciation rights and to receive
                           restricted stock and grants thereof and similar
                           incentive compensation benefits) to which Kilkenny
                           would have been entitled under all incentive
                           compensation plans maintained by the Company if
                           Kilkenny had remained in the employ of the Company
                           for the remainder of the Period of Employment; and

EMPLOYMENT AGREEMENT PAGE 3
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                           (ii) the employee benefits (including, but not
                           limited to, coverage under medical, dental,
                           disability and life insurance arrangements or
                           programs) to which Kilkenny would have been entitled
                           under all employee benefit plans, programs and
                           arrangements maintained by the Company in the event
                           Kilkenny had remained employed by the Company for the
                           remainder of the Period of Employment.

                  3.10.3 Release of Personal Liability for the Company's
                  Liabilities. The Company shall obtain the complete release of
                  Kilkenny from all personal liability for any and all of the
                  Company's debts, including but not limited to leases and
                  promissory notes, and provide Kilkenny with acceptable proof
                  (as determined in Kilkenny's sole discretion) of said release
                  no later than ten business days prior to the last day of
                  Kilkenny's employment by the Company.

                  3.10.4 Lump Sum Payment of Other Amounts Due Kilkenny. The
                  Company shall pay to Kilkenny in a lump sum an amount equal to
                  the sum of (i) all accrued but unpaid compensation that has
                  been previously deferred due to the Company's financial
                  difficulties, (ii) all amounts advanced and/or loaned by
                  Kilkenny to the Company, and (iii) any and all other amounts
                  due Kilkenny. The Company shall pay the lump sum payment
                  pursuant to this Section 3.10.4 to Kilkenny on or before the
                  last day of Kilkenny's employment.

         3.11 Termination and Cause Defined. The term "termination" shall mean
         termination by the Company, upon 60 days' prior written notice to
         Kilkenny, of the employment of Kilkenny with the Company for any reason
         other than cause (as defined below), or resignation of Kilkenny upon
         the occurrence of either (i) a significant change in the nature or
         scope of Kilkenny's authorities or duties from those described in
         Section 2, a reduction in his compensation or breach by the Company of
         any other provision of this Agreement, (ii) a reasonable determination
         by Kilkenny that, as a result of a change in circumstances regarding
         his duties, he is unable to exercise his authorities, powers, functions
         or duties attached to his executive officer position or positions with
         the Company as contemplated in Section 2, or (iii) a change in control
         within the meaning of Section 3.12. The term "cause" means gross
         misconduct materially injurious to the Company or willful and material
         breach of this Agreement by Kilkenny that results in material injury to
         the Company.

         3.12 Change of Control Defined. For purposes of this Agreement, each of
         the following specified events shall be deemed a "change of control":
         (i) any third person, including a "group" as defined in Sections
         13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
         amended, becomes the beneficial owner of shares of the Company or of
         proxies or other rights pertaining to the Company which carry 25
         percent or more of the total number of votes for the election of the
         Board of Directors of the Company or with respect to a merger,
         consolidation or sale; (ii) as result of, or in connection with, any
         cash tender offer, merger, or other business combination of the
         foregoing, the persons who were directors of the Company immediately
         prior to such event cease to constitute a majority of the Board of
         Directors of the Company; (iii) the approval of an agreement providing
         either for a transaction or series of transactions by which the Company
         will cease to be an independent publicly-owned company or for a sale,
         lease or other disposition of all or substantially all of the assets of
         the Company; (iv) the determination by Kilkenny, in his sole
         discretion, that a Change of Control has occurred; or following any
         public offering of securities of the Company during any period of 24
         consecutive months the persons who were members of the Company's Board
         of Directors at the commencement of the period cease for any reason to
         constitute a majority of the Company's Board of Directors.

EMPLOYMENT AGREEMENT PAGE 4
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         4. Disability or Death.

         4.1 Disability. The Company shall provide and maintain, at its sole
         cost and expense, a policy of disability insurance covering the
         sickness, disability or incapacity of Kilkenny (the "Disability
         Policy"), the terms, extent of coverage (including the nature of
         disabilities cover thereby) and the issuer thereof shall be within the
         sole discretion of Kilkenny. In no event shall the Disability Policy
         provide for a monthly disability payment to Kilkenny of less than
         $5,000 per month in the event of his disability within the meaning of
         the Disability Policy. During any period from the date of the
         commencement of period that Kilkenny's is absent from work due to
         sickness, disability or incapacity and until commencement of his
         receipt of payments of the monthly disability benefits under the
         Disability Policy, Kilkenny shall continue to be entitled to receive
         and the Company shall pay and provide his regular compensation, bonus
         compensation and the other compensation and benefits, in accordance
         with and as provided in Sections 3.1 through 3.8 during the remaining
         Period of Employment. The Company hereby agrees and acknowledges that
         the Company undertakes and assumes the risk of all such disability,
         incapacity or inability of Kilkenny during the Period of Employment
         (except to the extent such risk is insured against pursuant to the
         Disability Policy) to perform the services contemplated by Section 2 by
         reason of sickness, disability, incapacity or other inability. Upon
         expiration of the Period of Employment, the Company shall assign and
         transfer to Kilkenny, without any payment therefore by Kilkenny, the
         Disability Policy in the event ownership thereof is not maintained in
         the name of Kilkenny.

         4.2 Death. In the event Kilkenny shall die during the period Kilkenny
         is employed by the Company pursuant to this Agreement, this Agreement
         shall terminate effective on the last day of the month following the
         date of death, and the Company shall pay to the wife of Kilkenny, or if
         unmarried at the time of his death, to the estate of Kilkenny, the
         regular compensation and bonus compensation payable to Kilkenny
         pursuant to Sections 3.1 and 3.2 and for a period of three (3) months
         following the effective date of such employment termination pursuant to
         this Section 4.2, payable on the dates provided for such compensation
         payment there under.

         4.3 Accrued Compensation; Benefits; Reimbursement. In the event of
         termination of this Agreement pursuant to Section 4.1 and/or Section
         4.2 of this Agreement, Kilkenny (or his wife or if unmarried on the
         date of his death his estate) shall be entitled to receive accrued and
         unpaid expense reimbursements, automobile allowance and any unpaid
         bonus amounts awarded to Kilkenny prior to such termination and stock
         option grants awarded to Kilkenny prior to such termination exercisable
         in accordance with the terms of such stock option grants, as well as
         the benefits set forth Sections 3.10.3 and 3.10.4.

         5. Termination for Cause. In the event the Board of Directors of the
Company determines in good faith that Kilkenny is guilty of willful misconduct
or gross negligence materially injurious to the Company in the performance of
the services contemplated by this Agreement, the Company shall have the right,
by resolution unanimously adopted by all members (other than Kilkenny) of the
Board of Directors of the Company, to terminate this Agreement at the end of any
month by giving not less than 60 days' prior written notice to Kilkenny of its
election to so terminate this Agreement, and all obligations hereunder shall
thereupon terminate thereafter, except for those obligations set forth in
Sections 3.10.3 and 3.10.4.

         6. Non-Competition. During the period Kilkenny is employed by the
Company pursuant to this Agreement, Kilkenny may engage in any other employment
or pursuit of other endeavors which does not conflict with his ability to
perform his duties to the business interests of the Company, provided that such
other employment or pursuit of other endeavors does not violate the duty of
loyalty and care which

EMPLOYMENT AGREEMENT PAGE 5
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Kilkenny has to the Company by reason of this Agreement or in his capacity as an
executive officer of the Company.

         7. Confidentiality. During the period that Kilkenny is employed by the
Company, and for a period of one year thereafter, Kilkenny will not divulge to
anyone, other than the Company or persons designated by the Company in writing,
any confidential material information directly or indirectly useful in any
aspect of the business of the Company or any of its subsidiaries or affiliates,
as conducted from time to time, as to which Kilkenny is now, or at any time
during employment shall become, informed and which is not then generally known
to the public or recognized as standard practice.

         8. Certain Provisions to Survive Termination; Etc. Notwithstanding any
termination of his employment under this Agreement, Kilkenny, in consideration
of his employment hereunder to the date of such termination, shall remain bound
by the provisions of Section 7, and consequently, in addition to all other
remedies that may be available to it, the Company shall be entitled to
injunctive relief for any actual or threatened violation of such Sections.

         9. Non-Assignability. Neither party hereto shall have the right to
assign this Agreement or any rights or obligations hereunder without the written
consent of the other party.

         10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in the
City of Oklahoma City in accordance with the laws of the State of Oklahoma by
three arbitrators, one of whom shall be appointed by the Company, one by
Kilkenny and the third by the two arbitrators appointed by the Company and
Kilkenny. If the arbitrators appointed by the Company and Kilkenny cannot agree
on the appointment of a third arbitrator, then the third arbitrator shall be
appointed by the Chief Judge of the United States District Court of the Western
District of Oklahoma. The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this Section 10. Judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event that is shall be necessary or desirable for
Kilkenny to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of any and all of his rights under this
Agreement, he shall be entitled to recover from the Company reasonable
attorneys' fees and costs and expenses incurred by him in connection with the
enforcement of said rights, regardless of the final outcome.

         11. Notice. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given forty-eight (48)
hours after depositing in the United States mail, certified mail, postage
prepaid, addressed to the party to receive such notice at the address set forth
herein below or such other address as either party may give to the other in
writing pursuant to written notice pursuant to this Section:

                  If to Kilkenny:           Mr. Timothy J. Kilkenny
                                            3131 SW 89th Street, Apt 15102
                                            Oklahoma City, OK 73159

                  If to the Company:        FullNet Communications, Inc.
                                            201 Robert S. Kerr Avenue, Suite 210
                                            Oklahoma City, OK 73102

         12. General. The terms and provisions herein contained (i) may be
amended or modified only by a written instrument executed by the parties hereto,
and (ii) shall be construed and enforced in accordance

EMPLOYMENT AGREEMENT PAGE 6
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with the laws in effect in the State of Oklahoma without regard to its conflicts
of law provisions. Failure by a party hereto to require performance of any
provision of this Agreement shall not affect, impair or waive such party's right
to require full performance at any time thereafter.

         This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the 31st day of July, 2002.

"Company"                         FULLNET COMMUNICATIONS, INC.

                                  By:
                                     -------------------------------------------
                                     Roger P. Baresel, Chief Financial Officer

"Kilkenny"
                                  ----------------------------------------------
                                  Timothy J. Kilkenny

EMPLOYMENT AGREEMENT PAGE 7<PAGE>
                                                                   EXHIBIT 10.41

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into this 31st day of July 2002, but
is effective for all purposes as of the Commencement Date (as hereinafter
defined), by and between FullNet Communications, Inc. (the "Company"), an
Oklahoma corporation, and Roger P. Baresel ("Baresel"), an individual.

                                   WITNESSETH:

         WHEREAS, the Company and Baresel desire to enter into a long-term
employment agreement on the terms and conditions hereinafter provided;

         NOW, THEREFORE, for and in consideration of the conditions herein below
to be performed on the part of the respective parties hereto, and in
consideration of the mutuality thereof, the parties hereto agree as follows:

         1. Term of Employment. The Company hereby agrees to employ Baresel as
Chief Financial Officer of the Company, and Baresel hereby accepts such
employment and agrees to serve the Company as its Chief Financial Officer. The
term of employment under this Agreement shall commence on January 1, 2002 (the
"Commencement Date), and shall continue through December 31, 2004; provided,
however, the term of this agreement shall automatically be extended for
additional one-year terms, unless either party give notice of termination to the
other on or before June 30 in the year of termination, commencing June 30, 2004
("Period of Employment").

         2. Duties. Substantially all of the duties and responsibilities of
Baresel, subject to such travel as the duties of Baresel hereunder may
reasonably require, shall be performed by Baresel at and from the corporate
offices of the Company in Oklahoma City, Oklahoma.

         2.1 Time and Best Efforts. During the term of employment hereunder,
         Baresel shall be a full-time employee and shall devote his time,
         attention, skill, energy and best efforts as a full-time employee to
         the duties assigned to him from time to time as Chief Financial Officer
         by the Board of Directors of the Company, which duties shall be of the
         general character referred to in Section 2.2, and shall, but without
         obligation hereunder, serve the Company in the other executive officer
         positions to which he may be elected or appointed by the Board of
         Directors of the Company, subject to acceptance by Baresel of such
         other executive officer position or positions. Notwithstanding the
         foregoing, Baresel may (i) engage in other business pursuits or other
         endeavors which do not conflict with his ability to perform his duties
         on a best efforts basis to the business interests of the Company and
         (ii) become a director of other corporations and engage in charitable,
         civic and other similar pursuits; provided, however, that such other
         business pursuits or other endeavors do not interfere with his devoting
         his best efforts to his duties to the Company or violate the duty of
         loyalty and care which Baresel has to the Company by reason of this
         Agreement or in his capacity as an executive officer of the Company.

         2.2 Supervision. As an employee and Chief Financial Officer of the
         Company (and other executive officer positions held by Baresel),
         Baresel shall be responsible for overseeing and managing the financial
         activities of the Company which shall be subject to the overall
         supervision and instructions of the Board of Directors of the Company.

EMPLOYMENT AGREEMENT PAGE 1
<PAGE>

         3. Compensation and Other Benefits. During the Period of Employment,
the Company shall pay or provide to Baresel, and Baresel shall be entitled to
receive or have maintained for his benefit, for his services such compensation
as the Board of Directors shall fix from time to time, but not less than the
following amounts and benefits:

         3.1 Regular Compensation. The salary paid by the Company to Baresel
         under this Section 3.1 shall be not less than $5,417 per month, such
         monthly salary shall be subject to not less than a five percent (5%)
         increase, on each January 1 during the Period of Employment, based upon
         the monthly compensation paid Baresel during the month of December
         immediately preceding the applicable January 1. Payment of such salary
         shall be made in installments in accordance with the Company's
         compensation payments to its other employees. Salary paid in accordance
         with this Section 3.1 shall be considered Baresel's "regular
         compensation."

         3.2 Bonus Compensation. In addition to regular compensation, Baresel
         shall be eligible for annual bonuses that are not guaranteed and are to
         be determined by the Company's Board of Directors.

         3.3 Grant of Stock Options. From time to time the Company may grant
         stock options to its executive officers as determined by the Board of
         Directors (or the Compensation Committee and/or Stock Option Committee
         established by the Board of Directors). To the extent that stock
         options are granted by the Board of Directors (or the Compensation
         Committee and/or Stock Option Committee established by the Board of
         Directors) to its executive officers, Baresel shall be deemed to be a
         member of the group to which stock options are granted, and his stock
         option grants shall be determined in the same manner as are the stock
         option grants of other executives in the group. In no event shall this
         Agreement have any effect upon the stock options granted to Baresel
         prior to the date of execution of this Agreement.

         3.4 Entertainment, Travel and Similar Expense Reimbursement. Baresel is
         hereby authorized to incur reasonable expenses for the promotion of the
         Company's business, including entertainment, travel, lodging, meals,
         and similar expenses, and he shall be reimbursed therefore, by the
         Company upon his presentation of itemized accounts of such
         expenditures.

         3.5 Health, Dental, and Disability Insurance Arrangements and Programs.
         The Company shall provide to Baresel (including coverage of the
         dependents of Baresel) health, medical, dental, and disability
         insurance benefits comparable to those provided to the executive
         officers of the Company either as a group or individually.

         3.6 Vacation and Leave; Holidays. Baresel shall be entitled to (i)
         vacation leave with pay (at his regular compensation rate at the time
         such vacation leave is taken) during each calendar year of the Period
         of Employment, and (ii) reasonable periods of sick leave with pay (at
         his regular compensation rate at the time such sick leave is taken)
         commensurate with his position, in accordance with Company policy as
         established by the Board of Directors. Any annual vacation leave not
         taken by Baresel during a calendar year shall accumulate, and, at the
         option of Baresel, he may elect to receive his vacation compensation
         (at his regular compensation rate at the time of such election) in lieu
         of taking vacation leave. Baresel shall be entitled to all paid
         holidays observed by the Company.

         3.7 Automobile and Cellular Phone. At Baresel's sole option, the
         Company shall (i) pay to Baresel an automobile allowance of five
         hundred dollars ($500) per month, payable on the first day of each
         month, or (ii) the use of a Company owned or leased automobile, the
         make and model to be selected and determined in Baresel's sole
         discretion and pay all costs and expenses of

EMPLOYMENT AGREEMENT PAGE 2
<PAGE>

         operation, including without limitation insurance (in such amounts as
         mutually agreed upon by Baresel and the Company), gasoline, repairs,
         maintenance. Furthermore, and the Company shall provide to Baresel, at
         the sole cost and expense of the Company, a cellular phone to assist
         Baresel in the performance of his duties and responsibilities as an
         executive officer and employee of the Company.

         3.8 Life Insurance. The Company shall provide to Baresel and maintain
         term insurance, at the Company's sole cost and expense, covering the
         life of Baresel in the face amount of $250,000 (the "Life Insurance
         Policy"), the proceeds of which shall be payable to such beneficiary
         that Baresel shall designate or, in the event of failure to designate a
         named beneficiary, shall be payable to the estate of Baresel. Upon
         expiration of the Period of Employment, the Company shall assign and
         transfer to Baresel, without any payment therefore by Baresel, the Life
         Insurance Policy in the event ownership thereof is not maintained in
         the name of Baresel.

         3.9 No Limitation on Other Obligations of Company. No regular
         compensation or bonus compensation payment or the providing of any
         other compensation benefits to Baresel pursuant to this Agreement shall
         in any way limit or reduce any other obligation of the Company to
         Baresel as an employee of the Company. Baresel shall be entitled to
         participate in and receive benefits under any employee benefit plan or
         arrangement made available by the Company (both as of the effective
         date of this Agreement as well as in the future) to its employees or to
         any executive officer of the Company.

         3.10 Employment Termination. In the event of (i) a termination (as
         defined below) of Baresel's employment with the Company prior to the
         end of the Period of Employment, or (ii) termination of Baresel's
         employment at the end of the Period of Employment, the Company shall
         pay or provide the following:

                  3.10.1 Lump Sum Payment of Regular Compensation and Bonus
                  Compensation. The Company shall pay to Baresel (i) in a lump
                  sum an amount equal to the regular compensation payments for
                  the remainder of the Period of Employment at the salary rate
                  of regular compensation as provided in Section 3.1 to which
                  Baresel would have been entitled if Baresel had remained in
                  the employ of the Company for the remainder of the Period of
                  Employment, (ii) the automobile allowance, in such amount and
                  payable in accordance with and as provided by Section 3.7
                  during the remainder of the Period of Employment, and (iii)
                  payment of the insurance premiums on the policies of insurance
                  required to be maintained by the Company in accordance with
                  and as provided by Sections 3.8 and 4.1 during the remained of
                  the Period of Employment. The lump sum payment pursuant to (i)
                  of this Section 3.10.1 shall be paid to Baresel on or before
                  the date of termination of Baresel's employment pursuant to
                  Section 3.10.

                  3.10.2 Incentive Compensation and Stock Options. The Company
                  shall provide Baresel with the following (or the value
                  thereof):

                           (i) incentive compensation (including, but not
                           limited to, the right to receive and exercise stock
                           options and stock appreciation rights and to receive
                           restricted stock and grants thereof and similar
                           incentive compensation benefits) to which Baresel
                           would have been entitled under all incentive
                           compensation plans maintained by the Company if
                           Baresel had remained in the employ of the Company for
                           the remainder of the Period of Employment; and

EMPLOYMENT AGREEMENT PAGE 3
<PAGE>

                           (ii) the employee benefits (including, but not
                           limited to, coverage under medical, dental,
                           disability and life insurance arrangements or
                           programs) to which Baresel would have been entitled
                           under all employee benefit plans, programs and
                           arrangements maintained by the Company in the event
                           Baresel had remained employed by the Company for the
                           remainder of the Period of Employment.

                  3.10.3 Release of Personal Liability for the Company's
                  Liabilities. The Company shall obtain the complete release of
                  Baresel from all personal liability for any and all of the
                  Company's debts, including but not limited to leases and
                  promissory notes, and provide Baresel with acceptable proof
                  (as determined in Baresel's sole discretion) of said release
                  no later than ten business days prior to the last day of
                  Baresel's employment by the Company.

                  3.10.4 Lump Sum Payment of Other Amounts Due Baresel. The
                  Company shall pay to Baresel in a lump sum an amount equal to
                  the sum of (i) all accrued but unpaid compensation that has
                  been previously deferred due to the Company's financial
                  difficulties, (ii) all amounts advanced and/or loaned by
                  Baresel to the Company, and (iii) any and all other amounts
                  due Baresel. The Company shall pay the lump sum payment
                  pursuant to this Section 3.10.4 to Baresel on or before the
                  last day of Baresel's employment.

         3.11 Termination and Cause Defined. The term "termination" shall mean
         termination by the Company, upon 60 days' prior written notice to
         Baresel, of the employment of Baresel with the Company for any reason
         other than cause (as defined below), or resignation of Baresel upon the
         occurrence of either (i) a significant change in the nature or scope of
         Baresel's authorities or duties from those described in Section 2, a
         reduction in his compensation or breach by the Company of any other
         provision of this Agreement, (ii) a reasonable determination by Baresel
         that, as a result of a change in circumstances regarding his duties, he
         is unable to exercise his authorities, powers, functions or duties
         attached to his executive officer position or positions with the
         Company as contemplated in Section 2, or (iii) a change in control
         within the meaning of Section 3.12. The term "cause" means gross
         misconduct materially injurious to the Company or willful and material
         breach of this Agreement by Baresel that results in material injury to
         the Company.

         3.12 Change of Control Defined. For purposes of this Agreement, each of
         the following specified events shall be deemed a "change of control":
         (i) any third person, including a "group" as defined in Sections
         13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
         amended, becomes the beneficial owner of shares of the Company or of
         proxies or other rights pertaining to the Company which carry 25
         percent or more of the total number of votes for the election of the
         Board of Directors of the Company or with respect to a merger,
         consolidation or sale; (ii) as result of, or in connection with, any
         cash tender offer, merger, or other business combination of the
         foregoing, the persons who were directors of the Company immediately
         prior to such event cease to constitute a majority of the Board of
         Directors of the Company; (iii) the approval of an agreement providing
         either for a transaction or series of transactions by which the Company
         will cease to be an independent publicly-owned company or for a sale,
         lease or other disposition of all or substantially all of the assets of
         the Company; (iv) the determination by Baresel, in his sole discretion,
         that a Change of Control has occurred; or following any public offering
         of securities of the Company during any period of 24 consecutive months
         the persons who were members of the Company's Board of Directors at the
         commencement of the period cease for any reason to constitute a
         majority of the Company's Board of Directors.

EMPLOYMENT AGREEMENT PAGE 4
<PAGE>

         4. Disability or Death.

         4.1 Disability. The Company shall provide and maintain, at its sole
         cost and expense, a policy of disability insurance covering the
         sickness, disability or incapacity of Baresel (the "Disability
         Policy"), the terms, extent of coverage (including the nature of
         disabilities cover thereby) and the issuer thereof shall be within the
         sole discretion of Baresel. In no event shall the Disability Policy
         provide for a monthly disability payment to Baresel of less than $3,334
         per month in the event of his disability within the meaning of the
         Disability Policy. During any period from the date of the commencement
         of period that Baresel's is absent from work due to sickness,
         disability or incapacity and until commencement of his receipt of
         payments of the monthly disability benefits under the Disability
         Policy, Baresel shall continue to be entitled to receive and the
         Company shall pay and provide his regular compensation, bonus
         compensation and the other compensation and benefits, in accordance
         with and as provided in Sections 3.1 through 3.8 during the remaining
         Period of Employment. The Company hereby agrees and acknowledges that
         the Company undertakes and assumes the risk of all such disability,
         incapacity or inability of Baresel during the Period of Employment
         (except to the extent such risk is insured against pursuant to the
         Disability Policy) to perform the services contemplated by Section 2 by
         reason of sickness, disability, incapacity or other inability. Upon
         expiration of the Period of Employment, the Company shall assign and
         transfer to Baresel, without any payment therefore by Baresel, the
         Disability Policy in the event ownership thereof is not maintained in
         the name of Baresel.

         4.2 Death. In the event Baresel shall die during the period Baresel is
         employed by the Company pursuant to this Agreement, this Agreement
         shall terminate effective on the last day of the month following the
         date of death, and the Company shall pay to the wife of Baresel, or if
         unmarried at the time of his death, to the estate of Baresel, the
         regular compensation and bonus compensation payable to Baresel pursuant
         to Sections 3.1 and 3.2 and for a period of three (3) months following
         the effective date of such employment termination pursuant to this
         Section 4.2, payable on the dates provided for such compensation
         payment there under.

         4.3 Accrued Compensation; Benefits; Reimbursement. In the event of
         termination of this Agreement pursuant to Section 4.1 and/or Section
         4.2 of this Agreement, Baresel (or his wife or if unmarried on the date
         of his death his estate) shall be entitled to receive accrued and
         unpaid expense reimbursements, automobile allowance and any unpaid
         bonus amounts awarded to Baresel prior to such termination and stock
         option grants awarded to Baresel prior to such termination exercisable
         in accordance with the terms of such stock option grants, as well as
         the benefits set forth Sections 3.10.3 and 3.10.4.

         5. Termination for Cause. In the event the Board of Directors of the
Company determines in good faith that Baresel is guilty of willful misconduct or
gross negligence materially injurious to the Company in the performance of the
services contemplated by this Agreement, the Company shall have the right, by
resolution unanimously adopted by all members (other than Baresel) of the Board
of Directors of the Company, to terminate this Agreement at the end of any month
by giving not less than 60 days' prior written notice to Baresel of its election
to so terminate this Agreement, and all obligations hereunder shall thereupon
terminate thereafter, except for those obligations set forth in Sections 3.10.3
and 3.10.4.

         6. Non-Competition. During the period Baresel is employed by the
Company pursuant to this Agreement, Baresel may engage in any other employment
or pursuit of other endeavors which does not conflict with his ability to
perform his duties to the business interests of the Company, provided that such
other employment or pursuit of other endeavors does not violate the duty of
loyalty and care which

EMPLOYMENT AGREEMENT PAGE 5
<PAGE>

Baresel has to the Company by reason of this Agreement or in his capacity as an
executive officer of the Company.

         7. Confidentiality. During the period that Baresel is employed by the
Company, and for a period of one year thereafter, Baresel will not divulge to
anyone, other than the Company or persons designated by the Company in writing,
any confidential material information directly or indirectly useful in any
aspect of the business of the Company or any of its subsidiaries or affiliates,
as conducted from time to time, as to which Baresel is now, or at any time
during employment shall become, informed and which is not then generally known
to the public or recognized as standard practice.

         8. Certain Provisions to Survive Termination; Etc. Notwithstanding any
termination of his employment under this Agreement, Baresel, in consideration of
his employment hereunder to the date of such termination, shall remain bound by
the provisions of Section 7, and consequently, in addition to all other remedies
that may be available to it, the Company shall be entitled to injunctive relief
for any actual or threatened violation of such Sections.

         9. Non-Assignability. Neither party hereto shall have the right to
assign this Agreement or any rights or obligations hereunder without the written
consent of the other party.

         10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in the
City of Oklahoma City in accordance with the laws of the State of Oklahoma by
three arbitrators, one of whom shall be appointed by the Company, one by Baresel
and the third by the two arbitrators appointed by the Company and Baresel. If
the arbitrators appointed by the Company and Baresel cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be appointed
by the Chief Judge of the United States District Court of the Western District
of Oklahoma. The arbitration shall be conducted in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Section 10. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event that is shall be necessary or desirable for
Baresel to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of any and all of his rights under this
Agreement, he shall be entitled to recover from the Company reasonable
attorneys' fees and costs and expenses incurred by him in connection with the
enforcement of said rights, regardless of the final outcome.

         11. Notice. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given forty-eight (48)
hours after depositing in the United States mail, certified mail, postage
prepaid, addressed to the party to receive such notice at the address set forth
herein below or such other address as either party may give to the other in
writing pursuant to written notice pursuant to this Section:

                  If to Baresel:            Mr. Roger P. Baresel
                                            3509 Banner Court
                                            Edmond, OK 73013

                  If to the Company:        FullNet Communications, Inc.
                                            201 Robert S. Kerr Avenue, Suite 210
                                            Oklahoma City, OK 73102

         12. General. The terms and provisions herein contained (i) may be
amended or modified only by a written instrument executed by the parties hereto,
and (ii) shall be construed and enforced in accordance

EMPLOYMENT AGREEMENT PAGE 6
<PAGE>

with the laws in effect in the State of Oklahoma without regard to its conflicts
of law provisions. Failure by a party hereto to require performance of any
provision of this Agreement shall not affect, impair or waive such party's right
to require full performance at any time thereafter.

         This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the 31st day of July, 2002.

"Company"                        FULLNET COMMUNICATIONS, INC.

                                 By:
                                    -------------------------------------------
                                    Timothy J. Kilkenny, Chief Executive Officer

"Baresel"
                                  ----------------------------------------------
                                  Roger P. Baresel

EMPLOYMENT AGREEMENT PAGE 7

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