Document:

exv10w2

 

Exhibit 10.2

EMPLOYMENT AGREEMENT

     AGREEMENT,
dated as of the 25th day of August, 2005, by and between WQN, INC., a
Delaware corporation with an office located at 14911 Quorom Drive, Suite 140, Dallas, Texas 75254
(the “Company”), and DAVID S. MONTOYA, an individual (the “Employee”).

W I T N E S S E T H:

     WHEREAS, the Board of Directors of the Company has determined that it is in the best interests
of the Company to employ the Employee and the Employee desires to be employed by the Company; and

     WHEREAS, the Company and the Employee desire to set forth in this Agreement the terms and
conditions of the Employee’s employment.

     NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the
parties hereto agree as follows:

1. EMPLOYMENT 

     The Company hereby employs and engages the Employee to serve as the Chief Financial Officer of
the Company, and the Employee hereby accepts such employment with the Company, on the terms and
conditions herein set forth. The Employee’s conduct and performance shall be consistent with what
would be expected of senior executives at other institutions of similar size and type. Except as
otherwise provided herein, the Employee shall devote such business time, attention, and skill to
the business of the Company and perform such responsibilities as are customary for an employee
holding a Chief Financial Officer position and that are assigned to the Employee by the Board of
Directors in accordance with the standards and policies that the Company may from time to time
establish. The Employee shall use his reasonable best efforts to further the interests of the Company, and to
discharge diligently his duties and responsibilities to the Company under this Agreement. As of
the date of this Agreement, the Employee represents that he is not subject to any legal obligations
or restrictions that would prevent or limit the Employee from performing his responsibilities under
this Agreement. Notwithstanding the foregoing, this

 

 

Agreement shall not be construed or applied to prevent the Employee from engaging in any other
business or investment activities, including those which may be similar to the investments or
business of the Company.

2. COMMENCEMENT; TERM OF AGREEMENT

          2.01 The term of employment hereunder shall commence effective as of the date of the closing
of the Company’s asset sale to VOIP, Inc. (the “Commencement Date”), and shall continue until the
third anniversary of the Commencement Date (the “Employment Period”) unless terminated sooner
pursuant to the express provisions hereof.

     3. DUTIES

          3.01 During the Employment Period, the Employee shall be employed in an executive capacity as
the Chief Financial Officer of the Company, with the authority and responsibilities appropriate and
customary to such position.

          3.02 The Employee shall report and be responsible to the Board of Directors of the Company.

          3.03 On the date hereof, and at each annual meeting of stockholders during which the Employee
is serving as the Chief Financial Officer of the Company, the Company shall cause the Employee to
be nominated to the Board of Directors of the Company and shall use its reasonable best efforts to
have the Employee elected to the Board of Directors of the Company.

     4. COMPENSATION

          4.01 The Employee shall be eligible to receive compensation in accordance with resolutions
adopted by the Board of Directors, including fees payable to the members of the
Board of Directors (so long as, and to the extent that, Employee is a director of the Company).
Further, upon the Commencement Date, the Company shall grant to the Employee, pursuant to the
Company’s 2001 Stock Option Plan, a 10-year stock option (“Option”)

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to purchase 220,000 shares of
the Company’s common stock at an exercise price of $1.41 per share. Such options shall vest as follows: (i) one-third on the date hereof, (ii) one-third on the
first anniversary date of this Agreement; provided that the Employee is then in the employ of the
Company, and (iii) the remainder on the second anniversary date of this Agreement, provided that
the Employee is then in the employ of the Company. However, if the Employee’s employment is
terminated pursuant to Section 5.04 hereof or if the Employee leaves the employ of the Company for
Good Reason, the Option shall fully vest and the Employee shall have one (1) year thereafter to
exercise the Option.

For purposes of this Agreement, “Good Reason” shall mean the following:

          (a) a material default or breach by the Company of any obligation, representation, warranty,
covenant or agreement made by the Company herein, including, but not limited to: (i) a reduction of
the duties of the Employee; (ii) a change in the reporting responsibility of the Employee to the
Board of Directors or (iii) the Company’s failure to maintain in full force and effect Directors &
Officers Insurance in accordance with Section 4.02(i) of this Agreement; or

          (b) the Company requiring the Employee to be based anywhere other than the New York City, New
York metropolitan area, except for required travel on business; or

          (c) a material default or breach by the Company, of the Management Agreement by and between
the Company and WQN Capital Advisors, LLC (the “Management Company”),
dated on or about the date
hereof (the “Management Agreement”) (a termination in accordance with
Section 11 of the Management
Agreement shall not constitute a material default or breach by the Company).

          4.02 The Employee shall be entitled, during the Employment Period, to, (i) Director’s and
Officer’s Insurance, in an initial amount equal to that which is normal and customary for a
business the type of which the Company is engaged in, which amount shall be reviewed by the Board
of Directors and the Employee from time to time, and (ii) the maximum indemnification by

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the Company
that may be provided for officers/directors under the laws of the Company’s state of incorporation
and the Company’s certificate of incorporation and bylaws.

     5. TERMINATION

          5.01 The Employee’s employment hereunder shall terminate automatically and without notice upon
the death of the Employee or the Employee voluntarily leaving the employ of the Company.

          5.02 The Company may terminate the Employee’s employment hereunder, upon written notice to the
Employee, in the event of the Employee’s Incapacity. For the purpose of this Agreement, Incapacity
shall be deemed to refer to and include (i) the suffering of any mental or physical illness,
disability or incapacity to the extent that the Employee shall be unable to perform his duties
pursuant to this Agreement and such illness, disability or incapacity shall be deemed by a licensed
physician chosen by the Company to be of a permanent nature, or (ii) the Employee shall not have
performed his duties hereunder on a full-time basis for a continuous period of 90 days or a period
of 150 days in any one year period, and the Company, and its option, elects to treat such illness,
disability or incapacity as permanent in nature.

          5.03 The Company may terminate the Employee’s employment hereunder, upon written notice to the
Employee, for Cause. For purposes of this Agreement, “Cause” shall mean the following:

                   (a) the Employee’s conviction of a felony in a court of law of any crime or offense involving
money; or

                   (b) the Employee’s failure or refusal to substantially perform his duties hereunder (other
than any such failure or refusal resulting from his Incapacity or the failure to meet specific
growth and profit targets), or the Employee’s failure or refusal to carry out the reasonable
business directives of the Board of Directors, or the willful taking of any action by the Employee
which results in material damage to the Company, or the material default or breach by the

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Employee of any obligation, representation, warranty, covenant or agreement made by the Employee herein;
provided, however, that the Company shall have given the Employee written notice of
any such Cause for termination pursuant to this Section 5.03(b) and the Employee shall have failed
to cure such Cause within fifteen (15) days after the date of such notice. If the Cause for
termination is cured within the fifteen (15) day period, it shall be deemed for all purposes that
Cause for termination has not occurred; or

        
           (c) the Board of Directors of the
Company determines in good faith that the Employee, as a
member or manager of the Management Company, has caused a material breach or default by the
Management Company of the Management Agreement.

        
  5.04 The Company or the Employee may terminate the Employee’s employment hereunder without Cause.

     6. SURVIVAL

          The covenants and agreements contained in or made pursuant to this Agreement shall survive the
Employee’s termination of employment, irrespective of any investigation made by or on behalf of any
party.

     7. ENTIRE AGREEMENT; MODIFICATION

          This Agreement sets forth the entire understanding of the parties with respect to the subject
matter hereof, supersedes all existing agreements between them concerning such subject matter, and
may be modified, supplemented or discharged only by a written instrument duly executed by each
party.

     8. NOTICES

          Any notices or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified or registered mail, return receipt requested, or
personally delivered against receipt to the party to whom it is to be given at the address of such

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party set forth in the preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 8). Any notice or other
communication given by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party’s address which shall be deemed given at the time of receipt
thereof.

     9. WAIVER

          Any waiver by either party of a breach of any provision of this Agreement shall not operate as
or be construed to be a waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other term of this
Agreement. Any waiver must be in writing.

     10. BINDING EFFECT

          The Employee’s rights and obligations under this Agreement shall not be transferable by
assignment or otherwise, such rights shall not be subject to commutation, encumbrance, or the
claims of the Employee’s creditors, and any attempt to do any of the foregoing shall be void. The
provisions of this Agreement shall be binding upon and inure to the benefit of the Employee, his
heirs, executors, and administrators, and shall be binding upon and inure to the benefit of the
Company and its successors and assigns.

     11. HEADINGS

          The headings in this Agreement are solely for the convenience of reference and shall be given
no effect in the construction or interpretation of this Agreement.

     12. COUNTERPARTS; GOVERNING LAW

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

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Agreement
shall be governed by and construed in accordance with the laws of the State of New York, without
giving effect to any doctrine pertaining to the conflict of laws.

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year above
written.

	 	 	 	 	 
	/s/ David
S. Montoya
	 	 
	DAVID S. MONTOYA	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	WQN, INC.	 	 
	 
	 	 	 	 
	By:
	 	/s/ Robert Farmer	 	 
	 

	 	Robert Farmer, Chairman	 	 

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EXHIBIT 10.3

MANAGEMENT AGREEMENT

     THIS MANAGEMENT AGREEMENT (this “Agreement") is made this 25th day of August, 2005, by and
among WQN Capital Advisors, LLC, a to be formed Delaware limited liability company having an
address at 509 Madison Avenue, New York, New York (the “Management Company") and WQN,
Inc., a Delaware corporation, having an address at 14911 Quorom Drive, Suite 140, Dallas, TX 75254
(the “Company").

W I T N E S S E T H:

     WHEREAS, the Company is being reorganized as a specialty finance company;

     WHEREAS, the Company requires the services of qualified professionals who can manage and
operate the affairs of the Company, and provide suitable facilities; and

     WHEREAS, the Management Company can provide the Company with a fully-equipped office, all
appropriate office services, and experienced professionals who can take full responsibility for
managing and operating the affairs of the Company.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the parties hereto agree as follows:

     Section 1. Services To Be Provided By The Management Company.

          (a) The Management Company hereby agrees to provide to the Company suitable experienced
professionals to enable the Company to conduct its operations.

          (b) The Management Company hereby agrees to provide to the Company, as soon as practicable, an
office facility, located within the New York City, New York metropolitan area, to enable the
Company to conduct its business operations. Such office will be furnished with office equipment
(including computers and software) and furniture suitable to enable the Company to conduct its
business operations. The Management Company also agrees to furnish all janitorial service, utility
service, local and long distance telephone, high speed internet connections and fax service, and
other similar services necessary to the conduct of such operations.

          (c) The Management Company shall seek suitable investment opportunities and manage the
investment policy of the Company; perform day-to-day investment and business operations of the
Company; provide investment advice; and prepare and disseminate all necessary reports and financial
statements to the Company’s management and Board of Directors.

          (d) The authority delegated to the Management Company pursuant to this Agreement will be
exercised in conformity with the terms and conditions of this Agreement.

 

 

Notwithstanding the foregoing, without the written approval of the board of directors of the
Company the Management Company shall not commit, or enter into any agreement on behalf of the
Company, with respect to (i) the incurrence by the Company of any indebtedness for borrowed money;
(ii) any investment by the Company, other than the investment of cash in short-term permitted
investments in the ordinary course of business; or (iii) any other material contract to which the
Company is a party.

     Section 2. Term.

          2.1. Length. This Agreement shall commence as of the date of the closing of the
Company’s asset sale to VoIP, Inc. (the “Commencement Date”) and shall continue in effect until the
earlier of (i) ten (10) years from the Commencement Date, or (ii) termination of this Agreement by
either party in accordance with Section 11 hereof (the “Term”).

        
  2.2. Surrender. Upon termination of this Agreement, the Company shall at its expense,
(i) promptly surrender to the Management Company possession of the above-described offices in good
order and repair (ordinary wear and tear excepted) and broom clean; (ii) repair any damage to such
offices caused by such removal, and (iii) if this Agreement is terminated otherwise than (x)
pursuant to Section 11 hereof or (y) as a result of the expiration of the Term, promptly pay the
Management Company a fee equal to three percent (3%) of Total Assets (as hereinafter defined), of
the Company, calculated as of the date of termination; plus the Fair Market Value (as defined
below) of the Incentive Fee and the Capital Gains Fee (as defined in Section 3 hereof) as of the
date of termination. As used herein, “Fair Market Value” means the value of the then unpaid amount
of the Incentive Fee and the Capital Gains Fee as determined, taking into account appropriate
discounts for limitations on voting rights, minority interests, illiquidity and restrictions on
transfer of the underlying investments, by an appraisal performed by an investment banking firm of
national standing selected by the Company; provided that (i) such appraiser shall be
directed to determine fair market value of such security as soon as practicable, but in no event
later than thirty (30) days from the date of its selection and (ii) the costs and expense of the
appraiser shall be paid by the Company.

     Section 3. Compensation. In consideration for the services to be provided to the
Company by the Management Company hereunder, the Company shall pay to the Management Company
management fees as follows:

	 	(i)	 	one-half of one percent (.5%) of Total Assets (as defined below), payable on
May 15, August 15, November 15 and March 31, based on the financial statements of the
Company at the end of the fiscal quarter immediately preceding the payment date (the
“Base Management Fee”); and
	 
	 	(ii)	 	an incentive fee equal to 20% of the excess, if any, of the Company’s Net
Investment Income (as defined below) for each fiscal quarter of the Company
that exceeds the Priority Return (as defined below), payable on May 15, August 15,
November 15 and March 31, based on the

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	 	 	 	financial statements of the Company determined in accordance with generally accepted accounting
principles, consistently applied, at the end of the fiscal quarter immediately
preceding the payment date (the “Incentive Fee”); and
	 
	 	(iii)	 	an incentive fee (“Capital Gains Fee”) equal to 20% of the Company’s net
Realized Capital Gains (Realized Capital Gains (as defined below) less Realized
Capital Losses (as defined below)) on a cumulative basis for each fiscal year of the
Company following the Commencement Date, minus any Unrealized Capital
Depreciation (as defined below) at the end of such fiscal year and minus the
aggregate amount of all Capital Gains Fees paid to the Management Company in prior
fiscal years of the Company, payable on April 15 of each year based on the Company’s
audited financial statements for the prior fiscal year of the Company ;
provided, however, that no Capital Gains Fees shall be paid to
the Management Company with respect to the Company’s investment in Seaview Mezzanine
Fund LP (“Seaview”).

As used herein, “Total Assets” means the amount of gross assets of the Company as set forth on the
applicable financial statements of the Company at the end of the fiscal quarter immediately
preceding the payment date, as determined in accordance with generally accepted accounting
principles, consistently applied; provided, however, that in computing Total Assets
the gross book value with respect to the Company’s investment in Seaview shall be excluded from the
calculation of Total Assets.

As used herein, “Net Investment Income” shall mean the interest income, dividend income, and any
other income (including any other fees such as commitment, origination, syndication, structuring,
diligence, managerial assistance, monitoring, and consulting fees or other fees that the Company
receives from portfolio companies or investments) which are collected during the fiscal quarter of
the Company; minus the Company’s operating expenses for the fiscal quarter (including the
Base Management Fee and any interest expense, but excluding the Incentive Fee and the Capital Gains
Fee); provided, however, that any Net Investment Income with respect to the Company’s investment in
Seaview shall be excluded from the calculation of Net Investment Income. Net Investment Income
does not include Realized Capital Gains, Realized Capital Losses or Unrealized Capital
Depreciation.

As used herein, “Priority Return” means a rate equal to 1.5% (6% annualized) of the Company’s Total
Assets.

As used herein, “Realized Capital Gains” on each investment of the Company will be calculated as
the excess of the net amount realized from the sale or other disposition of such investment over
the original cost of the investment (less any Unrealized Capital Depreciation with respect to such investment
which was deducted with respect to the payment of any Capital Gains Fees in any prior fiscal year).

As used herein, “Realized Capital Losses” on each investment of the Company will be calculated as
the amount by which the net amount realized from the sale or other disposition of such investment
is less than the original cost of such investment.

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As used herein, “Unrealized Capital Depreciation” on each investment will be calculated as the
amount by which the original cost of such investment exceeds the fair value of such investment as
of the end of a fiscal year of the Company.

     Section 4. Payment of Expenses. The Management Company shall be responsible for the
payment of: (i) the compensation of all professional and other employees of the Management
Company; (ii) the cost of providing support, management and general services to the Company (other
than the costs paid by the Company as provided below), including, without limitation: (a) office
expenses; (b) travel; (c) business development; (d) office and equipment rental; (e) bookkeeping;
and (f) the development, underwriting, due diligence, investigation and monitoring of investments.

     The Company shall pay all of its expenses directly, including, but not limited to, financial
printing, legal and independent auditor costs, directors and officers insurance, board of directors
expenses for the Company’s board of directors, any other expenses related to the Company being a
“publicly reporting company”, direct transaction expenses and the rental of facilities, other than
the office facility being provided by the Management Company pursuant to Section 1(b) hereof.

     Section 5. Use and Operation of the Office. The Company shall occupy and use the
office provided by the Management Company only for the operation of the Company. The Company shall
use such premises for no other purpose, unless approved in advance in writing by the Management
Company; such approval may be withheld at the sole discretion of the Management Company. The
Company covenants and agrees that it shall observe and comply with all laws, orders, ordinances,
rules, requirements and regulations of any and all governmental departments, bodies, bureaus,
agencies, and officers, and all rules, directions, requirements and reasonable recommendations of
the Management Company’s and the Company’s insurers and of any fire insurance underwriters or
rating organization, and of the state and local health departments, and of any other bodies or
agencies now or hereafter exercising similar functions in the location in which the Company’s
office is situated, which pertain to the use and occupancy thereof.

     Section 6. Indemnification of Management Company. To the fullest extent permitted by
law and by the Company’s certificate of incorporation or bylaws, the Company shall indemnify and
hold harmless the Management Company, its current and past members, managers, employees, agents and
assigns and any of their respective affiliates, from and against any and all liabilities, claims,
damages, actions or proceedings arising out of the activities of, or relating to, the Company.

     Section 7. Assignment. Neither the Company nor the Management Company shall have any
right to assign this Agreement, rights or obligations hereunder, without the prior written consent
of the other party. Any such assignment made without the written consent of the non-assigning
party shall be void and deemed ineffective.

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     Section 8. Other Activities. This Agreement shall not be construed or applied to
prevent the Management Company from engaging in any other business or investment activities,
including those which may be similar to the investments or business of the Company.

     Section 9. Notices. Any notice, demand, consent, approval, request or other
communication or document to be provided hereunder to a party hereto shall be given in writing, and
shall be deemed to have been given forty-eight (48) hours after being sent as certified or
registered mail in the United States mails, postage prepaid, return receipt requested, to the
address of such party set forth hereinabove or to such other address in the United States as such
party may designate from time to time by notice to the other parties.

     Section 10. General.

          10.1. Effectiveness. This Agreement shall become effective upon its execution and
delivery by each party hereto.

          10.2. Complete Understanding. This Agreement represents the complete understanding
between the parties hereto as to the subject matter hereof, and supersedes all prior and
contemporaneous written or oral negotiations, representations, warranties, statements or agreements
between the parties hereto as to the subject matter hereof.

          10.3. Amendment. This Agreement may be amended only by an instrument executed and
delivered by each party hereto.

          10.4. Applicable Law. This Agreement shall be given effect and construed by
application of the law of New York.

     Section 11. Termination. Either the Company or the Management Company may terminate
this Agreement as a result of a material breach by the other party of the terms and conditions of
this Agreement by providing written notice to the breaching party setting forth in reasonable
detail the material breach (a “Notice of Breach”). Upon receipt of a Notice of Breach, the
recipient shall have (i) ten days to cure such material breach if such material breach relates to
the failure to pay amounts due to the non-breaching party pursuant to this Agreement (a “Payment
Default”); or (ii) thirty days to cure such material breach if such material breach relates to any
material breach of this Agreement other than a Payment Breach.
Notwithstanding the foregoing, (i) if the Total Assets, for two consecutive fiscal quarters, are not at least equal to 60% of the
Total Assets on the Commencement Date (net of any amounts payable by the Company as of the
Commencement Date), (ii) if E. Denton Jones, Michael B. Adler, David S. Montoya or Scott W.
Hartman withdraw as members (whether they own their interest directly or indirectly) of the
Management Company, other than as a result of death or disability or
(iii) either Scott W. Hartman or David S. Montoya
voluntarily terminates their employment with the Company or
voluntarily resigns as an officer of the Company (each, a “Triggering Event”), the
Company may terminate this Agreement at any time upon written notice to the Management Company
during the thirty-day period following the occurrence of the Triggering Event.

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(Signatures on following page)

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     IN WITNESS WHEREOF, each party hereto has executed and sealed
this Agreement, or caused it to be executed and sealed on its behalf by its duly authorized
representatives, the day and year first above written.

	 	 	 	 	 
	 	 	WQN Capital Advisors, LLC
	 	 	(a to-be-formed entity)
	 
	 	 	 	 
	 

	 	By:	 	/s/ David S. Montoya
	 

	 	 	 	 
	 

	 	Its:
	 	Managing Director
	 
	 	 	 	 
	 	 	WQN, Inc.
	 
	 	 	 	 
	 

	 	By:	 	/s/ Robert Farmer
	 

	 	 	 	 
	 

	 	Its:
	 	Robert Farmer, Chairman

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