1
Exhibit 10.12
EMPLOYMENT AGREEMENT
This employment agreement (the "Agreement") is entered into as of the 1st day of
October, 1999, by and between SHARED TECHNOLOGIES CELLULAR, INC. ("STC"), having
its principal offices at 000 Xxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx, XX
00000, a Delaware corporation, and XXXXXXX X. XXXXXXXX ("Employee").
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties agree as follows.
WITNESSETH
WHEREAS, the Company desires to obtain the services of Employee in
accordance with the terms, conditions and provisions of this Agreement;
WHEREAS, Employee desires to provide services to the Company in
accordance with the terms, conditions and provisions of this Agreement; and
WHEREAS, each of the Company and Employee agree that the terms,
conditions and provisions of this Agreement are fair and reasonable and are
necessary to protect the legitimate business interests of each other.
NOW THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts such employment and agrees to perform his duties and responsibilities
hereunder, in accordance with the terms and conditions hereinafter set forth.
2. Term. This Agreement shall have a term of one (1) year, commencing
October 1, 1999 (the "Effective Date") and expiring September 30, 2000, unless
earlier terminated in accordance with Section 9 of this Agreement (the "Term").
Such Term shall be automatically renewed for successive one-year periods
thereafter unless, at least sixty (60) days before the end of the current Term
either Employee or the Company gives written notice to the other of his or its
intent to terminate this Agreement without Cause (see Section 9(c) for
definition of the term "Cause"), in which event this Agreement and Employee's
employment hereunder shall terminate at the end of the then current Term, except
that any such nonrenewal by the Company shall be subject to Section 9(e) hereof.
3. Duties and Responsibilities. During the Term, Employee shall be
employed in the capacity of CHAIRMAN AND CHIEF EXECUTIVE OFFICER of the Company,
and shall perform those duties normally associated with that position, subject
to such policies, guidelines and directions consistent therewith as may be
established from time to time by the Board of Directors of the Company. During
the Term, Employee will utilize a hands-on management approach and will devote
substantially all of his full time, attention and energies to the business of
the Company, and will perform and discharge his duties and responsibilities
under Section 3 hereof faithfully,
2
diligently, to the best of his efforts and abilities and in a manner consistent
with any and all policies, guidelines and directions, consistent with those
duties normally associated with Employee's position, as may be established from
time to time by the Board of Directors of the Company. Except as provided in
Section 8 hereof, the foregoing shall not be construed as preventing Employee
from making investments in other businesses or enterprises not competitive with
the Company (as defined in Section 8(a) hereof), provided that Employee agrees
not to become engaged in any other business activity which may interfere with
his ability to discharge his duties and responsibilities hereunder.
5. Compensation, Benefits and Expenses.
(a) Salary. During the first year of the Term, the Company
shall pay to Employee a base salary at the rate of THREE HUNDRED SEVENTY-FIVE
THOUSAND DOLLARS ($375,000) per annum, less deduction and withholding required
by applicable law, or such greater amount as shall be approved by the Board of
Directors of the Company ("Base Salary"), payable in arrears in accordance with
the Company's regular payroll schedule.
(b) Bonuses. Employee shall be entitled to receive a bonus for
each calendar year based on the attainment of measurable performance objectives
that, if met, will result in a bonus to Employee equal to FIFTY PERCENT (50%) of
Employee's Base Salary in effect as of the end of the applicable year (the
"Target Bonus"). Such performance objectives shall be established by the
Company's Board of Directors each year and Employee shall be notified thereof.
Target Bonuses shall be payable, if earned, not later than January 31 of the
year after the year for which they are earned. The Company's Board of Directors
may pay less than the full amount of the Target Bonus if the performance
objectives are not fully met.
(c) Expenses. During the Term, the Company shall reimburse
Employee monthly for his travel (other than commutation) and other reasonable
business expenses incurred in connection with his services under this Agreement
during the preceding month upon submission of written receipts substantiating
such expenses and otherwise in accordance with the Company's expense
reimbursement policies.
(d) Vacation and Personal Days. During the Term, Employee
shall be entitled to paid time off for vacation and personal days in accordance
with the Company's regular vacation policy.
(e) Other Employee Benefits. During the Term, the Company
shall provide to Employee such fringe benefits, including, without limitation,
paid sick leave, paid holidays, participation in a health insurance plan, and
other employee benefit plans which may be regularly maintained by the Company
for its employees, in accordance with the policies of the Company in effect from
time to time.
2
3
6. Confidential Information.
(a) Information. Employee acknowledges and agrees that all
information relating to STC's existing and prospective customers, distributors,
carriers, suppliers, business partners, trade secrets, business plans, sales and
marketing strategies, contracts, technologies and processes, software, codes,
products, services, product development activities, procurement and sales
records, distribution information, promotion and pricing information, financial
data, and other proprietary data and information of STC (collectively,
"Information") are valuable, special and unique assets of STC. Employee
acknowledges that its access to and knowledge of the Information is essential to
the performance of its duties for STC. In light of the competitive nature of the
industry in which the business of STC is conducted, Employee agrees that all
knowledge and information about the Information known or in the future obtained
by Employee will be considered Information. In recognition of this, Employee
represents and agrees that, except as specifically authorized in writing by STC,
Employee will not, either during or after the Term hereof (i) disclose any
Information to any person or entity for any purpose whatsoever, or (ii) make use
of any Information for its own purposes or for the benefit of any other person
or entity, other than STC. Employee acknowledges that all Information will at
all times be subject to the control of STC, and Employee agrees to surrender and
return the same to STC upon request of STC, and in any event will surrender and
return such no later than the termination of this Agreement for any reason. The
obligations of this Section 6.1 shall survive the termination of this Agreement.
This Section 6.2 shall apply in a reciprocal manner to confidential information
of Employee.
(b) Work Product, etc. Employee hereby assigns, transfers and
conveys to STC all of Employee's right, title and interest to all work products
of any type whatsoever generated by Employee in connection with this Agreement,
including, without limitation, all data; software; intellectual property,
business plans, and material, conceived or developed solely, or jointly with
others by Employee during the Term hereof (a) which relate directly or
indirectly to the business of STC; or (b) which result from any work performed
or managed by Employee for STC. The obligations of Employee under this Section
6.2 shall survive the termination of this Agreement.
7. Restrictive Covenant. During the term(s) hereof and for a period of
one (1) year thereafter, Employee shall not, directly or indirectly:
(a) conduct or assist others in conducting or be involved or
interested in any manner in any business relating to the rental of cellular
phones or the sale of prepaid cellular services, or any other business that STC
is engaged in during the Term of this Agreement, within the United States and,
if STC conducts business or develops substantive plans for conducting business
outside of the United States during the Term hereof, then the scope of this
restriction shall to outside of the United States wherever STC conducts or plans
to conduct business;
(b) recruit, solicit or hire, or assist any other person or
party in recruiting, soliciting or hiring any Employee (as hereinafter defined),
or induce or attempt to induce or assist any other person or entity in inducing
or attempting to induce any Employee to terminate or alter its relationship with
STC (collectively "Recruiting Activity"). For the purposes of this Section 7(b),
3
4
the term "Employee" shall mean any person who is, or within the twelve (12)
month period preceding the date of any such Recruiting Activity was, an employee
or Employee of STC; or
(c) solicit any Customer (as hereinafter defined), or induce, attempt to
induce or assist any other person or entity in inducing or attempting to induce
any Customer to discontinue or alter its relationship with (collectively
"Solicitation Activity"). For the purposes of this Section 7(c), the term
"Customer" shall mean any individual, firm, partnership, corporation or other
entity which is, or within the twelve (12) month period immediately preceding
the date of such Solicitation Activity was, a customer, vendor, distributor,
dealer, or agent of STC. It is understood and agreed that the business(es) of
STC are national in scope, and that the geographical scope of the covenants set
forth in this Section 7(c) is therefore appropriate. IT IS EXPRESSLY UNDERSTOOD
AND AGREED THAT THE SCOPE OF EACH OF THE COVENANTS CONTAINED IN THIS SECTION
7(c) ARE REASONABLE AS TO TIME, SCOPE OF ACTIVITIES AND GEOGRAPHIC AREA AND ARE
NECESSARY TO PROTECT THE LEGITIMATE BUSINESS INTERESTS OF STC. It is further
agreed that such covenants will be regarded as divisible and if any such
covenant is found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or persons or in too broad a geographic area, it shall be interpreted
to extend over the maximum period of time, range of activities or persons, or
geographic area as to which it may be enforceable. The provisions of this
Section 7(c) shall survive the termination of this Agreement.
8. Injunctive Relief. Employee acknowledges that a remedy at law for any
breach or attempted breach of Sections 6 or 7 of this Agreement would be
inadequate, and agrees that the Company will be entitled to specific performance
and injunctive and other equitable relief in case of any breach or attempted
breach and agrees not to use as a defense that any party has an adequate remedy
at law. Sections 6 and 7 of this Agreement shall be enforceable in a court of
equity, or other tribunal with jurisdiction, by a decree of specific
performance, and appropriate injunctive relief may be applied for and granted in
connection herewith. Such remedy shall not be exclusive and shall be in addition
to any other remedies now or hereafter existing at law or in equity, by statute
or otherwise. To the fullest extent permitted by law, Employee waives the
requirement that the Company make a showing of irreparable harm or injury and
any requirement to post a bond in order to obtain equitable relief hereunder. No
delay or omission in exercising any right or remedy set forth in this Agreement
shall operate as a waiver thereof or of any right or remedy and no single or
partial exercise thereof shall preclude any other or further exercise thereof or
the exercise of any other right or remedy.
9. Termination.
(a) Termination upon Death. If Employee dies during the Term hereof,
this Agreement and Employee's employment shall terminate, except that Employee's
legal representative shall be entitled to receive Employee's Base Salary for a
period of ninety (90) days following the date of Employee's death.
(b) Termination upon Disability. If during the Term hereof Employee
shall become physically or mentally disabled, whether totally or partially, so
that he is unable substantially to
4
5
perform his duties under this Agreement for ninety (90) consecutive days or one
hundred twenty (120) days in the aggregate in any twelve (12) month period, the
Company may at any time after either such period elapses, as the case may be, by
written notice to Employee, but before Employee has recovered from such
disability, terminate the Term hereof, and upon such termination no further sums
shall be due to Employee hereunder.
(c) Termination by the Company for Cause. The Company may at any time
during the Term hereof, by written notice to Employee, terminate this Agreement
and Employee's employment for Cause (as hereinafter defined), in which event
Employee shall be entitled to receive his Base Salary accrued through the
effective date of such termination. Employee shall have no right to receive any
other compensation or benefit hereunder after the effective date of such
termination. Employee shall have no right to receive any other compensation or
benefit hereunder after the effective date of such termination, including
without limitation Severance Pay; provided, however, that the foregoing shall
not affect Employee's right to receive any compensation or benefit previously
paid by Employee or the Company under the Company's 401(k) plan. As used herein,
the term for "Cause" shall mean:
(i) the willful and continued failure by Employee after
written notice from the Board of Directors to substantially perform his duties
hereunder, (ii) any act of dishonesty by Employee involving or affecting the
Company, (iii) any material misappropriation by Employee of any asset of the
Company, (iv) the intentional engaging by Employee in conduct which is
materially injurious to the business or reputation of the Company, monetarily or
otherwise, (v) gross negligence or recklessness by Employee in the performance
of his duties hereunder, (vi) the conviction of Employee of a felony or crime
involving moral turpitude (vii) any breach by Employee of his obligations under
Sections 6 or 7 hereof, (viii) the engagement in conduct which involves a
significant conflict of interest between Employee and the Company, unless such
conduct has been disclosed to and approved by the Company's Board of Directors,
(ix) abuse of alcohol or other substances so as to interfere with the
performance of Employee's duties hereunder or, (x) the material violation of any
Company policy by Employee. In the event of termination for Cause, no payment
obligations shall accrue hereunder after the effective date of such termination.
(ii) Any termination for cause shall require prior approval of
the Company's Board of Directors by a vote of at least three-quarters of the
Company's Directors other than Employee. Prior to the Board taking a vote of
such matter, Employee shall have an opportunity to be heard, with Employee's
counsel, by the Board.
(d) Severance Pay upon Termination without Cause. This Agreement may be
terminated by the Company without Cause upon three (3) months' written notice to
Employee specifying the effective date of termination. In the event of such
termination without Cause, Employee shall be entitled to severance pay in an
amount, exclusive of the notice period, equal to the sum of ONE (1) YEAR'S BASE
SALARY PLUS ONE (1) YEAR'S TARGET BONUS, INCREASED BY A FACTOR OF TWENTY PERCENT
(20%) to account for Employee's loss of benefits ("Severance Pay"). Such
Severance Pay shall be payable in a lump sum within thirty (30) days of the
effective date of termination or, at the option of Employee, over a one (1) year
period, following the effective date of
5
6
termination, in equal semi-monthly installments or otherwise in accordance with
the Company's regular payroll schedule. Any payment of Severance Pay under this
Agreement shall be subject to applicable withholdings. As of the effective date
of termination without Cause, Employee shall become fully vested in all stock
options previously granted to Employee. Such Severance Pay and vesting of
options shall be the Employee's sole and exclusive remedies for such termination
without Cause.
(e) Severance Pay for Nonrenewal of Agreement by the Company. In the
event that the Company elects not to renew the Term of this Agreement, as
provided under Section 2 hereof, in which event this Agreement and Employee's
employment hereunder shall terminate at the end of the then current term, then
Employee shall be entitled to receive Severance Pay, payable as a lump sum
within thirty (30) days of the termination of the term hereof or, at the option
of Employee, over a one (1) year period, following the effective date of
termination, in equal semi-monthly installments or otherwise in accordance with
the Company's regular payroll schedule. Notwithstanding anything contained in
this Section 9(e), Employee shall not be entitled to Severance Pay in the event
that, in lieu of a renewal of the Term hereof, the Company and Employee mutually
agree to an alternative arrangement.
(f) Effect of Termination. Upon the termination of this Agreement, all
rights and obligations of the parties under this Agreement, except those rights
and obligations set forth in Sections 6, 7 and 8 hereof, shall terminate, except
as otherwise required by law. The provisions of Sections 6, 7 and 8 hereof shall
survive any termination of this Agreement, and Employee acknowledges that this
Agreement and the compensation and benefits payable hereunder are fair and
adequate consideration, in part, for the covenants of Employee under Sections 6,
7 and 8 and the survival of such covenants after the termination of this
Agreement.
(g) Additional Payment. In addition to the other payments payable
pursuant to this Agreement, in the event that any payment or benefit received or
to be received by Employee under this Agreement (a "Payment") is subject to the
excise tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any successor to such section, as
determined by a nationally recognized independent certified public accounting
firm selected by Employee (the "Tax Advisor"), then the Company shall make an
additional payment to Employee in a lump sum as soon as the determination of the
Tax Advisor is completed, in an amount such that after receipt of such lump sum
and payment of all excise and income taxes imposed with respect to and receipt
of the Payment, Employee will have received an after-tax amount equal to the
amount Employee would have received had the Excise Tax not been applicable to
the Payment. The determination of the Tax Advisor shall be completed not later
than forty-five (45) days following Employee's date of termination of
employment, and such determination shall be communicated in writing to Company,
with a copy to Employee, within such forty-five (45) day period. The
determination of the Tax Advisor as provided herein shall be deemed conclusive
and binding on Company and Employee. Company shall pay the fees and other costs
of the Tax Advisor hereunder.
6
7
10. Effect of a Trigger Event.
(a) It is the belief of the parties that any transfer of
ownership control of the Company after the date hereof shall be reflective of
Employee's contributions to the performance of the Company, and that Employee
should be compensated accordingly. Therefore, the parties agree that Employee
shall receive the additional payment set forth in Section 10(c) below in the
event that after the date of this Agreement, and during the Term(s) hereof, a
Trigger Event, as defined in Section 19(b) below, occurs.
(b) A "Trigger Event" shall be deemed to occur if (a) the
Company shall be merged or consolidated into another company, unless pursuant to
such transaction the shareholders of the Company holding, immediately prior to
such transaction, securities representing 50% or more of the aggregate voting
power of the Company, receive securities of the surviving company representing,
immediately after such transaction, 50% or more of the combined voting power of
the surviving company's then outstanding securities entitled to vote generally
in the election of directors, or (b) any "person" (as such term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended, hereinafter
the "Exchange Act") becomes the "beneficial owner" (as defined in Rule 13d-3 of
the Exchange Act) of securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors (the
"Threshold"). Notwithstanding anything to the contrary stated in this Section
10(b), a Trigger Event shall not include a public offering of the Company's
securities.
(c) Upon the occurrence of a Trigger Event, Employee shall be
entitled to a cash payment from the Company within thirty (30) days of effective
date of the Trigger Event (the "Additional Payment"), and the Company shall pay
to Employee the Additional Payment, less applicable withholdings, in a lump sum
amount equal to EIGHTEEN (18) MONTHS' BASE SALARY PLUS EIGHTEEN (18) MONTHS'
TARGET BONUS. The Additional Payment shall be in addition to, and not in
substitution for, Severance Pay that may be otherwise payable pursuant to the
terms of this Agreement. Employee also shall receive the Additional Payment if
Employee is offered and, in Employee's sole discretion, accepts employment with
the new owner (in which case there would be no Severance Pay).
(d) In the event of a Trigger Event, Employee shall have the
right to terminate his employment with the Company upon 30 days' notice, but in
no event later than six (6) months after the effective date of the Trigger
Event. In the event that Employee gives such notice, Employee shall be entitled
to the Severance Pay as if terminated without Cause pursuant to Section 9(d)
above, including acceleration of the vesting of options as provided in such
Section 9(d), provided, however, that no Severance Pay shall be payable under
such circumstances if (i) Employee has been advised in writing by the Company,
or its successor, that subsequent to the Trigger Event Employee is to be
retained for the remainder of the Term of this Agreement (as extended pursuant
to the last sentence of this paragraph) at the same rate of compensation
(including comparable bonus compensation and comparable fringe benefits, such as
insurance), and that Employee will perform substantially the same functions as
those that Employee performed
7
8
prior to the Trigger Event, provided that Employee shall not be required to
relocate, and (ii) Employee continues to receive such compensation and be
permitted to perform such functions. In the event of a Trigger Event, Employee
is offered continued employment by the Company or its successor, such offer
shall include, an extension of the then remaining Term of this Agreement such
that the remaining Term hereof shall extend for a period of not less than one
(1) year following the Trigger Date, without in any way limiting the renewal
provisions of Section 2 hereof.
(e) During the term hereof and for a period of eighteen (18)
months following the termination of this Agreement (the "Noncompetition
Period"), Employee shall not, except as permitted by the Company upon its
written consent, engage in, be employed by, or in any way advise or act for, or
have any financial interest in any business that is a competitor of the Company.
The ownership of 5% of the outstanding securities of any corporation, even
though such corporation may be a competitor of the Company as specified above,
shall not be deemed as constituting a financial interest in such competitor. In
consideration for Employee's abstention from competitive activities during the
Noncompetition Period, Employee shall be eligible to receive Severance Pay,
subject to the other terms and conditions herein governing the payment of
Severance Pay to Employee.
11. Compliance with Other Agreements. Employee represents and warrants
that the execution and delivery of this Agreement and the performance of the
obligations hereunder have been duly authorized by all appropriate action, and
will not conflict with, result either in the breach of any provisions or the
termination of, or constitute a default under, any agreements to which he is or
may be bound. Employee agrees that he is not presently bound by, nor will he
enter into any agreement, either written or oral, in conflict with this
Agreement.
12. Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void, in whole or in part, then both
parties will be relieved of all obligations arising under such provision, but
only to the extent it is illegal, unenforceable or void. The intent and
agreement of the parties to this Agreement is that this Agreement will be deemed
amended by modifying any such illegal, unenforceable or void provision to the
extent necessary to make it legal and enforceable while preserving its intent,
or if such is not possible, by substituting therefor another provision that is
legal and enforceable and achieves the same objectives. Notwithstanding the
foregoing, if the remainder of this Agreement will not be affected by such
declaration or finding and is capable of substantial performance, then each
provision not so affected will be enforced to the extent permitted by law.
13. Notice. Whenever any notice is required to be given hereunder, such
notice shall be given in writing and personally delivered or sent by certified
or registered mail, return receipt requested, or by overnight courier. Notice
shall be deemed to have been given at the time of receipt, if personally
delivered, or three (3) days after mailing if sent by certified or registered
mail, or upon delivery if sent by overnight courier. Notices shall be delivered
to the parties' respective addresses set forth above. Either party may change
its notice address by giving notice of the change to the other party pursuant to
this Section.
8
9
14. General.
(a) No modification or waiver of any provision of this Agreement shall
be valid unless in writing signed by the parties hereto.
(b) Neither party may assign this Agreement to any third party without
the prior written consent of the other party. This Agreement shall be valid and
binding upon all heirs, successors and permitted transferees or assigns of the
parties hereto.
(c) This Agreement shall be governed by the laws of the State of
Connecticut, without giving effect to any principle of conflict-of-laws. Any
claim(s) arising out of or in connection with this Agreement shall be brought in
the State of Connecticut, wherein the parties waive to the fullest extent
permitted by applicable law all objections to personal and subject matter
jurisdiction.
(d) In the event of a dispute arising out of this Agreement, the
prevailing party shall be entitled to recovery of its reasonable legal fees and
expenses.
(e) The waiver of any provision of this Agreement shall not be
construed as a continuing waiver of such breach or of other breaches of the same
or of other provisions hereof.
(f) The section headings of this Agreement are for reference purposes
only and shall not constitute a part hereof or affect the meaning or
interpretation of this Agreement. Whether defined terms are stated in the
singular or plural shall not affect their construction as defined terms.
(g) All payment obligations, nondisclosure and noncompete provisions,
and any other provisions that by sense and context are intended to survive the
termination of this Agreement shall so remain in effect after the termination
hereof until the running of the applicable statute of limitations.
(h) The Company's Board of Directors reserves the right to amend this
Agreement in its sole discretion in order to eliminate any provisions that would
prevent "pooling" accounting treatment, but only to the extent necessary to
accomplish such objective.
(i) The parties acknowledge that they have each read this Agreement in
its entirety, understand it and agree to be bound by its terms and conditions.
(j) This Agreement represents the entire agreement between the parties
with respect to the subject matter hereof and supersedes any and all prior
agreements, discussions and understandings, whether oral or written.
9
10
[Remainder of this page intentionally left blank]
10
11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Employee Shared Technologies Cellular, Inc.,
a Delaware corporation
By: By:
------------------------------- -------------------------------------
Xxxxxxx X. Xxxxxxxx Xxxxxxx XxXxxxxxxx, CFO
Date: September ___, 1999 Date: September ___, 1999
11
