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EXHIBIT 99.1
EXHIBIT "A"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT"), is entered into as of
November 30 , 1999, by and between U. S. TECHNOLOGIES SYSTEMS, INC., a Missouri
corporation ("USTI"), being a wholly-owned subsidiary of XETA CORPORATION, an
Oklahoma corporation ("XETA") and XXXX X. XXXXXX, a resident of the State of
Missouri ("XXXXXX").
R E C I T A L S:
A. Pursuant to a Stock Purchase Agreement dated effective as of August
1, 1999 (the "PURCHASE AGREEMENT"), Xxxxxx has sold to XETA and XETA has
purchased from Xxxxxx all of his shares of common stock in USTI.
B. All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Purchase Agreement.
C. The Purchase Agreement provides that, as a condition to either
party's obligation to close, Xxxxxx and USTI shall have executed and delivered
this Agreement.
D. USTI is engaged in the business of distributing and servicing
telephone systems to commercial customers (the "BUSINESS").
E. XETA and USTI (hereinafter referred to, collectively, as the
"COMPANY") currently do business throughout the United States of America, Canada
and Mexico and wish to avail themselves of the services of Xxxxxx for the
continued management of the Business, and Xxxxxx wishes to accept such
employment on the terms and conditions hereinafter set forth.
X. Xxxxxx has been advised by counsel concerning the meaning and legal
effect of this Agreement and its various provisions.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, together
with a portion of the Purchase Consideration paid by the Purchaser for the
Shares and the goodwill associated therewith, and in consideration of the mutual
covenants and promises contained herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Duties. Subject to the terms and conditions of this Agreement, USTI
(the "EMPLOYER") and XETA hereby employ Xxxxxx, and Xxxxxx hereby accepts
employment with the Employer and XETA as President of USTI in St. Louis,
Missouri, where he will function as President of XETA's Commercial Channel
Division, with duties commensurate with such position as shall be determined
from time to time by the Company. It is agreed that the Company will not
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require Xxxxxx to move his residence from St. Louis, Missouri during the term
hereof. Xxxxxx hereby agrees to devote his full professional time and attention,
and his best efforts, to the performance of such duties, to diligently comply
with all specific reasonable instructions concerning the performance of such
duties as shall be communicated to him by the Company, to the extent such
instructions are not illegal or, in Xxxxxx'x reasonable belief, unethical, and
to make reports to the Company concerning all matters under his control or
within his knowledge whenever reasonably requested by the Company. The
Commercial Channel Division shall be comprised of those businesses currently
engaged in by USTI and all other businesses outside the hospitality market,
which are subsequently acquired by the Company.
2. Employment Term. Subject to the provisions respecting the
termination of this Agreement, the term of this Agreement (the "TERM") shall be
two (2) years, subject to extension for a period of one (1) additional year if
performance targets for USTI mutually agreed to by the Company and Xxxxxx are
met during the initial term.
3. Compensation.
3.1 The Employer agrees to pay Xxxxxx an initial annual base
salary (the "BASE SALARY") during the Term equal to the gross amount of One
Hundred Twenty Thousand Dollars ($120,000), less deductions and withholdings.
Payments of Base Salary will be made in equal semi-monthly installments in
accordance with USTI's procedures regarding the payment of executive
compensation. On at least an annual basis Xxxxxx'x performance for the previous
twelve (12) month period shall be evaluated by the Compensation Committee of
XETA's Board of Directors and by its President. Xxxxxx'x Base Salary shall not
be reduced during the Term.
3.2 In addition to the Base Salary, while Xxxxxx is employed
by the Employer, he shall be entitled to participate in the Company's incentive
compensation plan attached hereto as Exhibit "A"; provided, however, that all
Incentive Compensation Plan methodology/algorithms shall be subject to review
and revision upon subsequent acquisitions by the Company; provided further that
such review and revision shall not have the effect of decreasing Xxxxxx'x total
compensation for future performance by him which is equivalent to his past
performance, and that such review and revision shall not occur more frequently
than every six (6) months.
4. Employee Benefits.
4.1 Xxxxxx may participate in all of the employee benefit
plans and programs offered by the Employer to its employees to the extent that
Xxxxxx meets the eligibility requirements for each individual plan or program.
Such plans and programs currently include the following:
(i) Medical and group term life insurance;
(ii) 401(k) and discretionary profit sharing plans;
(iii) Vacation days based on years of service; and
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(iv) National Holidays.
Such benefits shall be governed by the terms of XETA's plan documents (where
applicable). For purposes of determining which benefits Xxxxxx may be entitled
to receive, Xxxxxx shall be credited by the Employer, to the extent that
Employer is able to arrange for this, with the years of service he has had with
the USTI prior to Closing.
4.2 The Employer shall reimburse Xxxxxx for all ordinary and
necessary out-of-pocket business, travel and entertainment expenses, incurred on
behalf of the Company by Xxxxxx, in the performance of his duties and
responsibilities hereunder, subject to and in accordance with the Employer's
customary policies and procedures for expense verification and reimbursement.
4.3 The Employer shall also provide Xxxxxx with the use of a
Company-owned automobile of the make and model comparable to the automobile
supplied to Xxxxxx by USTI prior to the Closing. The Employer shall be
responsible for the payment of all automobile insurance premiums arising for
coverage for use within the scope of Xxxxxx'x employment, reasonable routine
maintenance, and for reimbursement of other ordinary and necessary expenses
arising from the business use of such automobile.
5. Restrictions on Competition and Solicitation.
5.1 As used herein, "GEOGRAPHIC AREA" shall mean the United
States of America.
5.2 As used herein, "NON-COMPETITION PERIOD" shall mean the
period commencing on the Closing Date and ending two (2) years
thereafter; provided, however, that if Seller's employment with
Purchaser and the Company shall be terminated for "cause" (as defined
in the Employment Agreement) the Non-Competition Period shall not end
until two (2) years after the last payment of compensation by the
Company or the Purchaser pursuant to the Employment Agreement.
5.3 Xxxxxx shall not during the Non-Competition Period, either
directly or indirectly, as a stockholder of any corporation, a member
of any limited liability company, a partner of any partnership, or
otherwise as an owner, investor, principal, agent, officer, director,
associate, employee, consultant, creditor, co-venturer or in any other
manner, engage within the Geographic Area in any business that competes
in any manner with the Commercial Channel Division of the Company, nor
have any other interest in or be associated with a business that
competes in any manner with the Commercial Channel Division of the
Company within the Geographic Area, nor shall Seller assist any person
to whom Seller is related within the third degree, by blood or by
marriage, to do anything that Seller would be prohibited from doing
personally by reason of this Section 3.4; provided, however, that this
provision shall not be deemed to prevent or limit Xxxxxx xxxx owning
capital stock or other securities of any corporation which are publicly
owned or regularly traded in the over-the-counter market or on any
securities exchange so long as such
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investment does not exceed, directly or indirectly, 5% of the issuer's
outstanding securities of the same class.
5.4 During the Non-Competition Period, Xxxxxx shall not
directly or indirectly solicit, request, or advise, any person who is
or has been an employee of the Commercial Channel Division of the
Company within eighteen (18) months prior to the Closing Date to
terminate or change such person's relationship with the Commercial
Channel Division of the Company or to work in any business venture or
activity that is substantially competitive with any business conducted
by the Commercial Channel Division of the Company within the Geographic
Area during the Non-Competition Period.
5.5 During the Non-Competition Period, Xxxxxx shall not shall
not directly or indirectly divert or attempt to divert from the
Commercial Channel Division of the Company any business interest or
expectancy whatsoever, nor directly or indirectly solicit, request,
advise, or seek to induce, any person or entity who or which is or has
been a customer of the Commercial Channel Division of the Company
within eighteen (18) months prior to the Closing Date to terminate or
change such person's relationship with the Commercial Channel Division
of the Company or to purchase any product or service which is
substantially competitive with any product or service provided by the
Commercial Channel Division of the Company within the Geographic Area
during the Non-Competition Period.
5.6 During the Non-Competition Period, Xxxxxx shall not
request, advise, or seek to induce, any supplier or vendor of the
Commercial Channel Division of the Company to terminate or change such
supplier's or such vendor's relationship with the Commercial Channel
Division of the Company.
5.7 The restrictive covenants contained within this Section 5
are essential elements of this Agreement, and but for Xxxxxx'x
agreement to comply with such covenants, the Company would not have
entered into this Agreement.
5.8 The Company and Xxxxxx agree that the foregoing covenants
are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Commercial Channel Division
of the Company.
6. Confidentiality. For a period of five (5) years from and after the
Closing Date (the "NON-DISCLOSURE PERIOD"), Xxxxxx shall not use or disclose to
any third party, including but not limited to Lucent Technologies, Inc.
("LUCENT"), any confidential or proprietary information whatsoever of or
concerning the Company, which information (collectively, the "CONFIDENTIAL
INFORMATION") shall include but shall not be limited to: (i) all information
that the Company considers or treats as confidential whether or not the Company
has marked such information as confidential; (ii) all financial information of
the Company including the nature, location, condition or value of its assets and
any results of operations; (iii) all information concerning or related to the
Company's TQM Labs repair procedures or purchase methods; (iv) all information
concerning past
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contractual disputes with Lucent or any other party and the subject matter
thereof; and (v) all information concerning previous allegations made by Lucent
or any other party of breaches by the Company of any agreement, the subject
matter thereof, and the disposition of any such allegation; provided, however,
that for purposes of this Agreement the term "Confidential Information" shall
not include information within the public domain by any means other than
unauthorized disclosure.
6.1 None of the Confidential Information shall ever be
disclosed by Xxxxxx during the Non-Disclosure Period, nor shall he
authorize or permit any of his agents under his control to disclose any
Confidential Information to any third party without the Company's
express prior written consent; provided, however, that Xxxxxx may
disclose Confidential Information to the extent required by court
order, subpoena or other compulsory legal process so long as he
notifies the Company prior to such disclosure and affords the Company a
reasonable opportunity to object to such disclosure or a to seek other
appropriate protection for such Confidential Information.
6.2 Upon termination of his employment with the Company,
Xxxxxx shall promptly deliver to the Company any and all Company
records and any manuals, books, blank forms, documents, correspondence,
memoranda, notes, notebooks, plans, records, reports, information,
computer disks, computer tapes, source codes, data, tables,
calculations, and other documentation (and copies thereof), however
recorded, relating to the business of the Company or which contain any
Confidential Information which he may possess or have within his
control, together with all keys, access cards, access codes, passwords,
credit cards, personal computers, telephones and other electronic
equipment or devices belonging to the Company.
7. Representations and Warranties. Specifically with regard to the
covenants contained in Sections 5 and 6 hereof, but without any limitation
thereto, Xxxxxx hereby acknowledges, represents and warrants to the Company
that:
7.1 Xxxxxx has access to, and is knowledgeable concerning, the
trade secrets of USTI, and following the Closing, will have access to, and
become knowledgeable concerning the trade secrets of XETA.
7.2 The covenants contained in Sections 5 and 6 are essential
to XETA's main business purpose for entering into the Purchase Agreement, and
are made by Xxxxxx to protect the legitimate interests of the Company with
respect to XETA's purchase of USTI, including all goodwill associated with its
purchase of the Shares.
7.3 The Geographic Area, the Non-Competition Period, the
Non-Disclosure Period, and the activities in which Xxxxxx has hereby agreed not
to engage, are appropriate and reasonable in all respects in light of the nature
of the business of USTI and XETA and their legitimate need to protect their
respective customer bases and branch locations, and the investment by the XETA
in the Shares and all goodwill associated therewith.
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7.4 If any portion of the covenants set forth in Section 5 or
6 of this Agreement is held by a court of competent jurisdiction to be
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographic area. The
Company and Xxxxxx agree that, if any court of competent jurisdiction determines
that either the Non-Competition Period, the Geographic Area, the Non-Disclosure
Period, or the scope of the activities hereby restricted is unreasonable,
arbitrary and/or against public policy, then a lesser period, geographic area or
range of activities, which is determined to be reasonable, non-arbitrary and not
against public policy, may be enforced against Xxxxxx.
7.5 The execution and delivery of this Agreement, the
performance by Xxxxxx of the covenants and agreements contained herein, and the
enforcement by the Company of the provisions contained herein, will cause no
undue hardship on Xxxxxx.
8. Termination.
8.1 In the event of the death of Xxxxxx, his employment shall
terminate automatically, without any liability to or upon the Company other than
to pay Base Salary for services rendered prior to the date of Xxxxxx'x death and
incentive compensation that accrued during his employment and prior to his date
of death.
8.2 In the event that Xxxxxx becomes disabled as the term
"DISABILITY" is defined in 42 U.S.C. ss. 12101, et. seq., and if because of that
disability Xxxxxx cannot be reasonably accommodated without causing undue
hardship for the Employer, the Company may terminate Xxxxxx'x employment
hereunder notwithstanding any contrary other provision in this Agreement to the
contrary. In the event Xxxxxx is terminated because of a Disability, Xxxxxx
shall be entitled to receive only Base Salary for services rendered prior to the
date of Disability, incentive compensation that accrued during his employment
and prior to his date of Disability, and any disability benefits that may
payable pursuant to the terms of any applicable disability policy held by the
Employer.
8.3 Notwithstanding any other provision herein, this Agreement
shall terminate without any liability to or upon the Company other than to pay
Base Salary for services rendered prior to the date of termination if Xxxxxx is
terminated for "cause." As used herein "CAUSE" shall mean: (i) any breach of any
material term of this Agreement, (ii) Xxxxxx'x repeated failure or refusal to
perform any of duties hereunder or to comply with the Company's reasonable
directives, (iii) Xxxxxx'x misappropriation of any funds or property of the
Company which are valued in excess of one hundred dollars ($100), (iv) Xxxxxx'x
breach of any fiduciary duty to the Company, (v) Xxxxxx'x commission of an act
of gross negligence, fraud, or of an act that involves a conflict of interest or
self-dealing and has a material adverse effect on any aspect of the Company's
business, or (vi) Xxxxxx'x conviction of any felony; provided that the Xxxxxx
shall not be terminated for cause prior to receiving notice of the Company's
contention that such cause exists and being afforded a period of ten (10) days
to cure such cause, unless the extension of such ten-day cure period would have
a material adverse effect on the Company.
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8.4 The Company may terminate Xxxxxx'x employment hereunder
upon providing Xxxxxx at least thirty (30) days prior notice thereof. If his
employment is terminated by the Company without cause, the Employer will
continue to pay Xxxxxx'x compensation and benefits as described in Sections 3
and 4 hereof for the balance of the Term of this Agreement.
8.5 The termination of Xxxxxx'x employment shall not affect
XETA's obligation to pay any Purchase Consideration otherwise due to him
pursuant to the Purchase Agreement.
9. Remedies.
9.1 Xxxxxx acknowledges that any violation of Section 5 or 6
of this Agreement will result in irreparable injury to the Company for which
there is no adequate remedy at law. Xxxxxx agrees that, in the event he breaches
or threatens to breach Section 5 or 6 of this Agreement, the Company shall be
entitled to injunctive relief, both temporary, preliminary and permanent, in
addition to any other legal or equitable remedies which may be available to the
Company. Neither XETA nor USTI shall be required to post a bond in order to
obtain an injunction or any other equitable relief hereunder.
9.2 The provisions of Sections 5 and 6 hereof shall survive
termination of this Agreement by Xxxxxx or the Company.
10. Assignment. This Agreement and all rights and benefits hereunder
are personal to Xxxxxx, and neither it nor any right or interest of Xxxxxx
herein may be voluntarily or involuntarily sold, transferred or assigned by
Xxxxxx; provided, however, that the Employer may assign its rights, duties and
obligations hereunder to XETA without the prior written consent of Xxxxxx.
11. Entire Agreement. Except as provided in the Non-Competition
Agreement and the Confidentiality Agreement delivered by Xxxxxx pursuant to the
Purchase Agreement, all dated of even date herewith, this Agreement represents
the entire understanding and agreement between the parties with respect to the
subject matter hereof, and supersedes all of the negotiations, understandings
and representations (if any) made by and between such parties. Except as
otherwise provided herein, the terms or provisions hereof may be amended,
supplemented, waived or changed only by a writing signed by the Company and
Xxxxxx.
12. Severability. In the event any provision of this Agreement is held
illegal or invalid, the remaining provisions of this Agreement shall not be
affected thereby.
13. Waiver. The waiver of a breach of any provision of this Agreement
by any party or the failure of any party otherwise to insist upon strict
performance of any provision hereof shall not constitute a waiver of any
subsequent breach or of any subsequent failure to perform. No course of dealing
shall alter the obligations of Xxxxxx under this Agreement or otherwise affect
the ability of the Company to strictly enforce the terms of this Agreement.
14. Notice. Any notice required by this Agreement may be waived, in
writing, by the party entitled to receive such notice. Unless the parties are
notified to the contrary, notice required
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under this Agreement shall be in writing and personally delivered or sent by
certified mail, if to the Company at XETA's principal executive offices, at 0000
Xxxx Xxxxxx, Xxxxxx Xxxxx, XX 00000, Attn: Xx. Xxx X. Xxxxx, President, with
copy to Xxxxxx and Xxxxx, 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx, XX 00000-0000,
Attn: Xxx X. Xxxxxx, Esq., and if to Xxxxxx, at the last address filed by him in
writing with the Company, with copy to Xx. Xxxxxxxx X. Xxxxxx, Esq., Xxxxxxxx
Xxxxxx LLP, Xxx Xxxxxxxxxx Xxxxxx, Xx. Xxxxx, XX 00000-0000.
15. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, personal representatives,
successors and permitted assigns. This Agreement may be assigned by the Company
to any successor or affiliate.
16. Jurisdiction and Venue. The parties agree that, in any dispute
between them relating to this Agreement, exclusive jurisdiction shall be in the
trial courts, Federal or State, sitting within Tulsa County, Oklahoma, and venue
shall lie only in such courts, and any and all objections as to such
jurisdiction and venue are hereby expressly waived by each party.
17. Governing Law. Except as otherwise provided in Section 16, this
Agreement shall be construed, and the legal relations between the parties hereto
determined, in accordance with the local laws of the State of Oklahoma
applicable to agreements made and to be performed entirely within said State,
without giving effect to its conflicts of laws provisions.
18. Attorneys' Fees. If any party hereto institutes litigation to
enforce its rights or remedies under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award of the prevailing party's
reasonable attorney fees and all costs incurred in connection with such
litigation. The foregoing shall include reasonable attorney fees and costs
(including paralegal fees) incurred at trial, on any appeal, and in any
proceeding in bankruptcy. The agreement of the parties represented by this
Agreement is in addition to, and not in lieu of, any other agreement or
obligation of the parties contained in the Purchase Agreement or any other
agreement contemplated thereby or executed and delivered in connection
therewith.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute but one and the same agreement.
20. Recitals. The recitals set forth at the beginning of this Agreement
are true and correct and by are hereby incorporated by reference into the body
of this Agreement.
21. Gender, Number. Words of gender may be read as masculine, feminine,
or neuter, as required by context. Words of number may be read as singular or
plural, as required by context. All terms such as "herein," "hereby" or
"hereunder" refer to this Agreement as a whole.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year first above written.
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"USTI" "Xxxxxx"
U.S. TECHNOLOGIES SYSTEMS, INC.,
a Missouri corporation
By /s/ Xxxx X. Xxxxxx /s/ Xxxx X. Xxxxxx
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Printed Name: Xxxx X. Xxxxxx XXXX X. XXXXXX
Title: President
XETA CORPORATION,
an Oklahoma corporation
By /s/ Xxx X. Xxxxx
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Xxx X. Xxxxx, President
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EXHIBIT "A"
INCENTIVE COMPENSATION PROGRAM
1. Subject to Paragraph 2 below, Xxxxxx'x incentive compensation shall consist
of:
a. "Commission" equal to 0.5% of any positive Gross Profit of the
Commercial Channel Division for each quarter of each fiscal
year, payable thirty (30) days after the end of said quarter.
b. "Base Bonus" equal to 0.5% of any positive difference between
the Gross Profit of the Commercial Channel Division for that
fiscal year and for its prior fiscal year (provided that,
during the first fiscal year of this Agreement, Xxxxxx'x Base
Bonus shall be based on the positive difference between the
Gross Profits of the Commercial Channel Division for that
fiscal year and USTI's Gross Profit for the same twelve (12)
month period in the year immediately preceding the Closing of
the Purchase Agreement, payable sixty (60) days after the end
of the fiscal year.
c. "Extra Bonus" equal to 10% of any positive difference between
the Gross Profit of the Commercial Channel Division for that
fiscal year and the projected Gross Profit of the Commercial
Channel Division under the Commercial Channel Plan approved by
XETA's Board of Directors, payable sixty (60) days after the
close of each fiscal year. Such Commercial Channel Plan shall
provide for no more than 25% annual growth.
All incentive compensation hereunder shall commence with the fiscal year and
quarter beginning November 1, 1999.
2. As used herein, "Gross Profit" means "Revenue" less "Cost of Goods Sold,"
where:
Revenue means and includes receipts from sales from all sources, including,
new and used equipment, installations of equipment, repairs, consulting,
maintenance, long distance, commissions for the sale of Lucent Technologies,
Inc. maintenance contracts, leases and transportation, excluding only
rebates for product purchases and co-op advertising rebates; and
Cost of Goods Sold means and includes all direct equipment, parts, material
and labor cost; average inventory cost of product sold as calculated by the
Prelude(TM) Software on a basis consistent with past practices (including
capitalized conversion cost of used equipment sold such as, refurb cost and
repair cost of used equipment); installation, transportation, and warehouse
cost; excluding only rebates for product purchases and co-op advertising
rebates. No XETA corporate overhead shall be allocated to Cost of Goods
Sold.
