EXHIBIT 10.20
ELCOTEL, INC.
Employment Agreement OF
Xxxxxxx X. Xxxxxxxxx
Agreement (this "Agreement") dated as of the 24th day of September, 1997 by and
between Elcotel, Inc. (the "Company") and Xxxxxxx X. Xxxxxxxxx ("Xx. Xxxxxxxxx")
upon the following terms and conditions:
1. Term:
(a) Commencement
Date The "Effective Time" as that term is defined in that
certain Agreement and Plan of Merger dated as of August
13, 1997 by and among Technology Service Group, Inc.
("TSG"), the Company and Elcotel Hospitality Service,
Inc. providing for a merger of Elcotel Hospitality
Service, Inc. with and into TSG (the "Merger").
(b) Termination
Date December 31, 1998 unless sooner terminated as provided
herein.
(c) Renewal Except as hereinafter provided, on the Termination Date
and on each anniversary of the Termination Date, this
Agreement shall automatically be extended for an
additional year unless the Company shall have given Xx.
Xxxxxxxxx written notice of non-renewal at least one
hundred eighty (180) days in advance of the Termination
Date or an anniversary thereof, as the case may be.
(d) Non-Renewal If a notice of non-renewal is given to Xx. Xxxxxxxxx as
provided in Paragraph 1(c), above, he shall continue in
his then present position with the Company for all or
such part of the 180-day period as the Company may
request in writing, but he shall nevertheless be
entitled to take reasonable time during such period to
look for other employment. At the end of such period,
Xx. Xxxxxxxxx'x employment shall terminate, and the
Company shall provide to Xx. Xxxxxxxxx the Xxxxxxxxx
Benefits (as hereinafter defined).
2. Title & Respons-
ibilities: During the term of this Agreement, Xx. Xxxxxxxxx shall
be elected Executive Vice President and Chief Operating Officer of the
Company (or to such higher office as the Company may deem appropriate),
and he shall devote such time as he deems necessary to carry out the
responsibilities of his positions.
3. Salary: During the term of this Agreement, the salary paid to
Xx. Xxxxxxxxx shall not be less than one hundred sixty thousand dollars
($160,000) per year, and shall be subject to annual review for merit or
other increases in the sole discretion of the board of directors of the
Company.
Xxxxxxx X. Xxxxxxxxx Employment Agreement - continued
4. Location of
Employment: The location of Xx. Xxxxxxxxx'x employment shall be at
the Company's headquarters facility in Sarasota, Florida.
5. Relocation: Commencing with the closing of the merger and ending
seven (7) months after that date, Xx. Xxxxxxxxx shall relocate his
residence to the Sarasota, Florida area at Company expense as set forth
in Exhibit A.
6. Benefits: Xx. Xxxxxxxxx shall be entitled to the same benefits as
are made available to the Company's other senior executives and on the
same terms and conditions as such executives (the "Benefits").
7. Bonuses: Xx. Xxxxxxxxx shall be paid an annual incentive bonus
(the "Incentive Bonus") as provided in Exhibit B.
8. Stock Option: Xx. Xxxxxxxxx shall retain all options granted to him as
an employee of TSG, and shall be granted an additional stock option to
purchase shares of the Company's common stock pursuant to a Company stock
option plan as provided in Exhibit B.
9. Business
Expenses: Xx. Xxxxxxxxx shall be reimbursed (in accordance with
Company policy from time to time in effect) for all reasonable business
expenses incurred by him in the performance of his duties hereunder.
10. Indemnification: Xx. Xxxxxxxxx shall be indemnified by the Company with
respect to claims made against him as a director, officer and/or employee
of the Company and as a director, officer and/or employee of any
subsidiary of the Company to the fullest extent permitted by the
Company's certificate of incorporation, by-laws and the General
Corporation Law of the State of Delaware.
11. Termination By
the Company: Xx. Xxxxxxxxx'x employment may be terminated by the
Company only as provided below:
(a) For Cause For Cause, as defined below, by written notice to Xx.
Xxxxxxxxx and payment to him of salary accrued, but not
paid through the date of the termination of his
employment; provided however --
(i) If the nature of such Cause involves dishonesty,
fraud or serious moral turpitude, such termination
date shall be the date of the giving of such
notice; and
(ii) If the nature of such Cause does not involve
dishonesty, fraud or serious moral turpitude, such
termination date shall be the expiration of thirty
(30) days after the giving of such notice unless
within such thirty-day period, Xx. Xxxxxxxxx has
cured the basis of such Cause, or if a cure is not
possible within a thirty-day period, if he has
Xxxxxxx X. Xxxxxxxxx Employment Agreement - continued
within the 30-day period diligently and in good
faith commenced to effect such cure.
(b) Without Cause Without Cause, by prior written notice of termination
given to Xx. Xxxxxxxxx and by compliance with the
following:
(i) In the event that at the date the notice of a
termination without Cause is given there is at
least twelve (12) months remaining in the term of
this Agreement, such notice of termination shall
be sent to Xx. Xxxxxxxxx no more than seven (7)
days prior to the effective date of termination,
and the Company (i) on the effective date shall
pay to Xx. Xxxxxxxxx his salary in a lump sum for
the balance of the term of this Agreement; (ii)
shall continue at its expense to provide the
Benefits for the balance of the term of this
Agreement; and (iii) shall pay to Xx. Xxxxxxxxx
the Incentive Bonus and shall satisfy its
obligations regarding his stock options when, as,
and to the extent provided for in Exhibit B.
(ii) In the event that at the date the notice of a
termination without Cause is given there is less
than twelve (12) months remaining in the term of
this Agreement, such notice of termination shall
be sent to Xx. Xxxxxxxxx one hundred eighty (180)
days prior to the effective date of termination,
and during such 180-day period, Xx. Xxxxxxxxx
shall continue in his then present position with
the Company for all or any part of such period as
the Company may request, but he shall nevertheless
be entitled to take reasonable time during such
period to look for other employment. At the end of
such 180-day period, Xx. Xxxxxxxxx'x employment
shall terminate, and the Company shall provide to
Xx. Xxxxxxxxx the Xxxxxxxxx Benefits.
(iii) A reduction in Xx. Xxxxxxxxx'x title,
responsibilities or salary, or the relocation of
his place of employment by more than fifty miles
may, at Xx. Xxxxxxxxx'x option, be treated by him
as a notice of termination of his employment by
the Company without Cause given as of the date of
such reduction.
(c) Death or
Permanent
Disability Upon the death or permanent disability of Xx. Xxxxxxxxx,
but only after providing him with the Severance
Benefits.
(d) Definition of
"Cause" "Cause" for purposes of termination by the Company shall
be defined as (i) any act or acts by Xx. Xxxxxxxxx of
dishonesty or fraud or that constitute serious moral
turpitude; or (ii) misconduct of a material nature or a
material breach in connection with the performance by
him of his responsibilities hereunder that Xx. Xxxxxxxxx
knew or should have known
Xxxxxxx X. Xxxxxxxxx Employment Agreement - continued
would be materially detrimental to the Company or its
business.
(e) Definition of
"Severance
Benefits" The "Severance Benefits" shall mean --
(i) the payment by the Company of the Incentive Bonus
and the satisfaction by the Company of its
obligations regarding Xx. Xxxxxxxxx'x stock
options when, as and to the extent provided for
in Exhibit B or in the agreement covering such
options, or both, as the case may be; and
(ii) If Xx. Xxxxxxxxx has relocated his residence as
provided herein, the continuation by the Company
of the payment of Xx. Xxxxxxxxx'x salary in
effect at the date of the termination of his
employment and the continuation of the Benefits
at Company expense for a period of one year; or
(iii) If Xx. Xxxxxxxxx has not relocated his residence,
the continuation by the Company of the payment of
Xx. Xxxxxxxxx'x salary in effect at the date of
the termination of his employment and the
continuation of the Benefits at Company expense
for a period of one hundred eighty (180) days.
12. Termination By
Xx. Xxxxxxxxx: (a) Xx. Xxxxxxxxx may terminate his employment under
this Agreement by reason of a breach hereof by the
Company on twenty (20) days prior written notice to the
Company, in which event he may pursue all remedies for
such breach available to him under applicable law.
(b) Xx. Xxxxxxxxx may also terminate his employment
under this Agreement by giving the Company one
hundred twenty (120) days prior notice of
termination.
13. Notices: Notices that are required or permitted hereunder shall
be given by hand delivery, by delivery to a courier service providing
next business day delivery and proof of delivery or by facsimile
transmission (except to Xx. Xxxxxxxxx), as follows:
If to the Company at: Elcotel, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Chairman
Facsimile No.: (000) 000-0000
If to Xx. Xxxxxxxxx, to his most recent residence
address on the books of the Company;
Xxxxxxx X. Xxxxxxxxx Employment Agreement - continued
or, to such other address of a party as to which that
party shall notify the other party in the manner
provided herein.
14. Proration: To the extent that proration is not otherwise provided
for in this Agreement, all amounts payable to Xx. Xxxxxxxxx under this
Agreement shall be deemed earned on a daily basis and shall be pro rated
based on a 365-day year.
15. Entire
Agreement: (a) This Agreement together with Exhibit A and Exhibit B
contains the entire understanding of the parties except
as otherwise expressly contemplated herein; shall not be
amended except by written agreement of the parties
signed by each of them; shall be binding upon and inure
to the benefit of the parties and their successors,
personal representatives and assigns; and shall
supersede all prior employment agreements between Xx.
Xxxxxxxxx and TSG.
(b) No representation, affirmation of fact, course of
prior dealings, promise or condition in connection
herewith not incorporated herein shall be binding on
the parties.
(c) No waiver of any term or condition contained herein
shall be binding upon the parties unless made in
writing and signed by the party to be bound thereby.
In Witness Whereof, the parties have executed and delivered this Agreement as of
the date first set forth above.
Elcotel, Inc.
By: /s/ Xxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxx Xxxxxxx X. Xxxxxxxxx
President & CEO
Xxxxxxx X. Xxxxxxxxx Employment Agreement - continued
Exhibit A
Relocation: In connection with the Transition Period and Xx. Xxxxxxxxx'x
relocation of his principal residence to Florida, the Company shall --
(a) Pay to Xx. Xxxxxxxxx his actual temporary living and commuting expenses to
the Sarasota, Florida area at a rate not to exceed one hundred fifty
dollars ($150) per day during the Transition Period or until he has
relocated his residence to Florida. These expenses will not exceed
$25,000;
(b) Reimburse to Xx. Xxxxxxxxx the reasonable expenses of two (2) house hunting
trips of up to five (5) days each, including (i) mileage reimbursement for
use of a personal vehicle at the rate of twenty-eight cents ($0.31) per
mile or rental of a mid-size automobile, as he shall elect; (ii) round trip
coach airfare for Xx. Xxxxxxxxx and his family; and (iii) actual lodging
and living expenses during such trips, but not to exceed $500 per day;
(c) Reimburse to Xx. Xxxxxxxxx the real estate commissions actually paid by him
upon the closing of the sale of his principal residence in Groton,
Massachusetts or the rental commissions thereon if he shall elect to lease
the same, but not to exceed in each case, 7% thereof; and
(d) Reimburse to Xx. Xxxxxxxxx the actual costs of moving his and his family's
personal belongings from Groton, Massachusetts to the Sarasota, Florida
area. The total relocation expenses covered under items C and D above are
not to exceed $50,000.
End of Exhibit A
Xxxxxxx X. Xxxxxxxxx Employment Agreement - continued
Exhibit B
1. Incentive Bonus: The Company shall pay to Xx. Xxxxxxxxx an bonus for the
Company's fiscal year ending in March 1998 equal to two percent (2%) of the
TSG Operating Profits (as hereinafter defined). For fiscal years beginning
after March 1998, Xx. Xxxxxxxxx shall participate in any bonus program
maintained for senior executives of the Company to the same extent and on the
same terms as the Chief Executive Officer of the Company. Any such bonus is
referred to herein as an Incentive Bonus.
(a) Incentive Bonus Proration:
(i) In the event that this Agreement expires, or Xx. Xxxxxxxxx'x
employment is terminated by the Company for other than Cause prior
to the end of a fiscal year, he shall be entitled to the Incentive
Bonus calculated for the period from the beginning of the fiscal
year in which such expiration or termination occurred through the
last day of the fiscal month in which such expiration or termination
became effective (the "Short Fiscal Year") as if such period were a
complete fiscal year.
(ii) If Xx. Xxxxxxxxx shall resign from the Company's employ, no
Incentive Bonus shall be payable with respect to the fiscal year in
which he gave or was obliged to give his notice of termination as
provided herein, or for any subsequent fiscal year.
(b) Payment of the Incentive Bonus. The Company shall pay the Incentive Bonus
to Xx. Xxxxxxxxx within thirty (30) days after the completion of the
Company's fiscal year-end audit, but in any event within one hundred
twenty (120) days of the fiscal year end, provided however, that the
Incentive Bonus computed according to Paragraph 1(a)(i), above, shall be
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paid within sixty (60) days of the end of the Short Fiscal Year.
(c) Definitions. For purposes of this Agreement --
(i) For purposes of this Agreement, "TSG Operating Profits" shall be
defined as the net income attributable to TSG's operations
determined in accordance with generally accepted accounting
principles, consistently applied, before payment or provision for
federal or state income or franchise taxes, and excluding (a) any
effects of the Merger on TSG's operations; (b)any amortization of
goodwill or other intangibles and depreciation; (c) interest
charges; (d) any gains or losses arising from the revaluation of
assets or adjustments to the balance sheet at the date of the
consummation of the Merger; and (d) charges or allocations by the
Company or an affiliated company except to the extent that such
charges are for items of expense that, had they not been paid by the
Company or a related entity, would have been paid by the Company
(e.g. insurance premiums
Xxxxxxx X. Xxxxxxxxx Employment Agreement - continued
and interest on working capital borrowings). For purposes of the
foregoing, inventory shall be valued on a FIFO basis.
(ii) The words "fiscal year" and "fiscal month" shall refer to the fiscal
year and month of the Company being used on the Commencement Date.
In the event that the fiscal year or month of the Company is changed
for any reason, an equitable adjustment shall be made so that no
portion of the Incentive Bonus that would otherwise have been
payable hereunder shall by reason of such change become not payable.
2. Stock Option: On the Commencement Date, the Company shall grant to Xx.
Xxxxxxxxx an option to purchase fifty thousand (50,000) shares of the
Company's common stock under the Company's Stock Option Plan at a purchase
price per share equal to the closing per-share market value of the Company's
common stock of the Company on such date.
(a) Vesting. The option shall become exercisable as to twenty-five percent
(25%) of the shares one year after the date of the grant, and an
additional twenty-five percent (25%) on each of the second, third and
fourth anniversaries of the grant date, and shall terminate on the fifth
anniversary of the grant date.
(b) Registration of Sale of Option Shares. The Company shall use its best
efforts to register the sale of the option shares to Xx. Xxxxxxxxx on
Securities and Exchange Commission Form S-8 before or as soon as
practicable after the date of grant.
(c) Termination of Employment. The option shall continue in full force and
effect after the termination of Xx. Xxxxxxxxx'x employment in
accordance with the terms of the Company's 1991 Stock Option Plan.
End of Exhibit B
