EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of August 1, 1997 (the "Effective Date") by and among Teleco Acquisition
Corp., an Ohio corporation (the "Company") and Xxx Xxxxxxxxxxxxx ("Employee").
RECITALS
A. The Company is acquiring, by purchase, a certain telecommunications company
of which Employee is an owner and key executive (the "Purchased Company").
B. Employee's employment with the Company is a material inducement to the
Company to consummate the purchase.
C. The Company desires to employ Employee and Employee desires to accept such
employment upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual premises contained herein
and other good and valuable consideration, the receipt, adequately and
sufficiency of which is hereby acknowledged, the Company and Employee agree as
follows:
SECTION 1 - EMPLOYMENT AND TERMS
Subject to the terms and conditions hereinafter set forth, the Company will
employ Employee as Vice President, commencing on the Effective Date hereof and
continuing for an initial term ending on the second anniversary of the Effective
Date hereof (the "Initial Term"). Except as hereinafter provided in Section 4,
this Agreement will automatically renew from year to year after the Initial
Term. Either party may terminate Employee's employment effective at the end of
the Initial Term or any renewal period by providing thirty (30) days prior
written notice to the other party.
SECTION 2 - DUTIES AND AUTHORITY
During the term of this Agreement, and subject to the direction and control
of the Chairman and Board of Directors of the Company, Employee agrees to devote
Employee's full business time, best efforts, skill and attention to the
advancement of the Company. Employee's duties and authority shall be consistent
with the general job description attached hereto as EXHIBIT "A".
SECTION 3 - COMPENSATION
Employee will be entitled only to the compensation set forth in this
section. During the term of Employee's employment hereunder, the Company will
compensate Employee as follows:
(a) BASE SALARY. A base salary, payable in accordance with the Company's
prevailing payroll practices (and subject to the normal and customary
payroll
deductions) of $80,000 per year. Employee and the Board of Directors
of the Company may agree upon a different base salary, from time to
time, for periods after the Initial Term.
(b) COMMISSIONS. Employee's duties include managing the Company's "NewCo"
Division (the "Division"). Employee understands and agrees that
changes in the operations of the Company and its affiliates may
require changing the description and responsibilities of the Employee,
as determined by the Company in its absolute discretion. Commission
calculated will be based on sales made personally by the Employee, and
in accordance with the Commission Schedule(s) approved by the Board of
Directors and the Company from time to time. Sales made with the
participation of other employees will be subject to the Company's
commission sharing policies in effect from time to time. Substitute,
supplementary and/or additional Commission Schedules may be entered
into by the parties and will constitute a part of this Agreement when
signed by Employee and the CEO of the Company. In determining
Employee's commissions the following shall apply:
(i) Company shall calculate commissions due Employee based upon
Employee's sales and the Commission Schedule then in effect
for VPs.
(ii) Company shall determine whether the Division has been
profitable for two (2) consecutive quarters including the
proposed payment of any commissions due Employee under (i)
above.
(iii)If the calculations in (ii) above shows a Division Profit,
Employee shall be entitled to receive full commissions due
him. If the calculation in (ii) above shows a Division
loss, Employee shall be entitled to receive commissions in
an amount which will not reduce the Division Profit to zero.
All commissions which would reduce the profit to zero or
below shall be forever waived by the Employee.
(iv) Commissions due Employee will be paid for each sale after
receipt of payment from the customer the equipment and/or
service was sold to; or after receipt of payment from the
service provider (i.e., Long Distance Provider to the
Company, RBOC or other service provider.
(v) If for any reason, the Company receives a charge-back of
paid commissions on an account sold by Employee, the
commission paid to employee on that account, will be
deducted from any compensation otherwise payable to Employee
under this Agreement.
If required by the equipment or service provider, Employee will attend training
provided
by and become certified by the provider on those products and services on the
Commission Schedule attached and incorporated by reference. In addition: (i)
All prices and representations to customers must be under terms and
agreements set forth by the Company and under the service or equipment
provider's current rate, costs or tariffs; (ii) Standard service and
equipment providers ordering procedures required by these providers must be
followed and the proper order forms completed for submission to the provider;
and (iii) Employee must complete and submit all internal Company forms
required to properly maintain account status both and after installation of
services. Requirements may change from time to time.
(c) INCENTIVE BONUS. Provided that the Division's net profit, after
taxes, exceeds ten (10%) percent of the Divisions Gross Revenues for
the Company's fiscal year and the Gross Margin exceeds twenty eight
(28%) percent, Employee will be entitled to receive an incentive bonus
equal to twenty four (24%) percent of the net profit after taxes for
the Division. (See "Exhibit B" attached for illustration.) The
annual incentive bonus will be paid within thirty (30) days following
the filing of the Company's 10-K, unless otherwise paid sooner at the
discretion of the Board of Directors. Whenever the term "Net Profit"
is used in this Agreement, it shall mean the Net Profit as determined
by the Company's internal accounting staff pursuant to Profit and Loss
Statements relating solely to the Division (P & L Statement), and
shall be calculated in accordance with the Company's standard internal
cost accounting practices, in effect from time to time.
(d) EXPENSE REIMBURSEMENT. The Company will reimburse Employee's
reasonable expenses incurred in the conduct of the Company's business
provided such expenses are submitted in accordance with the Company's
prevailing reimbursement policy.
(e) HEALTH PLAN. Employee will be entitled to such health benefits
(medical, dental, and any other) provided by the Company to its other
regional vice presidents, as the same may be changed from time to time
with approval of the Company's Board of Directors.
(f) CAR ALLOWANCE. Employee's current lease on 1996 Buick Park Avenue
will be paid by the Company and charged against the employee's P&L
until the lease expires in September of 1998. After that date the
employee will be entitled to a car allowance of $500 per month paid in
accordance with the Company's car allowance program, as the same may
be changed from time to time with the approval of the Board of
Directors.
(g) VACATION. Employee will be entitled to four weeks vacation each
calendar year, commensurate with the vacation policy applicable to
other regional vice presidents of the Company. No vacation shall be
taken until Employee has been with the Company for at least six (6)
months.
(h) OTHER EMPLOYEE BENEFITS. Employee will be entitled to participate in
all of the Company's profit sharing, retirement, deferred compensation
and savings plans, as the same may be in effect and amended from time
to time for its vice
presidents.
SECTION 4 - TERMINATION FOR CAUSE. The Company may terminate Employee's
employment with the Company for Cause, effective upon five (5) days written
notice to Employee. For purposes of this Agreement, "For Cause" means: (I)
material breach by Employee of this Agreement, or Employee's Non-Competition
Agreement; (II) fraud, embezzlement, defalcation, or misappropriation of
funds or other property of the Company or any of the Company's affiliates;
(III) willfull, material failure or refusal by Employee to perform Employee's
duties as provided herein (including, without limitation, failure due to
death or disability); or (IV) failure to generate a profit for the Division
at the end of the Initial Term, or any subsequent anniversary of the Initial
Term as determined by the Profit & Loss Statement generated by the Company.
Employee acknowledges that notwithstanding the automatic renewal provision of
this Agreement following the Initial Term, Company shall have the right to
terminate this Agreement after the Initial Term once the twelve (12) month
profit figures become available to the Company, and provided they demonstrate
that the Division failed to generate a profit during the Initial Term of this
Agreement. "Company Affiliates" means Telecomm Industries Corp. ("Telecomm")
and any subsidiary or commonly owned corporation, partnership, limited
liability company, joint venture, or other entity of Telecomm.
(a) RETURN OF PROPERTY. Upon the termination of Employee's employment
with the Company, Employee will return to the Company all property of
the Company and any of the Company's affiliates, including, but not
limited to keys, credit cards, cars, financial reports, customer and
supplier information and all other materials relating to the business
of the Company.
(b) AUTOMATIC RESIGNATION. If Employee's employment terminates for any
reason, Employee's office and directorship, if any whether with the
Company or the Company's Affiliates, shall also automatically
terminate on the date of notice of termination (whether notice of
termination is provided by the Company or Employee), and Employee,
thereupon, shall be deemed to have resigned from such office and
directorship.
SECTION 5 - NON-WAIVER
The failure of either party at any time or from time to time to require
performance of any of the other party's obligations under this Agreement will
not affect such party's rights to enforce any provision of this Agreement at a
subsequent time, and the waiver of any right arising out of any subsequent
breach.
SECTION 6 - NOTICES
All notices and other communications hereunder will be in writing and will
be either personally delivered or mailed by certified mail, return receipt
requested, addresses as follows:
To Employee: Xxx Xxxxxxxxxxxxx
With a copy to: (Employee Attorney - Optional)
To the Company: Xxxxx X. Xxxxxx
0000 Xxxx Xxxxxx Xxxxxx #000
Xxxxxxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxxx X. Xxxxxxx, Esq.
000 X Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Either party may designate a different address pursuant to written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications will be effective when deposited in the
mail or upon personal delivery, addressed as aforesaid.
SECTION 7 - MISCELLANEOUS
(a) FREEDOM OF CONTRACT. Employee represents and warrants to the
Company that Employee is free to enter into this Agreement as
contemplated hereby and that Employee has no prior or other
obligations or commitments of any kind to any other person,
corporation, partnership, association, or business organization
which would in any way hinder or interfere with Employee's
obligations hereunder or the exercise of Employee's best efforts
hereunder, including, without limitation, no non-competitive or
confidentiality restrictions. Employee further covenants and
agrees to indemnify and hold harmless the Company, the Company's
Affiliates, shareholders, directors, officers and employees (and
their respective heirs, representatives, successors and assigns)
from and against and in respect of any loss, costs, damage or
expense (including attorney's fees arising out of or resulting
from the breach of the foregoing representation.
(b) AMENDMENTS. This Agreement may be amended from time to time, so
long as such amendments are in writing and executed by the parties
hereto.
(c) ASSIGNMENTS. This Agreement is for personal services to be
provided by Employee and may not be assigned or transferred by
Employee to, or the obligations of Employee performed by any other
party. Similarly, this Agreement and the rights and obligations
thereunder may not be assigned by the Company to any other party,
except to any of the Company's Affiliates (whether by way of sale,
disposition, merger, consolidation, reorganization or otherwise).
(d) ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto regarding the subject matter hereof and
supersedes all prior
contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written respecting the within subject
matter.
(e) GOVERNING LAW. This Agreement will be governed by, and constructed
in accordance with, the laws of the State of Ohio.
(f) BINDING EFFECT. This Agreement will be binding upon and inure to
the benefit of the Company and its successors and assigns, and
Employee's heir, representatives and successors.
(g) RECITALS. The recitals hereto are an internal part of this
Agreement and are incorporated herein by reference.
(h) COSTS AND EXPENSES. Each party will bear such party's expenses in
connections with the negotiation and preparation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
Teleco Acquisition Corp.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxx Xxxxxxxxxxxxx
-------------------------------- ---------------------------
Xxxxx X. Xxxxxx, Chairman - CEO Xxx Xxxxxxxxxxxxx
EXHIBIT "A"
TO EMPLOYMENT AGREEMENT
VICE PRESIDENT - TELECOMM INDUSTRIES
------------------------------------
* The VP of the "NEWCO" Division will be responsible for sales revenue
from any network, equipment or software sales and any other assigned
product sales or related sales programs in his or her assigned Telecomm
service areas as determined by the RVP and Board of Directors.
* The VP of Systems "NEWCO" Division will be responsible for the
development, delivery and execution of the "NEWCO Business Plan,
Policies and Procedures" as approved by the RVP and Telecomm Board of
Directors and distributed by his or her Chairman.
* The VP of the "NEWCO" Division will manage the overall growth and
profitability of projects assigned by his or her Branch RVP and will
take actions necessary to attain local, divisional and corporate
objectives.
* From time to time as needed, projects may arise where specific duties
will be changing temporarily.
MEASURE OF SUCCESS:
-------------------
* Percent attainment of Division revenue objectives for his or her Branch
(P & L)
* Percent attainment of Telecomm's "NEWCO" Division Quota Objectives for
Equipment, Software, Voice or Data network services or other assigned
products and services.
* Hiring and retention of qualified sales reps and technicians.
* Implementation of Division market coverage goals.
* Delivery of complimentary products for distribution by his or her sales
force.
THE COMPANY'S BOARD OF DIRECTORS HAS THE RIGHT TO CHANGE THIS DESCRIPTION TO
MEET BRANCH, DIVISION AND CORPORATE OBJECTIVES.
Sheet 1
"EXHIBIT B"
FOR ILLUSTRATIVE PURPOSES ONLY
GROSS REVENUES (SOURCES OF FUNDS):
Commissions from Ameritech and others $ 800,000.00 $ 800,000.00
Sales of equipment and material $ 200,000.00 $ 200,000.00
Other revenues $ 50,000.00 $ 50,000.00
TOTAL SOURCES OF FUNDS $ 1,050,000.00 $ 1,050,000.00
COGS (equipment, material, AE Salaries + commissions etc.) $ 600,000.00 $ 600,000.00
-------------- --------------
GROSS MARGIN $ 450,000.00 $ 450,000.00
gross margin as a percentage of gross revenues 0.428571429 0.428571429
Costs for Operations:
Rent $ 12,000.00 $ 12,000.00
Telephone $ 6,000.00 $ 6,000.00
RVP/MVP Commissions @ 25% $ 25,000.00 $ 25,000.00
RVP/MVP Salary $ 38,400.00 $ 80,000.00
Other expenses $ 20,000.00 $ 20,000.00
Interest Expense On Liabilities $ 36,000.00 $ 36,000.00
Additional Corporate Contribution
Depreciation Expense $ 5,000.00 $ 5,000.00 133333.3
-------------- --------------
TOTAL COST FOR OPERATIONS $ 142,400.00 $ 184,000.00
-------------- --------------
Gross Income Before Taxes (gross margin - cost ops.) $ 307,600.00 $ 266,000.00
Income tax @ 40% $ 123,040.00 $ 106,400.00
-------------- --------------
NET INCOME AFTER TAX $ 184,560.00 $ 159,600.00
net income after tax as a percentage of gross revenues $ 0.18 $ 0.15
24% share to RVP (Xxxx Xxxxxxxxxxxxx) $ 44,294.40 $ 38,304.00
24% share to VP (Xxx Xxxxxxxxxxxxx) $ 44,294.40 $ 38,304.00
52% share to corporate $ 95,971.20 $ 82,992.00
Cost per dollar to fund salary increase 0.312
Cost in wholedollars (to be deducted from 24% share.) $ 12,979.20
Page 1
Sheet 1
"EXHIBIT B"
FOR ILLUSTRATIVE PURPOSES ONLY
GROSS REVENUES (SOURCES OF FUNDS):
Commissions from Ameritech and others $ 800,000.00 $ 800,000.00
Sales of equipment and material $ 200,000.00 $ 200,000.00
Other revenues $ 50,000.00 $ 50,000.00
TOTAL SOURCES OF FUNDS $ 1,050,000.00 $ 1,050,000.00
COGS (equipment, material, AE Salaries + commissions etc.) $ 600,000.00 $ 600,000.00
-------------- --------------
GROSS MARGIN $ 450,000.00 $ 450,000.00
gross margin as a percentage of gross revenues 0.428571429 0.428571429
Costs for Operations:
Rent $ 12,000.00 $ 12,000.00
Telephone $ 6,000.00 $ 6,000.00
RVP/MVP Commissions @ 25% $ 25,000.00 $ 25,000.00
RVP/MVP Salary $ 38,400.00 $ 80,000.00
Other expenses $ 20,000.00 $ 20,000.00
Interest Expense On Liabilities $ 36,000.00 $ 36,000.00
Additional Corporate Contribution
Depreciation Expense $ 5,000.00 $ 5,000.00 133333.3
-------------- --------------
TOTAL COST FOR OPERATIONS $ 142,400.00 $ 184,000.00
-------------- --------------
Gross Income Before Taxes (gross margin - cost ops.) $ 307,600.00 $ 266,000.00
Income tax @ 40% $ 123,040.00 $ 106,400.00
-------------- --------------
NET INCOME AFTER TAX $ 184,560.00 $ 159,600.00
net income after tax as a percentage of gross revenues $ 0.18 $ 0.15
24% share to RVP (Xxxx Xxxxxxxxxxxxx) $ 44,294.40 $ 38,304.00
24% share to VP (Xxx Xxxxxxxxxxxxx) $ 44,294.40 $ 38,304.00
52% share to corporate $ 95,971.20 $ 82,992.00
Cost per dollar to fund salary increase 0.312
Cost in wholedollars (to be deducted from 24% share.) $ 12,979.20
Page 1
Sheet 1
"EXHIBIT B"
FOR ILLUSTRATIVE PURPOSES ONLY
GROSS REVENUES (SOURCES OF FUNDS):
Commissions from Ameritech and others $ 800,000.00 $ 800,000.00
Sales of equipment and material $ 200,000.00 $ 200,000.00
Other revenues $ 50,000.00 $ 50,000.00
TOTAL SOURCES OF FUNDS $ 1,050,000.00 $ 1,050,000.00
COGS (equipment, material, AE Salaries + commissions etc.) $ 600,000.00 $ 600,000.00
-------------- --------------
GROSS MARGIN $ 450,000.00 $ 450,000.00
gross margin as a percentage of gross revenues 0.428571429 0.428571429
Costs for Operations:
Rent $ 12,000.00 $ 12,000.00
Telephone $ 6,000.00 $ 6,000.00
RVP/MVP Commissions @ 25% $ 25,000.00 $ 25,000.00
RVP/MVP Salary $ 38,400.00 $ 80,000.00
Other expenses $ 20,000.00 $ 20,000.00
Interest Expense On Liabilities $ 36,000.00 $ 36,000.00
Additional Corporate Contribution
Depreciation Expense $ 5,000.00 $ 5,000.00
-------------- --------------
TOTAL COST FOR OPERATIONS $ 142,400.00 $ 184,000.00
-------------- --------------
Gross Income Before Taxes (gross margin - cost ops.) $ 307,600.00 $ 266,000.00
Income tax @ 40% $ 123,040.00 $ 106,400.00
-------------- --------------
NET INCOME AFTER TAX $ 184,560.00 $ 159,600.00
net income after tax as a percentage of gross revenues $ 0.18 $ 0.15
24% share to RVP (Xxxx Xxxxxxxxxxxxx) $ 44,294.40 $ 38,304.00
24% share to VP (Xxx Xxxxxxxxxxxxx) $ 44,294.40 $ 38,304.00
52% share to corporate $ 95,971.20 $ 82,992.00
Cost per dollar to fund salary increase 0.312
Cost in wholedollars (to be deducted from 24% share.) $ 12,979.20
Page 1
