EXHIBIT 10.2
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 Xxxx 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 Regional 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 RVPs.
(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 entilted 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 entilted 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 1994 Infinity will be
paid by the Company and charged against the employee's P&L until
the lease expires in August of 1997. 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 regional 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) willful, 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 the 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 of 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-WAVER
The failure of either party at any time of 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 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: Xxxx 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 kin 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/ Xxxx Xxxxxxxxxxxxx
------------------------------- -------------------------------
Xxxxx X. Xxxxxx, Chairman - CEO Xxxx Xxxxxxxxxxxxx
EXHIBIT "A"
TO EMPLOYMENT AGREEMENT
REGIONAL VP - TELECOMM INDUSTRIES
---------------------------------
* The RVP of the "NEWCO" Divison will be responsible for all 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 determioned by the Board of Directors.
* The RVP 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 Telecomm Board of Directors
and distributed by his or her Chairman.
* The RVP of the "NEWCO" Division will manage the overall growth and
profitability of his or her Branch and will take actions necessary to
attain local, divisonal 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 Divison 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
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"EXHIBIT B"
FOR ILLUSTRATIVE PURPOSES ONLY
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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
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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
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TOTAL COST FOR OPERATIONS $ 142,400.00 $ 184,000.00
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Gross Income Before Taxes (gross margin - cost ops.) $ 307,600.00 $ 266,000.00
Income tax @ 40% $ 123,040.00 $ 106,400.00
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NET INCOME AFTER TAX
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
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