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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (date of earliest event reported) August 11, 1997
TELECOMM INDUSTRIES CORP.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-4410 34-1765902
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(Commission File Number) (I.R.S. Employer Identification No.)
9310 Progress Parkway, Mentor, Ohio 44060
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(Address of Principal Executive Offices) (Zip Code)
(216) 953-1400
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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TELECOMM INDUSTRIES CORP.
FORM 8-K
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Not applicable
(b) PRO FORMA FINANCIAL INFORMATION.
Not applicable
(c) EXHIBITS.
10.1 Convertible Promissory Note, dated August 11, 1997, in the
principal amount of $1,000,000, issued by Telecomm
Industries Corp. to P&J Corporation
10.2 Employment Agreement, dated as of August 1, 1997, by and
between Telecomm Industries Corp. and Paul Satterthwaite
10.3 Employment Agreement, dated as of August 1, 1997, by and
between Telecomm Industries Corp. and Jon Satterthwaite
10.4 Non-Competition Agreement, dated as of August 11, 1997, by
and among Telecomm Industries Corp., Teleco Acquisition
Corp. and Paul Satterthwaite
10.5 Non-Competition Agreement, dated as of August 11, 1997, by
and among Telecomm Industries Corp., Teleco Acquisition
Corp. and Jon Satterthwaite
99 Press release issued by Telecomm Industries Corp and Unitel,
Inc. on August 15, 1997, reporting the acquisition of Unitel
by Telecomm
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TELECOMM INDUSTRIES CORP.
Date: August 26, 1997 By: /s/ Frank Campanale
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Frank P. Campanale
Chief Financial Officer
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EXHIBIT 10.1
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
UNLESS THEY ARE FIRST REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND THE COMPANY HAS RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE
OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE,
AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATE TO THE INDEBTEDNESS OF
THE MAKER (OR ANY SUCCESSOR THERETO) TO KEYBANK NATIONAL ASSOCIATION OR ITS
SUCCESSORS OR ASSIGNS PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT
DATED AUGUST 11, 1997, AS SUCH AGREEMENT MAY BE FROM TIME TO TIME AMENDED,
RESTATED OR OTHERWISE.
CONVERTIBLE PROMISSORY NOTE
$1,000,000 Due August 11, 2002
Cleveland, Ohio
FOR VALUE RECEIVED, TELECOMM INDUSTRIES CORP., a Cleveland, Ohio
corporation ("Payor"), hereby promises to pay to the order of P&J CORPORATION
("Holder"), the lesser of (i) One Million Dollars ($1,000,000) and (ii) the
difference between (x) One Million Dollars ($1,000,000) and (y) the dollar
amount for which this Note is converted into shares of Common Stock, par
value U.S. $0.01 per share, of the Company ("Common Stock") in accordance
with the terms hereof, with interest from the date hereof on the unpaid
principal balance hereof at the rate of five percent (5%) per annum, all such
principal being due and payable five (5) years from the date hereof
("Maturity Date"), at such address as is designated by Holder in writing.
Interest hereon shall be payable at Holder's principal place of business
quarterly, in arrears, at the rate of five percent (5%) per annum and shall
be calculated based upon the number of days elapsed over a 360 day year.
If any of the following events (each is herein referred to as an "Event
of Default") shall occur:
(i) all or any part of the principal or interest due under
this Note is not paid when and as the same shall become due and payable,
whether at the Maturity Date, by acceleration or otherwise;
(ii) a receiver, conservator, custodian, liquidator or trustee
of Payor or any of its Subsidiaries or of all or any of the property of any
of them is appointed by court order and such order remains in effect for more
than sixty (60) days, or an order for relief is entered under the
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federal bankruptcy laws with respect to Payor or any of its subsidiaries; or
any of its material property is sequestered by court order and such order
remains in effect for more than sixty (60) days; or a petition is filed
against Payor or any of its subsidiaries under the bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, and
is not dismissed within sixty (60) days after such filing;
(iii) Payor files a petition in voluntary bankruptcy or seeking
relief under any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, or consents to the filing
of any petition against it under any such law; or
(iv) Payor makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay, or in fact does not
pay, its debts generally as they become due, or consents to the appointment
of a receiver, conservator, custodian, liquidator or trustee of Payor or of
all or any part of its property;
then, when any Event of Default described above has occurred and shall be
continuing, for a period of at least 30 days, after Payor receives written or
facsimile notice thereof from Holder, this Note shall forthwith become
immediately due and payable, if not already due and payable. This Note may
not be prepaid by Payor.
In connection herewith, Holder shall receive the right to convert the
outstanding principal balance of this Note, at the Maturity Date, into shares
of Common Stock as set forth below.
(a) CONVERSION OF NOTE. At the sole election of Holder, (as evidenced
by a majority vote of the Stockholders of Holder) Holder may convert, without
forfeiture of any prepaid interest, all or any part of the principal balance
due under this Note (in increments of $100,000) into shares of Common Stock,
at the conversion rate of $2.00 per share (the "Initial Conversion Price"),
as may be adjusted from time to time as hereinafter set forth. The shares of
Common Stock deliverable upon such conversion, and as adjusted from time to
time, are hereinafter sometimes referred to as "Note Shares" and the
conversion price of each share of Common Stock in effect at any time and as
adjusted from time to time is hereinafter sometimes referred to as the
"Conversion Price". The right to convert may only be exercised as of the
Maturity Date by execution and delivery of the attached Conversion Election
Notice at least ten (10) days prior to such Maturity Date. Upon receipt by
Payor of this Note at its office, in proper form for conversion, Holder shall
be deemed to be the holder of record of the shares of Common Stock issuable
upon such conversion, notwithstanding that the stock transfer books of Payor
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to Holder. The Note Shares shall
be "restricted securities" as defined in the Securities Act of 1933, as
amended (the "Securities Act"). Certificates for the
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Note Shares shall be delivered to Holder within a reasonable time after the
conversion rights represented by this Note shall have been exercised.
(b) SHARES TO BE FULLY PAID; RESERVATION OF SHARES. Payor covenants and
agrees:
(1) that all Note Shares shall, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof;
(2) without limiting the generality of the foregoing, that Payor
will, from time to time, take all such action as may be required to assure that
the par value per share of the Common Stock is at all times equal to or less
than the then effective Conversion Price per share of the Common Stock issuable
pursuant to this Note;
(3) that, during the period within which this Note is outstanding,
Payor shall at all times have authorized, and reserved for the purpose of issue
upon payment hereof, a sufficient number of shares of Common Stock to provide
for the conversion hereof;
(4) that Payor will take all such action as may be necessary to
assure that the Note Shares may be issued without violation of any applicable
law or regulation or of any requirements of any domestic securities exchange or
the NASDAQ system upon which any capital stock of Payor may be listed, provided
Holder provides Payor with such information as Payor shall reasonably request
and that is necessary to comply with the requirements of any such exchange or
system; and
(5) that no person has any preemptive or other right with respect to
the issuance of any Note Shares.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon conversion of this Note.
(d) TRANSFER OR ASSIGNMENT OF NOTE. Subject to applicable law, as further
described herein, this Note is freely transferable and may be assigned or
hypothecated from the date hereof.
(e) RIGHTS OF HOLDER. Holder shall not, solely by virtue hereof, be
entitled to any rights of a stockholder in Payor, either at law or equity, and
the rights of Holder are limited to those expressed in this Note and are not
enforceable against Payor except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Conversion Price and the number and
kind of securities purchasable upon the conversion of this Note shall be
subject to adjustment
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from time to time upon the happening of certain events as hereinafter
provided. The Conversion Price in effect at any time and the number and kind
of securities purchasable upon conversion of the Note shall be subject to
adjustment as follows:
(1) ISSUANCE OF COMMON STOCK. If and whenever after the date
hereof Payor shall issue or sell (or be deemed to issue or sell as provided
hereunder) any shares of its Common Stock for a consideration per share less
than the Conversion Price in effect immediately prior to the time of such
issue or sale (other than any shares of Common Stock issued to Holder in
connection with the pending acquisition of [UNITEL] by Payor), then,
forthwith upon such issue or sale, the Conversion Price shall be reduced to
the price, calculated to the nearest cent, determined by dividing (i) the sum
of (A) the number of shares of Common Stock outstanding immediately prior to
such issue or sale multiplied by the then existing Conversion Price and (B)
the consideration, if any, received by Payor upon such issue or sale, by (ii)
the total number of shares of Common Stock outstanding immediately after such
issue or sale.
(i) ISSUANCE OF RIGHTS OR OPTIONS. In case at any time
Payor shall in any manner grant (whether directly or by assumption in a
merger or otherwise), after the date hereof, any rights to subscribe for or
to purchase, or any options for the purchase of (such rights or options being
herein called "Options"), Common Stock or any stock or securities convertible
into or exchangeable for Common Stock (such convertible or exchangeable stock
or securities being herein called "Convertible Securities") whether or not
such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities (determined as provided in the
following sentence) shall be less than the Conversion Price in effect
immediately prior to the time of granting such Options, then the total
maximum number of shares of Common Stock issuable upon the exercise of all
such Options or upon conversion or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of such Options shall
be deemed to have been issued for such price per share as of the date of
granting of such Options and thereafter shall be deemed to be outstanding.
The price per share for which Common Stock is issuable, as referred to in the
preceding sentence, shall be determined by dividing (A) the sum of (1) the
total amount, if any, received or receivable by Payor as consideration for
the granting of such Options, plus (2) the minimum aggregate amount of
additional consideration payable to Payor upon the exercise of all such
Options, plus (3) in the case of all such Options that relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of all such Convertible Securities (to the
extent not counted in clause (2) hereof) and upon the conversion or exchange
of all such Convertible Securities into Common Stock, by (B) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options; the consideration received or
receivable by Payor shall in each case be determined in accordance with
Section (f)(l)(v) hereof. Except as otherwise provided in Section (f)(l)(iii)
hereof, no adjustment of the Conversion Price shall
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be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. In case Payor
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell, after the date hereof, any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined as provided in the following
sentence) shall be less than the Conversion Price in effect immediately prior
to the time of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share as of
the date of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding, provided that (A) except as otherwise
provided in Section (f)(l)(iii) below, no adjustment of the Conversion Price
shall be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities, and (B) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which
adjustments of the Conversion Price have been or are to be made pursuant to
Section (f)(l)(i) hereof, no further adjustment of the Conversion Price shall
be made by reason of such issue or sale. The price per share for which Common
Stock is issuable, as referred to in the preceding sentence, shall be
determined by dividing (A) the sum of (1) the total amount received or
receivable by Payor as consideration for the issue or sale of such
Convertible Securities, plus (2) the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of such
Convertible Securities into Common Stock, by (B) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities; the consideration received or receivable by Payor
shall in each case bc determined in accordance with Section (f)(l)(v) hereof.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any outstanding Option referred to in Section (f)(l)(i)
hereof, the additional consideration, if any, payable upon the conversion or
exchange of any outstanding Convertible Securities referred to in Section
(f)(l)(i) or (f)(l)(ii) hereof, or the rate at which any such Convertible
Securities are convertible into or exchangeable for Common Stock shall change
at any time (other than under or by reason of provisions designed to protect
against dilution), the Conversion Price in effect at the time of such event
shall forthwith be readjusted to the Conversion Price that would have been in
effect at such time had such Options or Convertible Securities provided for
such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold. On the
expiration of any Option referred to in Section (f)(l)(i) hereof prior to the
exercise thereof or the termination of any right to convert or exchange any
Convertible Securities referred to in Section (f)(1)(i) or (f)(l)(ii) hereof
prior to the exercise of such rights, the Conversion Price then in effect
hereunder shall forthwith be increased (but in
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no case shall such Conversion Price be increased to a price greater than the
Initial Conversion Price) to the Conversion Price that would have been in
effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding for the purposes of
any calculation under Section (f)(l)(i) or (f)(l)(ii) hereof. If the purchase
price provided for in any Option referred to in Section (f)(l)(i) hereof or
the additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities issuable upon the exercise of any such Options
or upon the conversion or exchange of any Convertible Securities referred to
in Section (f)(l)(ii) hereof and still outstanding shall decrease, or the
number of shares of Common Stock issuable upon conversion or exchange of any
such Convertible Securities shall increase, at any time under or any reason
of provisions with respect thereto designed to protect against dilution, then
in case of the delivery of Common Stock upon the exercise of any such Option
or upon conversion or exchange of any such Convertible Security, the
Conversion Price then in effect hereunder shall forthwith be adjusted to the
Conversion Price which would have obtained had Section (l)(l)(i) and
(f)(l)(ii) hereof and the provisions of this Section (f)(l)(iii) hereof never
been given effect in relation to such Option or Convertible Securities and
had the Conversion Price been adjusted pursuant to Section (f)(l) hereof at
the time of delivery of such shares of Common Stock based on the
consideration received (or deemed received under Section (f)(l)(v) hereof)
for such Common Stock, determined as of the date of such delivery, provided
that such adjustment of the Conversion Price shall be made only if as a
result thereof the Conversion Price then in effect hereunder is thereby
reduced.
(iv) STOCK DIVIDENDS. In case Payor shall declare a
dividend or make any other distribution upon any stock of Payor payable in
Common Stock, Options or Convertible Securities, any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration for purposes of the calculations to be made under this Section
(f). If Payor shall at any time prior to payment in full of this Note declare
a dividend payable in cash on its Common Stock and at substantially the same
time offer its stockholders a right to purchase Common Stock from the
proceeds of such dividend or for an amount substantially equal to such
dividend, then, in such case, all Common Stock so issued shall, for purpose
of this Note, be deemed to have been issued as a stock dividend.
(v) CONSIDERATION FOR SECURITIES. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold by
Payor for cash, the consideration received therefor shall be deemed to be the
amount received by Payor thereof, provided that in no case shall any
deduction be made for any commissions, discounts or other expenses incurred
by Payor for any underwriting of the issue or otherwise in connection
therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by Payor shall be deemed
to be the fair value of such consideration as determined reasonable and in
good
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faith by the Board of Directors of Payor (irrespective of the accounting
treatment thereof). In case any Common Stock, Options or Convertible
Securities shall be issued in connection with any merger or consolidation in
which Payor is the surviving corporation (other than any consolidation or
merger in which the previously outstanding shares of Common Stock of Payor
shall be changed into or exchanged for the stock or other securities of
another Corporation) the amount of consideration therefor shall be deemed to
be the fair value as determined reasonably and in good faith by the Board of
Directors of Payor (irrespective of the accounting treatment thereof) of such
Option of the assets and business of the non-surviving corporation as such
Board may determine to be attributable to such shares of Common Stock,
Options or Convertible Securities, as the case may be in the event of any
consolidation or merger of Payor in which Payor is not the surviving
corporation or in which the previously outstanding shares of Common Stock of
Payor shall be changed into or exchanged for the stock or other securities of
another corporation, or in the event of any sale of all or substantially all
of the assets of Payor for stock or other securities of any corporation,
Payor shall be deemed to have issued a number of shares of its Common Stock
equal to the number of shares of Common Stock used for computing the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of transaction of
all such stock or securities of the other corporation received by the holders
of the capital stock of Payor or by Payor and such calculation results in
adjustment of the Conversion Price, the determination of the number of shares
of Common Stock issuable upon conversion of the Note immediately prior to
such merger, consolidation or sale, for purposes of Section (f)(3) hereof
shall be made after giving effect to such adjustment of the Conversion Price.
(vi) RECORD DATE. In case Payor shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution payable in Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of Payor, and the disposition or reissuance of any such
shares shall be considered an issue or sale of Common Stock for the purposes
of this Section (f).
(2) SUBDIVISION OR COMBINATION OF STOCK. In case Payor shall at any
time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined info a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
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(3) MERGER, SALE, REORGANIZATION, RECLASSIFICATION OR
CONSOLIDATION. If any capital reorganization or reclassification of the
capital stock of Payor, or any consolidation or merger of Payor with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities or assets with respect to or
in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provisions shall be made whereby Holder shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions
specified in this Note and in lieu of the shares of the Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to tile rights and interests
of Holder to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and Note Shares
upon the conversion of this Note) shall thereinafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of the rights represented hereby
(including an immediate adjustment, by reason of such consolidation or
merger, of the Conversion Price to the value for the Common Stock reflected
by the terms of such consolidation or merger if the value so elected is less
than the Conversion Price in effect immediately prior to such consolidation
or merger). In the event of a merger or consolidation of Payor with or into
another corporation as a result of which a number of shares of common stock
of the successor or surviving corporation greater or lesser than the number
of shares of Common Stock of Payor outstanding immediately prior to such
merger or consolidation are issuable to holders of Common Stock of Payor,
then the Conversion Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding shares of Common Stock of Payor
outstanding immediately prior to such merger or consolidation. Payor shall
not effect any such consolidation, merger or sale, unless prior to the
consummation thereof the successor or surviving corporation (if other than
Payor) resulting from such consolidation or merger or the corporation
purchasing such assets, as the case may be, shall assume by written
instrument executed and mailed or delivered to Holder hereof at the last
address of Holder appearing on the books of Payor, the obligation to deliver
to Holder such shares of stock, securities of assets as, in accordance with
the foregoing provisions, Holder may be entitled to purchase or receive
hereunder. If a purchase, tender or exchange offer is made to and accepted by
the holders of more than fifty percent (50%) of the outstanding shares of
Common Stock of Payor, Payor shall not collect any consolidation, merger or
sale with the Person (as hereinafter defined) having made such offer or with
any Affiliate (as hereinafter defined) of such Person, unless prior to the
consummation of such consolidation, merger or sale Holder shall have been
given a reasonable opportunity to then elect to receive either the stock,
securities or assets then issuable upon the conversion of this Note or, if
different, the stock,
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securities or assets, or the equivalent, issued to previous holders of the
Common Stock in accordance with such offer, computed as though Holder had
been, at the time of such offer, Holder of the stock, securities or assets
then purchasable upon the conversion of this Note. As used in this Section
(f)(3), the term "Person" shall include an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization and a
government or any department or agency thereof, and an "Affiliate" of any
Person shall mean any Person directly or indirectly controlling;, controlled
by or under direct or indirect common control with, such other Person. A
Person shall be deemed to control a corporation if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
(4) NOTICE OF ADJUSTMENT. Whenever the Conversion Price is
adjusted, as herein provided, Payor shall promptly cause a notice setting
forth the adjusted Conversion Price and adjusted number of Note Shares
issuable upon conversion of the Note, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based, to
be mailed to Holder of the Note at Holder's last address as shown on the
books of Payor. Payor may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by Payor) to make any computation required by this
Section (f), and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(5) NO ADJUSTMENT OF CONVERSION PRICE. Notwithstanding anything
contained to the contrary in this Note, no adjustment of the Conversion Price
shall be made upon the occurrence of any of the following events:
(i) the issuance by Payor of any options, restricted
stock awards or shares of Common Stock pursuant to any employee stock option
plan;
(ii) the issuance by Payor of any shares of Common Stock
that were acquired by Payor from Andy Gorogiani or any of his former
affiliates; or
(iii) the issuance by Payor of any options, restricted
stock awards or shares of Common Stock to former employees of Unitel, Inc. or
employees of Holder.
(6) OTHER NOTICES. In case at any time:
(i) Payor shall declare any dividend upon its Common
Stock payable in stock or make any special dividend or other distribution
(other than regular cash dividends) to the holders of its Common Stock;
(ii) Payor shall offer for subscription to the holders of
any of its Common Stock any additional shares of stock of any class or other
rights;
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(iii) there shall be any capital reorganization,
reclassification of the capital stock of Payor or consolidation or merger of
Payor with, or sale of all or substantially all of its assets to, another
corporation;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of Payor; or
(v) there shall be any subdivision or combination of the
outstanding shares of Common Stock into, respectively, a greater or lesser
number of shares of Common Stock; then, in any one or more of said cases,
Payor shall give, by first class mail, postage prepaid, addressed to Holder
at the address of Holder as shown on the books of Payor, (i) at least twenty
(20) days prior written notice of the date on which the books of Payor shall
close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and (ii) in the case of such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least twenty (20) days prior written notice of the date when
the same shall take place. Any notice required by clause (i) above shall also
specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall bc entitled
thereto, and any notice required by clause (ii) above shall also special the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
(7) DUTY TO MAKE FAIR ADJUSTMENTS IN CERTAIN CASES. If any event
occurs as to which in the opinion of the Board of Directors of Payor the
other provisions of this Section (f) are not strictly applicable or if
strictly applicable would not fairly protect the purchase rights of the Note
in accordance with the essential intent and principles of such provisions,
then Payor and Holder shall mutually agree upon an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid, but in no
event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Section (f) except in the
event of an increase in option price, additional consideration or conversion
rate as contemplated by Section (f)(l)(iii) hereof, or a combination of
shares of the type contemplated in Sec(ion (f)(2) hereof and then in no event
to an amount larger than the Conversion Price as adjusted pursuant to Section
(f)(l)(iii) or (f)(2) hereof.
(8) SHARE ADJUSTMENT. Whenever the Conversion Price payable upon
conversion of this Note is adjusted pursuant to Section (f) hereof, the
number of Note Shares purchasable upon conversion of this Note shall
simultaneously be adjusted by multiplying the
10
<PAGE>
number of Note Shares initially issuable upon conversion of this Note by the
Conversion Price in effect on the date hereof and dividing the product so
obtained by the Conversion Price, as adjusted.
(9) MINIMUM ADJUSTMENT. No adjustment in the Conversion Price shall
be required unless such adjustment would require an increase or decrease of
at least five cents ($0.05) in such price; provided, however, that any
adjustments which by reason of this Section (f)(X) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this Section
(f) shall be made to the nearest cent. Anything in this Section (f) to the
contrary notwithstanding, Payor shall be entitled, but shall not be required,
to make such changes in the Conversion Price, in addition to those required
by this Section (f), as it, in its sole discretion, shall determine to be
advisable in order that any dividend or distribution in shares of Common
Stock, subdivision, reclassification or combination of Common Stock, issuance
of warrants to purchase Common Stock or liquidating dividends referred to
hereinabove in this Section (f) hereafter made by Payor to the holders of its
Common Stock, shall not result in any tax to the holders of its Common Stock
or securities convertible into Common Stock.
(g) INVESTMENT REPRESENTATIONS. Holder, by acceptance hereof, and with
reference to this Note and the Note Shares, represents and warrants to Payor
that: Holder is acquiring such securities for investment and not with a view
to or in connection will any offering or distribution, and Holder has no
present intention of selling or otherwise disposing of such securities.
(h) SECURITIES LEGEND. This Note as well as, if necessary, the Note
Shares will bear substantially the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, UNDER ANY STATE SECURITIES LAWS, AND
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
UNLESS THEY ARE, FIRST REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND THE COMPANY HAS RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE
OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE, COMPANY (WHICH MAY INCLUDE,
AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY)." THE
SHARES ARE SUBJECT TO A FURTHER RESTRICTION AS EVIDENCED BY THE AGREEMENT
BETWEEN THE SHAREHOLDERS OF P&J HOLDINGS, INC. (FORMALLY UNITEL CORPORATION)
IN A SHAREHOLDER AGREEMENT DATED JULY ____, 1997.
(i) TRANSFERABILITY. Any Note Shares acquired hereunder can bc sold or
disposed of when Payor shall have received a copy of an opinion of counsel to
Holder (which
11
<PAGE>
opinion is reasonably acceptable to Payor) which states that the sale or
other disposition thereof may bc effected without registration under the
Securities Act in accordance with any rules or regulations promulgated
thereunder to which such Note Shares are subject; provided, that any such
sale or disposition is made in accordance with the terms of the opinion of
counsel.
(j) DESCRIPTIVE HEADINGS. The descriptive hearings of the several
Sections of this Note are inserted for convenience of reference only and do
not constitute a part of this Note.
(k) LEGAL EFFECT. This Note is being executed and delivered within the
State of Ohio and shall be construed and enforced in accordance with the laws
of said State. The Parties hereto agree to submit to the exclusive
Jurisdiction of the applicable court in Cuyahoga County, Ohio.
(l) This Note shall be subordinate to all bank financing of Telecomm
Acquisition Corporation and Telecomm Industries Corp. The Holder agrees to
execute all inter creditor agreements required in order to effect the
subordination required by any such financial institution.
TELECOMM INDUSTRIES CORP.
By: /S/ JAMES LOWERY
------------------------------------------
Its: CHAIRMAN OF THE BOARD
-----------------------------------------
Date: AUGUST 11, 1997
----------------------------------------
DO NOT DESTROY THIS ORIGINAL NOTE: When paid, this original Note must be
surrendered to Payor for cancellation and retention.
\c\3286
12
<PAGE>
PURCHASE FORM
Dated:______________________, 2002
The undersigned hereby irrevocable elects to convert the within Note to the
extent of purchasing ________________________ shares of Common Stock.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
---------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------------
(Please typewrite or print in block letters)
Signature
-----------------------------------------------------------------------
\c\3286
13
<PAGE>
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 Paul Satterthwaite ("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
<PAGE>
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
<PAGE>
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
<PAGE>
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: Paul Satterthwaite
<PAGE>
With a copy to: (Employee Attorney - Optional)
To the Company: James M. Lowery
1665 West Quincy Avenue #151
Naperville, Illinois 60540
With a copy to: Melvyn E. Resnick, Esq.
153 E. Erie Street
Painsville, OH 44077
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
<PAGE>
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/ James M. Lowery By: /s/ Paul Satterthwaite
------------------------------- -------------------------------
James M. Lowery, Chairman - CEO Paul Satterthwaite
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
SHEET 1
- -------------------------------------------------------------------------------------------
"EXHIBIT B"
FOR ILLUSTRATIVE PURPOSES ONLY
- -------------------------------------------------------------------------------------------
<S> <C> <C>
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
net income after tax as a percentage of gross revenues $ 0.18 $ 0.15
24% share to RVP (Paul Satterthwaite) $ 44,294.40 $ 38,304.00
24% share to VP (Jon Satterthwaite) $ 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
- -------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
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 Jon Satterthwaite ("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
<PAGE>
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
<PAGE>
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
<PAGE>
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: Jon Satterthwaite
<PAGE>
With a copy to: (Employee Attorney - Optional)
To the Company: James M. Lowery
1665 West Quincy Avenue #151
Naperville, Illinois 60540
With a copy to: Melvyn E. Resnick, Esq.
153 E Erie Street
Painsville, OH 44077
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
<PAGE>
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/ James M. Lowery By: /s/ Jon Satterthwaite
-------------------------------- ---------------------------
James M. Lowery, Chairman - CEO Jon Satterthwaite
<PAGE>
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.
<PAGE>
Sheet 1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
"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 (Paul Satterthwaite) $ 44,294.40 $ 38,304.00
24% share to VP (Jon Satterthwaite) $ 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
</TABLE>
Page 1
<PAGE>
Sheet 1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
"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 (Paul Satterthwaite) $ 44,294.40 $ 38,304.00
24% share to VP (Jon Satterthwaite) $ 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
</TABLE>
Page 1
<PAGE>
Sheet 1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
"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 (Paul Satterthwaite) $ 44,294.40 $ 38,304.00
24% share to VP (Jon Satterthwaite) $ 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
</TABLE>
Page 1
<PAGE>
Exhibit 10.4
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") is made and entered into as of
the 11th day of August, 1997, by and among TELECO ACQUISITION CORP., AN OHIO
CORPORATION (the "Company"), PAUL SATTERTHWAITE ("Shareholder") and TELECOMM
INDUSTRIES CORP., A DELAWARE CORPORATION ("Parent" and/or "Telecomm").
RECITALS:
A. The Company is acquiring the assets of Unitel, Inc., a telecommunications
businesses (the "Asset Purchase Agreement") of which Shareholder is an
owner and executive officer, pursuant to the terms of an Assets Purchase
Agreement.
B. The Company is concurrently engaging Shareholder as an executive officer
pursuant to the terms of an Employment Agreement.
C. To induce the Company to consummate the Asset Purchase Agreement and
employ Shareholder as an executive officer, Shareholder agrees to the
terms, conditions and restrictions of this Agreement.
D. To induce the Company to consummate the Asset Purchase Agreement and
employ Shareholder as an executive officer, and to further induce the
Parent to guarantee the Employment Agreement of Shareholder, Shareholder
agrees to the terms, conditions and restrictions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt, adequacy and
sufficiency of which is acknowledged, the Company and Shareholder agree as
follows:
SECTION 1. - COVENANT NOT TO COMPETE
a) DEFINITIONS. The following terms will have the meanings set forth
below:
i) "Company's Affiliates" means Telecomm and any subsidiary or commonly owned
corporation, partnership, limited liability company, joint venture, or
other entity of Telecomm.
ii) "Compete" means to manage, operate, control, or participate in, or have
any ownership interest in, or make loans to, or guaranty loans for, or
act as surety for, or aid or advise as an employee, officer, director,
consultant, agent or otherwise, whether directly or indirectly, any
business (whether an individual, sole proprietorship, partnership,
corporation, firm, joint venture, trust, or other entity) which is
engaged in any business in which the Company or the Company's
Affiliates is engaged.
1
<PAGE>
iii) "Restricted Area" means any state, territory, province or other
jurisdiction of the United States of America or Canada in which the
Company or the Company's Affiliates engage in or solicit business, or
plan to engage in or solicit business (as evidenced by business
records existing at the time of termination if known to Shareholder),
at any time during Shareholder's employment with the Company or any of
the Company's Affiliates. The Restricted Area is deemed to include, at
a minimum, the States of Illinois, Indiana, Michigan, Ohio, Kentucky
and Wisconsin.
iv) "Restricted Period" means during Shareholder's employment with
the Company or any of the Company's Affiliates and continuing for a
period of one (1) year following the date of termination.
v) "Shareholder's Affiliates" means, collectively and individually:
Any trust, corporation, partnership, limited liability company, joint
venture, or other entity for the benefit of, controlled by, or under
common control with, directly or indirectly, Shareholder.
b) IN GENERAL. As a consequence of Shareholder's prior ownership and
operation of Unitel, Inc. and employment with the Company or any of the
Company's Affiliates, Shareholder has and will receive and deal with
confidential information and business methods which are the exclusive
property of the Company and the Company's Affiliates, including, but not
limited to, its financial data, market data, business practices, pricing
techniques, market development techniques, acquisition and development plans,
and relationships with customers and suppliers. Shareholder further
acknowledges that the confidential information acquired from the Merged
Companies or the Company or the Company's Affiliates are of such a value and
nature as to make it reasonable and necessary for the protection of the
Company and the Company's Affiliates that Shareholder not Compete with the
Company or the Company's Affiliates within the area and for a period of time
hereinafter set forth, and that the Company and the Company's Affiliates will
be irreparably injured, and the value of their capital stock and goodwill
irreparably damaged, if Shareholder were to use or disclose any of the
confidential information concerning the Company or the Company's Affiliates
which Shareholder has acquired or will acquire, or if Shareholder were to
Compete with the Company or any of the Company's Affiliates.
Accordingly, except as hereinafter set forth, Shareholder represents,
warrants, covenants and agrees that during the Restricted Period, neither
Shareholder nor Shareholder's Affiliates will Compete with the Company or any
of the Company's Affiliates in the Restricted Area.
Without limiting the generality of the foregoing restrictive covenant,
Shareholder further represents, warrants, covenants and agrees that neither
Shareholder nor any of Shareholder's Affiliates will, during the Restricted
Period: (i) promote the business of any person or entity engaged in a
business which Competes with the Company or any of the Company's Affiliates;
(ii) solicit, divert or take away or attempt to solicit, divert or take away
any of the Company's or any of the Company's Affiliate's customers,
distributors, suppliers or patronage; (iii) attempt to seek or cause any of
the Company's or any of the Company's Affiliates clients or customers to
refrain from patronizing the Company or any of the Company's Affiliates; or
(iv) employ or engage or attempt to employ or engage in any capacity any
person employed or contracted by the Company or any of the Company's
2
<PAGE>
Affiliates at the date of termination of Shareholder's employment with the
Company and any of the Company's Affiliates.
c) REASONABLENESS OF RESTRICTIONS. Shareholder acknowledges
that: (i) Shareholder's experience and capabilities are such that the
provisions of this Section 1 will not prevent Shareholder from earning a
livelihood; (ii) the services to be rendered by Shareholder to the Company
and the Company's Affiliates are of a special nature and it would be very
difficult or impossible to replace those services; (iii) the terms and
conditions contained in this Section 1 and Section 2 are reasonable and
necessary for the protection of the Company and the Company's Affiliates; and
(iv) the Company and the Company's Affiliates cannot be adequately
compensated with monetary damages for any violation by Shareholder of any of
the provisions of this Section 1 and/or Section 2.
Accordingly, Shareholder agrees and consents that if Shareholder
violates any of the provisions contained in this Section 1 or Section 2, the
Company and the Company's Affiliates will be entitled to seek injunctive from
any court of competent jurisdiction, without bond, restraining Shareholder
from committing or continuing any violation of this Section 1 or Section 2.
The Company and the Company's Affiliates will also be entitled to any other
remedies they may have at law, in equity, under this Agreement, or otherwise.
d) SUSPENSION OF RESTRICTED PERIOD. In the event Shareholder
breaches any obligations, representations, warranties or covenants as set
forth herein, the Restricted Period will be tolled from the date of the
breach until such time as the violation(s) ceases, and the Restricted Period
extended for a period equal to the period of breach.
e) SEVERABILITY. Shareholder agrees that each of the covenants
set forth in this Section 1 and in Section 2 is a separate and distinct
covenant, independent of others and any other provision of this Agreement,
and that the illegality or invalidity of any one, or more of the covenants or
any part of one or more of them, will not render the others illegal or
invalid. If the invalidity or unenforceability is due to the
unreasonableness of the time or geographical area covered by said covenants,
then said covenants will nevertheless be enforced to the maximum extent
permitted by law and effective for such period of time and for such area as
may be determined to be reasonable by a court of competent jurisdiction, and
the parties hereby consent and agree that such scope may be judicially
modified in any proceeding brought to enforce such covenants.
f) INDEPENDENT SIGNIFICANCE. The covenants set forth in this
Section 1 and the covenants of confidentiality contained in Section 2 below
are of the essence of this Agreement and will be construed as independent of
any other of the provisions of this Agreement, the Merger Agreement and the
Employment Agreement, and the existence of any claim or cause of action of
Shareholder against the Company or the Company's Affiliates, whether
predicated on this Agreement or otherwise, will not constitute a defense to
the enforcement by the Company or any of the Company's Affiliates of any of
said covenants.
SECTION 2. - CONFIDENTIAL INFORMATION
a) NON-DISCLOSURE - IN GENERAL. From the date hereof,
Shareholder will maintain in strict confidence and will not, directly or
indirectly, or through Shareholder's
3
<PAGE>
Affiliates, divulge, transmit, publish, release, or otherwise use of cause to
be used in any manner contrary to the interests of the Company or any of the
Company's Affiliates, any confidential information relating to the Company's
or any of the Company's Affiliates' systems, operations, products, services,
business methods, management practices, contracts, computer programs and data
bases, records, development data and reports, quality control specifications,
cost analyses, flow charts, know-how, consumer lists, supplier lists,
prospects, market development programs, acquisition programs, personnel data,
or any information relating to customers, suppliers, products, sales,
acquisitions, acquisition plans, financial structure, or pricing, and other
information of like nature. Shareholder acknowledges that all information
regarding the Company or the Company's Affiliates compiled or obtained by, or
furnished to Shareholder regarding the Company, the Company's Affiliates or
their respective businesses is confidential information and the Company's and
the Company's Affiliates' exclusive property. Upon demand by the Company,
and in any event upon termination of Shareholder's services, Shareholder will
deliver to the Company all original and facsimile records, documents and data
in Shareholder's possession or under Shareholder's control, or in
Shareholder's Affiliates' possession or under Shareholder's Affiliates'
control, pertaining to the Company or any of the Company's Affiliates.
b) EXCEPTIONS. Notwithstanding the foregoing, this provision
does not apply to the extent, and only to the extent, that such information
is clearly obtainable in the public domain through no fault of Shareholder or
Shareholder's Affiliates.
SECTION 3. - 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
in no matter affect such party's rights to enforce any provision of this
Agreement at a subsequent time, and the waiver by either party of any right
arising out of any breach will not be construed as a waiver of any right
arising out of any subsequent breach.
SECTION 4. - 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, addressed as follows:
To Employee: Paul Satterthwaite
744 N. Arlington Avenue
Indianapolis, Indiana 46219
With a copy to: Mr. Robert W. Zentz, Esq.
Frank & Kraft
1st Indiana Plaza
Indianapolis, Indiana 46204
To the Company: Teleco Acquisition Corp.
9310 Progress Parkway
Mentor, Ohio 44060
4
<PAGE>
With a copy to: Melvyn E. Resnick, Esquire
Dworken & Bernstein Co., L.P.A.
153 East Erie Street, Suite 304
Painesville, Ohio 44077
Either party may designate a different address pursuant to all written notices
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 5. - MISCELLANEOUS
a) AMENDMENTS. This Agreement may be amended from time to time as
the parties desire, so long as such amendments are in writing and executed by
the parties hereto.
b) ASSIGNMENT. This Agreement is personal services to Shareholder
and may not be assigned or transferred by Shareholder to, or the obligations of
Shareholder fulfilled by, any other person or entity. Similarly, this Agreement
and the rights and obligations thereunder may not be assigned by the Company to
any other person or entity, except to any and all successors in interest to the
Company or the Company's Affiliates (whether by way of sale, exchange,
disposition, merger, consolidation, reorganization or otherwise).
c) ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto regarding the subject matter hereof and supersedes
all prior and contemporaneous agreements, understandings, negotiations, and
discussions, whether oral or written, respecting the within subject matter.
d) GOVERNING LAW. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Ohio. Non-exclusive venue and
jurisdiction for any action arising hereunder will be in the Courts of Common
Pleas of Cuyahoga County, Ohio or in federal courts situated in the Northern
District of Ohio (Eastern Division), in addition to any other courts having
venue and jurisdiction. Each party irrevocably consents to the personal and
subject matter jurisdiction of said courts.
e) BINDING EFFECT. This Agreement will be binding upon and inure to
the benefit of the Company, its successors and assigns, and Seller, and Seller's
heirs, representatives and permitted assigns. The terms of this Agreement, as
they relate to the Company's Affiliates, will also inure to the benefit of the
Company's Affiliates, their successors and assigns.
f) RECITALS. The recitals hereto are an integral part of this
Agreement and are incorporated herein by reference.
g) COSTS AND EXPENSES. Each party will bear such party's own costs
and expenses in connection with the negotiation and preparation of this
Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
"SHAREHOLDER"
/s/ Paul Satterthwaite
-----------------------------------
Paul Satterthwaite
"COMPANY"
TELECO ACQUISITION CORP.
AN OHIO CORPORATION
By: /s/ James Lowrey
--------------------------------
James Lowrey, Chairman
"PARENT"/"TELECOMM"
TELECOMM INDUSTRIES CORP.
By: /s/ James Lowrey
--------------------------------
James Lowrey, Chairman
6
<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") is made and entered into as
of the 11th day of AUGUST, 1997, by and among TELECO ACQUISITION CORP., an
Ohio corporation (the "Company"), JON SATTERTHWAITE ("Shareholder"), and
TELECOMM INDUSTRIES CORP., A DELAWARE CORPORATION ("Parent" and/or
"Telecomm")
RECITALS:
A. The Company is acquiring the assets of Unitel, Inc., a telecommunications
businesses (the "Asset Purchase Agreement") of which Shareholder is an
owner and executive officer, pursuant to the terms of an Assets Purchase
Agreement.
B. The Company is concurrently engaging Shareholder as an executive officer
pursuant to the terms of an Employment Agreement.
C. Company is a wholly owned subsidiary of Parent and Parent has guaranteed
Shareholder's Employment Agreement.
D. To induce the Company to consummate the Asset Purchase Agreement and
employ Shareholder as an executive officer, and to further induce the
Parent to guarantee the Employment Agreement of Shareholder, Shareholder
agrees to the terms, conditions and restrictions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt, adequacy and sufficiency
of which is acknowledged, the Company and Shareholder agree as follows:
SECTION 1. - COVENANT NOT TO COMPETE
a) DEFINITIONS. The following terms will have the meanings set
forth below:
i) "Company's Affiliates" means Telecomm and any subsidiary or commonly
owned corporation, partnership, limited liability company, joint
venture, or other entity of Telecomm.
ii) "Compete" means to manage, operate, control, or participate in, or
have any ownership interest in, or make loans to, or guaranty loans for,
or act as surety for, or aid or advise as an employee, officer,
director, consultant, agent or otherwise, whether directly or
indirectly, any business (whether an individual, sole proprietorship,
partnership, corporation, firm, joint venture, trust, or other entity)
which is engaged in any business in which the Company or the Company's
Affiliates is engaged.
iii) "Restricted Area" means any state, territory, province or other
jurisdiction of the United States of America or Canada in which the
Company or the Company's
1
<PAGE>
Affiliates engage in or solicit business, or plan to engage in or solicit
business (as evidenced by business records existing at the time of
termination if known to Shareholder), at any time during Shareholder's
employment with the Company or any of the Company's Affiliates. The
Restricted Area is deemed to include, at a minimum, the States of
Illinois, Indiana, Michigan, Ohio, Kentucky and Wisconsin.
iv) "Restricted Period" means during the Shareholder's employment with the
Company or any of the Company's Affiliates and continuing for a period of
three (3) years following the date of termination, but in all events for a
period of not less than five (5) years following the date of this
Agreement.
v) "Shareholder's Affiliates" means, collectively and individually: Any
trust, corporation, partnership, limited liability company, joint venture,
or other entity for the benefit of, controlled by, or under common control
with, directly or indirectly, Shareholder.
b) IN GENERAL. As a consequence of Shareholder's prior ownership
and operation of Unitel, Inc. and employment with the Company or any of the
Company's Affiliates, Shareholder has and will receive and deal with
confidential information and business methods which are the exclusive
property of the Company and the Company's Affiliates, including, but not
limited to, its financial data, market data, business practices, pricing
techniques, market development techniques, acquisition and development plans,
and relationships with customers and suppliers. Shareholder further
acknowledges that the confidential information acquired from the Merged
Companies or the Company or the Company's Affiliates are of such a value and
nature as to make it reasonable and necessary for the protection of the
Company and the Company's Affiliates that Shareholder not Compete with the
Company or the Company's Affiliates within the area and for a period of time
hereinafter set forth, and that the Company and the Company's Affiliates will
be irreparably injured, and the value of their capital stock and goodwill
irreparably damaged, if Shareholder were to use or disclose any of the
confidential information concerning the Company or the Company's Affiliates
which Shareholder has acquired or will acquire, or if Shareholder were to
Compete with the Company or any of the Company's Affiliates.
Accordingly, except as hereinafter set forth, Shareholder
represents, warrants, covenants and agrees that during the Restricted Period,
neither Shareholder nor Shareholder's Affiliates will Compete with the Company
or any of the Company's Affiliates in the Restricted Area.
Without limiting the generality of the foregoing restrictive
covenant, Shareholder further represents, warrants, covenants and agrees that
neither Shareholder nor any of Shareholder's Affiliates will, during the
Restricted Period: (i) promote the business of any person or entity engaged
in a business which Competes with the Company or any of the Company's
Affiliates; (ii) solicit, divert or take away or attempt to solicit, divert
or take away any of the Company's or any of the Company's Affiliate's
customers, distributors, suppliers or patronage; (iii) attempt to seek or
cause any of the Company's or any of the Company's Affiliates clients or
customers to refrain from patronizing the Company or any of the Company's
Affiliates; or (iv) employ or engage or attempt to employ or engage in any
capacity any person employed or contracted by the Company or any of the
Company's
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Affiliates at the date of termination of Shareholder's employment with the
Company and any of the Company's Affiliates.
c) REASONABLENESS OF RESTRICTIONS. Shareholder acknowledges that:
(i) Shareholder's experience and capabilities are such that the provisions of
this Section 1 will not prevent Shareholder from earning a livelihood; (ii)
the services to be rendered by Shareholder to the Company and the Company's
Affiliates are of a special nature and it would be very difficult or
impossible to replace those services; (iii) the terms and conditions
contained in this Section 1 and Section 2 are reasonable and necessary for
the protection of the Company and the Company's Affiliates; and (iv) the
Company and the Company's Affiliates cannot be adequately compensated with
monetary damages for any violation by Shareholder of any of the provisions of
this Section 1 and/or Section 2.
Accordingly, Shareholder agrees and consents that if Shareholder
violates any of the provisions contained in this Section 1 or Section 2, the
Company and the Company's Affiliates will be entitled to seek injunctive from
any court of competent jurisdiction, without bond, restraining Shareholder
from committing or continuing any violation of this Section 1 or Section 2.
The Company and the Company's Affiliates will also be entitled to any other
remedies they may have at law, in equity, under this Agreement, or otherwise.
d) SUSPENSION OF RESTRICTED PERIOD. In the event Shareholder
breaches any obligations, representations, warranties or covenants as set
forth herein, the Restricted Period will be tolled from the date of the
breach until such time as the violation(s) ceases, and the Restricted Period
extended for a period equal to the period of breach.
e) SEVERABILITY. Shareholder agrees that each of the covenants set
forth in this Section 1 and in Section 2 is a separate and distinct covenant,
independent of others and any other provision of this Agreement, and that the
illegality or invalidity of any one, or more of the covenants or any part of
one or more of them, will not render the others illegal or invalid. If the
invalidity or unenforceability is due to the unreasonableness of the time or
geographical area covered by said covenants, then said covenants will
nevertheless be enforced to the maximum extent permitted by law and effective
for such period of time and for such area as may be determined to be
reasonable by a court of competent jurisdiction, and the parties hereby
consent and agree that such scope may be judicially modified in any
proceeding brought to enforce such covenants.
f) INDEPENDENT SIGNIFICANCE. The covenants set forth in this
Section 1 and the covenants of confidentiality contained in Section 2 below
are of the essence of this Agreement and will be construed as independent of
any other of the provisions of this Agreement, the Merger Agreement and the
Employment Agreement, and the existence of any claim or cause of action of
Shareholder against the Company or the Company's Affiliates, whether
predicated on this Agreement or otherwise, will not constitute a defense to
the enforcement by the Company or any of the Company's Affiliates of any of
said covenants.
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<PAGE>
SECTION 2. - CONFIDENTIAL INFORMATION
a) NON-DISCLOSURE - IN GENERAL. From the date hereof, Shareholder
will maintain in strict confidence and will not, directly or indirectly, or
through Shareholder's Affiliates, divulge, transmit, publish, release, or
otherwise use of cause to be used in any manner contrary to the interests of the
Company or any of the Company's Affiliates, any confidential information
relating to the Company's or any of the Company's Affiliates' systems,
operations, products, services, business methods, management practices,
contracts, computer programs and data bases, records, development data and
reports, quality control specifications, cost analyses, flow charts, know-how,
consumer lists, supplier lists, prospects, market development programs,
acquisition programs, personnel data, or any information relating to customers,
suppliers, products, sales, acquisitions, acquisition plans, financial
structure, or pricing, and other information of like nature. Shareholder
acknowledges that all information regarding the Company or the Company's
Affiliates compiled or obtained by, or furnished to Shareholder regarding the
Company, the Company's Affiliates or their respective businesses is confidential
information and the Company's and the Company's Affiliates' exclusive property.
Upon demand by the Company, and in any event upon termination of Shareholder's
services, Shareholder will deliver to the Company all original and facsimile
records, documents and data in Shareholder's possession or under Shareholder's
control, or in Shareholder's Affiliates' possession or under Shareholder's
Affiliates' control, pertaining to the Company or any of the Company's
Affiliates.
b) EXCEPTIONS. Notwithstanding the foregoing, this provision does
not apply to the extent, and only to the extent, that such information is
clearly obtainable in the public domain through no fault of Shareholder or
Shareholder's Affiliates.
SECTION 3. - 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 in
no matter affect such party's rights to enforce any provision of this Agreement
at a subsequent time, and the waiver by either party of any right arising out of
any breach will not be construed as a waiver of any right arising out of any
subsequent breach.
SECTION 4. - 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, addressed as follows:
To Employee: Jon Satterthwaite
744 N. Arlington Avenue
Indianapolis, Indiana 46219
With a copy to: Mr. Robert W. Zentz, Esq.
Frank & Kraft
1st Indiana Plaza
Indianapolis, Indiana 46204
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<PAGE>
To the Company: Teleco Acquisition Corp.
9310 Progress Parkway
Mentor, Ohio 44060
With a copy to: Melvyn E. Resnick, Esquire
Dworken & Bernstein Co., L.P.A.
153 East Erie Street, Suite 304
Painesville, Ohio 44077
Either party may designate a different address pursuant to all written notices
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 5. - MISCELLANEOUS
a) AMENDMENTS. This Agreement may be amended from time to time as
the parties desire, so long as such amendments are in writing and executed by
the parties hereto.
b) ASSIGNMENT. This Agreement is personal services to Shareholder
and may not be assigned or transferred by Shareholder to, or the obligations of
Shareholder fulfilled by, any other person or entity. Similarly, this Agreement
and the rights and obligations thereunder may not be assigned by the Company to
any other person or entity, except to any and all successors in interest to the
Company or the Company's Affiliates (whether by way of sale, exchange,
disposition, merger, consolidation, reorganization or otherwise).
c) ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto regarding the subject matter hereof and supersedes
all prior and contemporaneous agreements, understandings, negotiations, and
discussions, whether oral or written, respecting the within subject matter.
d) GOVERNING LAW. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Ohio. Non-exclusive venue and
jurisdiction for any action arising hereunder will be in the Courts of Common
Pleas of Cuyahoga County, Ohio or in federal courts situated in the Northern
District of Ohio (Eastern Division), in addition to any other courts having
venue and jurisdiction. Each party irrevocably consents to the personal and
subject matter jurisdiction of said courts.
e) BINDING EFFECT. This Agreement will be binding upon and inure to
the benefit of the Company, its successors and assigns, and Seller, and Seller's
heirs, representatives and permitted assigns. The terms of this Agreement, as
they relate to the Company's Affiliates, will also inure to the benefit of the
Company's Affiliates, their successors and assigns.
f) RECITALS. The recitals hereto are an integral part of this
Agreement and are incorporated herein by reference.
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g) COSTS AND EXPENSES. Each party will bear such party's own costs
and expenses in connection with the negotiation and preparation of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
"SHAREHOLDER"
/s/ Jon Satterthwaite
----------------------------------------
Jon Satterthwaite
"COMPANY"
TELECO ACQUISITION CORP.
AN OHIO CORPORATION
By: /s/ James Lowrey
-------------------------------------
James Lowrey, Chairman
"PARENT"/ "TELECOMM"
TELECOMM INDUSTRIES CORP.
By: /s/ James Lowrey
-------------------------------------
James Lowrey, Chairman
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EXHIBIT 99
CONTACT:
Telecomm Industries Corp. Unitel, Inc.
David Gruber Paul Satterthwaite, President and CEO
Phone: (216) 963-0566 Phone: (317) 574-1000
Fax: (216) 963-0565 Fax: (317) 574-1020
PRESS RELEASE
TELECOMM INDUSTRIES CORP. ACQUIRES UNITEL
Cleveland, Ohio--August 15, 1997--Telecomm Industries Corp. (OTC:TCMM)
announced today that it has acquired substantially all of the assets of
Unitel, Inc., a privately held Indiana corporation, in a transaction valued
at $4.7 million. Pursuant to an agreement with Unitel and its controlling
shareholders dated July 7, 1997, Telecomm acquired the assets of Unitel for 2
million shares of Telecomm common stock, a $1 million convertible promissory
note and the assumption of a bank loan with a current balance of
approximately $1,300,000 and obligations to trade creditors of Unitel of up
to $1,200,000.
Unitel operates as a telephone and computer systems integrator, software
developer and a distributor of Ameritech (NYSE:AIT) and BellSouth (NYSE:BLS)
products and services. Effective immediately, Unitel will begin operations
as a wholly-owned subsidiary of Telecomm Industries. Combined, the companies
have 23 offices in five Midwestern States and over 250 employees.
Paul Satterthwaite, President and CEO of Unitel, said, "We look forward
to our new role as a part of Telecomm Industries. We will be able to expand
our strong single source technology vendor relationship to customers
throughout the Midwest. The acquisition is now behind us and I am excited
about the Company's future."
Telecomm also announced the hiring of John Russell, who left the Amdahl
Corporation (AMEX:AMH) to run Telecomm's "Systems Integration Division". The
Systems Integration Division will be engaged in the computer telephony
industry and will market computer, software and consulting services which are
complimentary to Telecomm's core products. John Russell, the founder of SID,
has over 25 years of sales, marketing and technical experience in computer
telephony, networking, mainframe computer, UNIX, consulting and software
markets. Telecomm expects the SID division to add $750,000 in revenues for
the remainder of 1997 and approximately $3 million in revenues for 1998.
James Lowery, Chairman and CEO of Telecomm Industries, stated, "With the
addition of the Systems Integration Division and the acquisition of Unitel we
are positioned to be the premiere systems integrator in the Midwest. This
combination has clearly helped us reach some of our strategic goals two years
ahead of schedule. With the addition of the two new divisions we have
increased our revenue forecast to $25 million for fiscal 1998. The revised
estimate is more than double our fiscal 1997 revenue goal."
<PAGE>
STATEMENTS ABOUT THE COMPANY'S FUTURE EXPECTATIONS, INCLUDING FUTURE REVENUES
AND EARNINGS, AND ALL OTHER STATEMENTS IN THIS PRESS RELEASE OTHER THAN
HISTORIC FACTS ARE "FORWARD LOOKING STATEMENTS" WITHIN SECTION 27A OF THE
SECURITIES ACT OF 1933, SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AND AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THE COMPANY INTENDS THAT SUCH FORWARD LOOKING STATEMENTS BE SUBJECT
TO THE SAFE HARBORS CREATED THEREBY. REFERENCE IS MADE TO THE COMPANY'S
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE COMPANY'S
ANNUAL REPORT FOR FISCAL 1996 ON FORM 10-KSB AND QUARTERLY REPORT FOR THE
SECOND QUARTER OF 1997 ON FORM 10-QSB, FOR A DESCRIPTION OF FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD
LOOKING STATEMENTS. THERE CAN BE NO ASSURANCE THAT UNITEL WILL BE
SUCCESSFULLY INTEGRATED INTO THE OPERATIONS OF TELECOMM.
Telecomm Industries Corp. is Ameritech's (NYSE:AIT) largest voice and
data distributor, selling voice, data, cellular, video and telephone
information solutions in Illinois, Ohio, Michigan, Indiana and Wisconsin. In
addition to Ameritech communication services, Telecomm also represents
numerous voice and data telecommunications manufacturers and service
suppliers including Northern Telecom, LCI Long Distance, Toshiba, Ascend
Communications, and Cisco Systems.
