14
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|x| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________ to________________.
Commission File No. 0-4410
TELECOMM INDUSTRIES CORP.
-------------------------
(Exact name of Issuer as specified in its charter)
DELAWARE 34-1765902
(State of Incorporation) (I.R.S. Employer Identification No.)
1743 Quincy Ave.
Naperville, Illinois 60540
(Address of principal executive offices)
630-369-7111
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as the latest practical date: common stock, $0.01 par
value: (as of May 12, 1999): 12,121,559
Transitional Small Business Disclosure Format:
Yes No X
---- ----
<PAGE>
TELECOMM INDUSTRIES CORP. AND SUBSIDIARY
INDEX
PART I-FINANCIAL INFORMATION Page No.
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets-
March 31, 1999 (unaudited) and
December 31, 1998 (audited) 4
Consolidated Statements of Operations-
three months ended March 31, 1999
and 1998 (unaudited) 5
Consolidated Statements of Cash Flow-
three months ended March 31, 1999 and
1998 (unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The Registrant's Consolidated Financial Statements follow this page.
3
<PAGE>
Telecomm Industries Corp. and Subsidiary
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
------------ ------------
ASSETS
Current assets:
<S> <C> <C>
Accounts receivable , net $ 3,884,237 $ 5,041,578
Inventories 1,788,983 1,583,879
Prepaid income taxes 45,147 45,147
Prepaid expenses 123,237 118,499
Employee advances 36,505 67,769
------------ ------------
Total current assets 5,878,109 6,856,872
------------ ------------
Property and equipment, net 1,558,430 1,609,874
Other assets:
Accounts receivable, long-term portion 4,257,310 4,102,589
Intangibles and other assets, net 3,618,393 3,670,572
------------ ------------
Total assets $ 15,312,242 $ 16,239,907
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 177,694 $ 453,208
Line of credit 1,416,015 1,030,377
Current portion of long-term debt 846,706 733,389
Accounts payable 1,252,022 1,612,261
Accrued payroll and related expenses 349,486 310,012
Accrued commissions and bonus 246,714 631,492
Accrued contractor fees 87,801 98,311
Customer deposits 402,073 219,841
Deferred income taxes 108,594 108,594
Income taxes payable 141,107 141,107
Other accrued expenses 371,898 615,961
Deferred revenue 105,309 --
------------ ------------
Total current liabilities 5,505,419 5,954,553
------------ ------------
Long-term debt, less current portion 5,799,624 6,066,715
Deferred revenue 8,961 8,961
Deferred income taxes 357,109 441,709
------------ ------------
Total liabilities 11,671,113 12,471,938
------------ ------------
Stockholders' equity:
Common stock $.01 par value: authorized 20,000,000 shares:
issued 12,650,746 and outstanding 12,121,559 126,508 126,508
Additional paid-in capital 3,957,172 3,957,172
Treasury stock, 529,187 shares at cost (317,512) (317,512)
Retained earnings (deficit) (125,039) 1,801
------------ ------------
Total stockholders' equity 3,641,129 3,767,969
------------ ------------
Total liabilities and stockholders' equity $ 15,312,242 $ 16,239,907
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
4
<PAGE>
Telecomm Industries Corp. and Subsidiary
Consolidated Statements of Operations (Unaudited)
For the three months ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Network service revenue $ 2,256,787 $ 2,495,758
Equipment sales and service revenue 1,554,224 2,727,939
Long distance and other revenue 113,747 264,440
----------- -----------
Net revenues 3,924,758 5,488,137
----------- -----------
Commissions, contractor fees and related expenses 2,298 37,101
Equipment sales and service costs 1,638,047 2,269,449
Long distance and other costs 631 66,378
----------- -----------
Net cost of commissions, contractor fees,
and related expenses 1,640,976 2,372,928
----------- -----------
Selling, general and administrative expenses 2,344,731 2,680,962
----------- -----------
Operating (loss) income (60,949) 434,247
Other income (expense):
Gain on disposal of assets 2,129 750
Interest expense (152,620) (70,208)
----------- -----------
(150,491) (69,458)
----------- -----------
(Loss) income from operations before
income tax (benefit) expense (211,440) 364,789
Income tax (benefit) expense (84,600) 145,846
----------- -----------
Net (loss) income $ (126,840) $ 218,943
=========== ===========
Net (loss) income per common share:
Basic $ (0.01) $ 0.02
=========== ===========
Diluted $ (0.01) $ 0.02
=========== ===========
Average number of common shares outstanding:
Basic
12,121,559 12,091,833
=========== ===========
Diluted 12,121,559 12,891,833
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements
5
<PAGE>
Telecomm Industries Corp. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
For the three months ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net (loss)income $ (126,840) $ 218,943
Adjustments to reconcile net income to net cash
provided by (used) in operating activities:
Depreciation and amortization 159,405 152,133
Deferred revenue (12,709) 574
Deferred income taxes (84,600) 142,085
Reserve for bad debt 14,100 2,803
(Gain) on sale of fixed assets (2,129) (750)
Changes in assets and liabilities:
Accounts receivable - trade 1,143,241 (216,621)
Accounts receivable - long term portion (154,721) (651,015)
Inventories (205,104) (318,768)
Prepaid expenses (4,738) (1,097)
Employee advances 31,264 57,156
Accounts payable - trade (360,239) 456,042
Accrued payroll and related expenses 39,474 49,253
Accrued commissions and bonus (384,778) (200,500)
Accrued contractor fees (10,510) (71,252)
Customer deposits 182,232 13,970
Income taxes payable -- 345
Other accrued expenses (244,063) (28,523)
Deferred Revenue 118,018 --
----------- -----------
Total adjustments 224,143 (614,165)
----------- -----------
Net cash provided by (used in) operating activities 97,303 (395,222)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (55,782) (147,416)
Proceeds from sale of property plant and equipment 2,129 --
Proceeds from stockholders' receivables -- 54,348
Purchase acquisitions, net of cash acquired -- (10,000)
----------- -----------
Net cash (used in) investing activities (53,653) (103,068)
----------- -----------
Cash flows from financing activities:
Payments on long-term debt (153,774) (107,070)
Proceeds from issuance of long-term debt -- 19,140
Net borrowings under line of credit 385,638 728,613
Cash Overdraft (275,514) --
----------- -----------
Net cash (used in) provided by financing activities (43,650) 640,683
----------- -----------
Net increase in cash -- 142,393
Cash and cash equivalents at beginning of period -- 97,779
----------- -----------
Cash and cash equivalents at end of period $ -- $ 240,172
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 143,835 $ 57,608
=========== ===========
Non-cash investing and financing activities:
Common stock issued for purchase acquisitions $ -- $ 420,000
=========== ===========
Notes issued for purchase acquisitions $ -- $ 20,000
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements
6
<PAGE>
TELECOMM INDUSTRIES, CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation - The accompanying consolidated interim
financial statements of Telecomm Industries Corp. ("Telecomm" or the
"Company") have been prepared without audit and do not include all of
the information and note disclosures required by generally accepted
accounting principles. The statements reflect all adjustments that are,
in the opinion of management, necessary to present fairly the financial
position of the Company as of March 31, 1999, and the results of its
operations for the quarter then ended. These adjustments are of a
normal and recurring nature. Therefore, the accompanying consolidated
interim financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Form 10-KSB of the Company for the year ended December 31, 1998.
2. Earnings Per Share - Computations of basic and diluted earnings per
share of common stock have been made in accordance with the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). The Company
was required to adopt the provisions of SFAS No. 128 beginning with the
year ended December 31, 1997. All prior and interim period earnings per
share amounts have been restated accordingly. All securities that have
an anti-dilutive effect on earnings per share have been excluded from
such computations.
Reconciliation of Numerators and Denominators of the Basic
and Diluted EPS Computations
<TABLE>
<CAPTION>
For the three month period ended March 31, 1999
--------------------------------------------------
Loss Shares Per-Share
(Numerator) (Denominator) Amount
-------------- --------------- ---------------
<S> <C> <C> <C>
Net loss $ (126,840)
Basic EPS:
Loss available to common stockholders;
weighted average common stock outstanding (126,840) 12,121,559 $ (.01)
-------------- --------------- --------------
Diluted EPS:
Income available to stockholders of common
shares and common stock equivalents $ (126,840) 12,121,559 $ (.01)
============== ================= ==============
For the three month period ended March 31, 1998
--------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
---------------- --------------- ---------------
Net income $ 218,943
Basic EPS:
Income available to common stockholders;
weighted average common stock 218,943 12,091,833 $ .02
outstanding
Effect of dilutive securities options 800,000
---------------- --------------- ---------------
Diluted EPS:
Income available to stockholders of common
shares and common stock equivalents $ 218,943 12,891,833 $ .02
================ =============== ===============
</TABLE>
Options to purchase 300,000 shares of common stock at $3.00 to $10.00
per share were outstanding on March 31,1999 and had been since April 3,
1998. These options, which expired on April 30, 1999, were not included
in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the common shares during
the period.
7
<PAGE>
3. Acquisitions - On February 20, 1998, the Company acquired Division-Tel
Communications, Inc. ("Division-Tel") under the provisions of an Asset
Purchase Agreement. Under the terms of this agreement, the Company
issued 350,000 shares of its common stock valued at $420,000, paid
$10,000 in cash, issued a $20,000 promissory note, due August 1998
(bearing interest at a fixed rate of 9%), and assumed approximately
$370,480 of Division-Tel's liabilities in exchange for all of the
outstanding common stock of Division-Tel.
The net purchase price was allocated as follows:
Current assets $ 95,876
Property and equipment 80,599
Other assets 156,900
Goodwill 487,105
Liabilities assumed (370,480)
----------
Net purchase price 450,000
Less: common stock issued 420,000
Non-cash note payable 20,000
===========
Cash paid for acquisition $ 10,000
===========
4. Subsequent Events - David L. Gruber was appointed to the Board of
Directors on April 23, 1999. Since May 1997, Mr. Gruber has served as a
public markets and investor relations consultant for the Company. From
May 1991 to May 1997, he was employed as an Investment Consultant first
with Parker/Hunter Inc. and subsequently with McDonald & Company
Investments. In addition, Mr. Gruber has served as a Director of
Advanced Medical Supply since January 1995. Mr. Gruber's Consulting
Agreement with Telecomm expired on April 30, 1999. A new Agreement is
currently under negotiations between the Company and Mr. Gruber.
5. Reclassification - Certain reclassifications have been made to the1998
consolidated financial statements to conform to the 1999 method of
presentation.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Overview
Telecomm is one of the nation's largest Regional Bell Operating Company
("RBOC") distributors. As such, Telecomm sells voice, data, cellular, video, and
telephone information network solutions to business customers throughout its
five-state region. Telecomm has sales personnel in Illinois, Indiana, Wisconsin,
Ohio and Kentucky. Ameritech and BellSouth are Telecomm's primary RBOC partners.
The voice services offered by these RBOCs include Centrex, Centrex-ISDN,
Multiserve, Intra-LATA usage plans, audio-conferencing and voice mail. Data
services include DS0, DS1, DS3, Synchronet, Frame Relay, Sonet, ATM, ISDN and
ISDN Prime.
In addition to RBOC services, Telecomm represents numerous
manufacturers of voice and data equipment. Telecomm markets, installs and
maintains telecommunications equipment manufactured by such globally recognized
companies as Nortel (Northern Telecom), NEC, Lucent, Toshiba, and Comdial.
Companies who purchase data equipment from a manufacturer, add value to
the equipment through technical expertise and additional software, and then
resell these solutions to their customers, are called Value Added Resellers
(VARs). Telecomm was identified as one of the 500 largest VARs in the country in
VAR Business Magazine's 1998 annual industry report. The original manufacturers
in Telecomm's product line include Microsoft, Ascend, Intel, Adtran, Cisco,
Amdahl and Citrix. These manufacturers are recognized throughout the industry
for providing high quality products and innovative software. Telecomm's value
added services include network consultation, design, installation, maintenance
and repair services.
All of Telecomm's product lines are complementary. The traditional
separation of voice and data communications and transmission is no longer valid.
Much of the voice transmitted over public and private networks is now dispatched
as digital packets utilizing the same protocols as data communications. In fact,
several of the products Telecomm markets will switch both voice and data.
Year 2000 Technology
Based upon a review by management, the Company has completed its
Year-2000 compliance requirements on all of its major internal systems through
software upgrades. The Company expects these upgrades to enable the systems to
properly process transactions relating to the year 2000 and beyond. The Company
has assessed third party issues to determine what impact, if any, they will have
on the Company's operations with respect to the Year 2000 issues.
All of Telecomm's major vendors have indicated that they are currently
Year 2000 compliant or will be by December 1999. However, the Company will
continue to evaluate whether additional corrective action will be necessary to
address Year 2000 issues.
9
<PAGE>
THREE MONTHS ENDED MARCH 31, 1999 vs. THREE MONTHS ENDED MARCH 31, OF 1998
The Company's net revenues decreased 28% to $3.9 million for the three
months ended March 31, 1999 from $5.5 million in the comparable 1998 period.
This decrease is attributable primarily to the restructuring of the Company's
Sales and Marketing department and events associated with or arising from such
restructuring. A comparison of the periods with respect to allocation of total
net revenues is as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31,1999 March 31, 1998
<S> <C> <C>
Sales of equipment and related services 40% 50%
Sales of network services 57% 45%
Long distance and other services 3% 5%
</TABLE>
Net revenues from equipment sales and related services decreased 43% to
$1.6 million during the three months ended March 31, 1999 from $2.7 million in
the three months ended March 31, 1998. Of the $1.6 million for the quarter, $1.2
million relates to voice equipment sales and services and $ .4 million relates
to data equipment sales and services.
Net revenues from network services sales decreased 10% to $2.3 million
in the three months ended March 31, 1999 from $2.5 million in the comparable
period for 1998. Of the $2.3 million for the quarter, $1.0 million related to
voice network services and $1.3 million related to data network and services.
Net cost of commissions, contractor fees and related expenses decreased
$.7 million to $1.6 million in the three months ended March 31, 1999, a 31%
decrease from such expenses of $2.3 million in the comparable period of 1998.
The decrease was primarily due to the reduction in sales revenue. As a
percentage of net revenues, these expenses decreased to 42% during the three
months ended March 31, 1999 from 43% during the comparable period of 1998. This
decrease is primarily due to the shift in the allocation of revenues from
equipment sales and related services to network service revenue during the three
months ended March 31, 1999.
Selling, general and administrative expenses ("SG&A") decreased $.3
million to $2.3 million in the three months ended March 31, 1999, a 13% decrease
from SG&A expenses of $2.6 million in the comparable 1998 period. As a
percentage of net revenues, these expenses increased to 60% during the three
months ended March 31,1999, from 49% during the three months ended March
31,1998. This increase is primarily a result of expenses incurred on behalf of
NetVision.Com Inc., the Company's newly-created subsidiary, and the Company's
continuing efforts to consolidate and streamline operations.
In the three months ended March 31, 1999, interest expense increased by
$82,000 or 117%, to $152,000 from $70,000 in the comparable 1998 period. The
increase in interest expense was primarily a result of increased borrowings
under the Company's credit facility in order to support the working capital
needs of equipment sales and long-term receivables.
Income from operations before income taxes decreased by $576,000 to
$(211,000) in the three months ended March 31, 1999, a decrease of 158% from
$365,000 in the comparable 1998 period, primarily for the reasons stated above.
10
<PAGE>
The provision for income taxes decreased by $230,000 to a benefit of
$85,000 in the three months ended March 31, 1999, compared to $145,000 in the
three months ended March 31, 1998, due to the loss recognized in the first
quarter of 1999.
As a result of the foregoing, the net loss for the three months ended
March 31, 1999 was $127,000, a decrease of $356,000, from the net income for the
three months ended March 31, 1998 of $219,000.
In 1998, Telecomm underwent major changes to consolidate and centralize
the Company's operations and redefine the information technology and accounting
departments negatively impacting short-term profitability. Management believes
these changes will enable the company to effectively manage its corporate
infrastructure and introduce new technology to its customer base.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund the internal
growth of long-term network service receivables, voice and data hardware sales,
the infrastructure to support and monitor the increased sales volume, and new
acquisitions.
Net cash provided by operating activities was $.1 million for the three
months ended March 31, 1999 compared to net cash used in operating activities of
$.4 million for the comparable period in 1998. The change was primarily due to
an decrease of $1.1 million in trade accounts receivable in the three months
ended March 31, 1999 compared to a $.2 million increase in the comparable 1998
period and a $.2 million increase in inventory for the three months ended March
31, 1999 compared to a $.3 million increase in the comparable 1998 period.
Customer deposits increased $.2 million for the three months ended March 31,
1999 compared to a $14,000 increase in the comparable 1998 period. These changes
are attributable to the Company's increased emphasis on collection of
receivables and strict credit policies.
The net operating cash provided was offset by decreases in accounts
payable of $.4 million, accrued commissions and bonus of $.4 million and other
accrued expenses of $.2 million in the three months ended March 31, 1999 as
compared to an increase in accounts payable of $.5 million and a decrease in
accrued commissions and bonus of $.2 million for the comparable 1998 period.
Net cash used in investing activities was $.1 million for the three
months ended March 31, 1999 compared to $.1 million for the comparable 1998
period. The use of cash for investing activities was primarily attributable to
the purchase of property and equipment. This is consistent with 1998, except the
company used cash of $10,000 for an acquisition in 1998.
Net cash used in financing activities was $44,000 for the three months
ended March 31, 1999 compared to net cash provided by financing activities in
the amount of $.6 million in the comparable 1998 period. The cash use is
attributable to the decrease in long term debt. In 1998, the net cash provided
by financing activities was due to the increase in short-term borrowings from
the line of credit.
The change in the commission payment structure by Ameritech, which was
implemented in June 1996, and Ameritech's continuing implementation of a new
billing and customer record system, lengthen the collection period of
receivables, adversely affecting the Company's working capital and cash flow.
11
<PAGE>
In 1999, Ameritech, under the new payment structure, increased the
percentage of compensation at the time of installation and simplified its
payment approach using standard flat rates on voice and usage products.
Management of Telecomm believes that cash flow will continue to be affected as
long as the existing Ameritech commission payment structure remains, however,
the changes for 1999, as indicated above, will enhance working capital by
reducing the delay in collection. Furthermore, the growing annuity stream of the
Ameritech long-term receivables should begin to help offset this situation in
future years.
Because of the Company's emphasis on equipment sales and related
services, an increase in inventory and trade credit is expected. Trade credit
arises from the willingness of the Company's creditors to grant payment terms
for inventory purchases. Although the Company has obtained favorable payment
terms on its trade credit from its vendors, there is no assurance that the
Company will be able to obtain such terms in the future.
The Company may also seek to obtain additional sources of funding,
including additional debt or equity financing as the Company continues to grow.
There is no assurance that the Company will obtain such additional funds or,
that if obtained, such financing will be on terms favorable to the Company.
Lastly, the Company continues to pursue and develop the opportunities
associated with its wholly-owned subsidiary, NetVision.Com Inc., as described in
greater detail in the Company's Form 10-KSB for the fiscal year ended December
31, 1998 and Proxy Statement for the1999 Annual Meeting of Stockholders to be
held on July 15, 1999.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report that are not historical
facts are forward-looking statements that are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. These risks and uncertainties
include, but are not limited to:
o the dependence of the Company on one principal supplier, Ameritech, for a
significant portion of its revenues;
o the effects of the proposed acquisition of Ameritech by Southwestern Bell
Communications;
o changes in Ameritech's commission payment plan and its billing and record
system, adversely affecting the Company's working capital and long-term
accounts receivable;
o changes in Ameritech's Distributor Agreement;
o the ability of the Company to collect any and all amounts due and payable
from Ameritech, including but not limited to, outstanding and future up
front commissions and outstanding and future residual payments;
o fluctuations in quarterly revenues and earnings of the Company depending on
when Ameritech objective attainment targets are met;
o the ability of the Company to obtain additional financing to support its
growth;
o changes arising from greater competition in local telephone service
attributable to passage of the Telecommunications Act of 1996;
o the introduction of competitors into the market including but not limited
to competitors with financial and other reserves significantly greater than
those of Telecomm;
o the ability of the Company to integrate the operations of recent
acquisitions into the Company;
o the availability of other acquisitions and the integration of the
operations of those acquisitions, if completed, into the Company, and the
availability of financing for such acquisitions;
12
<PAGE>
o the ability of Telecomm to continue to grow its sales force internally and
to expand its product mix more toward the hardware business, particularly
in light of the increased competition in the telecommunication markets in
which Telecomm operates;
o the loss or inability to attract key personnel;
o the ability of the Company to secure a reasonably high percentage of its
outstanding accounts receivable;
o and, general economic conditions, and other risk factors discussed herein.
In addition, any of the risks detailed above may have an impact on the
Company's ability to obtain additional working capital funds under its current
credit facility. An investor or potential investor in the Company must consider
these risks.
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
10.1 Ameritech Authorized Internet Solutions Sales Representative
Agreement between the Company and Ameritech dated March 30, 1999
27. Financial Data Schedule
B. REPORTS ON FORM 8-K
None
SIGNATURES
- ----------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TELECOMM INDUSTRIES CORP.
By: /s/ James M. Lowery
------------------------------
James M. Lowery, Chairman
And: /s/ Mark A. Travi
-------------------------------
Mark Travi, Chief Financial and
Accounting Officer
Date: May 17, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-KSB FOR THE
QUARTER ENDING MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-QSB.
</LEGEND>
<CIK> 0000087888
<NAME> TELECOMM INDUSTRIES CORP.
<MULTIPLIER> 1
<CURRENCY> dollars
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,884,237
<ALLOWANCES> 0
<INVENTORY> 1,788,983
<CURRENT-ASSETS> 5,878,109
<PP&E> 2,471,683
<DEPRECIATION> 913,253
<TOTAL-ASSETS> 15,312,242
<CURRENT-LIABILITIES> 5,505,419
<BONDS> 5,799,624
0
0
<COMMON> 126,508
<OTHER-SE> 3,514,621
<TOTAL-LIABILITY-AND-EQUITY> 15,312,242
<SALES> 0
<TOTAL-REVENUES> 3,924,758
<CGS> 0
<TOTAL-COSTS> 1,640,976
<OTHER-EXPENSES> 2,342,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,620
<INCOME-PRETAX> (211,440)
<INCOME-TAX> (84,600)
<INCOME-CONTINUING> (126,840)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (126,840)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
EXHIBIT 10.1
AMERITECH
AUTHORIZED INTERNET SOLUTIONS SALES REPRESENTATIVE AGREEMENT
Between
AMERITECH
AND
Telecomm Industries, Inc.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
<PAGE>
TABLE OF CONTENTS
Recitals.....................................................................1
Business Purpose.............................................................1
ARTICLE 1....................................................................1
APPOINTMENT...............................................................1
ARTICLE 2....................................................................4
TERRITORY.................................................................4
ARTICLE 3....................................................................4
EXCLUSIVITY...............................................................4
ARTICLE 4....................................................................4
TERM andTERMINATION.......................................................4
ARTICLE 5....................................................................6
AUTHORIZEDSALES REPRESENTATIVE DUTIES.....................................6
ARTICLE 6....................................................................9
AMERITECH'S DUTIES........................................................9
ARTICLE 7....................................................................9
SALES AND COMMISSION......................................................9
ARTICLE 8...................................................................11
THE PARTIES'RELATIONSHIP.................................................11
ARTICLE 9...................................................................11
TRADEMARKS AND TRADE NAMES...............................................11
ARTICLE 10..................................................................13
OWNERSHIP OF INFORMATION AND CONFIDENTIALITY.............................13
ARTICLE 11..................................................................16
RIGHT TO SET-OFF.........................................................16
ARTICLE 12..................................................................16
RIGHT TO AUDIT AND INSPECT SALES REPRESENTATIVE'S RECORDS................16
ARTICLE 13..................................................................16
AGREEMENT NOT TO COMPETE.................................................16
ARTICLE 14..................................................................17
NOTICE...................................................................17
ARTICLE 15..................................................................18
ASSIGNMENT...............................................................18
ARTICLE 16..................................................................18
GENERAL TERMS...........................................................18
Exhibit A TERRITORY....................................................20
Exhibit B AMERITECH PRODUCTS...........................................21
Exhibit C COMMISSION...................................................22
1.0 General............................................................22
2.0 Upon Termination...................................................24
3.0 Commission Calculation Methodology.................................25
4.0 Partnering.........................................................26
5.0 Centrex Product Family.............................................26
6.0 Eligible Data Products.............................................29
7.0 Contract Upgrade or Migration......................................31
Exhibit D CODE OF BUSINESS CONDUCT.....................................33
Exhibit E HOUSE ACCOUNTS...............................................34
Exhibit F SALES REPRESENTATIVE ANNUAL OBJECTIVE........................35
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
<PAGE>
AUTHORIZED INTERNET SOLUTIONS SALES REPRESENTATIVE AGREEMENT
BETWEEN AMERITECH
AND
Telecomm Industries, Inc.
This Authorized Internet Solutions Sales Representative Agreement
("Agreement") between Ameritech Services, Inc., through its Ameritech
Information Industry Services division, a Delaware corporation, with office at
350 N. Orleans, Chicago, Il. 60654 (hereinafter "AIIS"), and Telecomm
Industries, Inc. a Delaware Corporation (hereinafter "Ameritech Authorized
Internet Solutions Sales Representative" or "AISR" or "Sales Representative").
This Agreement is effective January 1st, 1999
Recitals
WHEREAS, Ameritech, on behalf of its affiliates, is engaged in marketing and
selling Ameritech brand telecommunications products and services to Internet
Services Provider customers and desires to appoint independent sales
representatives to market and solicit orders for Ameritech Products (as
hereinafter defined);
WHEREAS, Sales Representative represents and warrants that it is qualified to
market and sell Ameritech's Products to Internet Service Providers and has
sufficient knowledge of Ameritech's products to do so;
NOW, THEREFORE, in consideration of the covenants set forth herein, the parties
agree as follows:
Business Purpose
Ameritech and Sales Representative enter into this product marketing
agreement for the purpose of facilitating the marketing and sale of certain
Ameritech retail products and services to a very specific market the companies
deemed by Ameritech to be Internet Service Providers ("ISP") in the Territory
(as defined hereinafter) to facilitate the servicing of those ISP accounts after
the sale, and to provide market coverage and market penetration of Ameritech's
retail products and services in the Territory. The Sales Representative acts
hereunder as an independent sales representative of Ameritech's Products, and
the sales made hereunder shall always be at the prices and rates Ameritech sets
as retail prices for its business customers.
ARTICLE 1
APPOINTMENT
Section 1.1.......Grant. Subject to the terms and conditions of this
Agreement, Sales Representative is hereby appointed as an authorized sales
representative of Ameritech Products (as hereinafter defined) in the geographic
Territory (as hereinafter defined). For purposes of this Agreement, the
activities of marketing, promoting and soliciting orders for Ameritech Products,
and the servicing of Ameritech customer accounts pursuant to the terms of this
Agreement shall collectively be referred to herein as "Market" or "Marketing".
Sales Representative's right to Market is limited to the Marketing of products
and services within the "Territory" which are expressly defined as "Ameritech
Products" under Exhibit B.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
1
<PAGE>
Section 1.2.......Non-exclusive. Sales Representative's appointment
hereunder is non-exclusive. Nothing contained herein shall be construed to
prohibit Ameritech from selling or servicing any of Ameritech Products or other
products and services in the Territory in any manner it sees fit. In addition,
Ameritech reserves all rights not granted herein, including the right to appoint
others to Market its products and services in the Territory, and to send its own
or third party technical or sales personnel to any place inside or outside the
Territory to assist its independent sales representatives or distributors in
contacting customers (potential or otherwise), servicing accounts, soliciting
business, or promoting the sale of its products and services.
Section 1.3.......Sales Representative's Sales Personnel. The parties'
relationship is set forth under Article 8 of this Agreement. Sales
Representative shall not use any sales person to perform on its behalf hereunder
unless said sales person has been registered by Ameritech as qualified to Market
its Product. Ameritech reserves the right to set minimum qualification levels
for sales personnel at its sole discretion and Ameritech will notify Sales
Representative in writing of all such qualifications.
Section 1.4.......No Authority to Bind. Sales Representative shall have
no authority to bind Ameritech by contract or otherwise, or make representations
as to policies or procedures of Ameritech other than as specifically and
expressly authorized by this Agreement.
Section 1.5.......Third Party Sales Personnel. Sales Representative
hereby acknowledges and agrees that Ameritech has the sole and exclusive right
to appoint and authorize others to function and represent themselves as
Ameritech Authorized Sales Representatives or Ameritech Authorized Distributors.
Sales Representative shall not delegate its appointment or in any way authorize
anyone to Market or represent themselves as an agent of Ameritech or as an
Ameritech Authorized Sales Representative. In the event Sales Representative
utilizes independent sales representatives to perform on Sales Representative's
behalf hereunder, such sales representatives must at all times represent
themselves as sales representatives of the AISR and not as Authorized Sales
Representative of Ameritech. Ameritech shall not be liable to pay any fees or
compensation to any independent sales representative acting on behalf of Sales
Representative, or to pay any other party, including, but not limited to the
Sales Representative, for sales generated by any unauthorized representative.
In addition, processing orders for unauthorized or unregistered
individuals shall be deemed a material breach of this Agreement, and in such a
case Ameritech may terminate this Agreement immediately for cause, and pursue
all other rights or remedies it may have in law or equity.
Section 1.6.......Sales Representative Responsibility. Sales
Representative shall be held responsible for the actions or omissions of each
sales representative acting on its behalf, whether the sales representative is
an employee, agent or independent sales representative of Sales Representative.
Sales Representative shall require that its employees, agents, contractors and
independent representatives comply with the requirements of this Agreement to
the same extent as the Sales Representative has agreed to comply, including
without limitation, the obligations hereunder regarding Ameritech's logo and
other marks (See Article 9), and the ownership and confidentiality of
information (See Article 10).
Section 1.7.......House Accounts. Ameritech reserves the right to
identify certain accounts as "House Accounts", and Sales Representative is not
authorized to, and shall not Market Ameritech Products to such accounts. A list
of House Accounts is set forth under Exhibit D of this Agreement, incorporated
by reference herein, and Ameritech, at its sole discretion, may modify Exhibit D
from time-to-time via the Ameritech specified web site and bulletin board, and
each modification will be deemed incorporated herein as if originally set forth
herein, and the modification shall be effective on the date the modification is
posted on the web site and bulletin board. Ameritech will provide the Sales
Representative information and guidelines to access of the web site and bulletin
broad.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
2
<PAGE>
a) In the event Ameritech newly designates an account as a House
Account, Sales Representative will have ninety (90) days from the date of such
designation to close all pending sales activity, and Sales Representative will
be paid commissions for sales made to that account within said ninety (90) day
period. To be eligible for this exception to the House Account rule, Sales
Representative must notify Ameritech in writing within three (3) business days
of the new designation by Ameritech that Sales Representative has pending sales
activity on that account. The writing must include the account name, telephone
number, the Product(s) being marketed, and the current stage of the sale. Sales
Representative will not be awarded commissions (Upfront or Residual) under this
subsection on any House Account after ninety (90) days from the date the account
is so designated.
Section 1.8.......Internet Service Provider Customers; Retail Business
Prices.The parties hereto acknowledge and agree that this Agreement is solely
for the purpose of Marketing of Ameritech Products to Ameritech's Internet
Service Provider customers at prices and rates Ameritech deems as its retail
prices or rate for sales to business customers. Unless an exception applies, if
an account is "marked' by Ameritech according to its practices and procedures as
assigned to Ameritech's Information Industry Services division, and Ameritech
deems the customer to be an Internet Service Provider, the Sales Representative
may Market to that account under this Agreement..
Section 1.9.......Accepts Appointment. Sales Representative hereby
accepts the appointment granted above and agrees to comply with the terms and
conditions of the appointment as set forth in this Agreement.
Section 1.10......Reseller of Ameritech Products. AISR is prohibited
from acting as a reseller of Ameritech products and services as that term is
defined under applicable law or as it is used in the telecommunications
industry.
Section 1.11......Sales Representative's Acknowledgement. Sales
Representative acknowledges that Ameritech's right to Market Products, to
appoint others to Market its Products and to license the Marks pre-date this
Agreement and are not limited or changed by the terms of this Agreement. Sales
Representative agrees that by acknowledging those right the parties do not
intend to make Ameritech's exercise of such rights subject to rules applicable
to contractual performance or the exercise of contractual discretion under this
Agreement.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
3
<PAGE>
ARTICLE 2
TERRITORY
Section 2.1.......Geographic Territory. Sales Representative has the
right to Market the Products within the Territory set forth under Exhibit A
hereto, incorporated by reference herein.
The term "Territory" shall mean only that geographic territory set
forth under Exhibit A when used in this Agreement or otherwise related to the
marketing arrangement hereunder.
Section 2.2.......Out-of-Territory Sale. Sales Representative is
prohibited from marketing, selling or representing itself as an Ameritech sales
representative outside of the Territory.
Section 2.3 Branch Locations. At all times during this Agreement, Sales
Representative must maintain in the Territory a physical presence and a formal
place of business from which it carries out its Marketing activities.
Section 2.4.......Material Breach. Any violation by Sales
Representative of the provisions and conditions of this Article 2 will
constitute a material breach, and Ameritech may terminate this Agreement
immediately for cause.
ARTICLE 3
EXCLUSIVITY
Ameritech values its customer relationships, and, as provided elsewhere
in this Agreement, intends to share with Sales Representative Ameritech
Confidential Information regarding its customers and customer relationships,
including, but not limited to, business and product plans, customer relationship
information and other sensitive customer data. In the event Ameritech knows or
has a reasonable belief that Sales Representative is marketing, selling or in
some way promoting the sale and customer use of a telecommunications services,
which is competitive with a Product, and, unless such activity is expressly
provided for elsewhere in this Agreement, Ameritech may terminate this Agreement
for cause immediately. Ameritech's right to terminate under this Article is in
addition to any other right or remedy it may have at law or equity.
ARTICLE 4
TERM and TERMINATION
Section 4.1.......Term. This agreement is effective on January 1, 1999
or upon full execution by both parties, whichever is later. This Agreement will
expire on January 1, 2000 ("Initial Term") unless terminated earlier pursuant to
terms of this Agreement. This Agreement will automatically renew for subsequent
one (1) year terms ("Renewal Term") unless one of the parties elects not to
renew, and provides written notice to the other party no later than thirty (30)
days prior to the expiration of the Initial Term. Ameritech reserves the right
to modify terms of this Agreement upon renewal, including, but not limited to,
Commission or Territory.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
4
<PAGE>
If a party exercises this right not to renew, the Agreement will expire
naturally at the end of the Initial Term, and all rights and obligations of the
parties cease on the expiration date unless elsewhere herein expressly states
that the right or obligation survives expiration or termination of this
Agreement.
Section 4.2.......Termination.
a) This Agreement may be terminated by Ameritech in whole or in part
without cause and for convenience upon not less than thirty (30) days written
Notice to the Sales Representative;
b) This Agreement may be terminated by Sales Representative for any
reason upon not less than thirty (30) days written Notice to Ameritech;
c) This Agreement may be terminated immediately where expressly
provided for elsewhere in this Agreement. In such cases, Ameritech will notify
the Sales Representative in writing, and the termination shall be for cause, and
the effective date of the termination shall be the date of notice;
d) This Agreement may be terminated by Ameritech for cause in the event
of unsatisfactory performance including, but not limited to, unsatisfactory
sales performance or violation of Section 5.4 of this agreement on the part of
the Sales Representative. Ameritech will provide written notice to Sales
Representative of unsatisfactory performance, and such notice will provide the
period of time available to the Sales Representative to cure the unsatisfactory
performance. If Sales Representative does not cure in the specified time, the
Sales Representative will be given written notice of its termination for cause;
and,
e) Notwithstanding the foregoing Sections in this Article, it is agreed
that Ameritech may terminate this Agreement immediately without Notice in the
event of:
(i) an assignment by the Sales Representative for the benefit
of creditors;
(ii) the institution of voluntary or involuntary proceedings
against the Authorized Sales Representative in bankruptcy, or under any
other insolvency or similar law which is not dismissed within sixty
(60) days;
(iii) the dissolution of the Authorized Sales Representative;
(iv) an attempted assignment of this Agreement by the
Authorized Sales Representative without Ameritech's prior written
consent as required under Article 16 of this Agreement;
(v) Ameritech becomes aware of a sale, transfer or
relinquishment of a substantial interest in the ownership of Sales
Representative, or a substantial change in management of the Sales
Representative;
(vi) a Seriously Delinquent status on any Sales Representative
landline or PrePaid account with Ameritech which is not cured by Sales
Representative upon notice of the Seriously Delinquent, and which
cannot be cured through set-off provided for under this Agreement.
"Seriously Delinquent" is determined solely by Ameritech at its
discretion but in no event will a delinquency of less than ninety (90)
days be considered a "Seriously Delinquent";
(vii) submission by Sales Representative, its employer, agent
or independent sales representative of a sales agreement or sales order
or any other document which is subsequently found to contain forged
customer signatures or which the customer denies any knowledge of
placing an order with Sales Representative, or of false or fraudulent
reports or statements; or
(viii) Sales Representative violates in any way the terms or
limitations of its appointments as set forth under Article 1, or
violates in any way Sales Representative's obligations and duties under
Article 5.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
5
<PAGE>
Section 4.3.......Upon Expiration or Termination.
(a) Upon expiration or termination of this Agreement, Sales
Representative shall no longer be an Authorized Internet Solutions Sales
Representative of Ameritech Products and Sales Representative must not represent
itself as such to others;
(b) Upon expiration or termination of this Agreement, Sales
Representative agrees to provide to Ameritech a detailed report of all work in
progress under this Agreement within three (3) business days from the
termination or expiration of this Agreement, including, without limitation,
pending sales and installations;
(c) Upon expiration or termination of this Agreement, Sales
Representative shall remove and return to Ameritech any material, including,
without limitation, manuals, catalogues, brochures, pamphlets, promotional and
training materials, or destroy such materials at Ameritech's sole option;
(d) Upon expiration or termination of this Agreement, the Sales
Representative shall remove and discontinue the use of any sign or any other
designation containing any of Ameritech's logos, trademarks or trade names,
including, without limitation, the designation of "Authorized Internet Solutions
Sales Representative". Should such trademarks or trade names be printed on any
of the Sales Representative's business cards, letterhead or other written
documents, the written documents shall promptly be destroyed, and Sales
Representative must reprint the materials so as to remove any such trademarks or
trade names of Ameritech;
(e) Upon expiration or termination of this Agreement, Sales
Representative hereby has the duty to notify all publishers and others who may
identify, list or publish Sales Representative's identity or name as a marketer,
promoter or supporter of Ameritech Products that such identification or
publication is prohibited as of the date this Agreement is terminated. For
purposes of this Agreement, Publishers means, but is not limited to, the
publisher of telephone directories, yellow pages, association directories, or
membership rolls; and,
(f) Certain Exhibits and Attachments set forth terms which apply upon
termination of this Agreement, and Sales Representative and Ameritech hereby
acknowledge their agreement to those terms.
Section 4.4.......Account Transfer.Upon termination of this Agreement,
Ameritech, at its sole discretion, will designate itself or another Sales
Representative to act as successor to Sales Representative in providing
Ameritech Products to ISP customers "in progress" at the time of termination,
and to service those ISP customers who subscribed to Ameritech Products through
Sales Representative when this Agreement was in effect.
Section 4.5.......Commissions Upon Termination. Upon termination of
this Agreement, Exhibit B governs the treatment of commissions, including,
without limitation, residuals which may apply to Sales Representative sales made
during the term of this Agreement.
ARTICLE 5
AUTHORIZED SALES REPRESENTATIVE DUTIES
Section 5.1.......Standard of Conduct. Sales Representative agrees to
promote, encourage and increase the sales to, and acceptance by, ISP customers
of the Ameritech Products within the Territory. Sales Representative will
fulfill this duty in a professional and diligent manner. Sales Representative
agrees that Ameritech's business reputation is one of its most valuable assets.
In performing its duties under this Agreement, Sales Representative shall
observe the highest standard of integrity and fair dealing with members of the
public. Sales Representative shall do nothing which would tend to discredit,
dishonor, reflect adversely upon or in any manner injure the reputation of
Ameritech.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
6
<PAGE>
Section 5.2.......Application. Sales Representative must complete and
sign an application form and return it to Ameritech for acceptance. Ameritech
hereby acknowledges that an application may have already been submitted by Sales
Representative, and the parties agree that any prior applications are hereby
superceded and replaced by the one which is submitted pursuant to this Section.
Ameritech will review and accept the application according to its standard
practice, and Ameritech will not countersign this Agreement unless and until an
application is accepted by Ameritech.
Section 5.3.......Sales Achievement. The Sales Representative shall
satisfy minimum sales performance requirements as set forth in Exhibit F,
incorporated by reference herein, which may be modified or amended during the
term of this Agreement upon thirty (30) days written notice by Ameritech to
Sales Representative, and each such modification or amendment shall be deemed to
have been included as if originally set forth under in Exhibit F.
Section 5.4 ......Compliance. Sales Representative shall comply with
all Ameritech policies, procedures and practices. This includes, but is not
limited to: practices and procedures regarding order and subscriber agreement
processing; accuracy of submitted orders and agreements; Product methods and
procedures; advertising placement and quality rules; commission submission,
payment and inquiry guidelines; Ameritech Identity Guidelines; and, Ameritech
Authorized Sales Representative Policies and Practices.
Section 5.5.......Code of Business Conduct. Sales Representative
understands and agrees that any violation of the Ameritech Code of Business
Conduct by Sales Representative's employees, agents, independent sales,
representatives or contractors will be considered by Ameritech a violation of
this duty by the Sales Representative.
Section 5.6.......Inquiries, Quotations and Customer Relations. Sales
Representative shall promptly transmit any customer inquiries regarding any
matter related to Ameritech or Ameritech Products to Ameritech in a manner
prescribed by Ameritech.
Section 5.7.......Customer Information. Sales Representative agrees to
provide to Ameritech the names and addresses of all purchasers of Ameritech
Products through Sales Representative, and Sales Representative agrees that such
information is Confidential Information of Ameritech. The use and disclosure of
Ameritech Confidential Information is governed by the restrictions set forth
under Article 10 of this Agreement.
Section 5.8.......Financial Statements. Sales Representative shall
furnish to Ameritech such financial statements as may be reasonably requested by
Ameritech's credit manager for Ameritech's confidential use in evaluating the
Sales Representative's ongoing participation in the Sales Representative
Program.
Section 5.9.......Indemnity. Sales Representative agrees to indemnify,
defend and hold Ameritech harmless from any claims or losses, including
attorneys' fees and expenses, which arise out of any act or omission of the
Sales Representative, its employees, agents, representatives, or contractors, in
connection with or related to the Sales Representative's marketing, promotion,
or demonstration of Ameritech's products or services. In addition, and not in
derogation of the foregoing, Sales Representative agrees to indemnify and hold
Ameritech harmless from any claim or loss (including attorneys' fees and
expenses) which arise or is in connection with any statements (whether oral or
written) made with respect to the Ameritech's products or services, and from any
claim or loss which arises from or in connection with any representation or
warranty given, or allegedly given, by Sales Representative regarding
Ameritech's products or services, or regarding Sales Representative's right to
market and sell Ameritech's products and services, whether such representation
or warranty is oral or written, express or implied.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
7
<PAGE>
In addition to, and not in derogation of the above, Sales
Representative agrees to indemnify, defend and hold Ameritech free and harmless
from any loss, damage, liability, cost or expense, including legal fees and
expenses, for which Ameritech becomes liable by reason of acts or omissions of
Sales Representative, its employees, agents, representatives and contractors
during the course of their performance hereunder, except to the extent that such
act or omission was the result of Ameritech's gross negligence.
Section 5.10......C.P.N.I. Sales Representative must comply at all
times with Ameritech's policies on the use of information deemed by Ameritech to
be Customer Proprietary Network Information ("CPNI") under the
Telecommunications Act of 1996.
Section 5.11......Duty. Sales Representative assumes full
responsibility and liability for the acts of its employees, agents, independent
sales representatives and contractors, and for their supervision, daily
direction and control. Sales Representative shall require compliance with the
duties and obligations of this Agreement to the extent those duties or
obligations apply to the acts of the employee, agent, contractor or
representative.
Section 5.12......Insurance. Sales Representative will at all time
during the term of this Agreement, at Sales Representative's sole expense,
maintain insurance which is appropriate in type and amount for its performance
hereunder, including, but not limited to, automobile insurance and comprehensive
liability insurance against claims for bodily and personal injury, death,
property damage and all other harm caused by or occurring in connection with
Sales Representative's, its employees', representatives' and agents' actions,
omissions or misrepresentations. Upon request of Ameritech, Sales Representative
will furnish proof which is satisfactory to Ameritech that insurance coverage
required under this Agreement is in effect. Ameritech reserves the right to deem
in its sole discretion whether or not the insurance is "appropriate in type and
amount".
Section 5.13......Network Forecast.In order to provide ISP customers
with the highest level of service possible, it is necessary that Sales
Representative provide Ameritech with forecasts of each ISP customer's
requirements. For purposes of this duty and this Section only, "ISP Customer"
means an ISP to whom Sales Representative has received commission for a sale in
the ninety (90) days prior to the Network Forecast submission. This means that
each quarter Sales Representative must provide to their Distributor Manager a
report which details the thirty (30), sixty (60), ninety (90), and three hundred
sixty-five (365) day network facilities requirements for each ISP Customer, and
the submission must be in an Ameritech required format.
Section 5.14......Facilities and Materials. Sales Representative hereby
represents and warrants that it has adequate facilities, equipment, means of
transportation, sales force, marketing capabilities, and business office and
clerical staff necessary to perform the services and activities required by this
Agreement. Ameritech reserves the right to obtain access to Sales
Representative's facilities for the purpose of examining the adequacy of the
facilities and materials. Such access will be granted by Sales Representative
provided it is during Sales Representative's regular business hours. Sales
Representative also represents that none of the above items have been
specifically acquired or obtained for the performance of this Agreement.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
8
<PAGE>
ARTICLE 6
AMERITECH'S DUTIES
Section 6.1.......Sales Materials. Ameritech shall from time-to-time
furnish catalogues, brochures, pamphlets, promotional and other materials
pertaining Ameritech Products to assist Sales Representative in promoting and
developing the sale and acceptance of the products and services in the
Territory. Sales Representative may request additional sales materials,
Ameritech will furnish them, and a charge may sometimes apply.
Section 6.2.......Duty to Promote. Ameritech agrees to use reasonable
efforts to promote, encourage and increase the marketing efforts of its
Ameritech Products through advertising and other marketing initiatives.
Section 6.3.......Payment of Commissions. Ameritech shall pay
commissions to Sales Representative pursuant to the terms, conditions and
schedule set forth under Exhibit C.
ARTICLE 7
SALES AND COMMISSION
Section 7.1.......Exhibit C- Commissions. For Sales Representative's
services performed hereunder, Ameritech agrees to pay Sales Representative
commission pursuant to Exhibit C hereto, incorporated by reference herein, as
may be amended from time-to-time. Commissions are earned by Sales Representative
at the time of payment by Ameritech. Ameritech's commission payment procedures
and practices are governed by Ameritech Sales Representative commission
practices and procedures which are established by Ameritech in its sole
discretion, and may be modified by Ameritech at any time for any reason,
including, but not limited to, more efficient handling of payment inquiries and
tracking.
Section 7.2.......Sales Within Territory. Ameritech shall pay
commission to Sales Representative on sales made by Sales Representative within
the Territory for all Ameritech Products, and no commission will be paid for
sales outside of the Territory.
Section 7.3.......Internet Service Provider.As provided elsewhere in
this Agreement, the purpose of this Agreement is to benefit each party from the
solicitation of orders for Products from Internet Service Provider customers of
Ameritech at retail business prices. Therefore, Ameritech will not pay
commission on any product sold to a business customer who is not designated as
an Internet Service Provider by Ameritech, or on a sale in which the product
sold is at a rate or price which is not deemed by Ameritech to be a retail
price. Nonpayment of commission under this subsection is in addition to any
right or remedy Ameritech may have available in law or in equity for a violation
of this Section.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
9
<PAGE>
Section 7.4.......Special Arrangements. Ameritech acknowledges that the
dynamics of the telecommunications industry and the Internet Service Provider
market may result in specialized sales. Sales Representative may request unique
commission handling for a specialized sale, and Ameritech reserves the right in
its sole discretion to accept or reject the Sales Representative's request, to
set the commission payment Sales Representative will receive if the sale is
finalized, and establish the payment schedule which will apply to such a
payment. The decision by Ameritech on a specialized arrangement is final and not
appealable. To be eligible for unique commission handling, Ameritech must
consent in writing to the special arrangement prior to the close of the sale. No
exceptions will apply to this condition.
Section 7.5.......Commission Values. Ameritech is solely responsible
for the determination and calculation of the commission to be paid on an
individual sale, and Ameritech's commission award to Sales Representative,
absent arithmetic errors, is final and not appealable. Ameritech reserves the
right to pay a commission amount different from that which is set forth under
Exhibit C, provided that modification is reasonable, and Ameritech reserves the
right to establish a payment schedule for such a commission award.
Section 7.6.......Partnering. Ameritech does not discourage its AISRs
from working together or with sales representative employees of Ameritech on a
specific sale if it is in the best interest of Ameritech, provided Ameritech is
notified and approves of such partnering prior to any sales proposal being
submitted to the ISP In the event of such approved partnering arrangements,
Ameritech reserves the right to establish a commission payment value and payment
schedule for such a sale without invalidating any part of this Agreement, and
such arrangement shall not be considered as establishing a precedent. Ameritech
in its sole discretion shall establish the value and commission payment
percentages due to each of the sale partners.
Section 7.7.......No Authority to Bind. Sales Representative has no
authority to bind Ameritech, and all orders, subscriber agreements and customer
contracts are subject to acceptance by Ameritech in the manner prescribed by
Ameritech. Therefore, Sales Representative shall not be paid commission on any
sale or order until the subscriber agreement or order is accepted by Ameritech
under the then-in-effect acceptance procedures. Ameritech's acceptance will not
be unreasonably withheld or delayed. Ameritech as the Product supplier has the
right to refuse any customer order for any reason Ameritech deems sufficient,
and Sales Representative shall not be entitled to any commission on any order so
refused.
Section 7.8.......Discrepancy of Commission Due and Audit. In the event
of a discrepancy between the sales reflected on the Ameritech generated Sales
Representative commission report and the sales which Sales Representative claims
were approved and processed by Ameritech, Sales Representative may request an
audit of Ameritech's commission records. The Sales Representative may employ
such assistance as it deems desirable to conduct the audit, but may not use the
assistance of: (i) a person or an entity that competes or whose employer
competes with Ameritech; (ii) that is the principal outside auditor of a
competitor of Ameritech (unless such auditor is also the Sales Representative's
principal outside auditor); or, (iii) is someone to whom Ameritech reasonably
objects to performing any such audit. Sales Representative shall cause any
person or firm retained for this purpose to execute a non-disclosure agreement
in favor of Ameritech.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
10
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If the audit reveals that Ameritech made an error in its favor which
totals twenty-five percent (25%) or more of the Sales Representative's year to
date commissions, as determined by the most current Ameritech commission report,
Ameritech will bear the expense of the audit, provided that Sales Representative
submits evidence of actual expense.
ARTICLE 8
THE PARTIES' RELATIONSHIP
Section 8.1.......Independent Representative. The parties agree that
the relationship arising from this Agreement is that of Product supplier and
independent sales representative, and the relationship arising from this
Agreement does not constitute or create an agency, joint venture, partnership,
an employee relationship or franchise between them. Sales Representative has no
authority to bind Ameritech in contract or otherwise, or to make representations
as to the policies or procedures of Ameritech other than as expressly authorized
by Ameritech. Sales Representative acknowledges and agrees that it is an
independent business with respect to its performance under this Agreement.
Section 8.2.......Identification. Sales Representative is and must at
all times hold itself out to be an independent business authorized to act as an
authorized sales representative with respect to the Ameritech Products. Unless
expressly and specifically authorized by Ameritech in writing, Sales
Representative shall not make any promise, warranty or representation on
Ameritech's behalf with respect to the Ameritech Products, or any other matter.
Section 8.3.......No Fee. Sales Representative acknowledges that it has
paid no fee to Ameritech, directly or indirectly in connection with the
appointment made by Ameritech under this Agreement.
Section 8.4.......Employees. Sales Representative, its employees,
agents, representatives and contractors are not and will not be, and shall not
be deemed to be, employees or joint employees of Ameritech, its parent or its
affiliates, and shall at no time be eligible for or apply for eligibility for
any insurance or other benefit available to an employee of Ameritech
Corporation, its subsidiaries or affiliates. Ameritech is not and will not be
responsible for worker's compensation, disability benefits, unemployment
insurance, withholding taxes, social security or any other taxes or benefits for
Sales Representative, its employees, agents, representatives and contractors.
Sales Representative is and shall be solely responsible for all federal, state,
and local taxes applicable to it, and hereby agrees to indemnify and hold
Ameritech harmless from any claim or liability therefrom.
ARTICLE 9
TRADEMARKS AND TRADE NAMES
Section 9.1.......Limited, Non-exclusive License. Ameritech hereby
grants to Sales Representative a limited, non-exclusive, non-transferable,
non-sublicenseable, royalty-free right to use the AMERITECH trade names,
trademarks, and service marks, (hereinafter, "the Marks") in the Territory in
accordance with Sales Representative's performance hereunder. This license is
conditioned on Sales Representative's complete compliance with Ameritech's
policies, practices and procedures for use of the Marks, and Ameritech's
Identity Guidelines, both which are provided to Sales Representative by
Ameritech. In addition, the Sales Representative must comply with all applicable
governmental regulations with respect to the Marks. Ameritech reserves the right
to inspect, observe, review and in any way audit the Sales Representative's use
of the Marks at any time during the term of this Agreement, and, if requested by
Ameritech, such review or audit shall take place on Sales Representative's
premises, and Sales Representative grants Ameritech access to conduct such
review during Sales Representative's normal business hours.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
11
<PAGE>
Sales Representative shall not use, and is prohibited from adopting any
of the Marks, or any part of any of the Marks as an Internet domain name or as
part of its business name, and shall not register, or seek to register any name
or mark anywhere in the world which is identical or confusingly similar to any
Mark, or so similar thereto as to constitute a colorable imitation thereof or to
suggest some association, sponsorship, or endorsement by Ameritech.
Section 9.2.......Ameritech's Rights in Marks. Sales Representative
will not alter, modify, dilute or misuse the Marks, bring them into disrepute or
challenge Ameritech's rights in them. Sales Representative shall cooperate with
Ameritech as may be reasonably necessary for Ameritech to protect, prosecute or
defend its rights with respect to the Marks.
Section 9.3.......Layout Limitations. Sales Representative's right to
use the designation of "Ameritech Internet Solutions Sales Representative" is
limited to the layout and design guidelines which are set forth in Ameritech's
Identity Guidelines. Any use of that designation which is not in complete
compliance with the use requirements and guidelines set forth in the Authorized
Internet Solutions Sales Representative Identity Guidelines will be considered a
material breach of this Agreement, and Ameritech may terminate this Agreement
upon Notice if Sales Representative does not cure the breach immediately and to
the satisfaction of Ameritech. Such termination is in addition to any other
right or remedy Ameritech may have available to it at law or equity.
Section 9.4.......Ameritech Consent Required. Sales Representative will
not combine the Marks with any other marks, names, or symbols without
Ameritech's prior written consent. The Sales Representative shall refrain from
using any name, trademark, trade name, logo, slogan, label, title or insignia,
or one confusingly similar thereto, now or hereafter owned adopted or used by
Ameritech (whether registered or unregistered) in any manner, or any medium, or
for any other reason than that approved by Ameritech, and shall refrain from any
use in any geographic area outside of the Territory.
Section 9.5.......Substantial Value. Sales Representative hereby
acknowledges the substantial value of the Marks and the goodwill associated
therewith, and acknowledges that such goodwill is a property right belonging to
Ameritech. Sales Representative recognizes that Ameritech is the owner of the
Marks, and that nothing contained in this Agreement is intended as an assignment
or grant to the Sales Representative of any right, title, or interest in or to
the Marks. Sales Representative shall not do anything which is inconsistent with
Ameritech's ownership of the Marks, and all use of the Marks by Sales
Representative shall inure to the benefit of and be on behalf of Ameritech.
Sales Representative hereby acknowledges and agrees that its use of the Marks is
limited to purposes which are necessary for its performance hereunder.
Section 9.6.......Reproduction. Sales Representative agrees that
accurate reproduction of the Marks is uppermost. Prior to use, Sales
Representative must provide Ameritech with approval samples of all, advertising,
business cards, letterhead and any other materials which bear Marks. Ameritech
will attempt to answer promptly; if Ameritech does not respond within sixty (60)
days of receipt of such materials (except advertising), they will be deemed not
approved. With respect to advertising, if Ameritech does not respond within
thirty (30) days, the advertising will be considered approved. Sales
Representative is prohibited from modifying or changing any such approved
material without first obtaining written approval.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
12
<PAGE>
Section 9.7.......Discontinue Use. Upon expiration or termination of
this Agreement, Sales Representative shall immediately discontinue use of any
Mark now or hereafter owned, adopted or used by Ameritech (whether registered or
unregistered), and destroy all printed materials (including but not limited to
business cards, letterhead, promotional and advertising materials, store
signage, vehicle signage, and customer premises stickers and signage) bearing
any of the Marks.
Section 9.8.......Indemnification. Ameritech shall indemnify and hold
Sales Representative harmless from any and all damage or expense resulting from
valid trademark infringement claims with respect to any of the Marks used by the
Sales Representative pursuant to this Agreement, provided, however, that: (a)
Ameritech is given notice within ten (10) days after the Sales Representative
received notice of such claim or suit for infringement, together with full
information with respect thereto, and complete control of the defense and any
settlement thereof; and, (b) Sales Representative's use of the Mark(s) which
gives rise to the claim is a permitted use in accordance with this Agreement.
Section 9.9.......No Other Rights. No other rights are granted to Sales
Representative to use any Mark of Ameritech or its affiliates. Further, no
licenses, warranties, or indemnificatons, express or implied, under any patents,
copyrights, or any trade secrets are granted to Sales Representative.
Section 9.10......Survival. This Article 9 and all its Sections shall
survive any termination or expiration of this Agreement.
ARTICLE 10
OWNERSHIP OF INFORMATION AND CONFIDENTIALITY
Section 10.1......Ameritech Confidential Information.Any business and
management information of Ameritech, its parent or its affiliates, including,
but not limited to, reports, product specifications, pricing, product design,
business plans, strategies and practices, marketing or technical information and
data, and information regarding or related to customers, including, without
limitation, customer segmentation strategies and placement, existing customer
account information and history and potential targeted customers, and any
material marked "confidential" or "proprietary" which is furnished or disclosed
by Ameritech or its representative is collectively deemed "Ameritech
Confidential Information". Confidential Information of Ameritech is acknowledged
herein by the parties to be a significant asset of Ameritech, and Ameritech will
disclose its Confidential Information for Sales Representative to assist Sales
Representative in its performance hereunder. Any Ameritech Confidential
Information which is disclosed to Sales Representative or otherwise learned by
Sales Representative during the term of this Agreement is deemed the exclusive
property of Ameritech. This includes, but is not limited to, customer account
information generated by Sales Representative in the course of its performance
hereunder.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
13
<PAGE>
In addition, sales information including, but not limited to, the terms
and conditions of standard contracts, sales and operational methods, business
acquisition plans; new personnel acquisition plans; and, other business affairs
of Ameritech and any of its affiliates, are Ameritech "Confidential Information"
and trade secrets.
Section 10.2......Ten Years. During the term of this Agreement and for
a period of ten (10) years thereafter Ameritech Confidential Information shall
not be disclosed by Sales Representative to any person except officers and
employees of the Sales Representative requiring the information to perform under
this Agreement. In no event shall Ameritech Confidential Information or trade
secrets be used for the benefit of the Sales Representative except in connection
with performing under this Agreement.
Section 10.3......Bound to the Same Extent as Sales Representative. The
Sales Representative shall require all officers, employees, agents, independent
sales representatives, and contractors to whom that information is available or
disclosed to by Sales Representative to agree to protect against disclosure to
others of Ameritech Confidential Information to the same extent as the Sales
Representative has agreed.
Section 10.4......Liability. The Sales Representative shall be liable
to Ameritech for damages caused by any breach of this provision or by any
unauthorized disclosure of that Confidential Information and those materials by
its officers, employees, representatives and agents.
Section 10.5......Sales Representative Confidential Information.
Ameritech agrees that it will protect the disclosure of Sales Representative
Confidential Information to the same extent it protects its own Confidential
Information. In no event is Ameritech authorized to disclose Sales
Representative Confidential Information outside of Ameritech without prior
written approval of Sales Representative.
Section 10.6......Limitations. The obligations of this Article 10 shall
not apply to Ameritech Confidential Information which is: (i) available to the
public through no breach of this Agreement; (ii) is required by law or
regulation to be disclosed, but only to the extent and for the purposes of such
required disclosure; or, (iii) is disclosed in response to a valid order of a
court or other governmental body of the United States with proper jurisdiction,
but only to the extent of and for the purposes of such order and only if the
Sales Representative first notifies Ameritech of the order and permits Ameritech
to seek an appropriate protective order.
Section 10.7......Ownership of Subscriber Information. To the extent
allowed under law, all subscriber and customer information, which includes, but
is not limited to: subscriber and customer lists; customer's use of products and
services; subscriber billing and related information; and, subscriber and
customer satisfaction information, all of which is collectively referred to
herein as "Subscriber Information" is the exclusive property of Ameritech and is
to be used by the Sales Representative only for purposes of this Agreement, and
promptly returned to Ameritech upon termination or expiration of this Agreement.
Subscriber Information is always Ameritech Confidential Information.
Section 10.8......Terms of this Agreement. The terms and conditions of
this Agreement are Confidential Information of Ameritech and Sales
Representative.
Section 10.9......Survival. This Article 10 and all its Sections shall
survive the termination or expiration of this Agreement.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
14
<PAGE>
[The Balance of this Page Intentionally Left Blank]
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
15
<PAGE>
ARTICLE 11
RIGHT TO SET-OFF
Ameritech reserves the right to set-off commissions due to Sales
Representative if any Sales Representative account with Ameritech or its
affiliates is deemed by Ameritech to be "Seriously Delinquent" (defined
hereinafter). In the event of a "Seriously Delinquent" on any Sales
Representative Ameritech account, including, but not limited to, Ameritech
monthly billing statements for service and Ameritech invoices for CPE, Ameritech
may, at its sole election, set off the amount of the delinquency by the amount
owed to Sales Representative in future commissions, including, without
limitations, Residual Payments. Ameritech's decision to set-off is final and not
subject to appeal. In the event such set-off is necessary, Ameritech will notify
Sales Representative in writing of its intent to set off, and Sales
Representative's commission statement will reflect the set-off. In no event will
Ameritech define "Seriously Delinquent" if the delinquency is less than ninety
(90) days. In the event set-off is not adequate for an Sales Representative's
Seriously Delinquent accounts, Ameritech's right to terminate is governed by
Section 4.2 (c).
ARTICLE 12
RIGHT TO AUDIT AND INSPECT SALES REPRESENTATIVE'S RECORDS
During the term of this Agreement and for one (1) year after
termination or expiration of this Agreement, Ameritech reserves the right to
obtain access to and examine fully the books, records and accounts of all
transactions and activities covered by this Agreement upon reasonable notice to
Sales Representative and during Sales Representative's regular business hours,
and Sales Representative agrees to maintain for that period of time all books
and records related to all transactions and activities covered by this
Agreement.
ARTICLE 13
AGREEMENT NOT TO COMPETE
Section 13.1......Protection of Ameritech's Customer Relationship. The
parties agree with the Business Purpose of this Agreement which is stated above,
and agree that the commitments of this Article 13 are necessary to maintain this
mutual benefit. The parties agree that this Article 13 serves to protect
Ameritech's legitimate business interest in protecting Ameritech's customer
relationships and Ameritech's customer/subscriber information which is disclosed
to Sales Representative solely for successful performance hereunder.
Section 13.2......Term of Non-Compete. During the term of this
Agreement and for a period of one (1) year thereafter, Sales Representative and
individuals associated with Sales Representative will be privileged to a
significant amount of Ameritech Confidential Information, therefore, Sales
Representative and its principal(s) director(s), officer(s) and shareholder(s)
(except those holding stock in the Sales Representative corporation whose stock
is publicly traded and which is subject to the reporting requirements of the
Securities Exchange Act of 1934 and then only to the extent of owning not more
than ten percent (10%) of the issued and outstanding shares of such
corporation), collectively and individually are bound by the terms of this
Section.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
16
<PAGE>
Sales Representative and any individual subject to this Section shall
not assist or facilitate the sale or use by a customer of a product or service
which is "competitive" to the Ameritech Products. For purposes of this Section,
"competitive to" shall mean that the product or service is of a similar type or
serves the same purpose as the Product(s), or performs the same function as the
Ameritech Products, or provides the customer the same benefit as the Ameritech
Products covered by this Agreement. This shall mean that an individual subject
to this Section shall not be employed by, serve as an agent for, or act as a
representative or contractor for a company which sells, promotes or distributes
the competitive products or services in the Territory.
Section 13.3......Equitable Relief.The Sales Representative, its
shareholders and officers, jointly and severally acknowledge and agree that the
remedy at law for any breach, or threatened breach, of any of the provisions of
Article 13 will be inadequate, and the Sales Representative and its shareholders
jointly and severally agree that Ameritech shall be entitled to such equitable
relief as may be available from any court of competent jurisdiction, and this
right shall be in addition to any other rights or remedies it may have for any
violation of these provisions.
Section 13.4......Severability. In the event any of the provisions of
this Article 13 is determined by a court of competent jurisdiction to be in
violation of applicable law for any reason whatsoever, then any such provision
or part of a provision shall be deemed to be automatically amended so as to
comply with applicable law, and not deemed void.
Section 13.5......Survival. This Article 13 and all its Sections shall
survive the termination or expiration of this Agreement.
ARTICLE 14
NOTICE
Section 14.1......Notice. Unless Notice via "ameritechdealer.com" is
expressly identified as proper communication elsewhere in this Agreement, Notice
or other communication given by one party to the other under this Agreement
shall be deemed sufficient and proper if the Notice is in writing and is
delivered personally, or is sent postage prepaid, first class U.S. Mail, or by
overnight courier, and such Notice shall be deemed received by the other party:
a) three (3) days after the Notice is deposited with the U.S. Postal Service;
or, b) the following business day if sent by overnight courier. Notice will also
be deemed sufficient and proper if sent by facsimile provided the original
notice is sent via postage prepaid, first class U.S. Mail the same day as the
facsimile; if sent by facsimile Notice will be deemed received by the other
party on the date and time shown on the original transmission confirmation sheet
which is electronically generated by the facsimile machine at the time the
transmission is completed. Notice must be directed as set forth below; each
party reserves the right to change the direction of the Notice, and will do so
through proper Notice to the other party.
If to Ameritech If to Sales Representative
--------------- --------------------------
Ameritech......... James Lowery
350 North Orleans. Telecomm Industries, Inc.
Chicago, Illinois 60606 1743 West Quincy Suite 143
Attn: ISP Sales Representative Manager Naperville IL 60540
Facsimile Number: 312-335-0282 Facsimile Number : 630-369-7193
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
17
<PAGE>
ARTICLE 15
ASSIGNMENT
Section 15.1......Sales Representative Assignment. This Agreement may
not be assigned by Sales Representative without the prior written consent of
Ameritech, and such consent will not be unreasonably denied or withheld. Any
attempted assignment in violation of this Section shall be deemed void. In the
event the proposed assignee is an existing Ameritech Sales Representative,
Ameritech reserves the right to consent with conditions, including but not
limited to, conditioning consent on acceptance by Sales Representative of
Territory modifications or sales objective restructure.
Section 15.2......Complying Assignment. In the event of a complying
assignment, this Agreement shall be binding upon and shall inure to the benefit
of the party's respective assigns and successors.
ARTICLE 16
GENERAL TERMS
Section 16.1......Governing Law. This Agreement shall be governed and
construed by the laws of the State of Illinois, as those laws apply to contracts
which are executed and fully performed within that State. Further, the Illinois
Sales Representative Act will only apply if its jurisdictional elements are met.
If state law where Sales Representative has its principal place of business
provides additional rights for Sales Representative, Ameritech shall comply with
such requirement to the extent that they exceed Ameritech's obligations under
this Agreement.
Section 16.2......Counterparts. This Agreement shall be executed in
counterparts and shall not be binding upon Ameritech until each counterpart is
executed by Ameritech and Sales Representative. Each party will retain a
document with original signature, and each fully executed counterpart will be
considered an original Agreement.
Section 16.3......Non-Waiver. All rights, remedies and relief available
to Ameritech shall be exercised at Ameritech's sole option. The failure of
Ameritech to enforce at any time any provision of this Agreement, or to exercise
any option which is provided for herein, or the failure of Ameritech to require
performance by the Sales Representative of any provision herein, shall in no way
affect the validity of, or act as a waiver of this Agreement, or any part
thereof or any right of Ameritech thereafter to enforce it.
Section 16.4......Incorporation. All Recitals, Exhibits and Attachments
and Annexes are fully incorporated herein, and each modification or amendment
thereto shall be deemed incorporated as if set forth originally therein.
Ameritech reserves the right to modify, add to and amend this Agreement,
including the Exhibits and Attachments hereto upon thirty (30) days written
notice to Sales Representative, and the modification, addition or amendment will
be effective on the thirtieth (30th) calendar day after the date the Notice is
received by the Sales Representative without the requirement of acknowledgement
or any other act by Sales Representative.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
18
<PAGE>
Section 16.5...... Entire Agreement.This Agreement contains the entire
agreement of the parties related to Ameritech's grant of rights as an Ameritech
Authorized Sales Representative and Sales Representative's acceptance thereof,
and cancels all prior agreements, understandings and representations, whether
written or oral, express or implied, and all such prior agreements are hereby
deemed terminated by mutual consent of the parties and all obligations under any
such prior agreement are agreed by each party to be inoperable and
unenforceable.
Section 16.6......Section Headings.All article and section headings and
captions used in this Agreement are for convenience or reference only and are
not intended to define or limit the scope of any provisions in this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound, the undersigned
authorized parties have duly executed this Agreement effective on the date.
Ameritech Information Industry Services Telecomm Industries, Inc.
a division of Ameritech Services , Inc. Sales Representative:
By: By:
------------------------------------ -----------------------------
Signature: Signature:
------------------------------ ----------------------
Name Typed or Printed: Name Typed or Printed:
------------------ ----------
Title: Title:
---------------------------------- --------------------------
Date: Date:
---------------------------------- ---------------------------
[The Balance of this Page Intentionally Left Blank]
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
19
<PAGE>
Exhibit A
Territory
Exhibit A TERRITORY
This is Exhibit A to the Authorized Internet Solutions Sales
Representative Agreement between Ameritech and Telecomm Industries, Inc.("Sales
Representative") dated January 1, 1999.
Sales Representative is granted the right to perform under this
Agreement within the following geographic territory:
o In those areas within the states of Illinois, Indiana, Michigan,
Ohio and Wisconsin where Ameritech or its affiliates have the
regulatory authority to sell the Products (as that term is
defined under Exhibit B).
During the Initial or any Renewal term of this Agreement, Ameritech
reserves the right to expand or contract the Territory, provided the change is
made with a thirty (30) day prior written Notice by Ameritech and the change is
effective thirty-one (31) days after the date of the Notice.
[The Balance of this Page Intentionally Left Blank]
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
20
<PAGE>
Exhibit B
Ameritech Products
Exhibit B AMERITECH PRODUCTS
This is Exhibit B to the Authorized Internet Solutions Sales
Representative Agreement between Ameritech and Telecomm Industries, Inc. ("Sales
Representative") dated January 1, 1999.
The products and services which are identified under this Exhibit
collectively constitute the "Product" for purposes of the above referenced
Agreement between Ameritech and Sales Representative.
Ameritech Centrex Service
Ameritech Digital Transport Service - Enhanced (ADTS-E)
Ameritech DSO (except Total Access Service)
Ameritech DS1 (except Total Access Service)
Ameritech DS3(except Total Access Service)
Ameritech Fractional DS1 (384) (except Total Access Service)
Ameritech Frame Relay Service (FRS)
Ameritech ISDN Direct Service
Ameritech ISDN Prime Service
Ameritech OMNI Presence Service
Ameritech Reconfiguration Service (ARS)
Ameritech Synchronized Optical Network Service (SONET)
_______________________________________ ___________________________________
Ameritech Signature Sales Representative Signature
_______________________________________ ___________________________________
Date Date
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
21
<PAGE>
Exhibit C
Commission
Exhibit C COMMISSION
This is incorporated as Exhibit C to the Authorized
Internet Solutions Sales Representative Agreement Between Ameritech
and Telecomm Industries, Inc. ("Sales Representative") dated
January 1, 1999 (hereinafter the "Agreement").
1.0 General
1.1 Definitions
As used in this Agreement, the following definitions apply:
"Sales Representative of Record" shall mean the Authorized
Sales Representative firm credited with the sale of a new or
renewed Centrex Service.
"Base Commission" shall mean the amount paid upfront to an
Sales Representative for sales of Ameritech Products.
"Billable Revenue" shall mean those Recurring and
Non-Recurring charges which result from the customer service
order(s) which result from the sale submitted by the Sales
Representative.
"Completed Orders" shall mean a "completed" status in an
Ameritech service ordering or billing systems.
"Contract Value or "CV" shall mean the value of the Recurring
and Non-Recurring revenue charges for each product which is
used by Ameritech for purposes of establishing the value of a
sale for commission purposes.
"Eligible Product" or "Product Eligibility" shall mean those
Products the Sales Representative is authorized to promote,
market and sell under this Agreement and which are identified
fully under Exhibit C of the Agreement.
"New" shall mean the sale of a Product to a customer who does
not currently have that specific Product and Ameritech in its
sole discretion will determine if customer currently has the
Product. To retire an Sales Representative's objective the
sale must be an Eligible Product. In no event will a sale
which is classified by Ameritech in its sole discretion as a
Recast, a Renewal, a Renegotiation, a Migration or an Upgrade
be considered a "New" sale for purposes of the Agreement.
"Non-Recurring Revenue" shall mean those one-time billed
charges which are a result of a sale by Sales Representative.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
22
<PAGE>
"Partnering" means that the Sales Representative is not the
sole sales entity in the sales effort with a particular
customer, and Sales Representative markets Product(s) to a
particular customer with another Sales Representative or
Ameritech sales representative. Sales Representative must
receive prior written approval by Ameritech for each
Partnering effort, and commission will not be paid on sales
which result from such efforts without the prior written
consent of Ameritech. Ameritech reserves the right to set
commission values for each partnering arrangement.
"Recast/Renewal/Renegotiation" collectively shall mean a sale
, and such sale is not classified as a New sale for purposes
of Total Monthly Billable Revenue Commission Payment purposes.
For purposes of the Agreement, a sale will be deemed a Recast
or a Renewal (whichever is appropriate) when a customer signs
a new contract for a Product, and the customer already
subscribes to the same Ameritech product or to an Ameritech
product which is deemed solely by Ameritech to be similar to
the Product covered under the new contract, and the new
contract extends the customer's term commitment for the
Product.
A sale will be deemed a Renegotiation when a customer enters
into a new contract with Ameritech for a Product they already
subscribe to, and the terms of the contract are substantially
changed from the contract then-in-effect for that Product, and
Ameritech determines, in its sole discretion that the sale is
eligible for commission payment to the Sales Representative at
the Renegotiation rate.
"Recurring Revenue" shall mean those monthly charges billed to
the customer for Products as a result of a sale by Sales
Representative.
"Residual Payment" shall mean the commission payment which is
paid by Ameritech over time, and the time period for payment
is established by Ameritech based on contract term or other
factors relevant to the sale. Ameritech determines the amount
and payment schedule in its sole discretion.
"Takeback" shall mean commission amounts which are forfeited
or returned by the Sales Representative as a result of a
customer discontinuing its subscription to the Product(s). In
the event the Takeback is accomplished by the Sales
Representative returning commissions already paid, Ameritech
will debit the Sales Representative's future commission
payments by the amount to be returned. If such a debit does
not satisfy the Takeback amount, Ameritech may demand full
payment from the Sales Representative immediately.
"Territory" is defined in the Agreement.
"Upfront Commission Payment" shall mean that portion of the
total commission paid to the Sales Representative upon
Ameritech's verification that the order(s) associated with the
sale are Completed Orders.
"Total Billable New Monthly Revenue" shall mean the monthly
revenue associated with all New sales of eligible products
under the agreement and completed in the year.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
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"Upgrade" means that a customer signs a contract for an
Ameritech Product to which the customer already subscribes, or
for a Product which Ameritech deems is similar to the Product
the customer already subscribes to, and the new contract is
for a term that extends the customer's contract term beyond
the existing contract's expiration date, and the new contract
includes a product commitment which is larger than that which
is in effect at the time of the new contract.
"Winback Bonus" shall mean the incremental commission amount
paid to Sales Representative because the sale of an Eligible
Product is deemed solely by Ameritech to satisfy Ameritech's
criteria to be classified as a "winback" sale as that term is
understood in the telecommunications industry.
1.2 Earned Date. Sales Representative earns the commission on any
sale at the time the commission is paid by Ameritech.
1.3 Commission Amount and Payment Schedules.
The commission value and the time of payment for each sale is
based upon a number of factors, first and foremost is the
Product sold and the terms and conditions of this Agreement.
To be eligible for commission on a specific sale, the Sales
Representative must comply with all Ameritech practices and
procedures, including, but not limited to, those related to
the processing of sales and subscriber agreements by Sales
Representative, and the accuracy of each submission by Sales
Representative.
Ameritech reserves the sole right to modify or change any or
all of its practices and procedures related to the Sales
Representative program, and will provide Sales Representative
with a minimum of thirty (30) days prior written Notice of any
modification which will affect the Sales Representative's own
practices or procedures. As elsewhere stated in the Agreement,
this right to modify includes, but is not limited to the right
to modify Commission amounts or schedule upon the effective
date of any Renewal Term. Ameritech may elect to serve this
Notice via the "ameritechdealer.com" web site and bulletin
board, and the Notice will be considered given on the date the
Notice is posted by Ameritech on the web site.
1.4 Acceptance by Ameritech. Ameritech reserves the right to
accept or reject any sale submitted by Sales Representative,
and, accept or deny, in whole or in part, any request for
commission for a specific sale. Ameritech in its sole
discretion has the right to establish the reasonable
commission value of any sale.
2.0 Upon Termination
2.1 Ameritech Terminates. The parties agree that in the event
Ameritech exercises its right to terminate for convenience as
is provided for under Section 4.2.a of the Agreement,
Ameritech will, at its sole election, pay the Authorized Sales
Representative either:
a) Liquidated damages equal to a sum of the following
formula: [The amount of residual commission the Sales
Representative would be awarded if all contracts
remained in effect through the end of the contract
term then in effect provided the Sales Representative
remained eligible for residual payments for those
customer contracts for the entire term] x (times)
[the Ameritech net present value discount rate on the
date of termination] x (times) [seventy five percent
(75%)]; or,
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
24
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b) Pay on a monthly basis Residual Payment for customer
sales which are in effect and approved for commission
on the date Ameritech terminates the Agreement.
Residual Payments will continue through the
expiration date of the customer contract in effect at
the time Ameritech terminates this Agreement, or
until the original expiration date of this Agreement,
whichever is sooner.
2.2 Sales Representative Terminates. In the event Sales
Representative exercises its right to terminate the Agreement
pursuant to the terms of the Agreement, Sales Representative
is not entitled to any commission payment after the date of
termination. Ameritech agrees that in extraordinary situations
a commission payment after the termination date may be
reasonable, and under such situations Ameritech will deem at
its sole discretion that the Sales Representative will receive
payment. If such a situation occurs, Ameritech will provide to
the Sales Representative in writing the amount and timing of
the payment, and the conditions or limitations on such
payment(s).
2.3 Upfront Commission Payment. Sales Representative will be
eligible for the Upfront Commission Payment for any sale which
is accepted by Ameritech prior to the date this Agreement is
terminated. In no event shall Sales Representative be paid
Residual Commissions after the date of expiration of this
Agreement.
3.0 Commission Calculation Methodology
3.1. Calculation Basis. Ameritech will pay commissions on a sale
submitted by Sales Representative based upon:
a) The Product sold.
b) Whether the sale is deemed by Ameritech to be: (i) a
New sale or an addition to an existing service; (ii)
a Recast, Renewal or Renegotiation; (iii) a Migration
or Upgrade;
c) Whether the Sales Representative is the sole sales
entity or if the sale is the result of an approved
Partnering sale as provided for elsewhere in this
Exhibit; and,
d) The order(s) which are associated with the sale are
Completed Orders.
3.2 Commission Eligibility. In no event will an Sales
Representative be paid commission on a sale: (i) of a product
Sales Representative is not authorized to sell under the
Agreement (i.e., product or service is not specified in
Exhibit B of the Agreement); (ii) made to a customer the Sales
Representative is not authorized to sell to, including, but
not limited to, an Ameritech house account, a customer who is
not deemed to be an internet service provider customer, or a
customer who has expressly granted agency to another Sales
Representative unless that customer has expressly, in writing
revoked such agency; and (iii) to Ameritech or to an Sales
Representative or other independent Authorized Ameritech
representative.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
25
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3.3 Commission Award Final. Ameritech reserves the right to
establish the commission value for any sale, and that value
may, with reasonable justification, be less than, more than or
equal to the values set forth herein for such sale, or the
value previously paid for similar sales. Ameritech is solely
responsible for the determination and calculation of the
commission to be paid on any single sale, and Ameritech's
commission determination, absent arithmetic errors, is final
and not appealable.
4.0 Partnering
Provided a Partnering arrangement complies with the
requirements under Article 7, Section 7.6 of the Agreement, Ameritech
will pay commission on such sales. The general commission payment
treatment for a Partnering sale is that Sales Representative will be
paid an Upfront Commission Payment equal to fifty percent (50%) of the
Upfront Commission Payment which would be paid for the same sale if no
Partnering took place. If two AISRs partner, each will receive this
reduction.
5.0 Centrex Product Family
For purposes of the Agreement, Products classified by
Ameritech as part of the Centrex product family will be paid commission
pursuant to this Section 5.0.
5.1 Centrex Product Family. The Centrex product family is the
collective term for the following Ameritech Centrex products:
Ameritech Centrex Service (ACS); Indiana Advanced Centrex
Service; ISDN Centrex; and, Individual Case Basis (ICB)
Centrex.
5.2 Grandfather and Sunset Offerings. Commission will not be paid
on New sales of an Ameritech Centrex offering which has been
grandfathered or sunset as those terms relate to
telecommunications offerings. Commission will be paid for
sales which are additions to an existing, installed system of
a grandfathered or sunset Centrex offering.
5.3 New Centrex Sales. Commission on New Centrex system sales will
be paid provided the sale results in a net increase in Centrex
station lines of at least fifteen percent (15%) of the
existing installed system. In Indiana, the Centrex station
line net increase must be at least one hundred percent (100%)
of the existing installed system.
5.4 Upfront Commission Payment Schedule
The Upfront Commission Payment schedule set forth below
applies to New Centrex system sales. The Commission Payments
are stated in terms of one Centrex station line; the actual
Commission Payment for a particular sale will be based on the
number of lines sold, and, the Commission Payment amount will
be calculated by multiplying the rate set forth below for a
single Centrex station line by the total number of station
lines sold.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
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------------------------------------------------------------------------------
ACS and Indiana Advanced Centrex
------------------------------------------------------------------------------
------------------ ---------------------- --------------------- --------------
Month-to-Month 36 Months 60 Months 84 Months
------------------ ---------------------- --------------------- --------------
------------------ ---------------------- --------------------- --------------
$20 $45 $65 $90
------------------ ---------------------- --------------------- --------------
------------------------------------------------------------------------------
ISDN Centrex
------------------------------------------------------------------------------
------------------ ---------------------- --------------------- --------------
Month-to-Month 36 Months 60 Months 84 Months
------------------ ---------------------- --------------------- --------------
------------------ ---------------------- --------------------- --------------
$30 $70 $100 $135
------------------ ---------------------- --------------------- --------------
------------------------------------------------------------------------------
ICB Centrex
------------------------------------------------------------------------------
------------------ ---------------------- --------------------- --------------
Month-to-Month 36 Months 60 Months 84 Months
------------------ ---------------------- --------------------- --------------
------------------ ---------------------- --------------------- --------------
$16 $36 $52 $72
------------------ ---------------------- --------------------- --------------
------------------------------------------------------------------------------
Note: ICB Centrex sales for contract lengths greater than 84
months will be awarded commission based on the 84 month
commission award.
-------------------------------------------------------------------
5.5 Centrex Station Line Additions
a) Commission for Centrex station line additions to an
existing installed system will be awarded only to the
Sales Representative of Record unless Ameritech has
approved in writing alternative treatment of
commission payments. Ameritech will determine at its
sole discretion when there is a deviation in this
payment policy.
b) The Upfront Commission Payment for Centrex station
line additions will be 50% of the commission values
in the above schedules. The Upfront Commission
Payment for Centrex station line additions to a
system which is a grandfathered or sunset offering
will be $20 regardless of type of system or contract
length.
5.6 Winback Bonus
If the Sales Representative makes a Centrex sale which is
designated by Ameritech as a "winback" sale, a Winback Bonus
will be paid which will increase the Base Commission by one
hundred percent (100%).
5.7 Residual Commission Payment Schedule
A Residual Commission Payment will be paid at a rate of one
dollar ($1.00) per line, per month, and will continue for so
long as the customer's contract is in effect. In no event
will Residual Payments be paid on a month-to-month Centrex
sale.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
27
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5.8 Recasts, Renewals, Renegotiations of existing Centrex
Contracts
a) The Sales Representative of Record or other Ameritech
representative of Record has the exclusive right to
Renew, Recast or Renegotiate the contract during the
contract term through sixty (60) days prior to the
contract expiration date.
b) If the customer's contract term in effect at the time
of the Recast or Renewal is more than one hundred and
eighty (180) days from the date the contract expires,
commission will not be paid to Sales Representative
for a Centrex Recast or Renewal, unless Ameritech has
provided prior written approval for such a payment.
Commission will not be paid on Centrex Renegotiations
unless Ameritech has provided written approval for
such payment prior to the date the contract was
signed by the customer.
c) After a customer contract has expired, and the
customer is under a month-to-month term for that
Product, any sale of that Product which is submitted
by Sales Representative will be considered a Recast
or Renewal for purposes of commission. If the
customer contract expired six (6) or more months
prior to the Sales Representative's submission, and
the customer has been on a month-to-month
subscription for that period, Ameritech will pay
commission at the New sale rate.
d) Commission for Centrex Recasts, Renewals and
Renegotiations will be paid as follows:
(i) The Base Commission will equal 75% of the amount
paid for an identical New sale.
(ii) The Residual Commission Payment will be paid at
the same rate as an identical New Centrex sale.
5.9 Month-to-Month Centrex. For purposes of calculating
the CV, a month-to-month Centrex sale will be
considered equal to nine (9) months Recurring
Revenue. In no event will Residual Payments be paid
on a month-to-month Centrex sale.
5.10 Takeback. The Upfront Commission Payment is subject
to Takeback in the event the customer discontinues a
service (for any or no reason) for which Sales
Representative received commission in the past. The
Takeback amount will be based upon the length of time
the customer retained the service and whether the
sale was under a term contract:
a) If the sale is a term contract, and the
service is discontinued within the first
fifty percent (50%) of the contract term,
the amount of Takeback will be prorated to
the length of time remaining on the
customer's contract.
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
28
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b) If the sale was a month-to-month
subscription, and the customer discontinues
the service within sixty (60) days of the
Completed Order date, the Takeback amount
will equal one hundred percent (100%) of the
commission paid. Residual Commission
Payments cease when a service is
discontinued.
6.0 Eligible Data Products
6.1 Common Provisions. The following applies to
all Eligible Standard Data Products.
a) Sales to Internet Service Provider Customers
Only. The conditions and limitations set
forth elsewhere in the Agreement apply to
the sale of Data Products.
b) Eligible Data Products. Eligible Data
Products are specified under Exhibit B of
the Agreement, and Sales Representative's
right to earn commission for sales of Data
Products as set forth below are governed by
the terms, conditions and limitations of the
Agreement and Exhibit C.
c) Recasts, Renewals, Renegotiations.
(i) If the customer's contract
term-in-effect at the time of the
Recast or Renewal is more than one
hundred and eighty (180) days from
the date the contract expires,
commission will not be paid to
Sales Representative for a Data
Product Recast or Renewal, unless
Ameritech has provided prior
written approval for such a
payment. Commission will not be
paid on Data Product Renegotiations
unless Sales Representative has
received from Ameritech written
approval for such payment prior to
the date the contract was signed by
the customer.
(ii) After a customer contract has
expired, and the customer is under
a month-to-month term for that
Product, any sale for that Product
which is submitted by Sales
Representative will be considered a
Recast or Renewal for purposes of
commission. If the customer
contract expired six (6) or more
months prior to the Sales
Representative's submission, and
the customer has been on a
month-to-month subscription for
that period, Ameritech will be pay
commission at the New sale rate.
(iii) Commission for Data contract
Recasts, Renewals and
Renegotiations will be awarded as
follows:
(a) The Base Commission will equal 50%
of the amount paid for an identical
New sale (New sale commission
payment schedule set forth below)
(b) The Residual Payment will be paid
at the same rate as an identical
New sale of the same Data Product
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
29
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d) Month-to-Month Subscription. For
purposes of commission payment
calculation, a month-to-month Data
sale will be considered equal to
nine (9) months Recurring Revenue.
In no event will Residual Payments
be paid on a month-to-month Data
sale.
e) Takeback. If the Sales
Representative received commission
for a Product subject to this
Section 6.0, and the customer
discontinues the Product for any
reason, Takeback applies. The
amount of Takeback is based upon
the length of time the customer
retained the service and if the
sale was a term contract: a) if the
customer discontinues the Product
during the first fifty percent
(50%) of the contract term, the
Takeback amount will be prorated to
the length of time remaining on the
customer's contract; b) if the
customer discontinues a
month-to-month subscription of the
Product within sixty (60) days of
installation, the Takeback will
equal one-hundred percent (100%) of
the Upfront Commission Payment.
Residual Commission Payments cease
when a contract is discontinued.
6.2 Basic Data Products
a) Commission Payment Schedule. The
following commission payment
schedule applies to New sales and
additions to existing, installed
services for the following
Products:
Ameritech Base Rate (BR or DS0)
Ameritech DS1
Ameritech Fractional DS1 (384)
Ameritech DS3
Ameritech ISDN Prime
Ameritech Reconfiguration Service
Ameritech Digital Transport Service
- Enhanced (ADTS-E)
Ameritech Omnipresence
- --------------------- --------------- --------------- -------------------------
Total Billable Winback
New Monthly Revenue Upfront Bonus Residual
- --------------------- --------------- --------------- -------------------------
- --------------------- --------------- --------------- -------------------------
0 -$50,000 12.00% of CV 8.00% of CV 5.00% of Monthly Charges
$50,001-$75,000 15.00% of CV 8.00% of CV 5.00% of Monthly Charges
$75,001 or greater 18.00% of CV 8.00% of CV 5.00% of Monthly Charges
- --------------------- --------------- --------------- -------------------------
b) CV. The CV for the above schedule is determined by
the following formula: (Nonrecurring Revenue) +
(Recurring Revenue x Contract Length) = CV
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
30
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6.3 Complex Data Products
a) Commission Payment Schedule. The following commission
payment schedule applies to New sales and additions
to existing installations of the following Data
products: Ameritech Synchronized Optical Network
Service (SONET) Ameritech Frame Relay Service (FRS)
-------------------- ---------------- ------------- --------------------------
Total Billable Winback
New Monthly Revenue Upfront Bonus Residual
-------------------- ---------------- ------------- --------------------------
-------------------- ---------------- ------------- --------------------------
0-$50,000 9.00% of CV 5.00% of CV 2.00% of Monthly Charges
$50,001-$75,000 11.25% of CV 5.00% of CV 2.00% of Monthly Charges
$75,001 or greater 13.50% of CV 5.00% of CV 2.00% of Monthly Charges
-------------------- ---------------- ------------- --------------------------
b) CV. The CV for the above schedule is determined by
the following formula: (Nonrecurring Revenue) +
(Recurring Revenue x Contract Length) = CV
6.4 Ameritech ISDN Direct Service.
a) The following commission payment schedule applies to
New sales and additions to existing installations of
Ameritech ISDN Direct Service:
--------------------- -------------- -------------------------
Total Billable
New Monthly Revenue Upfront Residual
--------------------- -------------- -------------------------
--------------------- -------------- -------------------------
$0-$50,000 16.00% of CV 4.25% of Monthly Charges
$50,001-$75,000 20.00% of CV 4.25% of Monthly Charges
$75,001 or greater 24.00% of CV 4.25% of Monthly Charges
--------------------- -------------- -------------------------
b) CV. The CV for the above schedule is determined by
the following formula:
(Nonrecurring Revenue) +
(Recurring Revenue x Contract Length) = CV
7.0 Contract Upgrade or Migration
7.1 Commission Payment
a) When both the Product sold and the Ameritech product
or service which is being replaced are both specified
in Exhibit B as "Products" for purposes of the
Agreement, the Upfront Commission Payment for a sale
deemed by Ameritech as an Upgrade or a Migration will
be determined by the following formula:
(Current Base Upfront Commission for New Product)
(Current Base Upfront Commission for
Old Product) = Upfront Commission Payment
b) When a sale for a Product is replacing an Ameritech
product or service which is not specified in Exhibit
B as a "Product", the Upfront Commission Payment for
the sale (whether it is deemed an Upgrade or a
Migration) is determined by the following formula:
(Current Base Upfront Commission for
New Product) x (50%) = Upfront
Commission Payment
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
31
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7.2 Does Not Retire Objective. Neither an Upgrade nor a Migration
will serve to retire the Sales Representative's Usage Product
family objective, and neither an Upgrade nor a Migration is
subject to an Objective Bonus.
7.3 Residual Commission Payment. The Residual Commission Payment
for an Upgrade or a Migration will be calculated in the same
manner and at the same rate as a New sale of the Product. In
every case, the Residual Commission Payment, if any, for the
product or service which is being replaced as the result of
the Upgrade or Migration will be discontinued effective the
date of the Completed Order.
7.4 Takeback. If the Sales Representative received commission for
a Product subject to this Section 7.0, and the customer
discontinues the Product for any reason, Takeback applies. If
the customer discontinues a Product within one-hundred and
eighty days after the Completed Order date, the Takeback will
equal one-hundred percent (100%) of the Upfront Commission
Payment. Residual commissions cease effective the date the
customer cancels the product.
[The Balance of this Page Intentionally Left Blank]
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
32
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Exhibit D
Code of Business Conduct
Exhibit D CODE OF BUSINESS CONDUCT
This is Exhibit D to the Authorized Internet Solutions Sales
Representative Agreement Between Telecomm Industries, Inc. ("Sales
Representative") and Ameritech effective January 1, 1999, and this Exhibit is
incorporated into the Agreement by reference.
1. Every Authorized Sales Representative has the professional responsibility of
fair dealing towards Ameritech's customers, past and present, fellow Authorized
Sales Representatives, and the general public.
2. Every Authorized Sales Representative has the professional responsibility of
adhering to generally accepted standards of accuracy and truth.
3. An Authorized Sales Representative shall not place itself in a position where
the Authorized Sales Representatives interest is, or may be, in conflict with
its duty to the customer or Ameritech.
4. Each Authorized Sales Representative shall safeguard the confidence of both
present and former customers/clients, and shall not disclose or use these
confidences to disadvantage or prejudice such clients.
5. An Authorized Sales Representative shall not disseminate false or misleading
information, and each Authorized Sales Representative is obligated to use
appropriate means to avoid dissemination of false or misleading information.
6. An Authorized Sales Representative shall not disparage the professional
reputation or practice of another Authorized Sales Representative.
7. Each employee of the Authorized Sales Representative shall be treated as
individuals with respect to their dignity and recognition of their merit.
[The Balance of this Page Intentionally Left Blank]
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
33
<PAGE>
Exhibit E
House Accounts
Exhibit E HOUSE ACCOUNTS
This is Exhibit E to the Authorized Internet Solutions Sales Representative
Agreement Between Telecomm Industries, Inc. ("Sales Representative") and
Ameritech effective January 1, 1999, and this Exhibit is incorporated by
reference therein.
House Accounts
Pursuant to Article 1, Section 1.7, the Customer accounts which Ameritech
designates, in its sole discretion, as "House Accounts" are listed on the
Ameritech-provided web site, and said list is incorporated by reference as if
set forth fully herein, as modified from time-to-time by Ameritech, and each
such modification is deemed incorporated as if set forth originally herein.
[The Balance of this Page Intentionally Left Blank]
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
34
<PAGE>
Exhibit F
Annual Objective
Exhibit F SALES REPRESENTATIVE ANNUAL OBJECTIVE
This is Exhibit F to the Authorized Internet Solutions Sales Representative
Agreement Between Telecomm Industries, Inc. ("Sales Representative") and
Ameritech effective January 1, 1999, and this Exhibit is incorporated by
reference therein.
Sales Performance Requirement
Sales Representative will achieve New Monthly Billable Revenue of
seventy-five thousand dollars ($75,000) by December 31, 1999. Sales
Representative further agrees that Ameritech will make quarterly progress
reviews toward the Revenue Attainment goal. If Sales Representative has not made
proportional progress toward the Revenue Attainment, Ameritech at it's sole
discretion may take corrective action up to and including termination for
unsatisfactory performance.
[The Balance of this Page Intentionally Left Blank]
Effective January 1, 1999
Confidential and Proprietary Information of Ameritech. Not to be disclosed to
another party without prior written consent of Ameritech
35
