EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the ____ day of _____, 1998, by and
between POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
("Company"), and THOMAS M. CLAYTON ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement
("Purchase Agreement") of even date pursuant to which it
purchased certain of the assets of Commercial Business Systems,
Inc. (_CBS_); and
WHEREAS, Employee owns ninety percent (90%) of the outstanding
stock of CBS; and
WHEREAS, Employee, as an inducement for and in consideration of
Company entering into the Purchase Agreement, has agreed to enter
into and execute this Employment Agreement pursuant to Section 6
thereof; and
WHEREAS, Company desires to engage the services of Employee,
pursuant to the terms, conditions and provisions as hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein set forth, the parties hereby
covenant and agree as follows:
1. Employment
. The Company agrees to employ the Employee, and
the Employee agrees to be employed by the Company, upon the
following terms and conditions.
2
Term. The initial term of Employee's employment pursuant to
this Agreement shall begin on the 6th day of March, 1998,
and shall continue for a period of five (5) years ending
March 5, 2003 unless terminated earlier pursuant to the
provisions of Section 10, provided that Sections 8, 9,
10(b) and 11, if applicable, shall survive the termination
of such employment and shall expire in accordance with the
terms set forth therein.
3. Renewal
Term. The term of Employee's employment shall
automatically renew for additional consecutive renewal terms
of one (1) year unless either party gives written notice of
his/its intent not to renew the terms of this Agreement
sixty (60) days prior to expiration of the then expiring
term.
4. Duties
. Employee shall serve as Regional Vice President
for the Company's Virginia/West Virginia Service Division.
May 1, 1998 (9:33AM)
Employee shall be responsible to and report directly to the
officers of Company. Employee shall devote his best efforts
and substantially all his time during normal business hours
to the diligent, faithful and loyal discharge of the duties
of his employment and towards the proper, efficient and
successful conduct of the Company's affairs. Employee fur-
ther agrees to refrain during the term of this Agreement
from making any sales of competing services or products or
from profiting from any transaction involving computer
services or products for his account without the express
written consent of Company.
5.
Compensation. For all services rendered by the Employee
under this Agreement (in addition to other monetary or other
benefits referred to herein), compensation shall be paid to
Employee as follows:
(a) Base Salary: During each year of the initial term
of this Agreement, Employee shall be paid an annual
base salary of One Hundred Twenty-Five Thousand
Dollars ($125,000.00). Said base salary shall be
payable in accordance with the historical payroll
practices of the Company.
(b) Annual Cash Bonus: In addition to Employee's base
compensation as set forth in paragraph 5(a) above,
Employee shall be entitled (in the event certain
criteria as defined below is satisfied) to an annual
cash bonus to be determined as follows:
(i) If the earnings before interest and taxes (_EBIT_)
of Company's Virginia/West Virginia Service
Division for each year (or portion thereof as set
forth below) of the initial term of this Agreement
exceeds the following: March 6, 1998 to January
5, 1999 - $417,000.00; January 6, 1999 to January
5, 2000 - $550,000.00; January 6, 2000 to January
5, 2001 - $600,000.00; January 6, 2001 to January
5, 2002 - $650,000.00; January 6, 2002 to January
5, 2003 - $700,000.00; and January 6, 2003 to
March 5, 2003 - $83,000.00, Company shall pay to
Employee by check or wire transfer within ninety
(90) days following the end of such year, an
amount equal to fifty percent (50%) of fifty
percent (50%) of the EBIT of Company's
Virginia/West Virginia Service Division in excess
of the EBIT threshold for the applicable year or
portion thereof, subject to a cumulative
limitation of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000.00) during such
aggregate period.
(ii) For purposes of this Section, the term _EBIT_
shall mean the net income before taxes and before
interest expense of Company's Virginia/West
Virginia Service Division (and before deduction of
the payments to be made pursuant to this Section)
during the applicable period. In making said
determination, all gains or losses realized by the
Virginia/West Virginia Service Division of Company
on the sale or other disposition of its assets
(other than in the ordinary course) shall be
excluded. The EBIT shall be determined by Company
in the manner set forth below, in accordance with
general accepted accounting principles, subject to
verification as described below. Commencing in
the year 1998, in making the determination of EBIT
for the Company's Virginia/West Virginia Service
Division, a one and one-half percent (1.5%) MAS
royalty fee on gross sales by such division
[discus State of West Virginia contract] **shall
be made incident to such determination. An MAS
royalty fee is a fee charged to each branch of the
Company for the following services performed by
Company's corporate headquarters: marketing,
advertising, professional, accounting and other
related expenses. For each subsequent year during
the term of this Agreement for which Company may
be required to pay additional bonus hereunder, the
parties shall, in good faith, agree upon an MAS
royalty fee to be charged hereunder based on the
level of services and support being provided by
Company to its Virginia/West Virginia Service
Division. Provided, however, such MAS royalty fee
shall be 1.5% if the parties are unable to come to
any agreement for each subsequent year. For
purposes of this Section, the term _Virginia/West
Virginia Service Division_ shall be the business
acquired by Company from CBS under the Purchase
Agreement. Company's contract with the State of
West Virginia relating to computer hardware and
software and services for educational purposes for
K through 12 shall not be included as part of the
Virginia/West Virginia Service Division.
(iii) For purposes of determining the EBIT for any
particular year, except as noted above, no item of
income or expense will be allocated by Company to
Company's Virginia/West Virginia Service Division
unless such items are reasonably calculated to
contribute to the increased profits of such
division, it being the intent of the parties that
the Company shall exercise the utmost good faith
with respect to allocations of income and expense
to Company's Virginia/West Virginia Service
Division. Incident to the determination of EBIT
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of Company's Virginia/West Virginia Service
Division, no compensation of any executive or
other employee of Company or its affiliates who do
not work directly for Company's Virginia/West
Virginia Service Division shall be allocated to
such division. Any bonus paid to Employee
pursuant to this Section 5(b) shall not be charged
against EBIT for any year.
(iv) Within sixty (60) days after the end of each
period described herein, Company will deliver to
Employee copies of the report of EBIT prepared by
Company for the subject period along with any
supporting documentation reasonably requested by
Employee. Within thirty (30) days following
delivery to Employee of such report, Employee
shall have the right to object in writing to the
results contained in such determination. If
timely objection is not made by Employee to such
determination, such determination shall become
final and binding for purposes of this Agreement.
If timely objection is made by Employee to
Company and Employee and Company are able to
resolve their differences in writing within thirty
(30) days following the expiration of the thirty-
day period, then such determination shall become
final and binding as it regards to this Agreement.
If timely objection is made by Employee to
Company and Employee and Company are unable to
resolve their differences in writing within thirty
(30) days following the expiration of the thirty-
day period, then all disputed matters pertaining
to the report shall be submitted and reviewed by
the arbitrator (the _Arbitrator_) which shall be
an independent accounting firm selected by Company
and Employee. If Company and Employee are unable
to agree promptly on the accounting firm to serve
as the Arbitrator, each shall select, by not later
than thirty (30) days day following the expiration
of the sixty-day period, an accounting firm, and
the two selected accounting firms shall be
instructed to select promptly another accounting
firm, such newly selected accounting firm to serve
as the Arbitrator. The Arbitrator shall consider
only the disputed matters pertaining to the
determination and shall act promptly to resolve
all disputed matters and its decision with respect
to all disputed matters shall be final and binding
upon Company and Employee. The expenses of the
arbitration (including reasonable attorney and
accounting fees) shall be borne one-half (1/2) by
Employee and one-half (1/2) by Company.
6.
Fringe Benefits. During the term of this Agreement,
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Employee shall be entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with
the standard family medical health and insurance
coverage maintained by Company on its employees.
Company and Employee shall each pay fifty percent
(50%) of the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a
vacation of four (4) weeks during which time his
compensation will be paid in full. Provided,
however, such weeks may not be taken consecutively
without the written consent of Company.
(c) Retirement Plan - Employee shall participate, after
meeting eligibility requirements, in any qualified
retirement plans and/or welfare plans maintained by
the Company during the term of this Agreement.
(d) Insurance - During the term of this Agreement,
Company shall maintain on the life of Employee,
provided he is insurable at standard rates, a
declining term life insurance policy in the amount
set forth on Exhibit A attached hereto. Employee
shall be the owner of such policy and shall designate
the beneficiary thereof. Employee agrees to take any
and all physicals that are necessary incident to the
issuance and/or renewal of said policy. In addition,
Employee agrees to take any and all physicals that
are necessary incident to the procurement of key-
person insurance upon his life by Company. In the
event that Employee is not insurable at standard
rates during the term of this Agreement, but Employee
is able to procure rated coverage, Employee shall
have the right to procure coverage for a lower amount
of insurance, the cost of which is equivalent to the
standard term rate cost of the coverage set forth on
Exhibit A or to contribute to the cost of insurance
to maintain the applicable coverage. Said
determination shall be at Employee's sole discretion.
In the event Employee is not insurable, then Company
shall pay Employee an amount equal to the projected
cost of the contemplated term insurance coverage set
forth on Exhibit A at standard rates. The cost of
this insurance coverage shall be a charge against the
EBIT of Company's Virginia/West Virginia Service
Division for purposes of Section 5(b). In the event
that Employee should die prior to the insurance being
obtained hereunder or in the event insurance cannot
be obtained for medical reasons, Company shall have
no obligation to Employee or his beneficiary for
payment of any of the amounts set forth on Exhibit A
upon Employee's death.
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(e) Other Company Programs - Employee shall be eligible to
participate in any other plans or programs
implemented by the Company for all of its employees
with duties and responsibilities similar to Employee.
(r) Employee shall be responsible for any and all taxes
owed, if any, on the fringe benefits provided to him
pursuant to this Section 6.
7.
Expenses. During the term of Employee's employment
hereunder, Employee shall be entitled to receive prompt
reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business
expenses incurred by Employee in fulfilling the Employee's
duties and responsibilities hereunder, including, all
expenses of travel and living expenses while away from home
on business or at the request of and in the service of the
Company, provided that such expenses are incurred and
accounted for in accordance with the reasonable policies and
procedures established by the Company.
8. Non-Competition
. Employee expressly acknowledges the
provisions of Section 7 of the Purchase Agreement relating
to Employee's Covenant Not to Compete with Company.
Accordingly, such provisions of Section 7 are incorporated
herein by reference to the extent as if restated in full
herein. In addition to the consideration received under
this Agreement, Employee acknowledges that as one of the two
owners of the common stock of CBS, he has received
substantial consideration pursuant to such Purchase
Agreement and that as an inducement for, and in
consideration of, Company entering into the Purchase
Agreement and Company entering into this Agreement, Employee
has agreed to be bound by such provisions of Section 7 of
the Purchase Agreement. Accordingly, such provisions of
Section 7 and Exhibit L-1 and the restrictions on Employee
thereby imposed shall apply as stated therein.
9.
Non-Disclosure and Assignment of Confidential Information.
The Employee acknowledges that the Company's trade secrets
and confidential and proprietary information, including
without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
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(b) unpublished financial information, including
unpublished information concerning revenues, profits
and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is
used for purposes of the Securities Exchange Act of
1934, as amended;
all constitute valuable, special and unique proprietary and trade
secret information of the Company. In recognition of this fact,
the Employee agrees that the Employee will not disclose any such
trade secrets or confidential or proprietary information (except
(i) information which becomes publicly available without
violation of this Employment Agreement, (ii) information of which
the Employee did not know and should not have known was disclosed
to the Employee in violation of any other person's
confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make
use of any such information for the benefit of any person, firm,
operation or other entity except the Company and its subsidiaries
or affiliates. The Employee's obligation to keep all of such
information confidential shall be in effect during and for a
period of five (5) years after the termination of his employment
in those states where Company has business offices; provided,
however, that the Employee will keep confidential and will not
disclose any trade secret or similar information protected under
law as intangible property (subject to the same exceptions set
forth in the parenthetical clause above) for so long as such
protection under law is extended.
10.
Termination.
(a) The Employee's employment with the Company may be
terminated at any time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability
which renders Employee unable to perform his
duties hereunder.
(iii) By the Company, for cause upon three (3) day's
written notice to Employee. For purposes of this
Agreement, the term "cause" shall mean termination
upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to
the Company, monetarily or otherwise, including
but not limited to any material misrepresentation
related to the performance of his duties; (ii) the
conviction of Employee of a felony or other crime
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involving theft or fraud, (iii) Employee's gross
neglect or gross misconduct in carrying out his
duties hereunder resulting, in either case, in
material harm to the Company; or (iv) any material
breach by Employee of this Agreement.
(b) Compensation upon Termination: In the event of
termination of employment, the Employee or his estate,
in the event of death, shall be entitled to his annual
base salary and other benefits provided hereunder to
the date of his termination. In addition, Employee
shall be entitled to receive any bonus accrued to the
date of his termination of employment as provided in
Section 5(b), which shall be payable (if applicable)
pursuant to the terms thereof. In the event of
Employee's death, Employee's designated beneficiary
shall also be entitled to all life insurance benefits
as referenced in paragraph 6(d).
11. Disability
. In the event that Employee becomes temporarily
disabled and/or totally and permanently disabled, physically
or mentally, which renders him unable to perform his duties
hereunder, Employee shall receive one hundred percent (100%)
of his base annual salary (in effect at the time of such
disability) for a period of one (1) year following the
initial date of such disability (offset by any payments to
the Employee received pursuant to disability benefit plans,
if any, maintained by the Company.) Such payments shall be
payable in twelve consecutive equal monthly installments and
shall commence thirty (30) days after the determination by
the physicians of such disability as set forth below.
For purposes of this Agreement, Employee shall be deemed to
be temporarily disabled and/or totally and permanently
disabled if attested to by two qualified physicians, (one to
be selected by Company and the other by Employee) competent
to give opinions in the area of the disabled Employee's
physical and/or mental condition. If the two physicians
disagree, they shall select a third physician, whose opinion
shall control. Employee shall be deemed to be temporarily
disabled and/or totally and permanently disabled if he shall
become disabled as a result of any medically determinable
impairment of mind or body which renders it impossible for
such Employee to perform satisfactorily his duties
hereunder, and the qualified physician(s) referred to above
certify that such disability does, in fact, exist. The
opinion of the qualified physician(s) shall be given by such
physician(s), in writing directed to the Company and to
Employee. The physician(s) decision shall include the date
that disability began, if possible, and the 12th month of
such disability, if possible. The decision of such
physician(s) shall be final and conclusive and the cost of
such examination shall be paid by Employer.
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12.
Severability. In case any one (1) or more of the provisions
or part of a provision contained in this Agreement shall be
held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not
affect any other provision or part of a provision of this
Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or
unenforceable provision, or part of a provision, had never
been contained herein, and such provision or part shall be
reformed so that it will be valid, legal and enforceable to
the maximum extent possible.
13. Governing
Law. This Agreement shall be governed and
construed under the laws of the State of Kentucky and shall
not be modified or discharged, in whole or in part, except
by an agreement in writing signed by the parties.
14. Notices
. All notices, requests, demands and other
communications relating to this Agreement shall be in
writing and shall be deemed to have been duly given if
delivered personally or mailed by certified or registered
mail, return receipt requested, postage prepaid to the
following addresses (or to such other address for a party as
shall be specified by notice pursuant hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Saunders, Cary and Patterson
9100 Arboretum Parkway, Suite 300
Richmond, Virginia 23236
Attn: Edwin Gadberry, III
15. Enforcement of Rights
. The parties expressly recognize that
any breach of this Agreement by either party is likely to
result in irrevocable injury to the other party and agree
that such other party shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of
competent jurisdiction in Chesterfield County, Virginia,
either at law or in equity, to obtain damages for any breach
of this Agreement, or to enforce the specific performance of
this Agreement by each party or to enjoin any party from
activities in violation of this Agreement. Should either
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party engage in any activities prohibited by this Agreement,
such party agrees to pay over to the other party all
compensation, remuneration, monies or property of any sort
received in connection with such activities. Such payment
shall not impair any rights or remedies of any non-breaching
party or obligations or liabilities of any breaching party
pursuant to this Agreement or any applicable law.
16.
Entire Agreement. This Agreement and the Purchase Agreement
referred to herein contain the entire understanding of the
parties with respect to the subject matter contained herein
and may be altered, amended or superseded only by an
agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension
or discharge is sought.
17. Parties in Interest
.
(a) This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or
obligations hereunder without first obtaining the
written consent of the other party hereto; provided,
however, that nothing in this Section 17 shall preclude
(i) Employee from designating a beneficiary to receive
any benefit payable hereunder upon his death, or (ii)
executors, administrators, or legal representatives of
Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto.
Notwithstanding the foregoing, this Agreement shall be
binding upon and inure to the benefit of any successor
corporation of Company
(b) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the assets of
the Company or the business with respect to which the
duties and responsibilities of Employee are principally
related, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent
that Company would have been required to perform it if
no such succession had taken place. As used in this
Agreement "Company" shall mean the Company as
hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers
the assumption agreement provided for in this Section
17 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
18.
Representations of Employee. Employee represents and
warrants that he is not party to or bound by any agreement
or contract or subject to any restrictions including without
limitation any restriction imposed in connection with
previous employment which prevents Employee from entering
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into and performing his obligations under this Agreement.
19.
Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed an
original part, which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effective as
of the day and year first above written.
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________
By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________
____________________________________
THOMAS M. CLAYTON
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