EXHIBIT 10.7
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and dated as of December
27, 1996 (the "Effective Date"), by and between Xxxxxx Holdings, Inc., a
Delaware corporation (the "Company"), and XXXXXX X. XXXXXX, a resident of the
State of Alabama (the "Consultant").
RECITALS
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WHEREAS, the Company is acquiring all of the outstanding shares of capital
stock of Xxxxxx Telecommunications Corporation, an Alabama corporation ("TTC")
and all of the outstanding shares of capital stock of AmeriTel Pay Phones, Inc.,
a Missouri corporation ("AmeriTel");
WHEREAS, the Consultant is a major shareholder of TTC, and as a condition and
in consideration for the Company's acquisition of his shares, the Consultant has
agreed to enter into this Agreement;
WHEREAS, the Consultant has acquired extensive knowledge and experience in the
business conducted by TTC, AmeriTel and the Company;
WHEREAS, the Company desires to obtain the benefit of the Consultant's
knowledge and experience by retaining the Consultant, and the Consultant desires
to accept such position, for the terms and upon the other conditions hereinafter
set forth;
WHEREAS, the Consultant and the Company each acknowledge and agree that the
terms and conditions set forth below are reasonable and necessary in order to
protect the legitimate business interests of the Company, TTC, AmeriTel and
their subsidiaries and affiliates (collectively, the "Acquisition Entities") and
to compensate the Consultant for information, knowledge and experience brought
to the Acquisition Entities;
NOW, THEREFORE, in consideration of the premises and the mutual agreements set
forth below, the parties hereby agree as follows:
1. CONSULTING. The Company hereby agrees to engage the Consultant, and the
Consultant hereby accepts such engagement, on the terms and conditions
hereinafter set forth.
2. CONSULTING PERIOD. The period for which the Consultant is engaged by the
Company hereunder (the "Consulting Period") shall commence on the Effective Date
and shall end on the second anniversary of the Effective Date (unless earlier
terminated in accordance with Section 5 of the Agreement). Commencing on the
second anniversary of the Effective Date, the Consulting Period
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shall be extended for successive one-year periods (individually, a "Renewal
Period"), unless a notice not to extend this Agreement shall have been given by
either party hereto to the other not later than ninety (90) days immediately
preceding the commencement of the Renewal Period (or unless earlier terminated
in accordance with Section 5 of this Agreement). Unless the context otherwise
requires, the Consulting Period hereunder shall for purposes of this Agreement
be deemed to include any Renewal Period.
3. POSITION AND DUTIES.
(a) DUTIES. During the Consulting Period, the Consultant shall make
himself available to perform consulting services with respect to the business
conducted by the Acquisition Entities. Such consulting services shall be related
to such matters as the chief executive officer or board of directors of the
Company may designate from time to time. The Consultant shall accommodate
reasonable requests for the Consultant's consulting services, and shall devote
reasonable time and his reasonable best efforts, skill and attention to the
performance of such consulting services.
(b) POSITION. Without limiting the generality of the foregoing, upon
request of the Company, the Consultant agrees to serve as a member of the Board
of Directors and/or the executive committee of the Company and/or the other
Acquisition Entities with such powers and duties as may from time to time be
reasonably assigned to him.
4. COMPENSATION AND RELATED MATTERS.
(a) CONSULTING FEE. During the Consulting Period, the Company shall pay the
Consultant the annual Consulting Fee specified in Exhibit 4 (the
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"Consulting Fee"), which Consulting Fee shall be paid in equal installments in
accordance with the Company's payroll policy, subject to Section 5 below.
(b) SEPARATE PAYMENT. In consideration of the Consultant's release and
agreements set forth in Section 6 below, the Company shall pay the Consultant,
the one-time payment specified in Exhibit 4 (the "Separate Payment"), which
Separate Payment shall be due and payable in equal installments over a 12-month
period in accordance with the Company's payroll policy, subject to Section 5
below.
(c) OTHER BENEFITS. During the Consulting Period, the Consultant shall be
entitled to and eligible for group health insurance coverage and any other
fringe benefits in accordance with policies applicable generally to salaried
employees of the Company.
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5. TERMINATION.
(a) TERMINATION FOR CAUSE. Prior to the end of the Consulting Period, the
Company may terminate the Consultant's engagement under this Agreement for
"Cause". For purposes of this Agreement, the Company shall have Cause to
terminate the Consultant's engagement hereunder in the event the Consultant: (i)
has committed any act of willful misconduct, embezzlement or wrongful conversion
of money or property belonging to any Acquisition Entity, or any act of fraud or
dishonesty that affects the business of any of the Acquisition Entities
(including, without limitation, any past act of which the Company becomes aware
after the date of this Agreement); (ii) is convicted of a felony at any time
hereafter; (iii) has failed to comply with any material directive of the Board
of Directors of the Company; or (iv) has willfully failed to substantially
perform his duties hereunder (other than any such failure resulting from the
Consultant's death or disability). If the Consultant's engagement hereunder is
terminated by the Company for Cause, the Company shall pay the Consultant: (i)
the balance of the Separate Payment then due and owing to the Consultant
pursuant to Section 4(b); and (ii) any Consulting Fee accrued or owing to the
Consultant hereunder through the date of termination, less any amounts owed by
the Consultant to the Company or any of its Subsidiaries, and the Company shall
have no further liability or obligation to the Consultant hereunder.
(b) TERMINATION WITHOUT CAUSE. Prior to the end of the Consulting Period, the
Company may terminate the Consultant's engagement under this Agreement for a
reason other than Cause or no reason whatsoever (i.e., without Cause). If the
Company terminates the Consultant's engagement without Cause prior to the
expiration of the Consulting Period, the Company shall pay the Consultant: (i)
the balance of the Separate Payment then due and owing to the Consultant
pursuant to Section 4(b), and (ii) any Consulting Fee accrued or owing to the
Consultant hereunder through the date of termination. The Company's liability to
the Consultant is limited to the amount of Consulting Fee and Separate Payment
(if any) owing to the Consultant for the remainder of the Consulting Period.
(excluding any Renewal Periods). The Company shall pay this remaining Consulting
Fee and Separate Payment (if any) to the Consultant at the same rate such
Consulting Fee and Separate Payment (if any) would have been due and owing to
the Consultant if he had remained engaged by the Company for the entire
Consulting Period. (excluding any Renewal Periods). If the Company terminates
the engagement of the Consultant because he has become disabled such that he is
unable to perform the essential functions of his job (with or without reasonable
accommodation), any such termination shall be deemed to be a termination without
Cause pursuant to this Agreement. Similarly, the Consultant's engagement shall
terminate upon his death, and shall be deemed a termination by the Company
without Cause, with payments of the Consulting Fee and Separate Payment (if any)
to be made to the Consultant's estate.
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6. CONFIDENTIAL INFORMATION, REMOVAL OF DOCUMENTS, DEVELOPMENTS AND
NON-COMPETITION.
(a) CONFIDENTIAL INFORMATION. The Consultant shall hold in a fiduciary
capacity for the benefit of the Company and the other Acquisition Entities all
trade secrets, confidential information, proprietary information, knowledge and
data relating to the Acquisition Entities and/or the businesses or investments
of the Acquisition Entities, which may have been obtained by the Consultant
during the Consultant's engagement by the Company (and/or during the
Consultant's prior employment by any of the Acquisition Entities), including
such information with respect to any products, improvements, formulas, designs
or styles, processes, services, customers, suppliers, marketing techniques,
methods, know-how, data, future plans or operating practices ("Confidential
Information"). Except as may be require or appropriate in connection with his
carrying out his duties under this Agreement, the Consultant shall not, without
the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such Confidential Information to
anyone other than the Company and those designated by the Company.
(b) REMOVAL OF DOCUMENTS. All records, files, drawings, letters, memoranda,
reports, computer disks, electronic storage media, documents, models and the
like relating to the business of any of the Acquisition Entities, which the
Consultant prepares, uses or comes into contact with and which contain
Confidential Information shall be the exclusive property of the Company to be
used by the Consultant only in the performance of his duties for the Company and
shall not be removed by the Consultant from the premises of any Acquisition
Entity (without the written consent of the Company) during or after the
Consulting Period unless such removal shall be required or appropriate in
connection with his carrying out his duties under this Agreement, and, if so
removed by the Consultant, shall be returned to such Acquisition Entities
immediately upon termination of the Consultant's engagement hereunder, or
earlier request by the Company (with the Consultant retaining no copies thereof
or any notes or other records relating thereto).
(c) DEVELOPMENTS. The Consultant will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software and/or works of authorship relating in any way to the business,
activities or affairs of any of the Acquisition Entities, whether patentable or
not, which are created, made, conceived or reduced to practice (in whole or in
part) by the Consultant or under his direction or jointly with others during the
Consulting Period, whether or not during normal working hours or on the premises
of the Company (collectively, "Developments"). The Consultant agrees to assign
and does hereby assign to the Company all of his right, title and interest in
and to all Developments and related patents,
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copyrights and applications therefor. The Consultant shall do all permissible
things, and take all permissible action, necessary or advisable, in the
Company's sole discretion and at the Company's expense, to cause any other
person related to the Consultant or an entity controlled by the Consultant
having an interest in a Development to assign to the Company all of such
person's or entity's right, title and interest in and to such Development and
related patents, copyrights and applications therefor. The Consultant, however,
does not guarantee that such assignment will be obtained. The Consultant agrees
to cooperate fully with the Company, both during and after the termination of
the Consulting Period, with respect to the procurements, maintenance and
enforcement of copyrights and patents (both in the United States and foreign
countries) relating to Developments.
(d) NON-COMPETITION. During (i) the Consulting Period and (ii) the two-year
period immediately following the expiration or earlier termination of the
Consulting Period, the Consultant (A) shall not engage, anywhere within the
geographical areas in which any Acquisition Entity is then conducting its
business operations, directly or indirectly, alone, in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization, in any "Competitive Business" which
competes with any business then being conducted by such Acquisition Entity; (B)
shall not solicit or encourage any officer, employee, independent contractor,
vendor or consultant of any of the Acquisition Entities to leave the employ of,
or otherwise cease his relationship with, any of the Acquisition Entities; and
(C) shall not solicit, divert or take away, or attempt to divert or to take
away, the business or patronage of any of the customers or accounts, or
prospective customers or accounts, of any Acquisition Entity, which were
contacted, solicited or served by any Acquisition Entity during the time the
Consultant was engaged by any Acquisition Entity (including any employment of
the Consultant prior to the date hereof). Notwithstanding anything herein to the
contrary, the Consultant will not be in violation of this provision if he owns
five percent or less of the outstanding voting stock of a publicly-traded
corporation as to which the Consultant is neither an officer, director, nor
employer. If, at any time, the provisions of this Section 6(d) shall be
determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 6(d) shall
be considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
the Consultant agrees that this Section 6(d) as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein. For purposes of this Section 6(d), Consultant and Company agree that
Competitive Business shall mean the corrections or penal management businesses
and the
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administration or servicing thereof, and the inmate telephone business and the
pay telephone business generally.
(e) NON-COMPETITION IN EXPANSION MARKETS. Consultant acknowledges that a
valuable asset of the Acquisition Entities is the plan of the Company and
Acquisition Entities to extend and expand their business, by acquisition or
otherwise, to areas of the United States of America which Acquisition Entities
do not yet serve on the Effective Date. Accordingly, during (i) the Consulting
Period and (ii) the two-year period immediately following the expiration or
earlier termination of the Consulting Period, the Consultant shall not engage,
anywhere in the United States of America directly or indirectly, alone, in
association with or as a shareholder, principal, agent, partner, officer,
director, employee or consultant of any other organization, in any Competitive
Business. Notwithstanding anything herein to the contrary, the Consultant will
not be in violation of this provision if he owns five percent or less of the
outstanding voting stock of a publicly-traded corporation as to which the
Consultant is neither an officer, director, nor employer. If, at any time, the
provisions of this Section 6(e) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 6(e) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Consultant agrees that
this Section 6(e) as so amended shall be valid and binding as though any invalid
or unenforceable provision had not been included herein. For purposes of this
Section 6(e), Consultant and Company agree that Competitive Business shall mean
the corrections or penal management businesses and the administration or
servicing thereof, and the inmate telephone business and the pay telephone
business generally.
(f) CONTINUING OPERATION. Any termination of the Consultant's engagement as a
consultant by the Company or any termination of this Agreement shall have no
effect on the continuing operation of this Section 6.
(g) LEGITIMATE BUSINESS INTERESTS. The Consultant has carefully read and
considered the provisions of this Section 6 and, having done so, agrees that the
restrictions set forth herein, including, without limitation, the time and
geographic restrictions set forth above, are fair and reasonable and are
reasonably required for the protection of the legitimate business interests and
goodwill of the Company.
(h) REMEDIES. The Consultant acknowledges that any violation of any of the
covenants and agreements contained in this Section 6 would result in irreparable
and continuing harm and damage to the Company and the other Acquisition Entities
which would be extremely difficult to quantify and for which
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money damages alone would not be adequate compensation. Consequently, the
Consultant agrees that, in the event he violates or threatens to violate any of
these covenants and agreements, the Company shall be entitled to: (1) entry of
an injunction, temporary and permanent, enjoining such violation and/or
requiring the Consultant to return all materials or other proprietary
information of the Company and (2) money damages insofar as they can be
determined. Nothing in this Agreement shall be construed to prohibit the Company
and the other Acquisition Entities from also pursuing any other legal or
equitable remedy, the parties having agreed that all remedies are cumulative.
The parties waive the right to a jury trial with respect to any controversy or
claim between or among the parties hereto, including any claim arising out of or
relating to this Agreement or based on or arising from an alleged tort.
(i) In consideration of the covenants of the Company contained herein and the
Separate Payment provided for above, Consultant does hereby release, acquit and
forever discharge TTC and Xxxxxx Telecommunications of Carolina, Inc., and their
present and former officers, directors, agents, employees, and their respective
insurers and all other persons, firms and corporations to whom and for whose
conduct the parties hereby released may be liable (the "Released Parties") from
any and all claims, demands and causes of action of whatsoever nature, known or
unknown, foreseen or unforeseen, whether in contract or in tort, or arising
under or by virtue of any federal or state statute or regulation, which arose
prior to the date hereof and in any way relate to the Consultant's employment by
TTC and/or Xxxxxx Telecommunications of Carolina, Inc.; provided however that
nothing herein shall release the Released Parties from any claim of Consultant
arising under this Agreement or in connection with or related to any of the
Contemplated Transactions as that term is defined in that certain Stock
Acquisition Agreement by and among Company and Xxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxx, Xx., Xxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx Telecommunications
Corporation and Xxxxxx Telecommunications of Carolina, Inc.
7. SEVERABILITY. Whenever possible, each provision and term of this
Agreement will be interpreted in a manner to be effective and valid, but if any
provision or term of this Agreement is held to be prohibited or invalid, then
such provision or term will be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement.
8. WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege. To the
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maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the Company and its affiliates, successors and assigns, and the
Consultant and his assigns, heirs and legal representatives. Each of the
Acquisition Entities (and their respective affiliates, successors and assigns)
shall be third party beneficiaries of this Agreement and may independently
enforce and benefit from the terms hereof.
10. OTHER AGREEMENTS; INDEMNIFICATION. The Consultant hereby represents
that, except as he has disclosed in writing to the Company, the Consultant is
not bound by the terms of any agreement with any previous employer or other
party to refrain from using or disclosing any trade secret or confidential or
proprietary information in the course of the Consultant's engagement with the
Company or to refrain from competing, directly or indirectly, with the business
of such previous employer or any other party. The Consultant further represents
that his performance of all of the terms of this Agreement does not and will not
breach any agreement to keep in confidence proprietary information, knowledge or
data acquired by the Consultant in confidence or in trust prior to the date of
this Agreement, and the Consultant will not disclose to the Company or induce
the Company to use any confidential or proprietary information or material
belonging to any previous employer or others. The Consultant hereby indemnifies
and agrees to defend and hold the Company harmless from and against any and all
damages, liabilities, losses, costs and expenses (including, without limitation,
reasonable attorneys' fees and the costs of investigation) resulting or arising
directly or indirectly from any breach of the foregoing representations or from
allegations, claims, proceedings or actions by third parties relating to the
confidential information belonging to them and disclosed by the Consultant to
the Company.
11. WITHHOLDING. Any payments provided for in this Agreement shall be paid
net of any applicable withholding of taxes required under federal, state or
local law.
12. RECITALS; HEADINGS; CONSTRUCTION. The Recitals set forth in the preamble
of this Agreement shall be deemed to be included and form an integral part of
this Agreement. The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or
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interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms. All references
herein to the word "or" shall mean "and/or." The parties, in acknowledgment
that all of them have been represented by counsel and that this Agreement has
been carefully negotiated, agree that the construction and interpretation of
this Agreement and other documents entered into in connection herewith shall not
be affected by the identity of the party or parties under whose direction or at
whose expense this Agreement and such documents were prepared or drafted.
13. TIME OF ESSENCE. With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
14. GOVERNING LAW. This Agreement shall be governed by the substantive laws
of the State of Alabama, without regard to its conflicts of laws principles. In
particular, Alabama substantive law will govern any controversy or claim between
or among the parties hereto, including any claim arising out of or relating to
this Agreement or based on or arising from an alleged tort.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral agreements and understandings between the
parties with respect to the subject matter of this Agreement. This Agreement
may not be amended except by a written agreement executed by both parties.
16. NOTICES. Any notice, demand or other communication which may or is
required to be given under this Agreement shall be in writing and shall be: (a)
personally delivered; (b) transmitted by United States postage prepaid mail,
registered or certified mail, return receipt requested; (c) transmitted by
reputable overnight courier service such as Federal Express; or (d) transmitted
by legible facsimile (with answer back confirmation) to the parties' respective
addresses as set forth opposite their signatures hereto. Except as otherwise
specified herein, all notices and other communications shall be deemed to have
been duly given on (i) the date of receipt if delivered personally, (ii) two (2)
calendar days after the date of posting if transmitted by registered or
certified mail, return receipt requested, (iii) the first (1st) business day
after the date of deposit if transmitted by reputable overnight courier service
or (iv) the date of transmission with confirmed answer back if transmitted by
facsimile, whichever shall first occur. A notice or other communication not
given as herein provided shall only be deemed given if and when such notice or
communication is actually received in writing by the party to whom it is
required or
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permitted to be given. The parties may change their address for purposes hereof
by notice given to the other parties in accordance with the provisions of this
Section, but such notice shall not be deemed to have been duly given unless and
until it is actually received by the other party.
17. COMMON LAW OR OTHER DUTIES. The Consultant's duties obligations, and
agreements hereunder are in addition to (and not in limitation of) any duties or
obligations under common law or statute owed to the Acquisition Entities by the
Consultant by reason of his position as officer or director, as applicable, of
the Acquisition Entities.
18. ATTORNEYS' FEES. In the event of any litigation or proceeding brought
with respect to this Agreement in which the parties to this Agreement (or any
other Acquisition Entity or Entities) is a party, the prevailing party(ies)
shall be entitled to recover from non-prevailing party(ies) any reasonable
attorneys' fees and expenses incurred therein.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Xxxxxx Holdings, Inc.,
a Delaware corporation
By: /s/ XXXX X. XXXXXXX
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Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
Address: c/o Xxxxxx Xxxx Xxxxxxx
Capital Corporation
0000 Xxxxxx Xxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
/s/ XXXXXX X. XXXXXX
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XXXXXX X. XXXXXX, XX.
Address: 000 Xxx Xxxxxx Xxxxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Telephone: __________________
Facsimile: __________________
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EXHIBIT 4
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to Talton, Sr. Consulting Agreement
(a) Consulting Fee: $86,000 for the first year of Consulting Period
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$96,000 for the second year of Consulting Period
$120,000 for any year after the second year of
the Consulting Period
(b) Separate Payment: $10,000
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(c) Other Benefits: During the Consulting Period, the Consultant shall
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be entitled to receive and enjoy all fringe benefits that he enjoyed as an
executive of TTC immediately prior to the commencement of the Consulting Period.
In addition, the Consultant shall be eligible for all future fringe benefits
made available to salaried employees of the Company or the Acquisition Entities.
During the Consulting Period, the Consultant shall have the exclusive use of
that certain 1991 Range Rover, Vehicle Identification No. XXXXX0000XX000000 (the
"Vehicle"), now owned by TTC. During the Consulting Period, the Company shall
maintain the Vehicle and shall pay all costs incurred by the Consultant in
connection with his use and operation of the Vehicle. Upon the expiration of
this Consulting Agreement, or upon the termination of this Consulting Agreement
pursuant to Sections 5(a) or 5(b), the Company shall cause TTC or one or more of
the other Acquisition Entities to deliver title to the Vehicle, without payment
therefore by the Consultant, to the Consultant free and clear of all liens or
encumbrances.
(d) Insurance: The Company and the Acquisition Entities shall each
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maintain D&O insurance coverage.
(e) Indemnity: The Company shall also indemnify, defend, and hold the
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Consultant free and harmless of, from, and against any and all claims, demands,
actions, causes of action, and all other litigation related to the engagement of
the Consultant under this Consulting Agreement.
(f) Additional Compensation: Should Consultant serve as the chairman of
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the Company's Board of Directors and successfully manage the initial twelve
months of the Company's operations, the Company will evaluate paying Consultant
additional reasonable compensation for such efforts.
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