CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") by and between XXXXXX
COMMUNICATIONS CORPORATION, an Oklahoma corporation (the "Company"), and
Xxxxxx X. Xxxxxx, Xx., an individual (the "Consultant"), dated as of the 21st
day of December, 1998 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, Sygnet Wireless, Inc. and its subsidiary, Sygnet
Communications, Inc. (together, "Sygnet") are engaged in providing full
service mobile telecommunications including cellular telecommunications (the
"Business"); and
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of July
28, 1998, the Company, through an indirect subsidiary, has agreed to acquire
Sygnet (the "Sygnet Acquisition"); and
WHEREAS, Consultant is a director and is President and Chief Executive
Officer of Sygnet; and
WHEREAS, Consultant, in his capacity as President and Chief Executive
Officer of Sygnet, has been instrumental in developing the goodwill of the
Business by virtue of his intimate knowledge of all aspects of the Business
and his personal relationships with the employees and certain customers of
the Business; and
WHEREAS, the Company desires to preserve and protect the value of the
Business and goodwill to be acquired by the Company, and the value of any
goodwill developed following the Company's acquisition of Sygnet as a result
of Consultant's services rendered pursuant to this Agreement; and
WHEREAS, the Consultant has agreed to assist the Company in the
transition of ownership, and the operation, of the Business, to maintain the
confidentiality of certain information concerning the Business, and to
refrain from competing with the Company and Sygnet for a reasonable period of
time;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. ENGAGEMENT. The Company hereby engages the Consultant as a
consultant and advisor, and Consultant agrees to accept such engagement, on
the terms and conditions set forth herein. Consultant further agrees to
serve faithfully and to the best of his ability and to devote such of his
time, energy and
skill to the service of the Company and Sygnet, all as set forth in this
Agreement; provided, however, nothing herein contained shall prevent
Consultant from engaging in other endeavors not in conflict with the business
of the Company or its subsidiaries or his duties and responsibilities under
this Agreement.
2. DUTIES. During the term of this Agreement, Consultant shall render
such services of an advisory or consultive nature and promote the name and
good will of the Company and Sygnet as the Company, through its Chief
Executive Officer, may reasonably request so that the Company may have the
benefit of Consultant's experience and knowledge of the business and affairs
of Sygnet and of his reputation and contacts in the Business. In this
regard, Consultant will (i) use his best efforts (which shall not require an
unusual or burdensome amount of time nor shall Consultant be required to
incur out-of-pocket costs or expenses without reimbursement) to assist the
Company in maintaining good business relations with the principal suppliers
to and customers of the Business, and (ii) not take any action that would
detract from or impair the business relationship of those parties.
Consultant agrees that he will be available for advice and counsel to the
officers and directors of the Company at all reasonable times by telephone,
letter, or in person. Consultant agrees that he will serve faithfully and to
the best of his ability, and devote such of his time, energy and skill to the
service of the Company, as the Company through its Chief Executive Officer
may reasonably request.
3. INDEPENDENT CONTRACTOR. During the term of this Agreement,
Consultant shall be retained by the Company as and Consultant shall hold
himself out as, an independent contractor, and not as an "associate" or
"employee" of the Company. Accordingly, the Company shall not withhold
amounts of applicable federal and state income, withholding and employment
taxes from the fees to be paid Consultant hereunder unless otherwise required
by applicable law and regulations. Consultant shall be solely responsible
for and shall pay all of such taxes.
4. TERM. The initial term of this Agreement shall be for a period of
five years commencing on the Effective Date and ending on the earlier to
occur of (i) the fifth anniversary of the Closing Date of the Sygnet
Acquisition or (ii) the last day of the month coinciding with the date on
which a termination event (death, Disability, Cause or Voluntary Termination)
shall have occurred as provided in paragraph 6 hereof. Such period is
hereafter referred to as the "Consulting Period".
5. COMPENSATION.
5.1. TRANSITIONAL PERIOD FEE. The parties have agreed that
for consultive services provided by Consultant under
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this Agreement for a transition period of 90 days next following the
consummation of the Sygnet Acquisition (the "Transition Period"), the
Consultant shall receive a fee of $40,000, payable in full, within ten days
next following the last day of the Transition Period.
5.2. CONSULTING FEE. Commencing on the first day next
following the expiration of the Transition Period and for the remainder of
the Consulting Period, and in consideration of the Consultant faithfully
performing consulting services under this Agreement, and in consideration of
the Consultant being reasonably available to render to the Company the
services provided in paragraph 2 hereof, the Consultant shall receive an
annual fee of Sixty Thousand Dollars ($60,000) (the "Consulting Fee"),
payable in monthly installments in advance of $5,000.00 each commencing on
the first day of the Consulting Period and continuing until the earlier of
the expiration of the Consulting Period or termination of this Agreement
pursuant to, and subject to the provisions of, Section 6.
5.3. EXPENSES. During the Consulting Period, the Consultant
shall be entitled to receive reimbursement for all reasonable business and
travel expenses incurred by the Consultant while performing consulting
services for and at the request of the Company, all under and in accordance
with the policies, practices and procedures of the Company with respect to
key management associates of the Company and recognized by the Internal
Revenue Code of 1986, as amended (the "Code"), and rules and regulations of
the Internal Revenue Service promulgated thereunder, as approved and
interpreted by the Chief Financial Officer of the Company.
5.4. HEALTH, DISABILITY AND LIFE BENEFITS. In addition to
the consulting fee and the reimbursement expenses provided for above,
commencing with the first day of the Transition Period and for the remainder
of the Consulting Period, Consultant shall be entitled to receive such
health, disability and life insurance coverage as is provided to employees
whose annual compensation is comparable to the consulting fee to be paid to
Consultant under the terms of this Agreement.
5.5. OFFICE AND SUPPORT STAFF. During the Consulting Period
and if determined to be reasonably necessary for the Consultant to perform
his duties hereunder by the Chief Financial Officer of the Company, the
Consultant shall be provided with a suitable office in Youngstown, Ohio, of a
size and with furnishings and other appointments and secretarial and other
assistants as are provided to key management associates of the Company.
6. TERMINATION.
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6.1. DEATH OR DISABILITY. Except as provided in paragraph
7.1 hereof, this Agreement shall terminate automatically upon the
Consultant's death or "Disability." For purposes of this Agreement
"Disability" means disability which, at least twelve weeks after its
commencement, is determined to be total and permanent by a physician selected
by the Company and acceptable to the Consultant or Consultant's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
6.2. CAUSE. The Company may terminate this Agreement for
"Cause." For purposes of this Agreement "Cause" means (i) an act or acts of
personal dishonesty taken by the Consultant and intended to result in
personal enrichment of the Consultant at the expense of the Company, (ii) the
continued failure of Consultant to perform his duties and obligations under
this Agreement, which failure is not remedied at a reasonable period of time
after receipt of written notice from the Company, or (iii) the conviction of
the Consultant of a felony. Further, for purposes of this paragraph 6.2:
(a) No act, or failure to act, on the Consultant's
part shall be deemed "willful" unless done, or omitted to be done, by the
Consultant not in good faith and without reasonable belief that the
Consultant's action or omission was in the best interest of the Company.
(b) The Consultant shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Consultant a copy of a resolution duly adopted by the affirmative vote of a
majority of the entire membership of the Board of Directors of the Company
(excluding the Consultant) at a meeting of the Board called and held for such
purpose (after reasonable notice to the Consultant and an opportunity for the
Consultant, together with the Consultant's counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the Consultant
was guilty of conduct set forth in clauses (i), (ii) or (iii) above and
specifying the particulars thereof in reasonable detail. The determination
of the Board shall be binding upon the Company and the Consultant.
6.3. VOLUNTARY TERMINATION. The Consultant may voluntarily
terminate this Agreement ("Voluntary Termination") at any time during the
Consulting Period. A Voluntary Termination is any termination of this
Agreement by the Consultant during the Consulting Period other than
termination due to death, Cause or Disability.
6.4. NOTICE OF TERMINATION. Any termination by the Company
for Cause or Disability or by the Consultant by reason of his death or
Voluntary Termination shall be communicated a
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Notice of Termination to the other party hereto in accordance with the terms
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Consultant's engagement under the provisions so indicated, (iii) if
applicable, a copy of the resolution of the Board required by paragraph 6.2
hereof, and (iv) specifies a date of termination, which date shall be the
last day of the month of such notice.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
7.1. DEATH OR DISABILITY. If this Agreement is terminated
by reason of the Consultant's death or Disability, it shall terminate without
further obligations of the Consultant or his legal representative, as the
case may be, or the Company; provided, however, (i) in the event of the death
of the Consultant, the Company shall continue to pay the Consulting Fee
during the Consulting Period to the legal representative of Consultant or
Consultant's designee or (ii) in the event of the Disability of the
Consultant, the Company shall continue to pay the Consulting Fee during the
Consulting Period to the Consultant or his legal representative, as the case
may be, and (iii) in either event, any approved sums due under paragraphs 5.3
and 5.4 which have been accrued and have been expended by the Consultant and
which have not been reimbursed by the Company shall be paid to the Consultant
or his legal representative, as the case may be. In either of such events,
with the exception of the Consulting Fee the Company shall have no further
obligations to Consultant, Consultant's designee or his legal representative
under or pursuant to this Agreement.
7.2. CAUSE OR VOLUNTARY TERMINATION. If this Agreement is
terminated for Cause or by reason of a Voluntary Termination, the Company
shall have no further obligations to the Consultant from and after the
termination date and Consultant shall not be entitled to any severance
payment. If on the date of termination for cause, Consultant holds any
unexercised options to purchase capital stock of the Company, such options
shall be deemed surrendered and cancelled as of the date of termination,
without exercise.
7.3. INVOLUNTARY TERMINATION. If this Agreement is
terminated by the Company without cause and not by reason of the Consultant's
death or Disability, the Company shall be obligated to pay to Consultant an
amount equal to two monthly installments of the Consulting Fee described in
Section 5.2 hereof for the two calendar months next following the date of
such termination. In addition, in the event of an Involuntary Termination by
the Company, and if at the date of such termination
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the Consultant shall hold unexercised options to purchase capital stock of
the Company, the Consultant shall be entitled to exercise any and all options
to purchase stock which, in accordance with the terms of such options, could
be exercised within 12 months next following the date of termination. Any
additional unexercised options then held by Consultant shall be deemed
surrendered and canceled as of the date of termination, without exercise.
8. FULL SETTLEMENT. Except for termination of this Agreement by
the Company for Cause or as provided for in paragraph 10, the Company's
obligations to make the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Consultant or others. In no event shall the
Consultant be obligated to seek employment or take any other action by way of
mitigation of the amounts payable to the Consultant under any of the
provisions of this Agreement.
9. INDEMNIFICATION. During the Consulting Period, the Company
shall indemnify the Consultant for his acts under this Agreement to the same
extent and manner it provides indemnification for its officers and directors.
10. CERTAIN REDUCTIONS OF PAYMENTS BY THE COMPANY. In the event
that any payment made by the Company to the Consultant pursuant to the terms
of this Agreement shall be determined by the Internal Revenue Service as
nondeductible for federal income tax purposes by the Company, such amount
shall be repaid by the Consultant to the Company within 45 days after
notification by the Company. In the event at the end of said period,
Consultant has not reimbursed the Company for such sum, the Company shall
have the right of offset as against the Consulting Fee with respect to any
payments then due and owing, together with interest at the applicable federal
rates provided for in Section 7872(f)(2) of the Code.
11. DISCLOSURE OF INFORMATION. Consultant agrees that during the
term of this Agreement and for a period of three (3) years next following the
termination hereof, Consultant will not, without the prior written consent of
the Board of Directors of the Company, directly or indirectly, in any
individual, corporate or representative capacity whatsoever, reveal, divulge,
disclose or communicate to any person, firm, association, corporation or
other entity in any manner whatsoever information of any kind, nature or
description concerning any matters affecting or relating to the Business
which are not already in the public domain, including without limitation:
(i) the names of any of the prior or present customers or accounts of the
Business, (ii) the prices for which Buyer obtains or has obtained, or at
which it sells, or has sold,
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products of the Business, (iii) the names of the personnel involved in the
Business, (iv) the Company's financial affairs as they relate to the
Business, (v) the Company's or Sygnet's methods and manner of operating the
Business or (vi) the Company's plans, trade secrets, or other data of any
kind, nature or description whatsoever relating to the Business. Without
regard to whether any or all of the foregoing matters would be deemed
confidential, material or important, the parties hereto stipulate that as
between them, the same are important, material and confidential and
materially affect Buyer's effective and successful conduct of the Business
and its goodwill.
12. COVENANT NOT TO COMPETE. Consultant agrees that during the
term of this Agreement and for a period of three (3) years next following the
termination hereof, without the prior written consent of the Board of
Directors of the Buyer, Consultant will not, directly or indirectly, (i)
through any corporation, partnership or other entity (a) with respect to
which Sygnet, the Company or any Affiliate of Sygnet or the Company is now or
may hereafter be a director, executive officer or general partner, (b) which
is now or may hereafter be otherwise owned or controlled by Sygnet, the
Company or any Affiliate, or (ii) as principal, agent, employee, employer,
consultant, director, stockholder or holder of any equity security, partner
or in any other individual or representative capacity whatsoever:
12.1. Call upon, solicit, divert, take away or attempt to
call upon, solicit, divert or take away any then existing customers,
suppliers, businesses, or accounts of the Business, or of Sygnet or the
Company in connection with any business competitive with the Business in any
State where Sygnet or the Company is presently conducting the Business
(collectively, the "Restricted States"), nor interfere or compete with the
Business, or any portion thereof or the Buyer in connection with such
customers, suppliers, businesses, and accounts in the Restricted States;
12.2. Knowingly hire, attempt to hire, contact or solicit
with respect to hiring any present employee or future employee or consultant
of the Business or any portion thereof, or of Sygnet or the Company;
provided, that the foregoing prohibition shall not extend to (a) a former
employee of Sygnet whose employment by Sygnet or the Company was not
continued following consummation of the Merger, or (b) a former employee of
Sygnet or the Company whose employment by Sygnet or the Company, as the case
may be, ceased more than twelve (12) months prior to contact by Consultant;
12.3. Knowingly engage in, or give any advice to, any person,
firm, partnership, association, corporation or other entity engaged in a
business competitive with the Business or any
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portion thereof in the Restricted States;
12.4. Lend credit, money or reputation for the purpose of
establishing or operating a business competitive with the Business or any
portion thereof in the Restricted States; or provided, however, that the
foregoing provisions of this Section 12 shall not apply to the Consultant's
investment in or employment by the communications tower business controlled
by Xxxxxxx X. Xxxxxx, nor employment by or the ownership of less than a 5%
investment interest in a significantly active regional wireless provider who
may be in competition with Sygnet, such as Western Wireless or Nextel, or a
nationally active wireless provider who may be in competition with Sygnet,
such as AT&T Wireless.
These covenants are intended to restrict Consultant and his
Affiliates, agents and representatives from competing in any manner with the
Business, any portion thereof or Sygnet or the Company in the activities
which have heretofore been carried on by Sygnet or the Company in connection
with the Business or any portion thereof. The parties hereto agree that
prohibitions set forth in this Section 12 shall be liberally interpreted in
order to carry out the intents and purposes of this Agreement. As used in
this Agreement, the term "Affiliate" shall mean a person that directly, or
indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the person specified; and, when used to
indicate a relationship with any person, shall include (i) a corporation or
organization of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee
or in a similar capacity, and (iii) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such person or who is a
director or officer of the person or any of its parents or subsidiaries.
13. ENFORCEMENT OF COVENANTS. Consultant acknowledges that a
violation or attempted violation on its part of any agreement in Sections 11
or 12 above will cause such damage to the Company and the Business which will
be irreparable, and accordingly, Consultant agrees that the Company shall be
entitled as a matter of right to an injunction from any court of competent
jurisdiction, restraining any further violation of such agreements by
Consultant and his Affiliates, their respective employees, agents or
representatives, either individually or collectively. Consultant further
agrees that the three (3) year period of restriction set forth in Sections 11
and 12 above shall be tolled during any period of violation thereof by
Consultant or any of his Affiliates. Any exercise by the Company of its
rights pursuant to this Section 13 shall be cumulative and in addition to any
other
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remedies to which the Company may be entitled.
14. BOARD OF DIRECTORS. Upon (a) execution of this Agreement by
Consultant, and (b) consummation of the Sygnet Acquisition, it is intended
that Consultant will be elected to the office of, and become a director of
the Company. Consultant agrees that so long as he is a member of the
Company's Board of Directors, Consultant will attend all meetings of the
Board of Directors and, on an annual basis, at least two (2) company strategy
sessions, wherever held, unless Consultant is unable to attend by reason of
illness, physical infirmity or family emergency. Upon Consultant becoming a
member of the Company's Board of Directors, the Company agrees that it will
grant to Consultant options, under the Company's 1996 Stock Option Plan, as
amended (the "Plan"), options to purchase an aggregate of 833 shares of the
Company's Class B Common Stock at an option exercise price per share equal to
the fair market value of the Company's Class B Common Stock as determined by
a majority of the members of the Company's Board of Directors, subject to the
terms of such Plan and the other provisions contained in this Agreement.
15. ASSIGNMENT, BINDING EFFECT AND SUCCESSORS.
15.1. ASSIGNMENT. This Agreement is personal to the
Consultant and without the prior written consent of the Company shall not be
assignable by the Consultant otherwise than by will or the laws of descent
and distribution.
15.2. BINDING EFFECT. This Agreement shall inure to the
benefit of and be binding upon the Company, the Consultant, their respective
heirs, successors, assigns or legal representatives, as the case may be.
16. MISCELLANEOUS.
16.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma, without
reference to principles of conflict of laws.
16.2. INDEPENDENT CONTRACTOR. Consultant is and at all times
shall be an independent contractor. Nothing herein shall be construed as
creating a partnership, joint venture, the relationship of employer and
employee or of principal and agent or any other relationship between the
Company and Consultant.
16.3. HEADINGS. The captions of this Agreement are not part
of the provisions hereof and shall have no force and effect.
16.4. AMENDMENT. This Agreement may not be amended or
modified otherwise than by a written agreement executed
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by the parties hereto or their respective heirs, successors, assigns or the
legal representatives, as the case may be.
16.5. NOTICES. All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
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IF TO THE CONSULTANT:
Xx. Xxxxxx X. Xxxxxx, Xx.
0000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
IF TO THE COMPANY:
Xxxxxx Communications Corporation
00000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
Copy to:
McAfee & Xxxx A Professional Corporation
00xx Xxxxx, Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxx, Esq.
or such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be
effective when actually received by the addressee.
16.6. SEVERABILITY. The invalidity or enforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
16.7. NO WAIVER. The Consultant's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision hereof.
16.8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the Company and the Consultant with respect to the subject
matter hereof, and replaces in full the terms and conditions of all prior
negotiations, agreements and understanding between the parties hereto with
respect to the matters encompassed by this Agreement.
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IN WITNESS WHEREOF, the Consultant has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Xxxxxx X. Xxxxxx,
----------------------------------------
Xxxxxx X. Xxxxxx, Xx.
"CONSULTANT"
XXXXXX COMMUNICATIONS CORPORATION,
an Oklahoma corporation
By /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx, President
"COMPANY"
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