TOUCH TONE AMERICA, INC.
XXXXXX CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of
October 23, 1996 by and between TOUCH TONE AMERICA, INC. (the "Corporation"),
and XXXXXXX XXXXXX ("Consultant").
RECITALS
A. Consultant has been employed as the Chief Executive Officer of
Corporation.
B. Corporation is party to a transaction pursuant to which it will be the
survivor of a merger with SVV Sales d/b/a Arcada Communications (the "Merger").
C. Pursuant to the Merger, Consultant will resign as the Chief Executive
Officer of Corporation, and thenceforth will act merely as a consultant to the
Corporation.
D. The parties wish to enter into this Agreement to memorialize the terms
upon which the Consultant will provide consulting services to the Corporation.
AGREEMENT
In consideration of the mutual promises contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. TERM. The Corporation hereby retains Consultant, and Consultant
hereby agrees to be retained by the Corporation, for the consideration and upon
the terms and conditions herein set forth, to consult, counsel and advise with
the Corporation as set forth herein for a term commencing upon the consummation
of the Merger (the "Commencement Date") and continuing for one (1) year (the
"Term"). The Term may be extended by mutual agreement of the parties.
2. DUTIES. Consultant agrees to render counsel and advice to the
Corporation from time to time, as reasonably requested by and at the sole
discretion of the Corporation, for the profit, benefit and advantage of the
Corporation. The services of Consultant hereunder shall be rendered at such
times and places as shall be mutually convenient to the Corporation and the
Consultant. Consultant shall perform no work except at the request and with the
consent of the Corporation. Nothing in this Agreement shall prevent Consultant
from performing services for persons or entities other than the Corporation,
provided that performance of such services shall not be contrary to any of the
provisions of Sections 6 through 8 and shall not interfere with the Consultant's
performance of his duties hereunder unless Consultant has obtained the prior
written consent of the Corporation.
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3. CASH CONSIDERATION. Consultant shall be paid Five Hundred Dollars
($500) for every eight hour day of consulting activity actually performed
pursuant to this Agreement, which amount shall be pro-rated for any partial day
of consulting activity. Cash consideration shall be paid monthly.
4. STOCK CONSIDERATION.
4.1 GRANT OF STOCK OPTION. In consideration of Consultant's
agreement to resign as Chief Executive Officer of Corporation and to act as a
consultant hereunder, Corporation hereby grants an option (the "Option") to
purchase One Hundred Twenty-Five Thousand (125,000) shares of Corporation's
common stock (the "Option Shares"), subject to adjustments provided in Section
4.8 below, and on the terms and conditions hereinafter set forth.
4.2 DATE OF GRANT. The date of grant of the Option shall be deemed
to be the Commencement Date.
4.3 EXERCISE PRICE. The exercise price for the Option Shares shall
be $.01 per share.
4.4 EXPIRATION DATE. The Option shall expire three (3) years
following the expiration of the Term. If Consultant shall die during the term of
the Option, Consultant's legal representative or representatives, or the person
or persons entitled to do so under Consultant's last will and testament or under
applicable intestate laws, shall have the right to exercise the Option, but only
for the number of shares as to which Consultant was entitled to exercise the
Option in accordance with Section 4.5 hereof on the date of his death, and such
right shall expire and the Option shall terminate three (3) years and six (6)
months after the date of Consultant's death or on the expiration date of the
Option, whichever date is sooner.
4.5 VESTING. The Option shall be deemed fully vested as of the
Commencement Date.
4.6 NON-TRANSFERABILITY OF OPTION. Consultant may not transfer the
Option except by will or the laws of descent and distribution. The Option shall
not be otherwise transferred, assigned, pledged, hypothecated or disposed of in
any way, whether by operation of law or otherwise, and shall be exercisable
during the Consultant's lifetime only by the Consultant or his guardian or legal
representative.
4.7 LIMITED TRANSFERABILITY OF STOCK. Consultant may not transfer
any Option Shares, whether or not such Option Shares registered pursuant to
Section 4.13 hereof, for a one (1) year period beginning on the Commencement
Date.
4.8 STOCK ADJUSTMENT AND CORPORATE REORGANIZATION. If the Option
Shares are increased or decreased, or are changed into or exchanged for a
different number or kind of shares or securities, as a result of one or more
reorganizations, recapitalizations, stock splits, reverse stock splits, stock
dividends or the like occurring after the Commencement Date, appropriate
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adjustments shall be made in the number and/or kind of shares or securities for
which the unexercised portion of the Option may thereafter be exercised, all
without any change in the aggregate exercise price applicable to the unexercised
portion of the Option, but with a corresponding adjustment in the exercise price
per share or other unit. No fractional share of stock shall be issued under the
Option or in connection with any such adjustment. Such adjustments shall be
made by or under authority of the Corporation's board of directors whose
determinations as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
Upon the dissolution or liquidation of the Corporation, or upon a
reorganization, merger, statutory share exchange or consolidation of the
Corporation after the Commencement Date as a result of which the outstanding
securities of the class then subject to the Option are changed into or exchanged
for cash or property or securities not of the Corporation's issue, or upon a
sale of substantially all the property of the Corporation to, or the acquisition
of stock representing more than eighty percent (80%) of the voting power of the
stock of the Corporation then outstanding by, another corporation or person, the
Option shall terminate, unless provision be made in writing in connection with
such transaction for the assumption of options theretofore granted, or the
substitution for such options of any options covering the stock of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices, in which event the Option shall
continue in the manner and under the terms so provided. If the Option shall
terminate pursuant to the foregoing sentence, the Consultant shall have the
right, at such time prior to the consummation of the transaction causing such
termination as the Corporation shall designate, to exercise any unexercised
portion of the Option including the portions thereof which would, but for this
Section 4.8
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that the Option has shall be deemed granted upon the consummation of
the Merger, and the Merger shall not be deemed an event giving rise to any
adjustment or termination under this Section.
4.9 EXERCISE; PAYMENT FOR AND DELIVERY OF STOCK. The Option may be
exercised by the Consultant or other person then entitled to exercise it by
giving four (4) business days' written notice of exercise to the Corporation
specifying the number of shares to be purchased and the total purchase price,
accompanied by a check to the order of the Corporation in payment of such price.
If the Corporation is required to withhold on account of any present or future
tax imposed as a result of such exercise, the notice of exercise shall be
accompanied by a check to the order of the Corporation in payment of the amount
of such withholding.
4.10 ALTERNATIVE PAYMENT WITH STOCK. Notwithstanding the foregoing
provisions requiring payment by check, payment of such purchase price or any
portion thereof may be made with shares of stock of the same class as the shares
then subject to the Option, if shares of that class are then publicly traded (as
defined below), such shares to be credited toward such purchase price on the
valuation basis set forth below, in which event the stock certificates
evidencing the shares so to be used shall accompany the notice of exercise and
shall be duly endorsed or accompanied by duly executed stock powers to transfer
the same to the Corporation; provided, however, that such payment in stock
instead of cash shall not be effective and shall be
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rejected by the Corporation if (i) the Corporation is then prohibited from
purchasing or acquiring shares of the class of its stock thus tendered to it, or
(ii) the right or power of the person exercising the Option to deliver such
shares in payment of said purchase price is subject to the prior interests of
any other person (excepting the Corporation), as indicated by legends upon the
certificate(s) or as known to the Corporation. For purposes of this paragraph:
(a) "publicly traded" shares are those which are listed or admitted to unlisted
trading privileges on a national securities exchange or as to which sales or bid
and offer quotations are reported in the automated quotation system ("NASDAQ")
operated by the National Association of Securities Dealers, Inc. ("NASD"); and
(b) for credit toward the purchase price, shares so surrendered shall be valued
as of the day immediately preceding the delivery to the Corporation of the
certificate(s) evidencing such shares (or, if such day is not a trading day in
the U.S. securities markets, on the nearest preceding trading day), on the basis
of the closing price of stock of that class as reported with respect to the
market (or the composite of the markets, if more than one) in which such shares
are then traded, or if no such closing prices are reported, the lowest
independent offer quotation reported therefor in NASDAQ, or if no such
quotations are reported, on the basis of the most nearly comparable valuation
method acceptable to the Corporation. If the Corporation rejects the payment in
stock, the tendered notice of exercise shall not be effective hereunder unless
promptly after being notified of such rejection the person exercising the Option
pays the purchase price in acceptable form. If and while payment of the
purchase price with stock is permitted in accordance with the foregoing
provisions, the person then entitled to exercise the Option may, in lieu of
using previously outstanding shares therefor, use some of the shares as to which
the Option is then being exercised, in which case the notice of exercise need
not be accompanied by any stock certificates but shall include a statement
directing the Corporation to withhold so many of the shares that would otherwise
have been delivered upon that exercise of the Option as equals the number of
shares that would have been transferred to the Corporation if the purchase price
had been paid with previously issued stock.
4.11 RIGHTS IN SHARES BEFORE ISSUANCE. No person shall be entitled to
the privileges of stock ownership in respect of any Option Shares, unless and
until such shares have been issued to such person as fully paid shares.
4.12 REQUIREMENTS OF LAW AND OF STOCK EXCHANGES. By accepting the
Option, the Consultant represents and agrees for himself and his transferees by
will or the laws of descent and distribution that, unless a registration
statement under the Securities Act of 1933, as amended. and the rules and
regulations promulgated thereunder (the "1933 Act") is in effect as to the
Option Shares or are otherwise eligible for resale under the 1933 Act and Rule
144 promulgated thereunder, (i) any and all shares so purchased shall be
acquired for his personal account and not with a view to or for sale in
connection with any distribution, and (ii) each notice of the exercise of any
portion of the Option shall be accompanied by a representation and warranty in
writing, signed by the person entitled to exercise the same, that the shares are
being so acquired in good faith for his personal account and not with a view to
or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon exercise
of the Option shall be issued and delivered prior to the admission of such
shares to listing on notice of issuance
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on any stock exchange on which shares of that class are then listed, nor unless
and until, in the opinion of counsel for the Corporation, such securities may be
issued and delivered without causing the Corporation to be in violation of or
incur any liability under any federal, state or other securities law, any
requirement of any securities exchange listing agreement to which the
Corporation may be a party, or any other requirement of law or of any regulatory
body having jurisdiction.
4.13 REGISTRATION OF STOCK. In the event that, at any time or from
time to time after the date hereof, the Corporation proposes to register any
securities (the "Registration Stock"), including shares of stock, under the 1933
Act other than pursuant to a registration statement on Forms S-4 or S-8, or any
successor to such Forms, for the purpose of the sale or other transfer of the
Registration Stock by the Corporation or by any present or future holder of
securities of the Corporation, Consultant and/or any transferee of any Option
Shares held by Consultant to whom Consultant expressly transfers such person's
rights hereunder in accordance with the provisions hereof (collectively, the
"Transferees") shall have the right to request that the Corporation effect the
registration under the 1933 Act, of any or all of the Option Shares which are
beneficially owned by Consultant and/or Transferees (the "Requested Registration
Shares"). In such event, the Corporation shall use its best efforts to cause
the Requested Registration Shares to be registered under the 1933 Act; provided,
however, that the Corporation shall not be obligated to file and cause to become
effective more than one registration statement for the consultant and the
Transferees in which Requested Registration Shares are sold pursuant to this
Section 4.13. Consultant's and the Transferees' rights under this Section 4.13
shall terminate on the tenth anniversary of the Commencement Date.
5. EXPENSES. The Corporation shall reimburse Consultant for all
expenses, including travel expenses, reasonably incurred by Consultant and
directly relating to the provision by Consultant of his services pursuant to
this Agreement.
6. NONCOMPETITION. During the term of this Agreement and for a period of
at least three (3) years thereafter, Consultant shall not at any time, directly
or indirectly, in any capacity whatsoever, own, manage, operate, join in,
control, participate in, invest in, work for, or otherwise be connected with, in
any manner, whether as an officer, director, consultant, partner, investor,
consultant, agent or otherwise, any business entity or person which is engaged,
or proposes to engage, in activities that are directly competitive with the then
current or proposed activities of the Corporation. The parties hereto
acknowledge that this noncompetition covenant is made to induce the Corporation
to retain Consultant and is required for the purpose of preserving for the
Corporation the goodwill of its current and future business.
7. COVENANT NOT TO DISCLOSE. Consultant shall not at any time, without
the express prior written consent of the Corporation, disclose or otherwise make
known or available to any person, firm, corporation or other entity other than
the Corporation, or use for his own account, any Confidential Information of the
Corporation, whether made available to Consultant in the course of the provision
of his services to the Corporation, or in negotiations leading up to the
provision of such services, or otherwise, that relates to the Corporation, the
existing business of the Corporation, or the reasonably foreseeable business of
the Corporation.
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8. CONFIDENTIAL INFORMATION. As used in this Agreement, "Confidential
Information" means any non-public information obtained by Consultant from
Corporation, whether during or prior to the Term, including but not limited to
financial projections and performance information, billing information, customer
lists, business plans, marketing plans, and other proprietary business
information of the Corporation; any and all subject matter claimed in or
disclosed by any patent application prepared or filed by or on behalf of by the
Corporation, in any jurisdiction, and any amendments or supplements thereto; and
any and all "know how," methods, information, procedures or processes related to
any invention, invention report, trade secret, or proprietary information of the
Corporation.
Confidential Information includes any of the foregoing information whether
or not such information was developed, devised or otherwise created in whole or
in part by the efforts of Consultant. Confidential Information may be written,
oral, electronically stored, contained in magnetic media, simulated, or
manifested physically, or in or by other forms, but shall be protected as
Confidential Information regardless of form. Confidential Information shall not
include matters of public knowledge, unless such matters become public knowledge
as a result of any disclosure by Consultant or by any other party who is bound
by obligations of confidence to the Corporation, or unless the combination of
such matters would amount to Confidential Information. In any dispute over
whether information or matter is Confidential Information for purposes of
enforcement of this Agreement, it shall be the burden of Consultant to show both
that such contested information or matter is not Confidential Information within
the meaning of this Section 8, and that it does not constitute a trade secret
under the laws of the State of Washington.
9. RETURN OF CONFIDENTIAL INFORMATION. Immediately upon termination of
this Agreement, howsoever arising, or at any time upon the written request of
the Corporation or upon the oral request of any of Consultant's supervisors,
Consultant shall immediately return to the Corporation all Confidential
Information in any written or other manifestation or form, and shall further
surrender and deliver to the Corporation all records, materials, equipment,
drawings, documents and data of any nature pertaining to the Corporation, the
retention of Consultant's services, or the performance of any of Consultant's
duties as a consultant of the Corporation.
10. SPECIFIC PERFORMANCE. Consultant acknowledges and agrees that: (a)
but for the agreement of Consultant to comply with the covenants of this
Agreement, the Corporation would not contemplate retaining or continuing to
retain Consultant; (b) the Corporation will not have no adequate remedy at law
if Consultant violates the terms of this Agreement or fails to perform any other
obligation hereunder; and (c) the Corporation shall have the right, in addition
to any other rights it may have, to obtain in any court of competent
jurisdiction, temporary, preliminary and permanent injunctive relief to restrain
any breach, threatened breach, or otherwise to specifically enforce any, of such
covenants or any other obligations of Consultant, if Consultant fails to perform
any of his obligations under this Agreement.
11. SEVERABILITY. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of this Agreement or the
remainder of such section.
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Consultant acknowledges and stipulates that the covenants set forth in
Sections 6 through 9 above are fair and reasonably necessary for the protection
of the Corporation's protectable interests. In the event a court of competent
jurisdiction should decline to enforce any provision of Sections 6 through 9,
such section(s) shall be reformed to the extent necessary in the judgment of
such court to make such section(s) enforceable to the maximum extent which the
court shall find enforceable.
12. NOTICES. Any notices given under this Agreement shall be in writing,
personally delivered, or sent by certified mail, postage prepaid, or sent via
telefacsimile, receipt confirmed, to the following addresses and telephone
numbers, which a party may change from time to time by prior written notice to
the other party:
Corporation: Touch Tone America, Inc.
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Attention:
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With a copy to: Cairncross & Hempelmann, P.S.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxx
Consultant: Xxxxxxx Xxxxxx
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13. INDEPENDENT CONTRACTOR. Consultant shall during the Term be deemed to
be an independent contractor.
14. MISCELLANEOUS. This Agreement shall be binding upon and inure to the
benefit of the parties' respective successors and assigns. The waiver of any
breach of any provision of this Agreement or failure to enforce any provision
hereof shall not operate or be construed as a waiver of any subsequent breach.
In the event of any dispute between the parties that arises out of this
Agreement, the substantially prevailing party shall be entitled to reimbursement
for its attorneys' and experts' costs, fees and expenses. The provisions of
this Agreement shall not be construed as limiting any rights or remedies that
either party may otherwise have under applicable law, and shall be in addition
to all other rights and remedies of such party, including any which may arise
out of any other written agreement involving the parties.
15. GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Washington
without regard to conflicts of laws principles. The obligations set forth in
this Agreement are intended to supplement and not to supersede the protections
afforded the Corporation under the Uniform Trade Secrets Act, or similar law or
laws as may be in effect from time to time within the State of Washington. The
exclusive jurisdiction and venue of any lawsuit between the parties arising
under this Agreement
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or out of the transactions contemplated hereby shall be the Superior Court of
Washington for King County, or the United States District Court for the Western
District of Washington at Seattle, and each of the parties hereby submits itself
to the exclusive jurisdiction and venue of such court for the purposes of such
lawsuit.
16. PRIOR AGREEMENTS. This Agreement amends, restates and supersedes all
prior oral and written agreements between the parties.
DATED as of the day and year first written above.
TOUCH TONE AMERICA, INC.
By /s/ Xxxxx Xxxxx
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Its Chief Financial Officer
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/s/ Xxxxxxx Xxxxxx
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XXXXXXX XXXXXX
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