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Exhibit 10.38
AGREEMENT
This agreement ("Agreement") is made and entered into effective the
16th day of July, 1998, by and among (i) SSE TELECOM, INC., a Delaware
corporation ("SSET"), (ii) CORPORATE TELECOM SERVICES, INC., a Maryland
corporation ("CTSI"), and (iii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇▇▇▇").
RECITALS
R-1. In 1988, and for periods prior thereto, SSET maintained its
principal executive offices in Bethesda, Maryland, and engaged, directly and
through subsidiary companies, in the business, among other things, of providing
to its customers engineering and related services in respect to applications
filed with the Federal Communications Commission (the "FCC" or the "Commission")
seeking authority to provide public cellular telecommunications radio service.
SSET had developed a reputation as a leading provider of satellite systems
engineering services, as a provider of other consulting and engineering services
to companies in the telecommunications industry, and had developed an expertise
in the providing of services to customers seeking authority to operate such
systems through the competitive process which had been in effect at the FCC
through 1986. Starting in 1986, the Commission developed a lottery process for
the selection of a particular applicant among multiple applicants for
metropolitan service areas ("MSAs"), and later for the award to an applicant
from multiple applications for rural service areas ("RSAs"). In the
establishment of the lottery process, the Commission promulgated various rules,
including rules intended, among other things, to reduce "speculation" in lottery
applications through the filing and subsequent sale of applications, and the
filing of multiple applications by the same applicant for the same market area.
R-2. In 1986, SSET caused the formation of CTSI as a wholly-owned
subsidiary of SSET, and then used CTSI as SSET's corporate entity as an
applicant for the award of cellular licenses in certain of the MSA markets, and
subsequently as the applicant for various RSA markets. SSET prepared
applications for CTSI and CTSI filed with the Commission for various RSA
markets, correctly disclosing, as required by applicable rules, the parent
subsidiary relationship between SSET and CTSI, and the principal officers of
SSET and CTSI.
R-3. In the summer of 1988, SSET had formed, as a wholly-owned
subsidiary, SSE Technologies Inc. ("SSE Tech") to engage in the business of
manufacturing satellite transceivers, and by the latter part of 1988, and
continuing into early 1989, SSET was seeking financing for the business of SSE
Tech and intended to make a private placement of shares of SSET common stock to
raise needed capital. In 1988, SSET was a public company, with shares of its
common stock publicly traded, and the public nature of SSET has continued to the
present.
R-4. At the time of the proposed private placement, SSET became
concerned in respect to the effect of the proposed private placement on the
various pending applications filed by CTSI with the FCC for the pending RSA
lotteries because, among other things, completion of the private placement would
materially change the stock ownership interest in SSET and one of the
prospective investors had, through another entity, filed applications with the
FCC for some of the
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same RSA markets as filed for by CTSI.
R-5. In February 1989, SSET and CTSI sought the advice of experienced
FCC legal counsel, and being unable to receive guidance from the FCC, such legal
counsel recommended the placing in trust by SSET of its stock ownership interest
in CTSI, with the expectation that a formal application could then be made to
the Commission when appropriate to seek an amendment to CTSI's applications.
R-6. In February 1989, SSET, CTSI and ▇▇. ▇▇▇▇▇▇▇▇▇, as Trustee,
entered into a trust agreement dated February 23, 1989, under which SSET placed
in trust with ▇▇. ▇▇▇▇▇▇▇▇▇, as Trustee, all of the stock ownership interest in
CTSI, pursuant to the said trust agreement as amended July 7, 1989 (the "Trust
Agreement"). ▇▇. ▇▇▇▇▇▇▇▇▇ was the founder of SSET, and in February 1989 its
president and controlling stockholder. On May 5, 1989, following a lottery, the
Commission designated CTSI as the tentative selectee for the Nebraska-▇▇▇▇▇ No.
5 Rural Service Area (the "▇▇▇▇▇ RSA"), and on June 21, 1989, CTSI filed an
amendment to its application explaining the existence of the Trust Agreement and
seeking approval of the Commission to an amendment of CTSI's application and
confirmation of CTSI as the selectee of the ▇▇▇▇▇ RSA. The Mobile Services
Division ("MSD") of the FCC denied CTSI's application, and further rejected CTSI
as the tentative selectee for the ▇▇▇▇▇ RSA. CTSI appealed the decision of the
MSD to the Commission's Common Carrier Bureau (the "CCB"), and in October 1991,
the CCB affirmed the decision of the MSD. CTSI appealed such decision to the
full Commission, and on March 1, 1994, the Commission denied CTSI's application
for review, denied CTSI's request for waiver of certain of its rules, and
affirmed the order of the CCB. On March 29, 1994, CTSI appealed the decision of
the Commission to the United States Court of Appeals for the District of
Columbia Circuit. On June 2, 1995, the Court of Appeals reversed and remanded
the Commission's order and directed that the Commission reconsider the
application of CTSI. On remand and reconsideration, the Commission concluded
that CTSI's application did not violate the policy objectives of the Commission,
and that the application should, therefore, be granted, and effective May 7,
1997, the Commission granted CTSI's application and affirmed CTSI as the
selectee for the ▇▇▇▇▇ RSA. Thereafter, CTSI completed the application process
with the FCC and obtained FCC authorization (the "Authorization") to construct,
own and operate the non-wireline cellular telephone system in the ▇▇▇▇▇ RSA.
R-7. In December 1994, in order to obtain funds for the payment of
certain expenses of CTSI, including funds for the prosecution of the appeal in
the United States Court of Appeals, CTSI entered into a Loan and Pledge
Agreement dated December 13, 1994, with Global Communications Systems, Inc.
("Global") under which agreement (the "Loan and Pledge Agreement") Global lent
to CTSI $100,000.00, and Global acquired a put option right under which Global
obtained the right and option to match any offer received by CTSI for the
purchase from CTSI of the Authorization if CTSI gave notice to Global of its
intention to accept such an offer subject, however, to the proviso that Global
need not pay in excess of $40.00 "per pop" times the population in the ▇▇▇▇▇ RSA
market (the "per pop put price").
R-8. Effective December 22, 1997, CTSI entered into an Asset Purchase
Agreement with
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Western Wireless Corporation ("Western"), the interim operator, under which
agreement (the "Asset Purchase Agreement") the parties agreed to seek the
approval of the FCC for the sale by CTSI of the Authorization for the ▇▇▇▇▇ RSA
to Western, and, if such approval was obtained, for the sale by CTSI of such
Authorization to Western for the purchase price and upon the terms more
particularly set forth in the Asset Purchase Agreement. An application to the
FCC was duly filed by Western and CTSI, and the Commission granted such
application effective May 1, 1998. The Commission's Order granting the
application became final on June 15, 1998.
R-9. Throughout the period from February 1989, and through the date of
this Agreement, ▇▇. ▇▇▇▇▇▇▇▇▇ has held, as Trustee, the stock ownership interest
in CTSI, and has diligently pursued the obtaining of the Authorization for CTSI
and the subsequent approval for the sale and transfer of the Authorization to
Western under the Asset Purchase Agreement.
R-10.CTSI is no longer a party or applicant before the FCC or the
holder of any license or permit granted by the FCC, and the parties hereto have
concluded that termination of the Trust Agreement and redeliver to SSET of the
stock ownership in CTSI is appropriate.
NOW, THEREFORE, in consideration of the foregoing, and the covenants
and agreements herein contained, and the benefits to be derived here from, the
parties, intending to be legally bound, hereby agree as follows:
1. RECITALS. The recitals set forth above are incorporated herein by
reference and constitute a part of this Agreement.
2. SATISFACTION OF GLOBAL. The parties acknowledge that all
obligations of CTSI arising from the Loan and Pledge Agreement with Global have,
prior to the date of this Agreement, been satisfied in full by the following
transactions:
(a) To induce CTSI to enter into the Asset Purchase Agreement with
Western, CTSI through Trustee, and Global entered into a first amendment to the
Loan and Pledge Agreement effective September 26, 1997 (the "First Amendment")
pursuant to which, among other things, the "per pop put price" was amended to
$48.00, rather than $40.00 as set forth in the Loan and Pledge Agreement,
effectively increasing the consideration to be received by CTSI under the Asset
Purchase Agreement with Western by $8.00 "per pop". Further, CTSI gave notice to
Global of CTSI"s receipt of an offer for the transfer of the Authorization for
the ▇▇▇▇▇ RSA at $48.00 per pop based on the population of 145,000 in the ▇▇▇▇▇
RSA. Subsequent to the First Amendment, CTSI entered into the Asset Purchase
Agreement with Western.
(b) The First Amendment also provided for the repayment by CTSI to
Global of the term loan in the amount of $100,000, together with agreed interest
in the liquidated sum of $12,000, and such aggregate payment of $112,000 (the
"Global Debt") was paid by CTSI to Global concurrent with closing under the
Asset Purchase Agreement with Western.
(c) CTSI, ▇▇. ▇▇▇▇▇▇▇▇▇, Global and Global's president, ▇▇▇▇ ▇.
▇▇▇▇▇▇
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("▇▇▇▇▇▇") executed and delivered a Mutual Release Agreement, a copy of which is
annexed hereto and identified as Exhibit 2(c) (the "CTSI-Global Release"). CTSI
and ▇▇. ▇▇▇▇▇▇▇▇▇ hereby confirm that all conditions precedent to the
effectiveness of such release have been satisfied, and the CTSI-Global Release
is in full force and effect.
3. SALE TO WESTERN. Pursuant to the Asset Purchase Agreement, CTSI,
as Seller, and Western, as Purchaser, agreed to the sale and purchase of CTSI's
ownership interest in the Authorization for the ▇▇▇▇▇ RSA for the purchase price
and upon the terms and conditions set forth in the Asset Purchase Agreement. A
copy of the Asset Purchase Agreement is annexed hereto as Exhibit 3. In respect
to the Asset Purchase Agreement with Western, the parties acknowledge:
(a) All conditions to closing under the Asset Purchase Agreement
were satisfied, and the Closing of the purchase and sale of the Authorization
occurred on June 22, 1998.
(b) Annexed hereto as Exhibit 3(b) is a copy of the confirmation
of closing and receipt of the purchase price.
(c) CTSI has fully performed all of its obligations and has
exercised all rights under the Asset Purchase Agreement with Western, and as of
the date of this Agreement, CTSI no longer has any interest in the
Authorization.
4. SATISFACTION OF LIABILITIES OF CTSI. The parties acknowledge that
during the period from in or about February 1989, and continuing to the period
immediately prior to the date of this Agreement, CTSI incurred, and ▇▇.
▇▇▇▇▇▇▇▇▇, in his capacity as Trustee incurred, various liabilities and
commitments arising out of the pursuit by CTSI of the obtaining of the
Authorization for the ▇▇▇▇▇ RSA. SSET also incurred and paid obligations in
respect to CTSI both prior to February 1989 and subsequent to February 1989.
Except as set forth in (c) and (d) below, all of such liabilities have been paid
and satisfied as of the date of this Agreement as follows:
(a) The liabilities to Global have been satisfied as provided in
Section 2 above.
(b) Except for the liabilities described in (c) and (d) below, all
other liabilities of CTSI incurred or accrued during the period February 1989,
through and including the date of this Agreement, are identified on the annexed
Exhibit 4(b) (the "Scheduled Liabilities"). Prior to or concurrent with
execution of this Agreement, the Scheduled Liabilities have been paid and
satisfied in full at the amounts reflected on such Schedule.
(c) The parties acknowledge that SSET advanced various funds to
CTSI from the period of CTSI's organization through February 1989, and that
after February 1989, SSET paid directly to third persons various expenses
incurred on behalf of CTSI in furtherance of the business of CTSI, including
expenses incurred in pursuing the obtaining of the Authorization for CTSI.
Amounts advanced to CTSI from SSET, and amounts advanced, paid or expensed on
behalf of CTSI by SSET, shall be resolved and satisfied as CTSI and SSET shall
agree separate from the terms of this Agreement.
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(d) Payment of amounts to ▇▇. ▇▇▇▇▇▇▇▇▇ for his services as
Trustee shall be in accordance with the provisions of Section 6 below.
5. REASSIGNMENT OF CTSI STOCK TO SSET. The parties hereto have
concluded that the purpose for the conveyance by SSET of its stock ownership
interest in CTSI to ▇▇. ▇▇▇▇▇▇▇▇▇, as Trustee under the Trust Agreement, has
been satisfied and that the continued holding of the stock ownership interest in
CTSI by the Trustee is no longer necessary, and the parties, having considered
the advice of legal counsel, determined to terminate the holding of the stock
ownership interest in CTSI by ▇▇. ▇▇▇▇▇▇▇▇▇, as Trustee. Concurrent with the
execution of this Agreement, and without further act by any of the parties
hereto, the parties agree that the Trust Agreement is hereby terminated and the
stock ownership interest in CTSI is hereby redelivered to SSET. In furtherance
of such termination and redelivery, concurrent with the execution of this
Agreement, ▇▇. ▇▇▇▇▇▇▇▇▇ has surrendered the certificate representing 100 shares
of the common stock of CTSI, being all of the issued and outstanding shares of
CTSI, and has executed and delivered to SSET an assignment separate from the
certificate conveying such shares to SSET.
6. COMPENSATION TO ▇▇. ▇▇▇▇▇▇▇▇▇. SSET and CTSI acknowledge that ▇▇.
▇▇▇▇▇▇▇▇▇ diligently pursued the efforts to obtain the Authorization for CTSI,
was responsible, together with legal counsel, for the directions taken over the
preceding years in obtaining such Authorization, materially contributed to the
obtaining of an increase in the Aper pop put price@ resulting in substantial
benefit to CTSI, and has otherwise materially contributed to the transactions
which permitted the resultant sale of the Authorization and the return to SSET
of its ownership interest in CTSI. As compensation for all services rendered by
▇▇. ▇▇▇▇▇▇▇▇▇ arising out of the Trust Agreement, concurrent with the execution
of the Agreement, ▇▇. ▇▇▇▇▇▇▇▇▇ shall be paid $728,489.00. The parties agree
that the amount paid to ▇▇. ▇▇▇▇▇▇▇▇▇ pursuant to the preceding sentence
includes compensation for services rendered, and any incidental expenses
incurred by ▇▇. ▇▇▇▇▇▇▇▇▇ not included in the Scheduled Liabilities. Such amount
has been paid concurrent with the execution of this Agreement, the receipt of
which is acknowledged by ▇▇. ▇▇▇▇▇▇▇▇▇. ▇▇. ▇▇▇▇▇▇▇▇▇ acknowledges that the
amount so paid will be reported for federal and state income tax purposes as a
deductible expense on the separate tax return of CTSI and/or the consolidated
tax return of CTSI with SSET, and that the same is reportable by ▇▇. ▇▇▇▇▇▇▇▇▇
on his personal state and federal tax returns as income to ▇▇. ▇▇▇▇▇▇▇▇▇.
7. LEGAL COUNSEL. The parties acknowledge:
(a) At all times during the prosecution by CTSI of the proceedings
before the FCC, the law firm of Haley, Bader & ▇▇▇▇▇, P.L.C. has been legal
counsel for CTSI in all matters in respect to representation before the
Commission. Haley, Bader & ▇▇▇▇▇, P.L.C. perfected the appeal by CTSI to the
United States Court of Appeals, and in addition, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire,
represented CTSI in the United States Court of Appeals.
(b) Throughout the period of the Trust Agreement, ▇▇. ▇▇▇▇▇▇▇▇▇,
individually and in his capacity as Trustee, has been represented by independent
counsel, initially by ▇▇▇▇ &
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Priest, and since in or about February 1994, by ▇▇▇▇▇▇▇ & Berlin Chartered.
(c) SSET has, at all times, been represented by G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
(and law firms with whom he has been associated).
(d) In respect to this Agreement and the transactions herein
provided, the parties have received such legal advice as they have,
respectively, deemed necessary or appropriate.
8. INDEMNIFICATION.
(a) SSET and CTSI, jointly and severally (collectively, the
"Indemnitor") shall indemnify ▇▇. ▇▇▇▇▇▇▇▇▇, individually and in his capacity as
Trustee, and his heirs, administrators, successors and personal representatives
(the "Indemnitee") and hold the Indemnitee harmless from and against any and all
losses, costs, liabilities, damages or deficiencies (including, without
limitation, reasonable attorneys' fees and court costs) incurred by the
Indemnitee resulting from the assertion of any claim against Indemnitee arising
out of or relating to the Trust Agreement, any act or omission undertaken by ▇▇.
▇▇▇▇▇▇▇▇▇ under or pursuant to the Trust Agreement, or the redelivery by ▇▇.
▇▇▇▇▇▇▇▇▇ of the stock ownership interest in CTSI to SSET.
(b) Upon the assertion of any claim by third parties against
Indemnitee as to which Indemnitee is entitled to indemnification, Indemnitee
shall give reasonable notice to SSET after the Indemnitee has knowledge of the
commencement of any legal proceeding or the assertion of any claim, and shall
permit the Indemnitor to assume the defense of any such legal proceeding by
counsel reasonably acceptable to Indemnitee. If Indemnitor shall assume the
defense of any such claim or litigation resulting therefrom, Indemnitor shall
take all reasonable steps necessary in the defense or settlement of such claim
or litigation resulting therefrom, and the Indemnitee shall not admit any
liability with respect thereto or settle, compromise, pay or discharge the same
without the prior written consent of SSET so long as Indemnitor is contesting or
defending the same in good faith, and the Indemnitee shall cooperate with
Indemnitor in the contest or defense thereof, and shall accept any settlement
thereof recommended by Indemnitor so long as the amount of such settlement is
paid in full by SSET or CTSI, and otherwise complies with this Agreement.
(c) If both SSET and CTSI shall fail to assume the defense of any
such claim or litigation resulting therefrom, the Indemnitee may defend against
such claim or litigation in such manner as the Indemnitee may deem appropriate,
and may settle such claim or litigation on such terms as the Indemnitee may deem
appropriate, and SSET and CTSI, jointly and severally, shall promptly reimburse
the Indemnitee for the amount of such settlement and all expenses, legal or
otherwise, incurred by the Indemnitee in connection with the defense or
settlement of such claim or litigation.
9. NOTICES. All notices, requests, consents, demands and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been duly given (a) on the date
of personal delivery or (b) on the third day after the date of deposit in the
United States Mail, postage prepaid, by certified mail, return receipt
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requested, or (c) on the date of transmission by telephonic facsimile
transmission with written confirmation, or (d) on the first business day after
the date of delivery to a nationally recognized overnight courier service, in
each case, addressed as follows or to such other person or address as any party
shall designate by notice to the other parties in accordance herewith:
If to SSET: SSE Telecom, Inc.
Attn: Chief Financial Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to CTSI: Corporate Telecom Services, Inc.
Attn: Chief Financial Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With, when to
either SSET or
CTSI, a copy to: Surovell, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
Attn: G. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇. ▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇. ▇. ▇▇▇▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ & Berlin, Chartered
Attn: ▇▇▇▇ Van Over, Esquire
▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
10. EXHIBITS; SCHEDULES; SECTIONS. All exhibits and schedules to this
Agreement shall be deemed to be incorporated herein by reference and made a part
hereof as if set out in full herein. When reference is made in this Agreement to
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated.
11. BINDING EFFECT. This Agreement may not be assigned by any party
without the prior written consent of the other parties. Subject to the foregoing
and subject to the other express
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provisions of this Agreement to the extent otherwise providing, all of the
terms, provisions and conditions of this Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties hereto, and
their respective heirs, personal representatives, successors and assigns.
12. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, in such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If it shall be determined at any time by any court of
competent jurisdiction that any provision of this Agreement or any portion
thereof is unenforceable, then such portions as shall have been determined to be
unenforceable shall thereupon be deemed to be so amended as to make such
restrictions reasonable in the determination of such court, and the provisions,
as so amended, shall be enforceable between the parties to the same extent as if
such amendment had been made prior to the date of any alleged breach of such
provision.
13. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by, and shall be
construed in accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
SSE Telecom, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
Corporate Telecom Services, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Individually
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