CONSULTING AGREEMENT (the "Agreement") dated as of May 11, 1999 (the
"Effective Date") by and between, COMPU-▇▇▇▇, INC., a Delaware corporation (the
"Company") and, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the "Consultant").
The Company is engaged in the telecommunications and e-commerce business
(the "Business").
The Company desires to retain the Consultant to perform consulting services
with respect to providing the Company with guidance and advice from time to time
in the general management, administration and operation of the Company, and the
Consultant is willing to perform such services, upon the terms and conditions
herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
hereinafter set forth, the parties hereto have agreed, and do hereby agree, as
follows:
1. Retention; Duties. Subject to the terms and conditions set forth herein,
the Company hereby retains the Consultant, and the Consultant hereby accepts
such retention, to act as a consultant with respect to providing the Company
guidance and advice in the areas of management, administration, business
strategy, sales and marketing, from time to time during the term of the
Agreement (as hereinafter defined) as the Company and the Consultant shall
mutually agree. It is acknowledged however that such services shall not include
any services, advice or guidance relating to capital raising related business
strategy, financing, investor relations, shareholder communications, or
promotion of the Company in the securities markets. The Consultant shall also
provide guidance and advice in connection with the negotiation and sale of the
public safety division of the Company. In connection with his services relating
to the sale of the public safety division, the Consultant shall use his best
efforts to close such transaction by June 4, 1999 or as soon as possible
thereafter, and in connection therewith he shall use the same care as he would
if he were the Chief Consultant Officer and a Director of the Company. The
Consultant may provide services in person or by telephone from any location
which is convenient to him. The Consultant will be provided with an office at ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, through during the term of this
Agreement (the "Premises") until the earlier of (i) the date the Company ceases
to lease space in the Premises, or (ii) the day prior to the date the Company
subleases all of its space in the Premises to an unaffiliated third party, or
(iii) December 31, 1999, provided however that after December 31, 1999 and
during the term of this Agreement, Consultant will be allowed to remain in such
office until the earlier of the events described in Section 1(i) or (ii) occurs
or 30 days after receipt by the Consultant of written notice to abandon such
office space. The office provided need not be the Consultant's current office if
the Company either subleases space in the Premises including such current office
or the Company needs the use of such current office for a bona fide business
purpose. However, such office should be comparable in amenities to his current
office space.
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2. Term.
(a) The term of this Agreement shall commence as of the Effective Date
and subject to Sections 2(b), 2(c) and 2(d) below, continue until the last
of any common stock purchase options of the Company (the "Options") granted
to the Consultant prior to the date hereof which are unexercised at the
Effective Date are exercised or expire.
(b) Notwithstanding Section 2(a) above, the Consultant shall have the
right to immediately terminate this Agreement at any time upon thirty (30)
days' prior written notice.
(c) Notwithstanding Section 2(a) above, the Company shall have the
right to terminate this Agreement for "Cause". For purposes of this
Agreement, "Cause" shall include, but not be limited to: (i) the grossly
negligent performance by the Consultant of his duties to the Company, if
such grossly negligent performance is reasonably determined by the
Company's Board of Directors, in good faith, to have had or to be
reasonably likely to have a material adverse effect on the Company's
business, prospects and/or financial condition of the Company; (ii) the
Consultant's commission of any act finally determined by a court of
competent jurisdiction to constitute common law fraud or a felony which has
a materially adverse effect on the Company's business, prospects, financial
condition and/or reputation; (iii) any material misrepresentation or
material breach of any representation made by the Consultant hereunder
which is not cured within thirty (30) days following prior written notice
given by the Company to the Consultant in accordance with Section 9 hereof,
which results in a material adverse effect on the Company, its business,
prospects, or financial condition and/or reputation; or (iv) the
Consultant's engaging in misconduct which is materially injurious to the
Company, its business, operations and/or financial condition. Following any
notice and opportunity to cure contemplated by this Section 2(c) above, the
Company may terminate this Agreement for Cause by giving one (1) day's
prior written notice to the Consultant in accordance with Section 9 hereof.
During the pendency of any good faith action brought in a court of
competent jurisdiction to determine whether any act of the Consultant is a
common law fraud or a felony as described in Section 2(c)(ii), all payments
due to the Consultant hereunder shall accrue and the Consultant may not
exercise any Options without the prior written consent of the Company and
if such court finds that such acts constitute a common law fraud or felony,
the Company may terminate the Agreement for Cause upon one (1) day's notice
as of the date such act was committed. If such act is not deemed to
constitute a common law fraud or felony, the Company shall pay the
Consultant all accrued amounts, the Consultant may exercise his Options in
accordance with the terms hereof, and the Company and Consultant shall
thereafter continue to have all of their rights and obligations hereunder.
(d) This Agreement shall terminate automatically as of the date of the
Consultant's death.
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3. Compensation.
(a) In compensation for his services hereunder, the Company shall (i)
pay the Consultant fifteen hundred dollars ($1,500) per month during the
term of this Agreement and (ii) shall issue to the Consultant 62,500 Common
Shares of the Company (the "Consulting Shares").
(b) The Company shall provide the Consultant with disability,
hospitalization, accident, major medical, term life insurance in the amount
of $1,000,000, and dental insurance which is the same as that which the
Company is providing to the Consultant as of the day prior to the date
hereof under Section 1.5(c) of the Restated and Amended Employment
Agreement dated as of March 4, 1997, as amended on January 8, 1999
(collectively, the "Employment Agreement") and with respect to disability
insurance, if any, then the same as such disability insurance provided by
the Company to the Consultant prior to the date hereof, until the earlier
of December 31, 1999, or the date the Consultant obtains substantially
similar benefit(s) from a source other than the Company. With regard to the
term life insurance policy referenced above, any annual premium amount in
excess of $3,000 will be paid by the Consultant. Following termination of
this Agreement to the extent the Consultant does not receive any similar
health insurance benefits from a source other than the Company, the Company
shall provide the Consultant with COBRA rights, provided that the Company
is permitted to provide such rights to a consultant, and further provided
that if the Consultant exercises such COBRA rights it will not obligate the
Company to pay anything in connection therewith.
(c) If this Agreement is terminated by the Consultant pursuant to
Section 2(b) hereof, then, the Consultant shall be paid all amounts accrued
but unpaid as of the date on which this Agreement shall terminate, and no
further payments under Section 3(a) hereof shall be made hereunder.
(d) If this Agreement is terminated by the Company pursuant to Section
2(c) hereof, then, the Consultant shall be paid all amounts accrued but
unpaid as of the date on which this Agreement shall terminate, and no
further payments under Section 3(a) hereof shall be made hereunder.
(e) If this Agreement is terminated by operation of Section 2(d)
hereof, then, the Consultant's estate shall be paid all amounts, accrued
but unpaid as of the date on which this Agreement shall terminate, and no
further payments under Section 3(a) hereof shall be made hereunder.
4. Options.
(a) It is hereby acknowledged that services to be provided by the
Consultant pursuant to this Agreement are continuing services to the
Company by a consultant as contemplated in the Company's 1996 Stock Option
Plan and therefore all unexercised options held by the
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Consultant (the "Options") are immediately vested (if not already vested)
as of the date hereof and shall continue in full force and effect in
accordance with their respective terms.
(b) The Company hereby agrees to reprice the Consultant's Options that
are currently exercisable at more than $3.25 per share (the "Affected
Options") to an exercise price of $3.25 per share, the closing price of the
Company's Common Shares on The Nasdaq SmallCap Market on the date preceding
the Company's Board of Director's authorization of the Company's entry into
this Consulting Agreement, and the Company shall execute and deliver
amended Option Agreements relating to the Affected Options to that effect
as soon as is practicably possible.
5. Registration.
(a) The Company shall prepare and, on or before the thirtieth (30th)
day following the date hereof (the "Filing Date"), file with the Securities
and Exchange Commission (the "SEC") a Registration Statement on Form S-8 or
other appropriate form to effect a registration of (i) the resale of all of
Consulting Shares, and (ii) if requested by the Consultant, to the extent
not precluded by the Securities Act of 1933, as amended (the "Securities
Act"), any rule or regulation promulgated thereunder, the resale of any
Common Shares issued upon the exercise of any of the Options which were
previously registered on the Company's previous Form S-8 registration
statement, which registration provided for hereunder shall follow
deregistration of the resale of such Common Shares under the Company's
previously filed Form S-8 registration statement.
(b) If, subject to Section 5(c), the Registration Statement required
to be filed by the Company pursuant to Section 2(a) hereof is not filed
with the SEC on or before the Filing Date then the Consultant shall have
the option to cause the Company to redeem 7,692 Consulting Shares at a
price of $3.25 per share or an aggregate of $25,000 in cash for each thirty
day period after the Filing Date that the Registration Statement has not
been filed.
(c) If, at any time prior to the Filing Date, in the good faith
reasonable judgment of Compu-DAWN's Board of Directors, the premature
disclosure of material non-public information which may reasonably be
expected to have an adverse effect on Compu-▇▇▇▇ would be required in order
for any Registration Statement to be accurate and not misleading, then
Compu-▇▇▇▇ shall not be required to file the Registration Statement for a
period (a "Disclosure Delay Period") expiring upon the earlier to occur of
(A) the date on which such material information is disclosed to the public
or ceases to be material or (B) thirty (30) calendar days after the date on
which Compu-▇▇▇▇ provides a notice to the Consultant of the Commencement of
a Disclosure Delay Period.
6. Independent Contractor. The relationship created hereunder is that of
the Consultant acting as an independent contractor. It is expressly acknowledged
and agreed that the Consultant shall have no authority to bind the Company to
any agreement or obligation with any third party. Consultant acknowledges and
agrees further that, since it is not an employee of the Company, the Company
shall not be responsible for the withholding or payment of any taxes.
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7. Representations and Warranties of the Consultant. The Consultant hereto,
hereby represents and warrants to the Company:
(a) he has the power and authority to execute and deliver this
Agreement and to perform the duties and responsibilities contemplated
hereby;
(b) that neither the execution of this Agreement nor performance
hereunder will (A) violate, conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under the terms,
conditions or provisions of any contract, agreement or other instrument or
obligation to which he is a party, or by which he may be bound, or (B)
violate any order, judgment, writ, injunction or decree applicable to him.
(c) With respect to the issuance of the Consulting Shares:
(i) Consultant represents and warrants that the Common Shares are
being acquired for his own account, for investment purposes and not
with a view to any distribution. Consultant will not sell, assign,
mortgage, pledge, hypothecate, transfer or otherwise dispose of any of
the Consulting Shares unless (A) a registration statement under the
Securities Act, with respect thereto is in effect and the prospectus
included therein meets the requirements of Section 10 of the
Securities Act, or (B) the Company has received a written opinion of
its counsel that, after an investigation of the relevant facts, such
counsel is of the opinion that such proposed sale, assignment,
mortgage, pledge, hypothecation, transfer or disposition does not
require registration under the Securities Act.
(ii) Consultant represents and warrants further that (A) he is
either an "accredited investor," as such term is defined in Rule
501(a) promulgated under the Securities Act, or, either alone or with
its purchaser representative, has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of the acquisition of the Consulting Shares; (B) he
is able to bear the economic risks of an investment in the Consulting
Shares, including, without limitation, the risk of the loss of part or
all of his investment and the inability to sell or transfer the
Consulting Shares for an indefinite period of time; (C) he has
adequate financial means of providing for current needs and
contingencies and has no need for liquidity in his investment in the
Consulting Shares; and (D) he does not have an overall commitment to
investments which are not readily marketable that is excessive in
proportion to net worth and an
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investment in the Consulting Shares will not cause such overall
commitment to become excessive.
(iii) Consultant has obtained and reviewed the Company reports
filed under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") including, without limitation, the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998, and has
been afforded the opportunity to obtain such information with regard
to the Company he has requested to evaluate the merits and risks of
his investment in the Consulting Shares.
(d) Consultant acknowledges that a restrictive legend will be placed
on any instrument, certificate or other document evidencing the Consulting
Shares in, or substantially in, the following form:
"The securities represented by this certificate have not been
register ed under the Securities Act of 1933 and may not be
sold, transferred, pledged, hypothecated or otherwise disposed
of in the absence of (i) an effective registration statement
for such securities under said act or (ii) an opinion of
Company counsel that such registration is not required."
(e) Consultant acknowledges that the Company will be relying upon the
foregoing with regard to the issuance of the Consulting Shares to
Consultant and any subsequent transfer of the Consulting Shares by
Consultant and agrees to advise the Company in writing in the event of any
change in any of the foregoing.
8. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Consultant:
(a) the execution, delivery and performance of this Agreement has been
duly authorized by its Board of Directors and no other corporate approvals
are necessary;
(b) that neither the execution of this Agreement nor performance
hereunder will (A) violate, conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under the terms,
conditions or provisions of its Certificate of Incorporation or By-Laws or
any contract, agreement or other instrument or obligation to which it is a
party, or by which it may be bound, or (B) violate any order, judgment,
writ, injunction or decree applicable to it.
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9. Waiver of Jury Trial. THE COMPANY AND THE CONSULTANT ACKNOWLEDGE THAT
THE RIGHT TO A TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT MAY
BE WAIVED. THE COMPANY AND THE CONSULTANT EACH KNOWINGLY, VOLUNTARILY,
IRREVOCABLY AND WITHOUT COERCION, WAIVES ALL RIGHTS TO TRIAL BY JURY OF ALL
DISPUTES BETWEEN THEM. NEITHER THE COMPANY NOR THE CONSULTANT SHALL BE DEEMED TO
HAVE GIVEN UP THIS WAIVER OF JURY TRIAL UNLESS THE PARTY CLAIMING THAT THIS
WAIVER HAS BEEN RELINQUISHED HAS A WRITTEN INSTRUMENT SIGNED BY THE OTHER PARTY
STATING THAT THIS WAIVER HAS BEEN GIVEN UP. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY THE COURT.
10. Assignment. This Agreement shall not be assigned by the Consultant
without the prior written consent of the Company.
11. Notices. Any notice required or permitted to be given pursuant to this
Agreement shall be deemed to have been duly given when delivered by hand or sent
by certified or registered mail, return receipt requested and postage prepaid,
overnight mail or telecopier as follows:
If to the Company: Compu-▇▇▇▇, Inc.
12735 ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: R. E. (Teddy) ▇▇▇▇▇▇ IV
Chairman of the Board
With a copy to: Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Consultant: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as any party shall designate by notice to the other
party given in accordance with this Paragraph 11.
12. Choice of Law and Venue. The parties agree that this Consulting
Agreement is made and entered into in Nassau County, New York and shall be
governed by and construed in accordance with the laws of the State of New York,
and that any litigation, special proceeding or other proceeding as between the
parties that may be brought, or arise out of, in connection with or by reason of
this Consulting Agreement shall be brought in the applicable state court in and
for Nassau County, New York which Courts shall be the exclusive courts or
jurisdiction and venue.
13. Waiver of Breach; Partial Invalidity. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach. If any provision, or part thereof, of this
Agreement shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and not in any way affect
or render invalid or unenforceable any other provisions of this Agreement, and
this Agreement shall be carried out as if such invalid or unenforceable
provision, or part thereof, had been reformed, and any court of competent
jurisdiction or arbiters, as the case may be, are authorized to so reform such
invalid or unenforceable provision, or part thereof, so that it would be valid,
legal and enforceable to the fullest extent permitted by applicable law.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein. This
Agreement supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
transactions contemplated by this Agreement. This Agreement may be amended only
by a writing executed by the parties hereto.
15. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank
Signature Page Follows]
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IN WITNESS WHEREOF, the Consultant and the Company have executed or have
caused to be duly executed, this Agreement as of the day and year above written.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
COMPU-▇▇▇▇, INC.
By: /s/ R.E. (Teddy) ▇▇▇▇▇▇, IV
---------------------------------
R. E. (Teddy) ▇▇▇▇▇▇, IV
Chairman of the Board
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