SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-KSB
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 28, 1998
ELECTRONIC TRANSMISSION CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
22135 75-2578619
(Commission File Number) (I.R.S. Employer Identification Number)
5025 Arapaho Road, Suite 501 75248
Dallas, Texas (Zip Code)
(Address of Principal Executive Offices)
(972) 980-0900
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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INFORMATION INCLUDED IN REPORT ON FORM 8-KSB
ITEM 5. OTHER EVENTS.
Appointment of Steven K. Arnold
On May 28, 1998, the Board of Directors of Electronic Transmission
Corporation (the "Company") appointed Steven K. Arnold as Chief Executive
Officer and Chairman of the Board of the Company. W. Mack Goforth, resigned as
Chairman of the Board and Chief Executive Officer, but continues as Chief
Financial Officer with the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELECTRONIC TRANSMISSION CORPORATION
(Registrant)
By:
-------------------------------------
Steven K. Arnold, Chairman of the Board,
Chief Executive Officer
CONSULTING/EMPLOYMENT AGREEMENT
THIS CONSULTING/EMPLOYMENT AGREEMENT (this "Agreement") is entered
into effective as of the 1st day of May, 1998, by and among Electronic
Transmission Corporation, a Delaware corporation (the "Company"), and Steven K.
Arnold ("Arnold").
WITNESSETH:
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WHEREAS, the Company desires to assure itself of the services of
Arnold as a consultant to the Company and as an employee of the Company, and,
subject to certain conditions, Arno1d is willing to so serve; and
NOW, THEREFORE, in consideration of the premises, the mutual
covenants hereinafter contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed by and
between the Company and Arnold as follows:
ARTICLE I
CONSULTING ARRANGEMENT
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1.1 Retention. The Company agrees to retain Arnold as an
independent consultant to the Company until such time as the Company shall have
in place director and officer liability insurance reasonably acceptable to
Arnold. The Company agrees to use its best efforts to obtain such insurance
coverage as quickly as possible. In the event the Company has not obtained such
insurance coverage by June 30, 1998, Consultant may terminate this Agreement at
any time after such date (but before the Company has obtained such insurance
coverage) upon thirty (30) days written notice.
1.2 Responsibilities. Arnold agrees to perform faithfully the
duties assigned to him as a consultant by the Board of Directors of the Company,
and, except for periods of illness, to devote sufficient business time,
attention, skills and efforts to the Company's business as are necessary to
perform such duties.
1.3 Fees. The Company shall pay to Arnold a consulting fee
of $10,416.67 on each of the fifteenth (15th) day and last day of each month for
the period comn1encinar on the date hereof througl1 the earlier of (i) the date
that Arnold is hired as an employee of the Company pursuant to Article II,
below, and (ii) the date Consultant terminates his consulting arrangement with
the Company pursuant to Section 1.1, above.
1.4 Reimbursement For Expenses. Arnold al1 be paid or reimbursed
by the Company for all reasonable necessary business expenses incurred during
his tenure as an independent consultant to the Company by him in the course of
performing his duties under this Agreement, upon submission to the Company of a
written accounting of such expenses,
CONSULTING/EMPLOYMENT AGREEMENT - Page 1
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including an itemized list of all expenses incurred and the business purpose of
each such expense.
1.5 Vehicle Allowance. During Arnold's tenure as an
independent consultant to the Company, the Company shall pay to Arnold a monthly
vehicle allowance of $750.00.
1.6 Indemnification. The Company shall indemnify, save harmless,
and pay all judgments and claims against, or losses, liabilities, damages or
expenses incurred by, Arnold that are not covered by director and officer
liability insurance and that are a result of, or in any way arise out of,
Arnold's relationship with the Company (plus any and all attorneys' fees and
expenses incurred by Arnold in connection with the defense of any action that
could give rise to such indemnification obligation), including without
limitation by reason of any act performed or omitted to be performed by Arnold
in connection with the business of the Company.
ARTICLE II
EMPLOYMENT
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2.1 Employment. Upon the Company obtaining director and officer
liability insurance acceptable to Arnold and the resulting termination of the
consulting arrangement set forth in Article I, above (such date being the
"Employment Date"), the Company agrees to hire Arnold as an employee of the
Company, and Arnold agrees to be employed, for the Term (as defined in Section
2.3 hereof), subject to the terms and conditions herein provided.
2.2 Position and Responsibilities.
(a) Position. During the Term, the Company shall cause
Arnold to be employed, and Arnold shall serve, as an employee of the Company, as
its Chief Executive Officer and Chairman of the Board (the "Initial Position"),
to perform such duties as are normally associated with and inherent with such
positions, or in such other positions as may be determined by the Company
pursuant to the terms of this Agreement.
(b) Responsibilities. During the Term, Arnold agrees to
perform faithfully the duties assigned to him by the Board of Directors of the
Company, and, except for vacations and periods of illness, to devote his full
business time, attention, skills and efforts to the Company's business.
2.3 Term. Subject to Section 2.7 below, the period of Arnold's
employment under this Agreement shall be for an initial term of three (3) years
commencing as of the Employment Date and ending on the third (3rd) anniversary
thereof (the "Initial Term"), and thereafter, the period of Arnold's employment
under this Agreement, subject to Section 2.7 below, shall continue for
successive one (1) year terms as the parties may agree (the Initial Term and any
period of Arnold's employment under this Agreement after the initial Term
hereinafter referred to as, the "Term"); provided however, that on the second
(2nd) anniversary of the Employment Date and on every subsequent anniversary,
the parties shall either (i) execute a written agreement
CONSULTING/EMPLOYMENT AGREEMENT - Page 2
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extending the Term then in effect for one (1) year following the scheduled
expiration date or (ii) terminate the Term of this Agreement as of such date,
in which case the Company shall pay to Arnold all of Arnold's Salary (as
defined below) for the remaining year of the Term, in installments, in
accordance with the terms of the Company's salary policy then in effect for
executive personnel.
2.4 Salary: Adjustments to Salary.
(a) Initial Salary. During the Term, Arnold shall initially
receive an annual cash salary of $250,000.00 (the "Initial Salary") from the
Company. Arnold may receive increases to the Initial Salary as provided in
Section 2.4(b) and as may otherwise be provided by the Company, in its
discretion (such initial cash salary, with any subsequent adjustments, the
"Salary"). The Salary shall be payable in installments in arrears pursuant to
the Company's salary payment policy from time to time in effect for executive
personnel; provided, however, that Arnold and the Company agree that during all
or a portion of the twelve (12) month period commencing on the Employment Date
twenty-eight percent (28%) of such Initial Salary (the "Deferred Portion") shall
be deferred until the Company and Arnold agree that the Company's cash flow is
sufficient to support the payment of the Deferred Portion (provided, that such
Deferred Portion shall in all events be paid to Arnold on or before the first
(1st) anniversary of the Employment Date).
(b) Adjustments to Salary. The Company's Board of Directors
shall review Arnold's Salary annually, at which time it may adjust Arnold's
Salary and/or award bonuses based on the performance of Employee and of the
Company, but in no event shall such salary be adjusted below the Initial Salary.
2.5 Reimbursement For Expenses. Arnold shall be paid or
reimbursed by the Company for all reasonable necessary business expenses
incurred by him during the Term in the course of performing his duties under
this Agreement, upon submission to the Company of a written accounting of such
expenses, including an itemized list of all expenses incurred and the business
purpose of such expense.
2.6 Benefits.
(a) Office Facilities. During the Term, Arnold shall be
furnished such office, support and other facilities as the Company deems
necessary for Arnold to perform his responsibilities and duties.
(b) Vacation. For each successive twelve (12) month period
during the Term, Arnold shall be entitled to four (4) weeks vacation in
accordance with the vacation policy of the Company as in effect from time to
time. Such vacation shall be taken at such time or times reasonably acceptable
to the Company.
(c) Participation in Benefit Plans. During the Term, Arnold shall
be entitled to participate in any employee stock option plan, pension, savings
or similar plan, and to be covered
CONSULTING/EMPLOYMENT AGREEMENT - Page 3
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by any health, life, accident, hospitalization, long-term disability or similar
insurance, made available by the Company to its similarly situated employees in
accordance with the policies of the Company with respect thereto as in effect
from time to time. In the event there shall occur a delay beyond the Employment
Date for any reason (including without limitation the application of a waiting
period) in the Company's addition of Arnold to its health insurance benefit
plan, the Company shall reimburse Arnold for the cost of his monthly COBRA
premiums.
(d) Vehicle Allowance. During the Term, the Company shall
pay to Arnold a monthly vehicle allowance of $750.00.
(e) Equity Participation.
(i) Grant of Options. On the date of this Agreement, Arnold
shall be granted Options (the "Options") to purchase one million
eight hundred seventeen thousand five hundred ninety-two (1,817,592)
shares of the Company's Common Stock, no par value per share (the
"Common Stock"), for a purchase price of thirteen cents ($0.13) per
share. The above number of shares to be the subject of the Options
assumes the Company has 16,358,330 shares of Common Stock outstanding
on a fully diluted basis (not taking into account the Options); the
parties agree that in the event the Company has fewer or more shall
16,358,330 shares of Common Stock so outstanding as of the
Employment Date then the Company shall grant to Arnold a lesser or
greater number of Options, as the case may be, as shall equal ten
percent (10%) of the Company's outstanding shares of Common Stock on a
fully-diluted basis after taking into account such grant of the
Options to Arnold. Such Options shall not be subject to dilution, such
that upon the issuance by the Company of shares of Common Stock (or
securities convertible into Common Stock), Arnold shal1 automatically,
without the necessity of further action on the part of Arnold or the
Company, be granted additional Options (carrying a purchase price of
the dollar amount per share in such issuance) to purchase that number
of shares of Common Stock which, when added to the number of shares
into which the Options may be converted immediately prior to such
issuance, shall equal ten (10%) of the outstanding Common Stock of the
Company on a fully-diluted basis.
(ii) Vesting. The Options shall vest and become fully and
irrevocably exerciseable in accordance with the following schedule:
Percentage of Options Vested Date
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33.33% the Employment Date
66.67% December 31,1998
100% December 31,1999;
provided, however, that notwithstanding the above vesting schedule,
upon the occurrence of any of the following events one hundred
percent (100%) of the Options shall vest and become fully and
irrevocably exerciseable: (A) on the date (1) that the Company is
merged, consolidated, or reorganized into or with another person,
entity, or group of
CONSULTING/EMPLOYMENT AGREEMENT - Page 4
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entities under common control, or (2) a majority of the outstanding
capital stock or all or substantially all of the assets of the Company
are sold to any other person, entity, or group of entities under
common control and, as a result of such merger, consolidation,
reorganization, or sale of capital stock or assets, more than 51% of
the combined voting power of the then outstanding voting securities of
the surviving or acquiring person or entity immediately after such
transaction are held in the aggregate by a person, entity or group of
entities under common control who beneficially owned less than 51% of
the combined voting power of the Company prior to such transaction;
and (B) on the date the Term of this Agreement is terminated "without
cause" pursuant to Section 2.7(b) of this Agreement.
(iii) Restrictions. The Options may not be exercised until
such time as the issuance of shares of Common Stock upon such exercise
or the method of payment of consideration for such Shares would not
constitute a violation of any applicable federal or state securities
or other law or regulation.
2.7 Termination.
(a) Termination for Cause. The Term may be terminated for cause
by the Company at any time upon the occurrence of any of the following events:
(i) the perpetration by Arnold of a fraud or crime against the Company; (ii)
Arnold's conviction of a crime involving fraud, theft or embezzlement, or of any
other crime involving moral turpitude; (iii) Arnold's gross negligence or
willful misconduct in the performance of his duties under this Agreement; or
(iv) Arnold's material breach any of the terms or provisions of this Agreement
and subsequent to the expiration of fifteen (15) days following written notice
to Arnold of such breach, Arnold has not cured such breach to the reasonable
satisfaction of the Company.
(b) Termination Without Cause. The Company may terminate the
Term at any time without cause by giving thirty (30) days prior written notice
thereof. In the event the Company terminates the Term pursuant to this Section
2.7(b), the Company shall be obligated to pay Arnold as liquidated damages the
Salary of Arnold and all benefits provided by the Company to Arnold pursuant to
Section 2.6(c) above for the remainder of the Term then in effect. The Company
shall pay such Salary in installments pursuant to the Company's salary payment
policy then in effect for executive personnel. The liquidated damages shall not
be reduced by any compensation that Arnold may receive for other employment with
another employer after termination of his employment with the Company.
(c) Effect of Termination: Reduction in Duties.
(i) Termination of the Term under this Section 2.7 shall
not constitute termination of this Agreement, which shall remain in
full force and effect in accordance with its terms. The effect of a
termination of the Term shall be to relieve the parties hereto of
their respective rights and obligations under the provisions of this
Agreement that are effective by their terms only during the Term. In
the event of a termination "for cause" pursuant to the provisions of
Section 2.7(a), or the termination of the Term of this
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Agreement by Arnold for any reason, Arnold shall forfeit all unvested
Options granted pursuant to this Agreement. Further, in the event of a
termination "for cause" in connection with Arnold's conviction of a
crime involving fraud, theft, or embezzlement, the Company shall have
the right to purchase from Arnold all vested and unvested Options
(including all shares of Common Stock acquired upon the exercise of
Options) for a purchase price of $0.13 per share. In the event of a
termination "without cause" pursuant to the provisions of Section
2.7(b), Arnold shall not forfeit any Options.
(ii) A substantial reduction of the duties and
responsibilities of Arnold from those associated with the Initial
Position, with or without a change in job title to reflect such
reduction, shall be treated as a termination "without cause" for
purposes of this Agreement.
(iii) All Options must be exercised on or before the fifth
(5th) anniversary of the date of the expiration or termination for any
reason of the Term of this Agreement.
2.8 Withholding The Company may withhold from any payments made
or benefits granted to Arnold under Article II of this Agreement all amounts
that are required to be withheld with respect thereto under all applicable
present and future tax laws, rules and regulations.
2.9 Company Personnel Policies. During the Term, Arnold agrees
to comply with all personnel policies promulgated by the Company from time to
time.
ARTICLE III
CONFIDENTIALITY
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3.1 Confidentiality. Arnold agrees that he will not at any time
during or after termination of the Term disclose or reveal to any person not
authorized to receive the same by the Company any trade secret or other
confidential or proprietary information relating to the Company or to any of
tile businesses operated by it, including, without limitation, any customer,
pricing or distributor lists and Arnold confirms that such information
constitutes the exclusive and confidential property of the Company.
3.2 Remedies. Arnold agrees that in the event of breach of
this Article III, the Company would be irreparably injured and be without an
adequate remedy at law. Therefore, in the event of such a breach, or threatened
or attempted breach of any of the provisions hereof, the Company shall be
entitled to enforce, in addition to any other remedies which are made available
to it at law or in equity, to a temporary and/or permanent injunction and a
decree for the specific performance of the terms of this Article III, and
without being required to furnish a bond or other security.
3.3 Invalid Provisions. To the extent permitted by applicable
law, if any provision of this Article III is held to be illegal, invalid or
unenforceable under present or future laws effective during the Term hereof,
then such provision shall be fully severable. However, this Agreement
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shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by such illegal,
invalid or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part hereof a provision, as similar in the
terms to such illegal, invalid or unenforceable provision as is legal, valid and
enforceable at such time.
ARTICLE IV
MISCELLANEOUS
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4.1 Entire Agreement. This Agreement supersedes all prior
agreements between the parties (written or oral) with respect to the subject
matter hereof and is intended as a complete and exclusive statement of the terms
of this agreement between the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by a written instrument duly executed
by the pa'4ies hereto.
4.2 Notices. Any notice, demand, offer, exercise of an option or
other written instrument required or permitted to be given, made, or sent
hereunder shall be in writing, signed by the party giving or making the same,
and shall be sent postage prepaid by registered mail or certified mail, return
receipt requested, to all parties hereto simultaneously at their most recent
address shown on the books of the Company. The date of mailing of any offer,
demand, notice, exercise of option or instrument shall be deemed to be the date
of such offer, demand, notice, or instrument and shall be effective from such
date.
4.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
ITS PRINCIPLES OF CONFLICTS OF LAWS.
4.4 Jurisdiction and Venue. Any judicial proceedings brought by
or against any party on any dispute arising out of this Agreement or any matter
related thereto shall be brought in the state or federal courts of Dallas
County, Texas, and, by execution and delivery of this Agreement, each of the
parties accepts for itself the exclusive jurisdiction and venue of the aforesaid
courts as trial courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement after exhaustion of all
appeals taken (or by the appropriate appellate court if such appellate court
renders judgment).
4.5 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
4.6 Assignability. This Agreement and the Options granted
hereunder may not be assiy1ed by any party except with the prior written consent
of the other party.
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4.7 Invalid Provisions. If any provision hereof is held to be
illegal, invalid or unenforceable, such provisions shall be modified to the
extent necessary to render such provision enforceable and, if necessary, shall
be fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision was so modified as of the date
hereof, or never comprised a part hereof, as the case may be; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision.
4.8 Counterparts. This Agreement may be executed by the parties
hereto in counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first written above.
"COMPANY"
ELECTRONIC TRANSMISSION CORPORATION
By: /s/ Tim Powell
----------------------------
Name: Tim Powell
Title: EVP/Director
"ARNOLD"
/s/ Steven K. Arnold
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Steven K. Arnold, Individually
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