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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-23694
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Heartland Wireless Communications, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 73-1435149
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
200 Chisholm Place, Suite 200, Plano, Texas 75075
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (972) 423-9494
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N/A
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check X whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Shares Outstanding
Class as of August 7, 1998
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<S> <C>
Common Stock, $.001 par value 19,750,219
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HEARTLAND WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................. $ 38,403 $ 42,821
Restricted assets - investment in debt securities ..................... 927 9,818
Subscriber receivables, net of allowance for doubtful accounts of
$348 in 1998 and $340 in 1997 ................................... 1,834 2,198
Prepaid expenses and other ............................................ 2,185 1,390
------------ ------------
Total current assets ...................................... 43,349 56,227
Investments in affiliates, at equity ........................................ 15,222 34,167
Systems and equipment, net .................................................. 111,369 122,653
License and leased license investment, net of accumulated amortization of
$16,464 in 1998 and $12,929 in 1997 ................................... 102,298 123,369
Excess of cost over fair value of net assets acquired, net of accumulated
amortization of $4,682 in 1998 and $3,685 in 1997 ..................... 25,229 26,226
Restricted assets - investment in debt securities ........................... 515 515
Note receivable from affiliate .............................................. 2,213 2,069
Other assets, net ........................................................... 6,934 6,908
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$ 307,129 $ 372,134
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ................................. $ 26,165 $ 17,381
Current portion of long-term debt ..................................... 239,472 1,358
------------ ------------
Total current liabilities ................................. 265,637 18,739
Long-term debt, less current portion ........................................ 70,733 306,838
Minority interests in subsidiaries .......................................... 149 149
Stockholders' equity:
Common stock, $.001 par value; authorized 50,000,000 shares, issued
19,741,926 shares in 1998 and 19,670,135 shares in 1997 ............. 20 20
Additional paid-in capital ............................................ 261,925 261,880
Accumulated deficit ................................................... (290,977) (215,134)
Treasury stock, 13,396 shares, at cost ................................ (358) (358)
------------ ------------
Total stockholders' equity ................................ (29,390) 46,408
Commitments and contingencies (note 5) ...................................... -- --
------------ ------------
$ 307,129 $ 372,134
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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HEARTLAND WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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1998 1997 1998 1997
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues .............................................................. $ 18,622 $ 19,741 $ 37,721 $ 38,926
-------- -------- -------- --------
Operating expenses:
Systems operations .............................................. 8,969 11,252 18,284 20,113
Selling, general and administrative ............................. 8,862 11,079 17,988 21,352
Depreciation and amortization ................................... 11,153 16,508 22,453 27,626
Impairment of license and leased license
investment ..................................... 17,696 -- 17,696 --
-------- -------- -------- --------
Total operating expenses ...................................... 46,680 38,839 76,421 69,091
-------- -------- -------- --------
Operating loss ................................................ (28,058) (19,098) (38,700) (30,165)
-------- -------- -------- --------
Other income (expense):
Interest income ................................................. 675 1,539 1,491 3,271
Interest expense ................................................ (9,965) (9,977) (19,965) (19,910)
Equity in losses of affiliates .................................. (13,283) (8,272) (18,659) (16,574)
Other expense, net .............................................. (10) 17 (10) 14
-------- -------- -------- --------
Total other income (expense) .................................. (22,583) (16,693) (37,143) (33,199)
-------- -------- -------- --------
Loss before income taxes ...................................... (50,641) (35,791) (75,843) (63,364)
Income tax ............................................................ -- -- -- --
-------- -------- -------- --------
Net loss ............................................ $(50,641) $(35,791) $(75,843) $(63,364)
======== ======== ======== ========
Net loss per common share - basic and diluted ......................... $ (2.57) $ (1.82) $ (3.85) $ (3.23)
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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HEARTLAND WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
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1998 1997
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(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss ...................................................................... $(75,843) $(63,364)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization ............................................... 22,453 27,626
Debt accretion and debt issuance cost amortization .......................... 3,270 2,760
Equity in losses of affiliates .............................................. 18,659 16,574
Write down of assets due to impairment of undeveloped
licenses .......................................................... 17,696 --
Other ....................................................................... 45 --
Changes in assets and liabilities, net of acquisitions:
Subscriber receivables .................................................. 364 1,441
Prepaid expenses and other .............................................. (1,692) (1,210)
Accounts payable, accrued expenses and other liabilities ................ 8,784 (12,790)
-------- --------
Net cash used in operating activities .............................. (6,264) (28,963)
-------- --------
Cash flows from investing activities:
Proceeds from note receivable .............................................. -- 13,300
Purchases of systems and equipment ............................................ (6,271) (21,598)
Expenditures for license and leased licenses .................................. -- (448)
Proceeds from sale of debt securities ...................................... 8,731 11,869
Acquisitions, net of cash acquired ............................................ -- (1,622)
-------- --------
Net cash provided by investing activities .......................... 2,460 1,501
-------- --------
Cash flows from financing activities:
Payments on short-term borrowings and notes payable ........................... (614) (680)
Other ......................................................................... -- (90)
-------- --------
Net cash used in financing activities .............................. (614) (770)
-------- --------
Net decrease in cash and cash equivalents ........................................... (4,418) (28,232)
Cash and cash equivalents at beginning of period .................................... 42,821 79,596
-------- --------
Cash and cash equivalents at end of period .......................................... $ 38,403 $ 51,364
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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HEARTLAND WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
(1) General
(a) Description of Business
The primary business objective of Heartland Wireless
Communications, Inc. (the "Company") is to develop, own and
operate single family unit ("SFU") and multiple-dwelling unit
("MDU") subscription video businesses and retail high-speed
digital Internet access businesses (on a developmental basis
in 1998) in markets in which the Company owns or leases
sufficient wireless cable channel rights that will allow the
Company to best utilize its spectrum and maximize its return
on investment. The Company holds wireless cable channel rights
primarily in small to mid-size markets located in the central
United States. At June 30, 1998, the Company had wireless
cable television systems in operation in 57 markets and a
developmental Internet access business in one market. The
Company currently offers programming packages from DIRECTV,
Inc. ("DIRECTV") to certain MDU subscribers in 48 of its 57
markets. In addition, in August 1998, the Company will launch
its DIRECTV offering to SFU subscribers in 41 markets.
(b) Liquidity and Capital Resources
Wireless cable television and, to a lesser extent, high-speed
Internet access businesses are capital intensive. Since
inception, the Company has expended funds to lease or
otherwise acquire channel rights and operating subscription
video systems in various markets, to construct new
subscription video systems and to finance system operating
losses. The Company's primary sources of capital have been
from subscription fees, the sale of the Company's common
stock, debt financing and the sale of wireless cable channel
rights that are not part of the Company's strategic plan. The
growth of the Company's business requires substantial
investment in capital expenditures for SFU and MDU subscriber
growth, the development of alternative spectrum usages such as
high-speed Internet access, and the launch of additional
markets for subscription video and/or Internet access
businesses.
The Company does not expect to generate sufficient cash flow
in 1998 and beyond to implement its business plan and service
the Company's existing indebtedness. Accordingly, in January
1998, the Company retained the investment banking firm of
Wasserstein Perella & Co., Inc. ("Wasserstein") as its
financial advisor to assist the Company in analyzing all
options available to finance the Company's business plan and
recapitalize the Company. Such options may include the sale or
exchange of debt or equity securities, borrowings under
secured or unsecured loan arrangements, sales of assets
including wireless cable systems and channel rights, and/or a
recapitalization or restructuring of the Company's debt and/or
equity, including converting part or all of the Company's
existing indebtedness and related interest obligations into
equity of the Company (see Note 3 of Notes to Condensed
Consolidated Financial Statements).
The Company's ability to implement such options is limited by
the indentures governing its $115.0 million in original
principal amount of 13% Senior Notes due 2003 (the "13%
Notes") and $125.0 million in original principal amount of 14%
Senior Notes (the "14% Notes") due 2004 (collectively, the
"Senior Notes"), and the agreements governing its issuance of
$40.2 million of 9% Convertible Subordinated Discount Notes
due 2004 (the "Convertible Notes"). There can be no assurance
that the Company will be able to enter into new financing
arrangements or a recapitalization or restructuring in a
timely manner and on terms satisfactory to the Company.
In conjunction with an ongoing evaluation of the Company's
capital structure by management and in consultation with the
Company's financial advisor, on April 15, 1998, the Company
announced that it would not make a semiannual interest payment
due on that date of $7.5 million on the 13% Notes. Failure to
make this interest payment permits the trustee or the holders
of 25% or more in principal amount of the 13% Notes to
accelerate payment of the 13% Notes and all unpaid and accrued
interest
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thereon. Acceleration of the 13% Notes permits the trustee and
holders of 25% or more in principal amount of the Company's
14% Notes to accelerate payment of the 14% Notes and all
unpaid and accrued interest thereon. The Company currently
does not have sufficient funds available to pay in full the
indebtedness outstanding under either the 13% Notes or the 14%
Notes in the event that any of such indebtedness is
accelerated. At June 30, 1998 the principal amounts
outstanding under the Senior Notes had been classified as a
current liability in the accompanying condensed consolidated
balance sheet in accordance with EITF 86-30. As of August 12,
1998, principal and interest under the Senior Notes had not
been accelerated.
(c) Going Concern
The Company's condensed consolidated financial statements have
been presented on a going concern basis which contemplates the
realization of assets and the satisfaction of liabilities in
the normal course of business. The default by the Company
under the indentures governing the 13% Notes and the
restrictions on the Company's ability to obtain additional
financing raise doubt about the continuation of the Company as
a going concern without the consummation of an agreement with
holders of the Senior Notes to recapitalize the Company or
restructure the Senior Notes. The condensed consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Management of the
Company believes that at June 30, 1998, the Company had
adequate working capital to sustain operations, excluding
interest and principal payments on the Senior Notes and
Convertible Notes, at least through 1999.
The Company believes that its business strategy as discussed
herein and in prior public filings should facilitate the
consummation of a financial recapitalization or restructuring
in a timely manner and on terms acceptable to the Company by
demonstrating the long-term value of the Company's assets.
However, no assurance can be provided that such
recapitalization or restructuring will be consummated in a
timely manner and on terms and conditions acceptable to the
Company and third parties.
(d) Principles of Consolidation
The condensed consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries.
Significant intercompany balances and transactions between the
entities have been eliminated in consolidation. Investments in
20% to 50% owned affiliates are accounted for using the equity
method and investments less than 20% are accounted for using
the cost method.
(e) Interim Financial Information
In the opinion of management, the accompanying unaudited
condensed consolidated financial information of the Company
contains all adjustments, consisting only of those of a
recurring nature, necessary to present fairly the Company's
financial position as of June 30, 1998 and the results of
operations for the three and six months ended June 30, 1998
and 1997 and cash flows for the six months ended June 30, 1998
and 1997. These results are not necessarily indicative of the
results to be expected for the full fiscal year. The
accompanying financial statements are for interim periods and
should be read in conjunction with the audited consolidated
financial statements of the Company for the year ended
December 31, 1997, included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
(f) Net Loss Per Common Share
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128"). SFAS No. 128 revised
the previous calculation methods and presentation of earnings
per share under APB 15 and requires that
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all prior-period earnings (loss) per share data be restated.
The Company adopted SFAS No. 128 in the fourth quarter of 1997
as required. In accordance with SFAS No. 128, the Company has
presented basic loss per share, computed on the basis of the
weighted average number of common shares outstanding during
the period, and diluted loss per share, computed on the basis
of the weighted average number of common shares and all
dilutive potential common shares outstanding during the
period. All prior period loss per share amounts have been
restated in accordance with SFAS 128.
Net loss per basic and diluted common share is based on the
net loss applicable to the weighted average number of common
shares outstanding of approximately 19,704,000 and 19,645,000
for the three-month periods ended June 30, 1998 and 1997,
respectively, and 19,694,000 and 19,615,000 for the six months
ended June 30, 1998 and 1997, respectively. The potentially
dilutive effect of the Company's outstanding stock options and
warrants has not been considered in the computation of diluted
net loss per common share since their effect would be
antidilutive.
(2) Impairment of Long-Lived Assets
Under Statement of Financial Accounting Standards No. 121 ("SFAS No.
121"), companies are not required to actively search for impairment of
assets that are employed in the business or to perform an
asset-by-asset analysis to determine if impairment exists. A review is
required only when events or circumstances indicate that an impairment
might exist. At that point, expected future undiscounted cash flows
from the use of each asset must be estimated and compared with its book
value to determine if impairment exists. Any impairment loss is then
computed as the amount by which the asset's book value exceeds its fair
value.
In the second quarter ended June 30, 1998, the Company reviewed the
book value of certain assets associated with certain undeveloped
markets and determined that cash flows from operations currently would
not be adequate to fund the capital outlay required to build out such
markets and, because of the Company's recent default on its interest
payment due on the 13% Notes, outside financing for this purpose may
not be readily available prior to consummating a financial
recapitalization or restructuring. Therefore, in accordance with SFAS
No. 121, the wireless cable channel licenses and leases in these
undeveloped markets were individually evaluated and written down to
fair value.
As a result, the Company recorded a $17.7 million asset impairment
charge in the second quarter of 1998 in order to reflect its
undeveloped wireless cable channel licenses and leases at estimated
fair value. This charge related to licenses and leases in 34 of the
Company's non-operating markets and was recorded after considering,
among other things, recent market transactions of a similar nature
within the industry, the availability of willing buyers for channel
licenses and leases in each undeveloped market, and the present value
of cash flows projected to be generated if the markets were developed.
The Company will continue to review these licenses and leases for
impairment as well as for possible future development of its
subscription video and Internet lines of business if its financial
recapitalization or restructuring is successful and capital funds for
build-out become available.
Additionally, based on the current depressed market condition of the
wireless cable industry and the continuing losses of CS Wireless
Systems, Inc. ("CS Wireless"), management re-evaluated the goodwill
(excess basis over the Company's equity in the underlying net assets)
associated with its investment in CS Wireless. Accordingly, during the
second quarter ended June 30, 1998, the Company wrote off $6.8 million
of excess basis in its 36% equity interest in CS Wireless. The loss is
reflected in equity in losses of affiliates on the Company's condensed
consolidated statement of operations and as a reduction of investments
in affiliates on the Company's condensed consolidated balance sheet.
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(3) Financial Recapitalization/Restructuring
As noted above, the Company has retained Wasserstein as its financial
advisor to assist the Company in evaluating all options available to
finance the Company's business plan and recapitalize the Company. In
June 1998, an unofficial ad hoc committee purporting to represent at
least 66 2/3% of the holders of the Senior Notes (the "Ad Hoc
Committee") hired Jefferies & Co., Inc. ("Jefferies") as the Ad Hoc
Committee's financial advisor. The Company and Wasserstein have had
preliminary discussions with Jefferies regarding specific
recapitalization proposals. The Company continues to pursue
recapitalization and restructuring alternatives with all debt holders
on a consensual basis. There can be no assurance, however, that any
such alternatives will be acceptable to any or all such parties.
The Company may not be able to obtain the consents necessary from the
holders of the Senior Notes for a consensual, out-of-court
restructuring. In this event, if the Company believes that it is able
to obtain the requisite votes from debt holders supporting a
"prenegotiated" or "prepackaged" plan of reorganization (the "Plan")
that is acceptable to the Company, then the Company intends to formally
solicit consents from the holders of the Senior Notes, Convertible
Notes and certain other impaired creditors to approve such a Plan, file
a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code, and
seek confirmation of the Plan as promptly thereafter as possible. There
can be no assurance that, if filed, such Plan will be approved by any
creditors or confirmed in any formal proceeding.
(4) Comprehensive Income (Loss)
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," ("SFAS No. 130") was issued. SFAS No.
130 establishes standards for reporting and displaying comprehensive
income and its components in an annual financial statement that is
displayed with the same prominence as other annual financial
statements. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. The statement
also requires the accumulated balance of other comprehensive income to
be displayed separately from retained earnings and additional paid-in
capital in the equity section of the statement of financial position.
SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Comprehensive income (loss) for the Company does not differ from
net income (loss). Comprehensive income (loss) and net loss for the six
months ended June 30, 1998 and 1997 was $75.8 million and $63.4
million, respectively.
(5) Contingencies
On July 15, 1998, a purported class action lawsuit was filed in State
District Court in Kleberg County, Texas, styled Richard H. Thompson, et
al. v. Heartland Wireless Communications, Inc., David E. Webb and John
R. Bailey (98-371-d) (the "Thompson Suit"). The Thompson Suit alleges
violations of the Texas Securities Act and Texas common law. The
plaintiff alleges that defendants misrepresented or failed to disclose
material facts about the business prospects and financial condition of
the Company, and overstated revenues, consolidated earnings before
interest, taxes, depreciation and amortization ("EBITDA") and
subscriber numbers. The plaintiff seeks to certify a class to represent
all persons who acquired the securities of the Company during the
period from November 15, 1995 through March 20, 1997 (the "Class
Period"), including all persons who purchased or acquired securities
that were offered or sold by defendants during the Class Period. The
plaintiff seeks money damages, interest, attorneys' fees and costs, as
well as equitable and/or injunctive relief with respect to any proceeds
derived from defendants' stock sales.
On May 27, 1998, a purported class action lawsuit was filed in State
District Court in Brooks County, Texas, styled Azalia Garcia, et al. v.
Heartland Wireless Communications, Inc. d/b/a Heartland Cable
Television
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(98-60898-1) (the "Garcia Suit"). The Garcia Suit alleges that the
late fees charged by the Company are not reasonably related to the
costs incurred by the Company as a result of late payment of accounts.
The plaintiff seeks to certify a class to represent all persons
currently receiving cable service from the Company or who have been
charged a late fee in the past by the Company. The plaintiff seeks a
declaration that any contractual provisions for the Company's late fees
are void or usurious, and seeks money damages, interest, attorneys'
fees and costs.
The Company believes it has meritorious defenses to both of the above
lawsuits and is vigorously defending these actions.
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of business. Management
believes that the disposition of these other matters will not have a
material adverse effect on the Company's consolidated financial
condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis should be read in conjunction with the Company's
condensed consolidated financial statements and notes thereto.
OVERVIEW
The Company develops, owns and operates wireless cable television systems and
channel rights in small to mid-size markets in the central United States. The
Company currently offers its subscribers local off-air VHF/UHF channels, as well
as premium and basic cable television programming channels such as HBO, HBO2,
Cinemax, Showtime, Disney, ESPN, CNN, USA, WGN, WTBS, TNT, Nickelodeon, Turner
Classic Movies, The Weather Channel, Fox Sports, Discovery, the Nashville
Network, A&E and other popular cable television networks.
The Company currently offers programming packages from DIRECTV to certain MDU
subscribers in 48 of its 57 markets. In addition, in August 1998, the Company
will launch its DIRECTV offering to SFU subscribers in 41 markets. In June 1998,
the Company launched a developmental high-speed Internet access business in
Sherman, Texas and, subject to the results in the Sherman market, anticipates
launching Internet services in up to three other existing markets by the end of
1998. At June 30, 1998, the Company had wireless cable channel rights in 90
markets, including 57 markets with subscription video systems in operation,
providing service to approximately 170,000 subscribers. In addition, the Company
owns approximately 20% of the outstanding common stock of Wireless One, Inc.
("Wireless One") and approximately 36% of the outstanding common stock of CS
Wireless.
FORWARD LOOKING STATEMENTS
In addition to the matters noted elsewhere in this Quarterly Report on Form
10-Q, the statements contained in this report relating to the Company's
operating results and plans and objectives of management for future operations,
including plans or objectives relating to the Company's business strategy,
financing and financial recapitalization and restructuring needs, are forward
looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. Such statements are based on an assessment of a variety
of factors, contingencies and uncertainties deemed relevant by management,
including (i) the Company's ability to recapitalize and/or restructure its
existing indebtedness and access additional capital to finance its current
business plan, (ii) business and economic conditions in the Company's existing
markets, (iii) the Company's ability to implement a successful marketing plan
and competitive price structure to produce subscriber growth, (iv) the
successful implementation and launch of the Company's MDU and SFU alliances
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with DIRECTV, (v) regulatory and interference issues, including the grant of
two-way transmission authority and pending applications for new licenses or for
modification of existing licenses and the grant of applications for new licenses
and license modification applications that have not yet been filed with the
Federal Communications Commission ("FCC"), (vi) the successful launch and
marketing of the Company's high-speed Internet access business, and (vii)
competitive products and services, as well as those matters discussed
specifically elsewhere herein. Consequently, the actual future results realized
by the Company could differ materially from the statements made herein.
Investors are cautioned not to place undue reliance on the forward looking
statements made in this report.
GOING CONCERN; FINANCIAL RECAPITALIZATION/RESTRUCTURING
In conjunction with an ongoing evaluation of the Company's capital structure by
management and in consultation with the Company's financial advisor, on April
15, 1998, the Company announced that it would not make a semiannual interest
payment due on that date of $7.5 million on the 13% Notes. Failure to make this
interest payment permits the trustee or the holders of 25% or more in principal
amount of the 13% Notes to accelerate payment of the 13% Notes and all unpaid
and accrued interest thereon. Acceleration of the 13% Notes permits the trustee
and holders of 25% or more in principal amount of the Company's 14% Notes to
accelerate payment of the 14% Notes and all unpaid and accrued interest thereon.
The Company currently does not have sufficient funds available to pay in full
the indebtedness outstanding under either the 13% Notes or the 14% Notes in the
event that any of such indebtedness is accelerated. Accordingly, at June 30,
1998 the principal amounts outstanding under the Senior Notes have been
classified as a current liability in accordance with EITF 86-30. As of August
12, 1998, principal and interest under the Senior Notes had not been
accelerated.
The default by the Company under the indentures governing the 13% Notes and the
restrictions on the Company's ability to obtain additional financing raise doubt
about the continuation of the Company as a going concern without the
consummation of an agreement with holders of the Senior Notes to recapitalize
the Company or restructure the Senior Notes.
The Company continues to retain Wasserstein as its financial advisor to assist
the Company in evaluating all options available to finance the Company's
business plan and recapitalize the Company. The Company and Wasserstein have had
preliminary discussions with the Ad Hoc Committee's financial advisor regarding
specific recapitalization and restructuring proposals. The Company continues to
pursue recapitalization and restructuring alternatives with all debt holders on
a consensual basis. There can be no assurance, however, that any such
alternatives will be acceptable to any or all such parties.
The Company may not be able to obtain the consents necessary from the holders of
the Senior Notes for a consensual, out-of-court restructuring. In this event, if
the Company believes that it is able to obtain the requisite votes from the debt
holders supporting a "prenegotiated" or "prepackaged" plan of reorganization
(the "Plan") that is acceptable to the Company, then the Company intends to
formally solicit consents from the holders of the Senior Notes, Convertible
Notes and certain other impaired creditors to approve such a Plan, file a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code, and seek
confirmation of the Plan as promptly thereafter as possible. There can be no
assurance that, if filed, such Plan will be approved by any creditors or
confirmed in any formal proceeding.
The Company believes that its business strategy as discussed herein and in prior
public filings should help the Company consummate a financial recapitalization
or restructuring in a timely manner and on terms acceptable to the Company by
demonstrating the long-term value of the Company's assets. However, there can be
no assurance that such recapitalization or restructuring will be consummated.
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LIQUIDITY AND CAPITAL RESOURCES
Wireless cable television and, to a lesser extent, high-speed Internet access
businesses are capital intensive. Since inception, the Company has expended
funds to lease or otherwise acquire channel rights and operating subscription
video systems in various markets, to construct new subscription video systems
and to finance system operating losses. The Company's primary sources of capital
have been from subscription fees, the sale of the Company's common stock, debt
financing and the sale of wireless cable rights that are not part of the
Company's strategic plan. The growth of the Company's business requires
substantial investment in capital expenditures for SFU and MDU subscriber
growth, the development of alternative spectrum usages such as high-speed
Internet access, and the launch of additional markets for subscription video
and/or Internet access businesses.
The Company estimates that a launch of a wireless cable analog video system in
a typical market will involve the initial expenditure of approximately $820,000
to $1.3 million for transmission equipment and tower construction, depending
upon the type and sophistication of the equipment and whether the Company is
required to construct a transmission tower. In addition, installation costs for
each SFU subscriber are approximately $465 for boxed technology and
approximately $400 for boxless technology. These installation costs include
expenditures for equipment, labor, overhead charges and direct commissions. The
Company expects that installation costs for each new SFU subscriber who
receives the DIRECTV programming service will be approximately $390 to $275,
depending on whether the installation is in a boxed or boxless market. At June
30, 1998, the Company had 26 and 31 boxed and boxless systems, respectively.
The Company believes the average incremental installation costs will continue
to decrease as (1) subscribers are added in boxless systems and (2) combination
DIRECTV subscribers are added.
The Company converted two operating systems from a boxed to a boxless
technology in 1998 and plans to convert additional operating systems to realize
future cost savings. The Company is able to use boxed inventory removed from
converted markets to equip new subscribers in other boxed technology markets.
Other launch costs include the cost of securing adequate space for marketing
and warehouse facilities, as well as costs related to employees. The Company
estimates the launch of a developmental Internet access business will require
initial incremental capital expenditures of approximately $250,000 per market.
Operating losses are likely to be incurred by both a video and Internet access
business during the start-up period. Subject to the consummation of a financial
recapitalization or restructuring, the Company has determined to delay the
launch of any new wireless cable television markets temporarily.
Cash used in operations of the Company was $6.3 million for the six months ended
June 30, 1998, compared to $29.0 million during the first half of 1997. The
increase in cash from operations during 1998 was primarily due to lower
programming costs as a result of fewer subscribers and lower SG&A expenses
related to labor savings and efficiencies at the market level, as well as
nonpayment in the current year of accrued interest on the 13% Notes.
Cash provided by investing activities was $2.5 million during the first six
months of 1998, compared to $1.5 million in the same period last year. Cash
provided by/used in investing activities principally relates to the acquisition
and installation of subscriber receive-site equipment, the upgrade of
transmission equipment in certain markets and the acquisition of wireless cable
channel rights and operating systems, partially offset by the sale of wireless
cable channel rights that are not a part of the Company's strategic plan.
During the six months ended June 30, 1998, cash used in investing activities
included the sale of debt securities held in the Company's escrow account for
payment of interest on the 14% Notes, purchases of subscriber equipment and the
upgrade of transmission equipment in certain markets. Cash provided by
investing activities during the first half of 1997 included receipt of $13.3
million in cash from CS Wireless for partial payment on a note receivable and
sales of debt securities totaling $11.9 million, offset by the Company's
acquisition of operating systems in Woodward and Watonga, Oklahoma for $1.6
million.
Net cash used in financing activities was $614,000 for the six months ended
June 30, 1998, compared to $770,000 during the same period of 1997.
Expenditures in both periods primarily relate to principal payments on
obligations related to capital leases and various prior period acquisitions.
- 11 -
<PAGE> 12
At June 30, 1998, the Company had approximately $38.4 million of cash and cash
equivalents, and $1.4 million of restricted cash.
FUTURE CASH REQUIREMENTS
As of June 30, 1998 the Company had $240.0 million principal amount of Senior
Notes outstanding, approximately $55.0 million in accreted principal amount of
Convertible Notes outstanding and approximately $15.8 million principal amount
of installment notes outstanding payable to the FCC for the Company's basic
trading area ("BTA") authorizations (net of BTA lease payments from CS
Wireless). In April 1997, the Company disbursed all of the remaining funds in
the escrow account established in connection with the indentures governing the
13% Notes and in April 1998 the Company disbursed all of the funds in the escrow
account established in connection with the indenture governing the 14% Notes.
Cash interest obligations on the 13% Notes and the 14% Notes total approximately
$16.2 million every six months or $32.4 million per year (excluding any interest
payable as a result of delinquent interest payments). Excluding the principal
amounts and accrued but unpaid interest on the Senior Notes, the Company is
obligated to pay approximately $988,000 in principal and interest on installment
notes for its basic trading areas or BTAs, and $546,000 in operating leases and
other notes payable for the third and fourth quarters in the fiscal year ending
December 31, 1998. As of June 30, 1998, the Company had outstanding trade
payables of approximately $1.1 million. In November 1998, the Company will be
required to make quarterly principal payments (in addition to interest) on its
debt incurred in connection with the 1996 BTA auction, with amortized payments
ranging from $250,000 in November 1998 to $525,000 in May 2006 (net of BTA lease
payments from CS Wireless). In November 1999, the Company will be required to
make its first semiannual cash interest payment of approximately $2.8 million on
the Convertible Notes.
As discussed above, pending the outcome of its recapitalization and financing
efforts, the Company temporarily has suspended new wireless cable television
system launches. The Company remains committed to its long-term business plan,
subject to the recapitalization and financing issues discussed herein. This
business plan consists of (1) achieving moderate SFU subscriber growth through
traditional analog video service in selected markets, (2) pursuing SFU and MDU
subscriber and revenue growth through cooperative marketing alliances with
DIRECTV, (3) developing and testing Internet access service to small and
mid-size businesses in several markets, (4) launching several new markets that
offer MDU, Internet and SFU subscriber growth opportunities, and (5) pursuing
recapitalization and financing alternatives to allow the Company to carry out
this business plan.
Despite the Company's efforts to conserve capital and the improvement in its
EBITDA during the second half of 1997 and the first half of 1998, the Company
does not expect to generate sufficient cash flow in 1998 and beyond to implement
its business strategy and service the Company's existing indebtedness. As a
result, the implementation of the above-described business strategy is subject
to and dependent upon obtaining additional capital and recapitalizing or
restructuring the Company's current debt on terms and conditions acceptable to
the Company and in a timely manner. This may include the sale or exchange of
debt or equity securities, borrowings under secured or unsecured loan
arrangements, sales of assets including wireless cable systems and channel
rights, and/or a recapitalization or restructuring of the Company's debt and/or
equity, including converting part or all of the Company's existing indebtedness
and related interest obligations into equity of the Company.
The Company's ability to implement such options is limited by the indentures
governing the Senior Notes and the agreements governing the Convertible Notes.
There can be no assurance that the Company will be able to enter into new
financing arrangements or a recapitalization or restructuring in a timely manner
and on terms satisfactory to the Company that will enable the Company to
implement the above-described business strategy. Management of the Company
believes that at June 30, 1998, the Company had adequate working capital to
sustain operations, excluding interest and principal payments on the Senior
Notes and Convertible Notes, at least through 1999.
- 12 -
<PAGE> 13
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED
TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1997
Revenues; Subscribers. The Company's revenues consist of monthly fees paid by
subscribers for basic programming, premium programming, program guides,
equipment rental and other miscellaneous fees. The Company's revenues for the
second quarter of 1998 were $18.6 million, compared to $19.8 million for the
second quarter of 1997. Revenues for the six months ended June 30, 1998 were
$37.7 million compared to $38.9 million for the same period last year. Revenues
decreased for both periods primarily due to a decrease in average subscribers
from 200,500 for the quarter ended June 30, 1997 to 172,630 for the quarter
ended June 30, 1998, and from 196,500 for the six months ended June 30, 1997 to
171,150 for the same period of 1998. The decrease in average subscribers is
primarily due to (i) the Company's inability to hire and train a qualified sales
force as quickly as it had anticipated, (ii) the delayed launch of the Company's
marketing plan for its combined DIRECTV offerings until the third quarter of
1998, (iii) an increase as of January 1, 1998 in the Company's equivalent basic
unit or "EBU" conversion rate for calculating MDU subscribers (discussed in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998),
(iv) the transfer of one operating system (and its associated revenues) to CS
Wireless in December 1997 and (v) stricter credit policies for approving new
customers.
As noted above, the number of subscribers has decreased since the second quarter
of 1997. Although the Company has successfully attracted higher quality
subscribers, as measured by the Company's decreasing bad debt expense, the
overall number of subscribers has declined and has resulted in a corresponding
decrease in revenue. The Company recognizes that long-term subscriber growth is
critical for sustainable EBITDA growth and the ongoing viability of its
subscription video business. Although there can be no assurance that such
long-term growth will be achieved, the Company believes that with its enhanced
programming offering from DIRECTV, and continuing improvement in other
operational areas, it can achieve and maintain such long-term subscriber growth.
Additionally, although the number of subscribers of its subscription video
business has decreased since the second quarter of 1997, average recurring
revenue per subscriber increased 7% for the second quarter ended June 30, 1998
to $34.04 from $31.84 for the same period last year and 9% for the six months
ended June 30, 1998 to $34.06 from $31.19 for the same period last year. This
increase reflects overall higher average subscription rates, as lower priced
packages are replaced with upgraded offerings.
As discussed above, the Company will launch its SFU DIRECTV product in 41
markets in August 1998. This launch involves reorganizing individual market
channel line-ups to accommodate and avoid redundancies with DIRECTV's
programming line-ups. In the short-term, the number of subscribers in these
markets may decline and cause a temporary increase in the Company's churn rate,
as some existing subscribers may not wish to purchase DIRECTV services and might
be dissatisfied with the revised channel lineups that the Company will provide
in those markets. The Company believes that any temporary decline caused by this
reorganization will be more than offset by new subscribers and additional
revenues that the Company will generate through its alliance with DIRECTV.
Systems Operations. Systems operations expenses include programming costs,
channel lease payments, labor and overhead, costs of service calls and churn,
transmitter site and tower rentals, cost of program guides and certain repairs
and maintenance expenditures. Programming costs (with the exception of minimum
payments), cost of program guides and channel lease payments (with the exception
of certain fixed payments) are variable expenses based on the number of
subscribers. Systems operations expense was $9.0 million for the second quarter
of 1998, versus $11.3 million for the second quarter of 1997. As a percentage of
revenues, systems operations expense was 48.2% for the second quarter of 1998,
compared to 57.0% for the second quarter of 1997. For the six months ended June
30, 1998, systems operations expense was $18.3 million or 48% of revenue,
compared to $20.1 million or 52% of revenue for the first six months of 1997.
The decrease in systems operations expense was primarily due to lower
programming costs as a result of (i) fewer subscribers and (ii) increasing the
Company's EBU conversion rate which resulted in fewer MDU subscribers. This
decrease was slightly offset by programming rate increases from certain
providers. In addition, the Company experienced higher service call expense
during the second quarter and first six months of 1997 due to installation
corrections at certain subscriber households and an increase in expenses related
to the recovery of equipment from disconnected subscribers.
- 13 -
<PAGE> 14
Selling, General and Administrative ("SG&A"). SG&A expense for the second
quarter of 1998 decreased 20% to $8.9 million from $11.1 million during the same
period in 1997. As a percentage of revenues, SG&A was 47.6% in the second
quarter of 1998 compared with 56.1% for the second quarter of 1997. SG&A expense
for the first six months of 1998 decreased 15.8% to $18 million from $21.4
million for the same period last year. As a percentage of revenues, SG&A was 48%
for the first half of 1998 compared to 55% for the same period last year. SG&A
decreased over the periods presented due to lower bad debt expense resulting
from improved credit screening and collection procedures and as a result of
labor savings and efficiencies realized from consolidation of management and
staff in certain markets.
Depreciation and Amortization. Depreciation and amortization expense includes
depreciation of systems and equipment, amortization of license and leased
license investment and the excess of cost over fair value of net assets
acquired. The Company's policy is to capitalize the excess of direct costs of
subscriber installations over installation fees. These direct costs include
reception materials and equipment on subscriber premises, installation labor and
direct commissions. These direct costs are capitalized as systems and equipment
in the accompanying condensed consolidated balance sheet. Depreciation and
amortization expense was $11.2 million and $22.5 million for the quarter and six
months ended June 30, 1998, respectively, compared to $16.5 million and $27.6
million for the quarter and six months ended June 30, 1997, respectively. The
decrease in depreciation and amortization expense primarily was due to $8
million in write-offs of subscriber equipment during the third quarter of 1997
related to obsolete equipment and disconnected equipment not recovered from
subscribers' homes. This decrease was slightly offset by a change in the
amortization period of the nonrecoverable portion of subscriber installation
costs from four years to three years in the third quarter of 1997 and additional
amortization expense on the costs of BTA channel rights that began in the fourth
quarter of 1997.
Impairment of Long-Lived Assets. Under SFAS No. 121 companies are not required
to actively search for impairment of assets that are employed in the business or
to perform an asset-by-asset analysis to determine if impairment exists. A
review is required only when events or circumstances indicate that an impairment
might exist. At that point, expected future undiscounted cash flows from the use
of each asset must be estimated and compared with its book value to determine if
impairment exists. Any impairment loss is then computed as the amount by which
the asset's book value exceeds its fair value.
In the second quarter of 1998, the Company reviewed the book value of certain
assets associated with certain undeveloped markets and determined that cash
flows from operations currently would not be adequate to fund the capital outlay
required to build out such markets and, because of the Company's recent default
on its interest payment due on the 13% Notes, outside financing for this purpose
may not be readily available prior to consummating financial recapitalization or
restructuring. Therefore, in accordance with SFAS No. 121, the wireless cable
channel licenses and leases in these undeveloped markets were individually
evaluated and written down to fair value.
As a result, the Company recorded a $17.7 million asset impairment charge in the
second quarter of 1998 in order to reflect its undeveloped wireless cable
channel licenses and leases at estimated fair value. This charge related to
licenses and leases in 34 of the Company's non-operating markets and was
recorded after considering, among other things, recent market transactions of a
similar nature within the industry, the availability of willing buyers for
channel licenses and leases in each undeveloped market, and the discounted
future cash flows projected to be generated if the markets were developed.
The Company will continue to review these licenses and leases for impairment as
well as for possible future development of its subscription video and Internet
lines of business if its financial recapitalization or restructuring is
successful and capital funds for build-out become available.
Additionally, based on the current depressed market condition of the wireless
cable industry and the continuing losses of CS Wireless, management re-evaluated
the goodwill associated with its investment in CS Wireless. Accordingly, during
the second quarter ended June 30, 1998, the Company wrote off $6.8 million of
excess basis in its 36% equity interest in CS Wireless.
- 14 -
<PAGE> 15
Operating Loss. The Company generated operating losses of $25.2 million for the
second quarter of 1998, compared to $19.1 million for the second quarter of
1997. Operating losses for the six months ended June 30, 1998 were $35.9 million
compared to $30.2 million for the same period last year.
Excluding the write-down of the Company's undeveloped licenses and leases,
operating losses improved by 46% for the quarter and 30% for the six month
period ended June 30, 1998. EBITDA was $791,000 for the second quarter of 1998,
compared to negative $2.6 million in the second quarter of 1997. EBITDA for the
six months ended June 30, 1998 was $1.5 million compared to negative $2.5
million for the six months ended June 30, 1997. EBITDA is presented because it
is a widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA is not a financial measure determined
under generally accepted accounting principles and should not be considered as
an alternative to net income as a measure of operating results or as an
alternative to cash flows as a measure of funds available for discretionary or
other liquidity purposes.
In order to fully utilize its current resources and increase subscriber growth,
the Company expects that it will be required to continue to increase advertising
expenditures which may negatively impact EBITDA in the short term.
Interest Income. Interest income was $675,000 and $1.5 million for the quarter
and six months ended June 30, 1998, compared to $1.5 million and $3.3 million
for the quarter and six months ended June 30, 1997. The decrease in interest
income is due to higher interest earnings during 1997 on larger escrowed
balances segregated for the payment of interest on the Senior Notes and higher
interest earnings on a note receivable that was partially repaid during the
second and third quarters of 1997.
Interest Expense. Interest expense was $10.0 million for the second quarter of
1998 and 1997 and $20.0 million for the six months ended June 30, 1998, compared
to $19.9 million for the six months ended June 30, 1997. Interest expense
remained stable even though average borrowings for the six months ended June 30,
1998 increased approximately $5.0 million compared to the same prior year
period. However, this increase was due to the accretion of interest to the
principal balance of the Company's Convertible Notes.
Equity in Losses of Affiliates. The Company owns approximately 20% of the
outstanding common stock of Wireless One and approximately 36% of the
outstanding common stock of CS Wireless. Equity in losses of affiliates was
$13.3 million and $18.7 million for the quarter and six months ended June 30,
1998, respectively, compared to $8.3 million and $16.6 million for the same
periods of 1997, respectively. During the second quarter of 1998, the Company
wrote off $6.8 million of goodwill representing its basis in excess of its
equity in the net assets of CS Wireless, based on the depressed condition of the
wireless cable industry and CS Wireless' continuing losses. Excluding this
write-off, losses from affiliates for the quarter and six months ended June 30,
1998 were lower than the same periods last year due to the exclusion of losses
from Wireless One in 1998 following the Company's write-down of its investment
in Wireless One to zero in November 1997.
Net Loss. The Company has recorded net losses since inception. The Company
incurred net losses of $50.6 million, or $2.57 per basic and diluted common
share, during the second quarter of 1998, versus $35.8 million, or $1.82 per
basic and diluted common share, during the second quarter of 1997. During the
six months ended June 30, 1998, the Company incurred net losses of $75.8 million
or $3.85 per basic and diluted common share, compared to $63.4 million or $3.23
per basic and diluted common share for the six months ended June 30, 1997. As
discussed above, the increase in net losses is primarily due to the write-down
of $17.7 million of the Company's undeveloped licenses and $6.8 million of
goodwill associated with the Company's investment in CS Wireless during the
second quarter of 1998. Excluding these write-downs, net losses improved over
the periods presented due to decreases in systems operations expense, SG&A and
depreciation and amortization expense.
- 15 -
<PAGE> 16
BALANCE SHEET
Subscriber Receivables. Subscriber receivables decreased from $2.2 million at
December 31, 1997 to $1.8 million at June 30, 1998 as a result of stricter
credit screening policies and improved collections procedures. The Company's
monthly churn rate also has declined from an average of 4.6% at December 31,
1997 to 3.5% in the first quarter of 1998 to 3.2% in the second quarter of 1998.
Investments in Affiliates. As discussed above, based on the depressed valuations
in the wireless cable industry and CS Wireless' continuing losses, the Company
wrote-off $6.8 million of excess basis in its 36% equity interest in CS Wireless
during the second quarter ended June 30, 1998.
Current Liabilities. Accounts payable and accrued expenses increased from $17.4
million at December 31, 1997 to $26.2 million at June 30, 1998. This increase
was primarily due to additions to accrued interest on the Company's Senior Notes
as a result of the Company's election in April 1998 not to make an interest
payment of approximately $7.5 million on the 13% Notes. At June 30, 1998,
accrued interest payable amounted to approximately $14.4 million. In addition,
as a result of the Company's decision not to make its semi-annual interest
payment on its 13% Notes and the noteholders' right to accelerate all principal
amounts due under the 13% and 14% Notes, these principal balances have been
reflected as a current liability on the Company's condensed consolidated balance
sheet as of June 30, 1998.
THE YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (Year 2000) approaches. The Year
2000 issue is the result of computer programs being written using two digits
rather than four to define the applicable year. Any of the Company's computer
programs that have time-sensitive software may recognize a date using "00" as
1900 rather than the Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations including, among other things,
a temporary inability to process transactions, send invoices, transmit
programming or engage in similar normal business activities.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test its systems for the Year 2000 compliance. The
Company anticipates that all reprogramming efforts will be complete by early
1999, which the Company believes will allow adequate time for testing and
implementation before January 1, 2000. To date, confirmations have been received
from the Company's primary information processing vendors that plans are being
developed to address the processing of transactions in the Year 2000. However,
the Company is uncertain of the expense associated with the Year 2000 compliance
and related potential effect on the Company's results of operations.
FUTURE OPERATING RESULTS
The Company's future revenues and profitability are difficult to predict due to
a variety of risks and uncertainties, including those described under "Forward
Looking Statements" above.
The rate of future growth of the Company's subscription video and other
subscribers cannot be estimated with precision or certainty. Successful
implementation of the Company's business strategy, the Company's ability to
obtain timely financing on acceptable terms and the recapitalization of the
Company would have a significant impact on the Company's operating and financial
performance in 1998 and beyond. In addition, the Company cannot quantify the
potential impact on its 1998 financial performance of the implementation of its
business strategy.
- 16 -
<PAGE> 17
Because of the foregoing uncertainties affecting the Company's future operating
results, past performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods. In addition, the Company's participation in
a highly dynamic industry often results in significant volatility in the price
of the Company's common stock and debt.
RECENTLY ISSUED ACCOUNTING PRINCIPLES
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS No.
131"). SFAS No. 131 is effective for fiscal years beginning after December 31,
1997. This statement establishes standards for the way that public companies
report information about segments in annual and interim financial statements.
The adoption of SFAS No. 131 is not expected to have a material impact on the
Company's consolidated financial statements and related disclosures.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 15, 1998, a purported class action lawsuit was filed in State District
Court in Kleberg County, Texas, styled Richard H. Thompson, et al. v. Heartland
Wireless Communications, Inc., David E. Webb and John R. Bailey (98-371-d). The
Thompson Suit alleges violations of the Texas Securities Act and Texas common
law. The plaintiff alleges that defendants misrepresented or failed to disclose
material facts about the business prospects and financial condition of the
Company, and overstated revenues, EBITDA and subscriber numbers. The plaintiff
seeks to certify a class to represent all persons who acquired the securities of
the Company during the period from November 15, 1995 through March 20, 1997,
including all persons who purchased or acquired securities that were offered or
sold by defendants during the Class Period. The plaintiff seeks money damages,
interest, attorneys' fees and costs, as well as equitable and/or injunctive
relief with respect to any proceeds derived from defendants' stock sales.
On May 27, 1998, a purported class action lawsuit was filed in State District
Court in Brooks County, Texas, styled Azalia Garcia, et al. v. Heartland
Wireless Communications, Inc. d/b/a Heartland Cable Television (98-60898-1). The
Garcia Suit alleges that the late fees charged by the Company are not reasonably
related to the costs incurred by the Company as a result of late payment of
accounts. The plaintiff seeks to certify a class to represent all persons
currently receiving cable service from the Company or who have been charged a
late fee in the past by the Company. The plaintiff seeks a declaration that any
contractual provisions for the Company's late fees are void or usurious, and
seeks money damages, interest, attorneys' fees and costs.
The Company believes it has meritorious defenses to both of the above lawsuits
and is vigorously defending these actions.
The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business. Management believes that the
disposition of these other matters will not have a material adverse effect on
the Company's consolidated financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company ("Annual Meeting") was held on
June 12, 1998. Each of the following persons, who constituted all of the
Company's nominees for director, were elected at the Annual Meeting to serve on
the Board of Directors of the Company:
- 17 -
<PAGE> 18
<TABLE>
<CAPTION>
Votes Votes Broker
For Withheld Non-Votes
---------- -------- ---------
<S> <C> <C> <C>
Jack R. Crosby 17,424,258 235,885 0
J.R. Holland, Jr. 17,525,170 134,973 0
Carroll D. McHenry 17,528,395 131,748 0
Terry S. Parker 17,526,170 133,973 0
John A. Sprague 17,527,895 132,248 0
L. Allen Wheeler 17,521,169 138,974 0
</TABLE>
At the Annual Meeting, the stockholders also voted to ratify the selection of
KPMG Peat Marwick LLP as independent auditors for the Company for the fiscal
year ending December 31, 1998:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstained Non-Votes
---------- ------- --------- ----------
<S> <C> <C> <C>
17,474,487 59,115 126,541 0
</TABLE>
ITEM 5. OTHER INFORMATION
As noted in the Company's Quarterly Report on Form 10-Q for the quarter ended
March 30, 1998, The Nasdaq Stock Market, Inc. ("Nasdaq") has notified the
Company that it has failed to maintain a closing bid price of at least $1.00 for
30 consecutive trading days in violation of Nasdaq's Marketplace Rule
4450(a)(5). In addition, the Company was notified on July 6, 1998 that it has
failed to meet the net tangible asset requirement of $4 million in violation of
Nasdaq's Marketplace Rule 4450(a)(3). On July 17, 1998, the Company requested a
waiver of compliance with Marketplace Rule 4450(a)(5) and a hearing before a
panel authorized by the National Association of Securities Dealer, Inc. to
appeal any delisting decision based on the closing bid price requirement. The
Company also requested a waiver of compliance with Marketplace Rule 4450(a)(3)
regarding the net tangible asset requirement. On July 27, 1998, Nasdaq granted
the Company a hearing, which will be held on September 2, 1998 in Washington,
D.C. Any interim delisting action by Nasdaq has been stayed, pending the results
of that hearing. At the hearing, the Company will be allowed to present its case
for continued inclusion in the Nasdaq National Market, based on its ability to
regain and maintain compliance with all Nasdaq listing requirements. If the
panel determines that the Company's common stock should be delisted, such
delisting could occur as early as September 2, 1998. In this event, the Company
would evaluate its procedural remedies under Nasdaq's Marketplace Rules at such
time. Any such delisting could adversely affect the liquidity of the Company's
common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
*10.1 Agreement between DIRECTV and Heartland Wireless
Communications, Inc. dated April 5, 1998.
**10.2 Employment Agreement between Heartland Wireless
Communications, Inc. and Christopher P. Dailledouze
dated April 8, 1998.
- 18 -
<PAGE> 19
**10.3 Employment Agreement between Heartland Wireless
Communications, Inc. and Candice A. Farley dated
April 8, 1998.
**10.4 Employment Agreement between Heartland Wireless
Communications, Inc. and J. Curtis Henderson dated
April 8, 1998.
**10.5 Employment Agreement between Heartland Wireless
Communications, Inc. and Marjean Henderson dated
April 8, 1998.
**10.6 Employment Agreement between Heartland Wireless
Communications, Inc. and Randall C. May dated April
8, 1998.
**10.7 Employment Agreement between Heartland Wireless
Communications, Inc. and Wayne M. Taylor dated April
8, 1998.
**27 Financial Data Schedule
- --------------------------------
*Filed herewith. Confidential portions of the DIRECTV Agreement and exhibits
thereto have been omitted and filed separately with the Securities and Exchange
Commission under a confidential treatment request ("CTR") pursuant to Rule 24b-2
of the Securities Exchange Act of 1934, as amended. The Company will provide
without charge, upon written request, a copy of exhibits to the DIRECTV
Agreement, with confidential portions omitted pursuant to the CTR.
**Filed herewith.
(b) REPORTS ON FORM 8-K
1. On April 15, 1998 the Company filed a Current Report on Form 8-K dated
April 15, 1998 regarding the Company's determination not to make an
interest payment on the 13% Notes.
- 19 -
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: August 14, 1998 HEARTLAND WIRELESS COMMUNICATIONS, INC.
By: /s/ Carroll D. McHenry
------------------------------------------
Carroll D. McHenry
Chairman of the Board, President and Chief
Executive Officer (Principal Executive
Officer)
By: /s/ Marjean Henderson
------------------------------------------
Marjean Henderson
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
- 20 -
<PAGE> 21
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.1 Agreement between DIRECTV and Heartland Wireless Communications,
Inc. dated April 5, 1998.
10.2 Employment Agreement between Heartland Wireless Communications, Inc.
and Christopher P. Dailledouze dated April 8, 1998.
10.3 Employment Agreement between Heartland Wireless Communications, Inc.
and Candice A. Farley dated April 8, 1998.
10.4 Employment Agreement between Heartland Wireless Communications, Inc.
and J. Curtis Henderson dated April 8, 1998.
10.5 Employment Agreement between Heartland Wireless Communications, Inc.
and Marjean Henderson dated April 8, 1998.
10.6 Employment Agreement between Heartland Wireless Communications, Inc.
and Randall C. May dated April 8, 1998.
10.7 Employment Agreement between Heartland Wireless Communications, Inc.
and Wayne M. Taylor dated April 8, 1998.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
"*" Confidential portions of this Agreement have been omitted and filed
separately with the Securities and Exchange Commission under a
Confidential Treatment Request, pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.
AGREEMENT
This Agreement ("Agreement") is made and entered into as of this 5th
day of April, 1998, by and between DIRECTV, Inc., a California corporation
("DIRECTV"), and Heartland Wireless Communications, Inc., a Delaware corporation
("Company").
W I T N E S S E T H:
WHEREAS, DIRECTV is an operator of a direct broadcast satellite ("DBS")
service through which consumers may receive video, audio and other programming
via specialized DSS(R) satellite receiving equipment;
WHEREAS, DIRECTV desires to establish a single-family household
DBS/MMDS program (the "Program") to solicit orders for DIRECTV(R) video, audio
and other programming services;
WHEREAS, DIRECTV desires that Company act as a commissioned sales agent
under the Program and solicit Company's residential customers and prospects
through direct sales methods, including, telemarketing, direct mail,
door-to-door sales, and such other methods as DIRECTV shall approve ("Approved
Sales Methods"), to order DIRECTV programming packages and services (as set
forth on EXHIBIT A incorporated herein, the "DIRECTV Programming Packages") as a
complement to the consumer's purchase, lease or rental of DSS receiving
equipment (the "DSS System");
WHEREAS, Company desires to act as a commissioned sales agent of
DIRECTV under the Program and solicit residential customers through Approved
Sales Methods to order DIRECTV Programming Packages as a complement to the
consumer's purchase, lease or rental of DSS System;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
A. TERM. Unless earlier terminated in accordance with the terms hereof,
the term of our agreement shall commence upon the execution of this
Agreement and shall continue for a period of five (5) years. To this
end, Company shall use commercially reasonable efforts to maximize the
acquisition of DIRECTV subscribers under this Agreement and the
Cooperative Marketing Agreement as defined below.
B. TERRITORY. Company shall be authorized to solicit orders for DIRECTV
Programming Packages via Approved Sales Methods only from single family
residential households ("Residential Households"), excluding any
condominium complex, apartment building (including both rental and
cooperative apartments), or townhouse communities, and other multiple
dwelling units (collectively, "MDUs") located in the contiguous United
States (the "Territory"). Notwithstanding the foregoing, the parties
hereto acknowledge the existence of a Cooperative Marketing Agreement
between DIRECTV and Company, whereby Company became a "System Operator"
of DIRECTV in connection with the MDUs. The parties agree that the
rights as set forth herein to Company are provided on the basis that
Company will continue to perform its obligations under such Cooperative
Marketing Agreement "***".
C. ORDERS FOR DIRECTV PROGRAMMING PACKAGES.
(1) Company shall "***" solicit orders for DIRECTV Programming
Packages and to promote and enhance DIRECTV's business,
reputation and goodwill. DIRECTV will notify Company from time
to time of the DIRECTV Programming Packages for which Company
will be authorized to accept orders from the Residential
Households. All such orders for DIRECTV Programming Packages
shall
<PAGE> 2
be taken on the terms and conditions, including pricing,
specified to Company in writing by DIRECTV. "***"
(2) Company acknowledges and agrees that this Agreement authorizes
Company to submit to DIRECTV solely those orders for DIRECTV
Programming Packages that Company (or its employees on
Company's behalf) has solicited. In no event shall Company
submit orders to DIRECTV that have been solicited by another
agent, or for which Company has paid, has agreed to pay, or
will pay another person or entity any fees, commission or
other compensation (other than any compensation to its
employees) without the prior written consent of DIRECTV, which
consent may be withheld in DIRECTV's sole discretion. Any
breach of this Section shall be deemed a material breach of
this Agreement.
D. FEES.
(1) Subject to the limitations and restrictions set forth in this
Agreement, DIRECTV will pay Company a continuing service fee
(the "Continuing Service Fee") as set forth in the Fee
Schedule set forth in EXHIBIT B incorporated herein,
representing a percentage of all DIRECTV Programming Packages
revenue (excluding any Taxes, applicable fees and revenue
received in connection with pay-per-view or other
non-subscription programming) received by DIRECTV from each
Qualifying Subscriber (the "Net Revenues"), commencing on the
date of activation of such Qualifying Subscriber until the
earlier of (a) the termination or expiration of this Agreement
for any reason or (b) the termination, deactivation or
discontinuation of such Qualifying Subscriber's DIRECTV
Programming Package for any reason. In addition, an activation
fee will be paid to Company at the time of activation of
service for a Qualifying Subscriber ("Activation Fee") based
on the requirements and guidelines as set forth in EXHIBIT B.
Such Activation Fees are subject to chargebacks under certain
circumstances as specified in EXHIBIT B. "Qualifying
Subscriber" shall mean a Residential Household located within
the Territory from which Company solicits and takes the
initial order for a DIRECTV Programming Package pursuant to
the terms of this Agreement and which order is transmitted to
DIRECTV in accordance with the terms of this Agreement and
approved by DIRECTV in its sole discretion.
(2) All Fees for orders of DIRECTV Programming Packages will be
paid within "*" days after the accounting month, as such
accounting month is determined by DIRECTV (the "Accounting
Month"), in which DIRECTV receives payment for such DIRECTV
Programming Package.
(3) Company understands that DIRECTV will pay Fees as set forth
herein for DIRECTV Programming Packages sold by Company to
Residential Households in areas in the Territory which have
not been purchased by the National Rural Telecommunications
Cooperative ("NRTC"). DIRECTV will pay Fees for DIRECTV
Programming Packages sold by Company to Residential Households
in areas in the Territory which have been purchased by the
NRTC only in the amount and for the period of time that NRTC
reimburses DIRECTV for such Fee payments. Attached as EXHIBIT
C is a map indicating the areas in the Territory purchased by
the NRTC. As those NRTC territories which have agreed to
reimburse DIRECTV become known to DIRECTV, DIRECTV shall
provide Company with a list of such territories. Upon
execution of this Agreement, DIRECTV agrees to provide Company
with a complete list of NRTC zip codes in an electronic
format.
(4) Company shall not earn, and DIRECTV shall not pay, any Fees or
other amounts for any order of a DIRECTV Programming Package
that is not accurately, completely and properly transmitted to
DIRECTV by Company promptly pursuant to the terms set forth in
this Agreement and those Policies and Procedures described
herein below. Notwithstanding anything to the contrary
contained herein, "***"
E. DSS SYSTEM SUBSIDY.
(1) For each Qualifying Subscriber who initially activates a
minimum of DIRECTV Select Choice programming package during
the term of this Agreement, DIRECTV will provide a subsidy
payment to Company equal to "***". Company shall be solely
responsible and liable for any difference between the price of
the DSS System purchased by Company and the Subsidy provided
by
2
<PAGE> 3
DIRECTV. As a way of example, if the Subsidy provided by
DIRECTV hereunder is "*" and the price of the DSS System
purchased by Company is "*", Company shall be solely
responsible for the "*" in the difference between the two
amounts.
(2) Company hereby agrees and acknowledges that, in order to
receive the Subsidy as set forth herein, Company must provide
such DSS System to the Qualifying Subscribers through a rent,
lease, rent-to-own or lease-to-own model, which rent, lease,
rent-to own or lease -to-own model/arrangement must be in
compliance with any and all applicable federal, state and
local laws, statutes, codes, rules, regulations, ordinances or
otherwise.
(3) Company hereby represents and warrants that each DSS System
subsidized hereunder will generate, during the term of this
Agreement, gross revenues of "*" or more, in DIRECTV
Programming purchases (including pay-per-view movies and
events and sports programming subscriptions) on an aggregate
basis (collectively, the "Gross Revenues"). Upon the
expiration or termination of this Agreement for any reason, if
the aggregate Gross Revenues from all Qualifying Subscribers
are less than "*" times the aggregate number of DSS System
provided to such Qualifying Subscribers (the "Aggregate
Minimum Gross Revenues"), Company shall pay DIRECTV the
difference between the Aggregate Minimum Gross Revenues and
the actual gross revenues generated from the Qualifying
Subscribers. As a way of example, if DIRECTV provides the
Subsidy for 300 DSS Systems, the Aggregate Minimum Gross
Revenues shall be (300 x "*"), or "*"; if the actual gross
revenues are less than "*", Company shall remit to DIRECTV the
difference between such revenues. DIRECTV will remit the DSS
System Subsidy to Company within "*" days of verification of
purchases of DSS Receivers by Company and subsequent
leasing/renting of such DSS System to Qualifying Subscribers.
(4) DIRECTV will not provide DSS Systems to Company except as
otherwise agreed by DIRECTV and Company. In the event that the
DSS System is provided in lieu of the Subsidy, Company must
request shipment of DSS Systems in increments of 25 DSS
Systems with a minimum request of 25 DSS Systems, otherwise
Company shall bear the cost of the shipping and other charges
related therewith. For purposes of this Agreement, a DSS
System provided hereunder shall be treated as an equivalent to
a DSS System Subsidy, wherever appropriate. DIRECTV shall
notify Company of any changes to the price/cost of the DSS
System for purposes of the Subsidy at least 30 days prior to
such change.
(5) Except as otherwise provided under this Section E, Company
shall be solely responsible and liable, and reimburse DIRECTV,
if necessary, for any and all costs, expenses, charges, fees
and taxes in connection with the Subsidies provided by DIRECTV
hereunder.
(6) The access card included in each DSS System requires recycling
by DIRECTV each time a DSS System is assigned from a
terminated or deactivated Qualifying Subscriber to a new
Qualifying Subscriber. Company shall be responsible and liable
to DIRECTV for any and all costs associated with the recycling
of the access card (which fee must be reasonable in relation
to the costs incurred by DIRECTV in connection with the
recycling process) upon such assignment.
(7) The reimbursement obligations of Company as set forth in
Section E shall survive the expiration or termination of this
Agreement.
F. ADVERTISING.
(1) Company agrees to "***" market DIRECTV Programming Packages
and services and shall spend an average of "***" per
Qualifying Subscriber in connection with such advertising
efforts.
(2) DIRECTV agrees to assist Company in the marketing and
promotion of DIRECTV Programming Package through matching of
Company's actual advertising spending (the "Advertising Co-Op
Fund"). In order to receive the Advertising Co-Op Fund,
Company must obtain DIRECTV's prior approval for the
applicable advertising programs and the spending therefor (the
"Approved Programs"). For every dollar spent by Company in
connection with the Approved Programs of the
3
<PAGE> 4
DIRECTV Programming Packages in accordance with this
Agreement, DIRECTV will pay Company the Advertising Co-Op Fund
in an amount up to "***" per Qualifying Subscriber. Company
shall provide documentation as reasonably requested by DIRECTV
which verifies the advertising costs incurred by Company for
the Approved Programs. Company agrees that it will apply the
Advertising Co-Op Fund throughout the term of the Agreement
toward the advertising of the DIRECTV Programming Packages to
potential Qualifying Subscribers. DIRECTV will provide the
Advertising Co-Op Fund to Company within "***" days of
verification of Company's actual advertising spending in
accordance with this Section.
(3) "***"
G. DISPLAY MATERIALS; MARKETING/MERCHANDISING AND ADVERTISING.
(1) PROMOTION AND ADVERTISING. Except as set forth in Section F
hereinabove, Company agrees to promote and advertise DIRECTV
and/or DSS products, at Company's sole cost and expense, using
traditional advertising and marketing means at Company's sole
discretion and after prior approval by DIRECTV with a targeted
market area that is in accordance with Company's standard
marketing practices. Company agrees to provide all such
promotion and advertising materials to DIRECTV for approval
prior to use by Company, and DIRECTV shall provide its
approval or denial of approval, as the case may be, within no
more than 10 business days from the date of receipt of such
materials.
(2) TELEMARKETING. Company may implement, subject to DIRECTV's
written approval, telemarketing operations designed to promote
DIRECTV Programming Packages in the Territory. Such
telemarketing operations shall be implemented in accordance
with a mutually agreeable plan. Company may engage in other
Approved Sales Methods promoting DIRECTV Programming Packages,
provided that DIRECTV shall have given its advance written
approval thereof (which approval may be granted or withheld in
DIRECTV's sole discretion at any time).
(3) LOGO/TRADEMARK/SERVICE NAME GUIDELINES. DIRECTV has provided
Company with a trademark and logo usage guidelines manual
attached hereto in EXHIBIT D (which manual may be amended by
DIRECTV from time to time) that specifies the proper use and
placement of the DIRECTV and DSS trademarks, service names and
logos. Company agrees to use DIRECTV and DSS trademarks,
service names and logos only in accordance with the provisions
of the guidelines manual. Company shall not use any logo,
trademark, service mark or name of any supplier of DIRECTV
(including, without limitation, entities providing programming
to DIRECTV) for any purpose not allowed by such supplier.
(4) RISK OF LOSS. Company shall be responsible for any loss of, or
damage to any photos, slides, artwork or other graphic or
written materials (collectively, "Materials") provided to
Company by DIRECTV pursuant to this Agreement (whether
prepared by DIRECTV or by a third party for DIRECTV) while in
Company's custody. Company shall pay DIRECTV for any loss of
or damage to Materials, including all costs for replacement or
re-creation of the Materials. Company's responsibility shall
commence when the Materials are received by Company and shall
terminate only when Company returns all Materials to DIRECTV
in accordance with this Agreement.
(5) NONCOMPLIANCE. Any material noncompliance by Company with the
provisions of this Section, including but not limited to,
failure to obtain DIRECTV's approval of promotional and
advertising materials prior to use by Company shall be a
material breach of this Agreement.
H. OTHER COVENANTS AND REPRESENTATIONS.
(1) STANDARD OF CONDUCT. Company shall not engage in any activity
or business transaction which could be considered unethical,
or anticompetitive or damaging to DIRECTV's image or goodwill
or harmful to DIRECTV's business in any way. Company agrees
that it will comply with all applicable federal, state and
local laws, regulations and codes in the performance of this
Agreement and in all activities undertaken by Company pursuant
to or in furtherance of the goals of this Agreement,
including, without limitation, all federal and state laws
governing sales by direct sales methods, and any rules
4
<PAGE> 5
and regulations of any homeowners' associations governing
Residential Households Company may solicit. Company agrees to
indemnify DIRECTV for any loss or damage that may be sustained
by reason of Company's failure to comply with such federal,
state and local laws, regulations and codes.
(2) NO FINANCING OR COLLECTION OF FEES. Company shall not provide
financing for, or collect subscription fees or other money due
to DIRECTV from customers for, orders taken for DIRECTV
Program Packages; subscription fees for such orders shall be
billed directly to the customer by DIRECTV. If, in accidental
contravention of this Section, a subscriber purchasing a
DIRECTV Programming Package from Company pays Company for such
DIRECTV services, Company shall promptly notify DIRECTV and
take such action (including collection from such subscriber
and payment to DIRECTV of the subscription price and any
applicable taxes or other governmental charges) as DIRECTV may
direct.
(3) "***"
(4) ACCOUNTING SUPPORT/RECORD MAINTENANCE. Each party shall
provide the other party with accounting support and all
information necessary to support subscriber requests and to
verify such party's compliance with the terms of this
Agreement. Each party shall maintain accurate records of all
matters that relate to such party's obligations under this
Agreement in accordance with generally accepted accounting
principles and practices uniformly and consistently applied in
a format that will permit audit. Each party shall retain such
records for a period of at least three (3) years from the date
of final payment. To the extent that the records may be
relevant in determining whether a party is complying with its
obligations hereunder, the other party and its authorized
representatives shall have access to the records for
inspection and audit at all reasonable times during normal
business hours.
(5) ACTIVATIONS/TRAINING. Company shall allow only Company's
full-time employees (and not any independent contractors,
sub-agents or other person or entity) to solicit, take or
transmit any orders for DIRECTV Programming Packages unless
Company obtains DIRECTV's prior written consent to use of such
other person or entity, which consent may be withheld in
DIRECTV's sole, reasonable discretion. DIRECTV will provide
training and training materials to Company's training
personnel, as reasonably necessary. Company will be
responsible for the subsequent training of Company's personnel
to the satisfaction of DIRECTV. Any failure to adequately
train Company's personnel within thirty (30) days after notice
thereof by DIRECTV shall be a material breach of this
Agreement.
(6) NO TYING. Company agrees that in no event shall any sale of a
DIRECTV Programming Package or any DSS System be conditioned
upon, tied to or otherwise bundled with the sale of any other
product or service, including, without limitation, any
extended warranty other than a manufacturer's warranty, other
than as approved by DIRECTV in writing.
(7) TYPE OF ENTITY. Company hereby represents and warrants that:
(a) Except as otherwise expressly set forth in this
Agreement, Company is engaged in an independent
business, and intends to and will perform its
obligations under this Agreement as an independent
contractor and not as an agent or employee of
DIRECTV; Company's personnel are agents, employees or
subcontractors of Company and are not employees or
agents of DIRECTV; Company has and hereby retains the
right to exercise full control of and supervision
over the employment, direction, compensation and
discharge of any and all of Company's personnel
assisting in the performance of such obligations;
Company will be solely responsible for all matters
relating to payment of Company's personnel, including
compliance with workers compensation, unemployment,
disability insurance, social security, withholding,
and all other federal, state and local laws, rules
and regulations governing such matters; and Company
will be responsible for its own acts and those of its
agents, employees and subcontractors during the
performance of its obligations under this Agreement;
and
(b) This Agreement is intended to secure to DIRECTV
Company's assistance and cooperation and shall
operate to preclude Company from performing services
for others during the term of this Agreement that
could reasonably result in a conflict of interest
with the contractual
5
<PAGE> 6
relationship represented by this Agreement. Without
limiting any other provisions of this Agreement,
Company agrees that such a conflict of interest would
include, but not be limited to, Company or one of its
affiliates entering into a business relationship with
any other provider of a direct broadcast business. If
Company or one of its affiliates does undertake such
services, Company shall promptly so notify DIRECTV
and DIRECTV may, at its option, terminate this
Agreement, in addition to any other rights DIRECTV
may have under the terms of this Agreement.
(c) Company has provided to DIRECTV a true and complete
list of all Company's existing retail locations and
shall promptly provide DIRECTV with any additions or
deletions to such list during the term of this
Agreement.
A breach of any provision in this Section shall be a material
breach of this Agreement.
I. AUTOMATED ACCOUNT SET-UP SYSTEM.
(1) The parties will work together to identify opportunities and
potential viability for establishing an electronic
communications interfaces between Company and DIRECTV to allow
Company to perform automated account set-up and processing
from Company's location and which comply with the technical
parameters and/or standards specified by DIRECTV. Each of us
shall be responsible for implementing and bearing the costs
associated with our respective interfaces. Company shall pay
any telephone line costs associated with the electronic
communications interface link between Company and the
Electronic Data Interchange ("EDI") address (or other
applicable computer interface connection point) where DIRECTV
accesses the orders Company transmit to DIRECTV.
(2) Company hereby covenants that it will maintain and only use,
an electronic communications interface which complies with the
technical parameters and/or standards specified by DIRECTV;
provided, however, other methods for transmitting and
confirming orders (such as facsimile) may be used only when
the electronic communications interface is unavailable and
DIRECTV provides Company advance written notice that Company
may use such methods. Company agrees to pay those additional
costs incurred by DIRECTV that are directly related to the use
of such other method, if use of such other method is the
result of action or inaction by Company, or is associated with
a problem or deficiency in Company's equipment.
(3) After receiving an authorization request message from
Company's automated account set-up system, DIRECTV shall, upon
acceptance of such request, establish a pending account for
the subscriber, arrange for the necessary authorization
messages to the subscriber upon activation, and be responsible
for all billing/statement activities related to the
subscriber.
(4) If Company transmits to DIRECTV any orders for DIRECTV
Programming Packages through the communications interface of
another DIRECTV agent or representative, then all Fees paid by
DIRECTV for such order and any subsequent orders from such
customer will be paid to such other DIRECTV agent or
representative. The terms and conditions of any fees which
Company may receive for such orders shall be negotiated solely
between Company and such other DIRECTV agent or
representative. If at any time during the term of this
Agreement Company transmits all or substantially all orders
which Company takes for DIRECTV Programming Packages through
the communications interface of another DIRECTV agent or
representative, then DIRECTV may terminate this Agreement upon
"*" days' written notice to Company.
J. TERMINATION.
(1) Either party may terminate this Agreement, effective
immediately upon "*" days written notice to the other party
following a material breach of this Agreement by the other
party, unless such material breach is cured within such
period. In addition, either party may terminate this
Agreement, upon written notice, if the other party becomes
insolvent or institutes or permits to be instituted against it
any proceedings seeking receivership, trusteeship, bankruptcy,
reorganization, assignment for the benefit of creditors, or
other proceedings under Title 11 of the United States Code or
as provided by
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<PAGE> 7
any other insolvency law, state or federal. The termination of
this Agreement shall not affect DIRECTV's obligations to pay
Fees to Company earned and accrued for orders taken prior to
such termination pursuant to the provisions hereinabove. The
termination of this Agreement shall not affect either party's
obligations described in Sections M, N and P below.
(2) Company agrees that if this Agreement terminates for any
reason, then Company shall:
(a) immediately discontinue all sales of DIRECTV
Programming Packages, and immediately cease to
represent and/or imply to any person or entity that
Company is an authorized agent for DIRECTV services;
(b) immediately discontinue all use of any trademark or
tradename associated in any way whatsoever with the
DIRECTV Programming Packages, including, without
limitation DIRECTV, DSS, all marks or names
associated with any programming included in the
DIRECTV Programming Packages or in any service or
product offered by DIRECTV and such other marks or
names which DIRECTV may from time to time notify
Company, and confusingly similar or conflicting
trademarks, service marks, trade names and all other
indicia of origin upon receipt of notice of such
designation (together, "Marks"), other than Marks
which Company has the independent right to use
without the consent of DIRECTV;
(c) deliver to DIRECTV, or destroy, at DIRECTV's option
and cost (but not including cost of merchandise
delivered or destroyed), all tangible things of every
kind in Company's possession or control that bear any
of the Marks, other than Marks which Company has the
independent right to use without the consent of
DIRECTV; and
(d) upon request by DIRECTV, certify in writing to
DIRECTV that such delivery or destruction has taken
place.
K. POLICIES AND PROCEDURES. DIRECTV may, from time to time in its sole
discretion, provide to Company those Policies and Procedures developed
by DIRECTV for its commissioned sales agents, and Company agrees that
it will follow and abide by the policies and procedures related to
taking orders for and the promotion of DIRECTV Programming Packages as
specified from time to time in such Policies and Procedures (subject to
the provisions of this Section). DIRECTV may incorporate such Policies
and Procedures as they apply to Company into this Agreement, by
notifying Company at least thirty (30) days in advance of the date on
which such Policies and Procedures are to become effective subject to,
only in the case of an item which materially and adversely affects
Company, Company's written consent (which shall not be unreasonably
withheld). If Company fails to provide DIRECTV written notice of either
such consent or refusal to give such consent within twenty (20) days
after receiving such notice, Company shall be deemed to have consented.
If Company provides a written notice reasonably withholding such
consent, then DIRECTV may elect, in its sole discretion, either (i) to
continue the relationship as subject to this Agreement without
incorporating the proposed Policies and Procedures or (ii) to
immediately terminate this Agreement with no further obligation to
Company. Any material noncompliance by Company with those Policies and
Procedures to which Company has consented (or to which Company is
deemed to have consented), which Company does not cure to DIRECTV's
satisfaction within thirty (30) days after DIRECTV provides Company a
written notice of such material noncompliance, shall be a material
default of this Agreement.
L. INSURANCE. Any and all insurance and/or bonds that may be required
under the laws, ordinances and regulations of any governmental
authority with respect to Company's sale or solicitation of orders for
DIRECTV Programming Packages including, but not limited to, workers'
compensation insurance, are and shall be the sole responsibilities of
Company. Without limiting in any way Company's indemnification
obligations under this Agreement, Company shall maintain, at its
expense, workers' compensation insurance as required by applicable laws
or employer's liability insurance with limits of not less than
$1,000,000 per occurrence and automobile liability insurance covering
owned and non-owned automobiles with limits of not less than $1,000,000
combined single limit per occurrence. Company shall also maintain
commercial general liability insurance, including contractual liability
and personal injury liability (with "employee" and "contractual"
exclusions deleted) with limits of not less than $1,000,000 combined
single limit per occurrence and excess liability insurance (umbrella
form) with limits not less than $5,000,000 per occurrence, to provide
7
<PAGE> 8
protection against claims and/or liabilities including, but not limited
to, claims for bodily injury or property damage which may arise or
result from this Agreement, whether the services are performed by
Company or any of its subcontractors or by an agent and/or by anyone
directly or indirectly employed by either Company or any such
subcontractor or agent. Simultaneous with the execution of this
Agreement, Company shall deposit with DIRECTV evidence of the required
insurance protection in the form of certificates of insurance for the
insurance coverage described above. The amounts shall not be less than
the amounts specified above, or such other amounts as specified in
advance in writing by DIRECTV's Insurance Office. These certificates
must include DIRECTV as an additional named insured. All certificates
shall provide that the insurer give thirty (30) days written notice to
DIRECTV prior to the effective date of expiration, any material change
or cancellation.
M. INDEMNIFICATION. Each party shall indemnify the other, its affiliates
and their respective employees, officers, and directors from and
against any and all claims, damages, costs, expenses and other
liabilities (including attorneys' fees and other costs of investigation
and defense) caused by or arising out of, directly or indirectly, a
breach or alleged breach of the indemnifying party's representations,
warranties, covenants or obligations under this Agreement. DIRECTV's
obligation to indemnify Company with respect to the content of any
programming (including without limitation claims relating to trademark,
copyright, music, music performance and other proprietary interests) is
expressly limited to the extent of any applicable pass-through
indemnification provided to DIRECTV pursuant to its then-existing
agreements with the providers of such programming. COMPANY EXPRESSLY
WAIVES ANY RIGHT TO INDEMNIFICATION ARISING OUT OF THE CONSTRUCTION,
USE AND/OR OPERATION OF DIRECTV'S SATELLITE(S) AND RELATED SYSTEMS.
COMPANY FURTHER AGREES TO INDEMNIFY AND HOLD HARMLESS DIRECTV, ITS
AFFILIATES AND ITS OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND
EMPLOYEES, AND THEIR RESPECTIVE SUCCESSORS, LEGAL REPRESENTATIVES,
HEIRS AND ASSIGNS, FROM ANY AND ALL CLAIMS OF ANY OF COMPANY'S
EMPLOYEES OR AGENTS FOR COMPENSATION AND/OR DAMAGES ARISING OUT OF THE
TERMINATION OR NON-RENEWAL OF THIS AGREEMENT OR OF COMPANY'S ABILITY TO
TAKE ORDERS FOR DIRECTV PROGRAMMING PACKAGES.
N. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OF THE OTHER PARTY
OR ANY THIRD PARTY, WHETHER FORSEEABLE OR NOT AND REGARDLESS OF THE
FORM, LEGAL THEORY OR BASIS OF RECOVERY OF ANY SUCH CLAIM.
O. ARBITRATION. Any controversy, claim dispute or disagreement arising out
of, or relating to, this Agreement or any breach or alleged breach
thereof which cannot be settled amicably by the parties shall be
resolved according to binding arbitration conducted in Los Angeles,
California in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect (the "Rules");
provided, however, that the parties may seek injunctive relief in any
court of competent jurisdiction. Arbitration shall be by a single
arbitrator chosen by the parties, provided that, if the parties fail to
agree and to appoint a single arbitrator within thirty (30) calendar
days from the date a party has made a demand for arbitration, then the
arbitrator shall be chosen in accordance with the Rules. The decision
of the arbitrator shall be final and binding on the parties and any
award of the arbitrator may be entered in any court of competent
jurisdiction. Notwithstanding the foregoing, the arbitrator shall not
be authorized to award punitive damages with respect to any such
controversy, claim or dispute, nor shall any party seek punitive
damages relating to any matter arising out of, or relating to, this
Agreement in any other forum. The cost of any arbitration hereunder,
including the cost of the record or transcripts thereof, if any,
administrative fees, attorneys' fees and all other fees involved, shall
be paid by the party determined by the arbitrator to not be the
prevailing party, or otherwise allocated in an equitable manner as
determined by the arbitrator.
P. CONFIDENTIALITY. The parties agree that they and their employees have
maintained and will maintain, in confidence, the terms and provisions
of this Agreement as well as all data, summaries, reports or
information of all kinds ("Confidential Information"), whether oral
(only if the disclosing party requests in writing, at any time before
any disclosure by the other party, that such oral information be deemed
Confidential Information) or written, acquired or devised or developed
in any manner from the other party's personnel or files or from
performance of Company's obligations hereunder, including, but not
limited to, customer lists and information
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<PAGE> 9
concerning customer identification, location, order and billing
information ("Customer Information"). The parties further agree that
they have not and will not reveal Confidential Information (including
Customer Information) to any third party except: (i) at the written
direction of the other party; (ii) to the extent necessary to comply
with the law or the valid order of a court of competent jurisdiction or
governmental agency, in which event the disclosing party shall so
notify the other party as promptly as practicable (and, if possible,
prior to making any disclosure) and shall seek confidential treatment
of such information, or in connection with any arbitration proceeding;
(iii) as part of its normal reporting or review procedure to its parent
company, its auditors and its attorneys, and such parent company,
auditors and attorneys agree to be bound by the provisions of this
Section; (iv) in order to enforce any of its rights pursuant to this
Agreement; (v) to potential investors, insurers, financing entities
and, in the case of DIRECTV, to any entity engaged in its DBS business;
provided, however, that such person described above agrees to be bound
by the provisions of this Section; or (vi) if at the time of disclosure
the Confidential Information is in the public domain through no fault
of the disclosing party. All Confidential Information, including
Customer Information and customer lists, is and shall remain the
property of DIRECTV. Either or both parties intend to issue independent
press releases upon execution of this Agreement. During the term of
this Agreement, each party agrees to provide the other party with a
draft of any proposed press release relating to this Agreement or the
transaction contemplated hereby before distribution to the public for
comments thereon. The parties agree to endeavor in good faith to
promptly provide comments to the other party's press release(s).
Neither party shall issue a press release without the prior written
consent of the other party, which consent shall not be unreasonably
withheld.
Q. FORCE MAJEURE. Notwithstanding any other provision in this Agreement,
neither Company nor DIRECTV shall have any liability to the other or
any other person or entity with respect to any failure of Company or
DIRECTV to perform its obligations under the terms of this Agreement if
such failure is due to a Force Majeure. "Force Majeure" shall mean any
labor dispute; fire; flood; riot; legal enactment; government
regulation; Act of God; any problem associated with the construction,
use and/or operation of DIRECTV's satellite(s) or related systems; any
problem associated with any scrambling/descrambling equipment or any
other equipment owned or maintained by others; or any cause beyond the
reasonable control of both parties.
R. RIGHTS OF TRANSFER. Neither party shall transfer any of its rights or
obligations under this Agreement, except that either party may transfer
this Agreement in whole to a successor of all or substantially all of
its assets upon written notice to the other party, and DIRECTV may
transfer some or all of its rights and obligations under this Agreement
in connection with a public offering. Subject to the foregoing, this
Agreement shall be binding on and shall inure to the benefit of the
permitted successors and assigns of the parties.
S. NO PARTNERSHIP OR EMPLOYEE RELATIONSHIP; NO THIRD PARTY BENEFICIARIES.
It is understood and agreed that Company is an independent contractor
which takes orders for DIRECTV Programming Packages as a commissioned
sales agent. It is further understood and agreed that Company is not a
partner or employee of DIRECTV for any purpose whatsoever and Company
has no right or authority to make any representation, promise or
agreement on behalf of DIRECTV except for such representations,
promises or agreements which DIRECTV shall specifically authorize
Company, in writing, to make. Any such inconsistent or additional
warranty or representation made by Company shall constitute a breach
of, and serve as grounds for, termination of this Agreement. The
provisions of this Agreement are for the benefit only of the parties
hereto, and no third party may seek to enforce, or benefit from, these
provisions.
T. NO FRANCHISE. Company acknowledges that DIRECTV has not required
Company to pay any franchise fee or other payment as a condition of
this Agreement. Company represents and warrants to DIRECTV that Company
does not and shall not claim to be a franchisee of DIRECTV, either in
relation to this Agreement, or for any purpose, or under any statute,
law, rule or regulation.
U. REVIEW OF AGREEMENT BY COUNSEL; INTERPRETATION. By executing this
Agreement, each of the parties hereto is warranting and representing to
the other that it has had the opportunity to review this Agreement with
independent legal, financial, and tax counsel with respect to the
effect of each of the terms and conditions contained herein and has
either reviewed this Agreement with such counsel or has independently
elected not to proceed with such a review. Each of the parties further
warrants and covenants that it is satisfied with the results of such
consultation or opportunity to review and is signing this Agreement as
its free act and deed and not under any force or coercion. Each party
acknowledges and agrees that any rule of law, including but not limited
to Section 1654 of the California Civil Code, or any legal decision
that would require interpretation
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<PAGE> 10
of any claimed ambiguities in this Agreement against the party that
drafted it, has no application and any such right is expressly waived.
The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the intent of the parties.
V. GENERAL PROVISIONS.
(1) POWER AND AUTHORITY; NO BREACH. Each party represents and
warrants that it has full power and authority to enter into
this Agreement and to perform its obligations hereunder and
that its execution of this Agreement and performance of its
obligations hereunder does not and will not violate any
governmental statute, law, rule regulation, ordinance, code,
directive or order, or result in a breach of or default under
the terms of any contract or agreement by which it is bound.
(2) TAXES. Any taxes asserted against Company and/or DIRECTV by
any local, state, national or international entity, as a
result of or arising under Company's and/or DIRECTV's
performance of its obligations under this Agreement shall be
the responsibility of the parties as follows: (a) Company
shall be responsible for any property, employee, service,
franchise, customs, import/export duties, excise and any other
related taxes or levies arising out of and/or related to
Company's performance hereunder; and (b) each party shall be
responsible for any taxes related to its income hereunder.
(3) NOTICES. All notices and other communications from either
party to the other hereunder shall be in writing and shall be
deemed received upon actual receipt when personally delivered,
upon acknowledgment of receipt if sent by facsimile, or upon
the expiration of the third business day after being deposited
in the United States mails, postage prepaid, certified or
registered mail, addressed to the other party at a location
specified in writing by such party.
(4) SEVERABILITY. Nothing contained in this Agreement shall be
construed to require commission of any act contrary to law,
and wherever there is any conflict between any provision of
this Agreement and any law, such law shall prevail; provided,
however, that in such event, the affected provisions of this
Agreement shall be modified to the minimum extent necessary to
permit compliance with such law and all other provisions shall
continue in full force and effect.
(5) AUDIT RIGHTS. Each party shall have the right, upon reasonable
notice and at its sole cost and expense (unless a discrepancy
of 5% or greater is revealed, in which case the audited party
shall reimburse the auditing party for the auditing party's
reasonable out-of-pocket costs and expenses) to audit the
other party's books and records relating to the performance of
this Agreement and shall have reasonable access to such
party's personnel as necessary to efficiently conduct such
audit. Each party shall conduct any such audit at the other
party's place of business during reasonable business hours and
without unreasonable disruption to such party's business.
(6) GOVERNING LAW. This Agreement set forth in this letter shall
be interpreted and enforced in accordance with the laws of the
State of California, applicable to contracts made and to be
performed entirely within the State of California by residents
of the State of California (except for its conflict of laws
principles).
(8) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties, and supersedes all previous
understandings, commitments or representations concerning the
subject matter. Each party acknowledges that the other party
has not made any representations other than those that are
contained herein. This Agreement may not be amended or
modified, and none of its provisions may be waived, except by
a writing signed by an authorized officer of the party against
whom the amendment, modification or waiver is sought to be
enforced.
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<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.
<TABLE>
<CAPTION>
Heartland Wireless Communications, Inc. DIRECTV, Inc.
<S> <C>
By: /s/ C. D. McHenry By: /s/ Michael R. Meltzer
-------------------------------------- --------------------------
Name:Carroll D. McHenry Name: Michael R. Meltzer
------------------------------------ ------------------------
Title:Chairman & CEO Title:Vice President, Multi-Unit Sales
----------------------------------- ---------------------------------
</TABLE>
11
<PAGE> 12
EXHIBIT A
DIRECTV PROGRAMMING PACKAGES
[ATTACHED HERETO]
<PAGE> 13
EXHIBIT B
FEE SCHEDULE
[ATTACHED HERETO]
<PAGE> 14
EXHIBIT C
NRTC MAP
[ATTACHED HERETO]
<PAGE> 15
EXHIBIT D
DIRECTV LOGO GUIDELINES
[ATTACHED HERETO]
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 8th day of April, 1998, between Heartland Wireless Communications,
Inc., a Delaware corporation ("Heartland"), and Christopher P. Dailledouze
("Executive").
WHEREAS, Executive currently is the Vice President -- Technical
Services of Heartland; and
WHEREAS, it is the desire of the Board of Directors of Heartland (the
"Board of Directors") to assure itself of the continued services of Executive by
directly engaging Executive as an officer of Heartland and, as provided herein,
its subsidiaries and affiliates; and
WHEREAS, Executive desires to commit himself to serve Heartland on the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
definitions apply:
(a) Affiliate: shall mean, with respect to any Person, any
other Person that directly or indirectly controls, is controlled by, or is under
common control with the Person in question. As used in this definition of
"Affiliate," the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person.
(b) Cause: shall mean,
(i) a finding by a majority of the directors of
Heartland that Executive has acted with gross negligence or willful misconduct
in connection with the performance of Executive's duties as an officer of
Heartland;
(ii) a finding by a majority of the directors of
Heartland that Executive has engaged in a material act of insubordination or of
common law fraud against Heartland or its employees;
(iii) a finding by a majority of the directors of
Heartland that Executive has acted against the best interests of Heartland in a
manner that has or could have a material adverse affect on the financial
condition of Heartland;
<PAGE> 2
(iv) a finding by a majority of the directors of
Heartland of criminal conduct by Executive (other than minor infractions and
traffic violations) or the conviction of Executive, by a court of competent
jurisdiction, of any felony (or plea of nolo contendere thereto);
(v) a finding by a majority of the directors of
Heartland of a material violation by Executive of his duty of loyalty to
Heartland which results or may reasonably be expected to result in material
injury to Heartland or any Subsidiary;
(vi) a finding by a majority of the directors of
Heartland of a willful violation by Executive of Executive's covenants and
obligations under Sections 5 (Non-Competition), 6 (Confidentiality), or 7
(Intellectual Property) of this Agreement; or
(vii) a finding by a majority of the directors of
Heartland of chronic alcohol or drug abuse by Executive.
For purposes of the foregoing definition, if Executive is a director of
Heartland at the time in question, then Executive shall absent himself from any
portion of any meeting of the Board of Directors at which matters of, or
allegations of, Cause are discussed or deliberated, and he shall also abstain
from any vote thereon (or, if he should so vote, then his vote shall not be
considered for purposes of this Agreement) and, in all cases, his status as a
director shall not be considered as such for purposes of the constitution of a
majority.
(c) Competing Business: Any Person, other than Heartland or
any Subsidiary of Heartland, which engages in the Wireless Cable Business.
(d) Confidential Information: shall mean all of Heartland's or
any Subsidiary's trade secrets, know-how, financial information, intellectual
property and other proprietary rights, including without limitation
manufacturing and marketing information, formulae, knowledge, data, budgets,
products, subscriber and other customer lists, computer programs, software,
telephone numbers, prices, costs, personnel, suppliers, developments and
techniques concerning Heartland or its Subsidiaries and the Business (as defined
below) and all of Heartland's books, files, records, documents, plans, drawings,
designs, renderings, estimates, specifications, operating manuals, manuals, user
documentation, product literature, catalogues, marketing materials and similar
items relating to the Business or Heartland.
(e) Geographical Area: shall mean all counties, Basic Trading
Areas, or "BTAs" (as defined by Rand McNally in its 1992 Commercial Atlas and
Marketing Guide and used in the Federal Communications Commission's November
1995 auction of MMDS and MDS authorizations for such BTAs), and other defined
provinces or governmental subdivisions (domestic or international), considered
collectively, in which Heartland or any Subsidiary of Heartland engages in the
Wireless Cable Business at the time of the termination of Executive's employment
with Heartland, or in which Heartland or any Subsidiary of Heartland evidenced
in writing, at any time
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<PAGE> 3
during the six month period prior to termination of Executive's employment, its
intention to engage in the Wireless Cable Business.
(f) Good Reason: a resignation for Good Reason shall mean the
resignation by Executive from employment by Heartland after:
(i) any material reduction of Executive's
compensation or benefits to which Executive was entitled immediately before the
reduction; or
(ii) any other material adverse change to the terms
and conditions of Executive's employment or benefits as in effect immediately
before the change;
provided, that, (A) if Executive consents in writing to any event described in
clauses (i) or (ii) of this Subsection 1(f), then Executive's subsequent
resignation shall not be treated as a resignation for Good Reason unless a
subsequent event described in such clauses to which Executive did not consent
occurs and (B) any changes in Executive's discretionary bonus, if any, as from
time to time may be determined by the Board of Directors of Heartland shall not
constitute Good Reason. Notwithstanding the foregoing, Executive shall be
entitled to resign for Good Reason only if any occurrence referred to in clauses
(i) or (ii) of this Subsection 1(f) is not remedied within 30 calendar days
after receipt by Heartland of written notice from Executive setting forth in
reasonable detail the facts and circumstances giving rise to such Good Reason.
(g) Person: shall mean any individual, group, partnership,
corporation, association, trust or other entity or organization.
(h) Permanent Disability: shall mean any physical or mental
disability which renders Executive unable to perform the essential functions of
his job as an employee of Heartland on a full-time basis with or without
reasonable accommodation for 180 calendar days whether or not consecutive,
within any period of 12 consecutive months; provided, however, that during any
period of Executive's disability Heartland may assign Executive's duties to any
other employee of Heartland or any Affiliate of Heartland or may engage or hire
a third party to perform such duties and any such action shall not be deemed
"Good Reason" for Executive to terminate his employment.
(i) Subsidiary: shall mean any non-individual Person of which
a majority of the combined voting power of the outstanding voting securities (or
other voting interests) is owned, directly or indirectly, by Heartland.
(j) Wireless Cable Business: shall mean the installing,
licensing, sale and/or marketing of wireless video or wireless data
communication services utilizing MMDS, MDS or ITFS frequencies (as defined at 47
C.F.R. 21.901 and 47 C.F.R. 74.902 or any successor regulation or statute),
including, without limitation, wireless cable television and direct broadcast
satellite businesses or any other installing, licensing, selling or marketing
services in which Heartland, directly or indirectly through one or more
Subsidiaries, engages.
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<PAGE> 4
2. Employment and Term.
(a) Heartland hereby agrees to employ Executive as its Vice
President -- Technical Services, and Executive hereby agrees to accept such
employment, on the terms and conditions set forth herein, for the period
commencing on the date hereof (the "Effective Date") and expiring as of 11:59
p.m. on the first anniversary of the Effective Date (unless sooner terminated as
hereinafter set forth) (the "Term"); provided, however, that on each anniversary
of the Effective Date the Term shall automatically be extended for one
additional year. Provided, further, however, that no such extension shall result
on such anniversary, or on any subsequent anniversary, if, at least ninety (90)
days prior to such anniversary, Heartland or Executive shall have given notice
to the other party that it or he, as applicable, does not wish to extend this
Agreement.
(b) Executive affirms and represents that he (i) is under no
obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, Executive's employment
hereunder by Heartland or Executive's undertakings under this Agreement and (ii)
has read, understands and will comply with the terms and conditions of the
policies and procedures (the "Policies") relating to the conduct of the business
of Heartland (the "Business").
3. Compensation and Related Matters.
(a) Base Salary. Executive shall receive a base salary paid by
Heartland ("Base Salary") at the annual rate of not less than Ninety Thousand
Dollars ($90,000), payable in such increments as executives of Heartland
normally are paid.
(b) Bonus Payments. Executive shall be eligible to receive, in
addition to the Base Salary: (i) compensation under Heartland's Performance
Incentive Compensation Plan (provided that the performance requirements in such
plan are achieved by Executive); and (ii) compensation under such other bonus
plan, if any, as the Board of Directors or the Option and Compensation Committee
of the Board of Directors may specify (provided that the performance
requirements in such plan are achieved by Executive).
(c) Option Grants. Executive shall be eligible to receive such
stock options, if any, as the Board of Directors or Compensation Committee may
specify, all on the terms and conditions more fully described in the option
agreement(s) pursuant to which such grant(s) is made.
(d) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him (in
accordance with the policies and procedures established by the Board of
Directors for its senior executive officers) in performing services hereunder,
provided that Executive properly accounts therefor in accordance with the
Policies.
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<PAGE> 5
(e) Vacations. Executive shall be entitled to three (3) weeks
paid vacation in each calendar year commencing on or after January 1, 1998, or
such additional number as may be determined by the Board of Directors from time
to time. For purposes of this Subsection 3(e), weekend days shall not count as
vacation days. In addition, Executive shall also be entitled to all paid
holidays given by Heartland to its senior executive officers.
(f) Taxes. All compensation payable to Executive hereunder is
stated in gross amounts and shall be subject to all applicable withholding
taxes, other normal payroll deductions and any other amounts required by law to
be withheld.
4. Duties and Restrictions.
(a) Duties as Employee of Heartland. Executive shall serve as
Heartland's Vice President -- Technical Services, with all such powers and
duties as may be set forth in Heartland's Bylaws with respect to, and/or are
reasonably incident to, such office. Executive shall report to Heartland's Chief
Executive Officer.
Executive hereby agrees faithfully and conscientiously to
serve Heartland, to devote his full professional time, skill, attention and
energy to the Business and ancillary affairs of Heartland and to perform his
duties hereunder competently, diligently, and to the best of his abilities.
During the Term, Executive shall not be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage and shall render his
professional services exclusively to Heartland or its Subsidiaries, devoting his
full time during normal business hours throughout the Term to the services
required of him hereunder. The foregoing limitation shall not be construed as
prohibiting Executive from making personal investments in such form or manner as
shall not require his services in the operation or affairs of the companies or
enterprises in which such investments are made.
(b) Other Duties. Executive agrees to serve as requested by
the Chief Executive Officer in one or more executive offices of any of
Heartland's Subsidiaries and Affiliates. Executive agrees that he shall not be
entitled to receive any compensation from Heartland for serving in any
capacities of Heartland's Subsidiaries and Affiliates other than the
compensation to be paid to Executive by Heartland pursuant to this Agreement
(except that Executive shall be entitled to retain any director's fees or
similar compensation payable as a result of his service on boards of directors
of companies at the request of Heartland). Executive shall also perform and
discharge such other executive employment duties and responsibilities as the
Chief Executive Officer shall from time to time reasonably prescribe.
5. Non-Competition.
(a) Covenant. Executive acknowledges that during the course of
Executive's engagement by Heartland, Executive will have gained access to
Confidential Information, and may have acquired, developed and/or refined skills
that could be used by Executive to compete against
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<PAGE> 6
Heartland to the unfair detriment of Heartland and its future operations.
Executive also acknowledges that Heartland has a legitimate business interest in
reasonably limiting the ability of Executive to use such information and skills
to compete directly or indirectly against Heartland. Accordingly, Executive
covenants and agrees that he will not, directly or indirectly (personally,
through any other Person, or as principal, director, officer, employee,
consultant, partner, stockholder, trustee, manager or otherwise), during the
Term hereof and for a period of two (2) years following the termination of his
employment with Heartland:
(i) engage in the Wireless Cable Business in the
Geographical Area;
(ii) perform, for any Competing Business which
operates a Wireless Cable Business in the Geographical Area, any duties
substantially similar to those duties performed by Executive or his subordinates
during the Term;
(iii) employ or engage the services of any Person who
was a salaried employee of or a consultant to Heartland during the six (6)
months preceding such termination, or induce, request, advise, attempt to
influence or solicit, any Person who was a salaried employee of or consultant to
Heartland during the six (6) months preceding such termination, to terminate his
or her employment or consulting arrangement with Heartland;
(iv) lend credit, money or reputation for the purpose
of establishing or operating a business substantially similar to the Wireless
Cable Business in the Geographical Area;
(v) do any act that Executive knows or should know
might injure Heartland or that might divert subscribers or other customers,
suppliers or employees from the Business; or
(vi) without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business under the
name "Heartland Wireless Communications," or any other trade names, trademarks
or service marks used by Heartland within the Geographical Area;
For purposes of this Section 5 only, the term "Heartland" shall include
Heartland and all Subsidiaries at the time the covenants in this Section 5 are
in force or are to be enforced.
(b) Tolling of Non-Competition Term. If, during any calendar
month after the termination of Executive's employment by Heartland in which the
provisions of Subsection 5(a) are applicable, Executive is not in compliance
with the terms of Subsection 5(a), Heartland shall be entitled to, among other
remedies, demand compliance by Executive with the terms of Subsection 5(a) for
an additional number of calendar months that equals the number of calendar
months during which such noncompliance occurred.
(c) Reasonableness of Restrictions. Executive acknowledges
that the geographic boundaries, scope of prohibited activities, and time
duration of the provisions of Subsection 5(a) are
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<PAGE> 7
reasonable and are no broader than are necessary to maintain and to protect the
legitimate business interests of Heartland.
(d) Separate Covenants. The parties hereto intend that the
covenants contained in Subsection 5(a) of this Agreement be construed as a
series of separate covenants, one for each county, BTA or other defined province
or governmental subdivision in each Geographical Area in which Heartland
conducts business. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the applicable covenant contained in
Subsection 5(a) hereof. Furthermore, each of the covenants in Subsection 5(a)
hereof shall be deemed a separate and independent covenant, each being
enforceable irrespective of the enforceability (with or without reformation) of
the other covenants contained in Subsection 5(a) hereof.
6. Confidentiality.
(a) Executive shall not, except as otherwise provided in this
Agreement, directly or indirectly, at any time during or, for a two (2) year
period after the Term hereof, reveal, divulge or make known to any Person or use
for Executive's personal benefit (including without limitation for the purpose
of soliciting business, whether or not competitive with any business of
Heartland or any Subsidiary, or employees of Heartland or any Subsidiary), or
for the benefit of any Person in a Competing Business, any Confidential
Information acquired by Executive during the course of employment by Heartland.
The following information shall not be restricted under this Section 6:
(i) information already in the public domain;
(ii) information that Executive can demonstrate was
already in his possession before the time of disclosure without breach of
agreement or violation of law; or
(iii) information that Executive is required to
disclose under the following circumstances: (A) at the express direction of any
authorized governmental authority; (B) pursuant to a valid subpoena or other
court process; (C) as otherwise required by law or the rules, regulations, or
orders of any applicable regulatory body; or (D) as otherwise necessary, in the
written opinion of counsel for Executive, to be disclosed by Executive in
connection with any legal action or proceeding involving Executive and Heartland
or any Subsidiary in his capacity as an employee, officer, director, or
stockholder of Heartland or any Subsidiary; provided that, in the event of any
required disclosure, Executive shall, as soon as reasonably possible, provide
prior written notice of such required disclosure to Heartland and provide
Heartland the opportunity to defend against, limit or ensure confidential
treatment of such information required to be disclosed, and such disclosure
shall be permitted only to the extent so required.
(b) Executive shall, at the termination of his employment with
Heartland or at any time requested by Heartland (either during or within two (2)
years after the termination of Executive's employment with Heartland), promptly
deliver to Heartland all materials containing Confidential Information which
Executive may then possess or have under his control.
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<PAGE> 8
7. Intellectual Property. Executive shall disclose promptly to
Heartland any and all significant conceptions and ideas for innovations,
inventions, improvements and valuable discoveries, whether patentable or not,
which are conceived or made by Executive, solely or jointly with another, during
the Term or within one (1) year thereafter, which are directly related to the
Business or other activities of Heartland and which Executive conceives as a
result of his employment by Heartland or any Subsidiary or other Affiliate (the
"Intellectual Property"). Executive hereby assigns and agrees to assign all his
interests in the Intellectual Property to Heartland or its nominee. Whenever
requested to do so by Heartland, Executive shall execute any and all
applications, assignments or other instruments that Heartland shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect under relevant law Heartland's exclusive
proprietary interest in the Intellectual Property.
8. Termination. Executive's employment hereunder may be terminated by
Heartland or Executive, as applicable, without any breach of this Agreement,
only under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate
upon his death.
(b) Disability. Executive's employment hereunder shall
terminate upon his Permanent Disability.
(c) Cause. Heartland may terminate Executive's employment
hereunder for Cause.
(d) Good Reason. Executive may terminate his employment
hereunder for Good Reason.
9. Compensation Upon Termination. Executive shall be entitled to the
following compensation from Heartland upon the termination of his employment:
(a) Death. If Executive's employment shall be terminated by
reason of his death, Heartland shall pay to such Person as shall have been
designated in a notice filed with Heartland prior to Executive's death, or, if
no such Person shall be designated, to his estate as a death benefit, his Base
Salary to the date of his death in addition to any payments Executive's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any Plan
maintained by Heartland.
(b) Disability. During any period that Executive fails to
perform his material executive duties and responsibilities hereunder as a result
of incapacity due to physical or mental illness, Executive shall continue to
receive his Base Salary and bonus payments, if any, until Executive's employment
is terminated pursuant to expiration of the Term, pursuant to Subsection 8(b)
hereof. After such termination, Heartland shall pay to Executive, on or before
the fifth day following the Date of Termination (as hereinafter defined) his
Base Salary to the Date of Termination.
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(c) Cause. If Executive's employment shall be terminated for
Cause, Heartland shall pay Executive his Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination (as defined
below) is given. Such payments shall fully discharge Heartland's obligations
hereunder.
(d) Severance Benefit. If, prior to the expiration of the
Term, either (i) Executive's employment with Heartland is terminated by
Heartland other than (A) for Cause or (B) on account of Executive's death or
Permanent Disability, or (ii) Executive resigns from Heartland for Good Reason,
then Heartland shall pay to Executive, in a single lump sum which shall be paid
within 30 days after the termination of employment or resignation, a severance
payment in an amount equal to Executive's Base Salary (excluding all bonuses, if
any) at the rate then in effect, for the balance of the stated Term (determined
without regard to such termination or resignation, and also without regard to an
extension thereof that might result but for (and after) such termination or
resignation); provided that Heartland shall be permitted to make all such
payments net of any legally required tax withholdings.
10. Other Provisions Relating to Termination.
(a) Notice of Termination. Any termination of Executive's
employment by Heartland or by Executive (other than termination because of the
death of Executive) shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean: (1) if Executive's employment is terminated by his
death, the date of his death; (2) if Executive's employment is terminated
because of a Permanent Disability pursuant to Subsection 8(b), then thirty (30)
days after Notice of Termination is given (provided that Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty (30) day period); (3) if Executive's employment is terminated by
Heartland for Cause, then, subject to Subsection 9(c), the date specified in the
Notice of Termination; or (4) if Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is given.
(c) Cause. In the case of any termination of Executive for
Cause, Heartland will give Executive a Notice of Termination describing in
reasonable detail the facts or circumstances giving rise to Executive's
termination (and, if curable, the action required to cure same) and will permit
Executive thirty (30) days to cure such failure to comply or perform and an
opportunity to discuss the facts and circumstances regarding the Notice of
Termination with the Board of Directors. Executive's termination for Cause shall
be effective as of the date specified in the Notice of Termination or, if
Executive's failure to comply is curable, shall be effective within thirty (30)
days
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following Executive's receipt of a Notice of Termination for Cause unless
Executive has cured the facts or circumstances giving rise to Executive's
termination for Cause.
11. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, Executive's heirs and
legal representatives and Heartland's successors and assigns. This Agreement is
assignable by Heartland in connection with a reorganization, merger or
consolidation in which Heartland is not the surviving entity, or a sale of all
or substantially all of the assets of Heartland (a "Transaction"). In connection
with any such Transaction, Heartland shall, as a condition to consummation of
the Transaction, require the surviving or acquiring entity or Person to assume
in writing the obligations of Heartland under this Agreement. Upon any such
assumption, Heartland shall be released from all liability hereunder.
Executive's rights and obligations under this Agreement are personal in nature
and shall not be assignable by Executive.
12. Certain Payments. If Executive should die while any amounts would
still be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee or, if there
be no such designee, to Executive's estate.
13. Notice. For purposes of this Agreement, all notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when (a) delivered personally, (b) sent by
facsimile or similar electronic device and confirmed, (c) delivered by overnight
express, or (d) if sent by any other means, upon receipt. Notices and all other
communications provided for in this Agreement shall be addressed as follows:
If to Executive:
Christopher P. Dailledouze
324 Laurel Ridge Circle
Durant, OK 74702
If to Heartland:
200 Chisholm Place, Suite 200
Plano, Texas 75075
Facsimile: (972) 633-0074
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
14. Injunctive Relief. Executive acknowledges and agrees that a remedy
at law for any breach or threatened breach of the provisions of Sections 5, 6,
and 7 hereof would be inadequate and,
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therefore, agrees that Heartland shall be entitled to injunctive relief in
addition to any other available rights and remedies in cases of any such breach
or threatened breach; provided, however, that nothing contained herein shall be
construed as prohibiting Heartland from pursuing any other rights and remedies
available for any such breach or threatened breach.
15. Arbitration. Subject to Section 14 above, any unresolved dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three (3) arbitrators
(each with experience in the area of senior executive employment) in Dallas,
Texas, in accordance with the rules of the American Arbitration Association then
in effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof or to award punitive damages to any injured
party. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be shared
equally by the parties.
16. Miscellaneous. This Agreement constitutes the entire and final
expression of the agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in a written instrument signed by Executive and
Heartland. No waiver by either party hereto of, or compliance with, any
condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction, enforceability and
performance of this Agreement shall be governed by the laws of the State of
Texas, excluding any conflicts of law principles thereof. Neither this Agreement
nor any right or interest hereunder shall be assignable by Executive or his
beneficiaries or legal representatives without Heartland's prior written
consent; provided, however, that nothing in this Section 16 shall preclude
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
17. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Executive agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of Section 5, 6, or 7 hereof
is void or constitutes an unreasonable restriction against Executive, the
provisions of such Section 5, 6, or 7, as applicable, shall not be rendered void
but shall apply with respect to such reasonable restriction under the
circumstances.
18. Survival. The representations, warranties or covenants contained in
Sections 2(b)(i) and 7 of this Agreement shall survive indefinitely any
termination of this Agreement. The foregoing is without prejudice to express
time periods set forth in other sections of this Agreement.
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19. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
20. Legal Fees and Expenses. The prevailing party in any dispute or
controversy under or in connection with this Agreement (whether in arbitration
or otherwise) shall be entitled to reimbursement from the non-prevailing party
for all costs and reasonable legal fees incurred by such prevailing party. If
such dispute or controversy is resolved through arbitration, then the
arbitrators shall have the authority to determine the identity of the prevailing
party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEARTLAND WIRELESS CHRISTOPHER P. DAILLEDOUZE
COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ C.D. McHenry /s/ Christopher P. Dailledouze
----------------------- ------------------------------
Name: Carroll D. McHenry Signature
---------------------
Title: Chairman, President & CEO
-------------------------
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 8th day of April, 1998, between Heartland Wireless Communications,
Inc., a Delaware corporation ("Heartland"), and Candice A. Farley ("Executive").
WHEREAS, Executive currently is the Vice President -- Human Resources
of Heartland; and
WHEREAS, it is the desire of the Board of Directors of Heartland (the
"Board of Directors") to assure itself of the continued services of Executive by
directly engaging Executive as an officer of Heartland and, as provided herein,
its subsidiaries and affiliates; and
WHEREAS, Executive desires to commit herself to serve Heartland on the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
definitions apply:
(a) Affiliate: shall mean, with respect to any Person, any
other Person that directly or indirectly controls, is controlled by, or is under
common control with the Person in question. As used in this definition of
"Affiliate," the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person.
(b) Cause: shall mean,
(i) a finding by a majority of the directors of
Heartland that Executive has acted with gross negligence or willful misconduct
in connection with the performance of Executive's duties as an officer of
Heartland;
(ii) a finding by a majority of the directors of
Heartland that Executive has engaged in a material act of insubordination or of
common law fraud against Heartland or its employees;
(iii) a finding by a majority of the directors of
Heartland that Executive has acted against the best interests of Heartland in a
manner that has or could have a material adverse affect on the financial
condition of Heartland;
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(iv) a finding by a majority of the directors of
Heartland of criminal conduct by Executive (other than minor infractions and
traffic violations) or the conviction of Executive, by a court of competent
jurisdiction, of any felony (or plea of nolo contendere thereto);
(v) a finding by a majority of the directors of
Heartland of a material violation by Executive of his duty of loyalty to
Heartland which results or may reasonably be expected to result in material
injury to Heartland or any Subsidiary;
(vi) a finding by a majority of the directors of
Heartland of a willful violation by Executive of Executive's covenants and
obligations under Sections 5 (Non-Competition), 6 (Confidentiality), or 7
(Intellectual Property) of this Agreement; or
(vii) a finding by a majority of the directors of
Heartland of chronic alcohol or drug abuse by Executive.
For purposes of the foregoing definition, if Executive is a director of
Heartland at the time in question, then Executive shall absent herself from any
portion of any meeting of the Board of Directors at which matters of, or
allegations of, Cause are discussed or deliberated, and she shall also abstain
from any vote thereon (or, if he should so vote, then her vote shall not be
considered for purposes of this Agreement) and, in all cases, her status as a
director shall not be considered as such for purposes of the constitution of a
majority.
(c) Competing Business: Any Person, other than Heartland or
any Subsidiary of Heartland, which engages in the Wireless Cable Business.
(d) Confidential Information: shall mean all of Heartland's or
any Subsidiary's trade secrets, know-how, financial information, intellectual
property and other proprietary rights, including without limitation
manufacturing and marketing information, formulae, knowledge, data, budgets,
products, subscriber and other customer lists, computer programs, software,
telephone numbers, prices, costs, personnel, suppliers, developments and
techniques concerning Heartland or its Subsidiaries and the Business (as defined
below) and all of Heartland's books, files, records, documents, plans, drawings,
designs, renderings, estimates, specifications, operating manuals, manuals, user
documentation, product literature, catalogues, marketing materials and similar
items relating to the Business or Heartland.
(e) Geographical Area: shall mean all counties, Basic Trading
Areas, or "BTAs" (as defined by Rand McNally in its 1992 Commercial Atlas and
Marketing Guide and used in the Federal Communications Commission's November
1995 auction of MMDS and MDS authorizations for such BTAs), and other defined
provinces or governmental subdivisions (domestic or international), considered
collectively, in which Heartland or any Subsidiary of Heartland engages in the
Wireless Cable Business at the time of the termination of Executive's employment
with Heartland, or in which Heartland or any Subsidiary of Heartland evidenced
in writing, at any time
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during the six month period prior to termination of Executive's employment, its
intention to engage in the Wireless Cable Business.
(f) Good Reason: a resignation for Good Reason shall mean the
resignation by Executive from employment by Heartland after:
(i) any material reduction of Executive's
compensation or benefits to which Executive was entitled immediately before the
reduction; or
(ii) any other material adverse change to the terms
and conditions of Executive's employment or benefits as in effect immediately
before the change;
provided, that, (A) if Executive consents in writing to any event described in
clauses (i) or (ii) of this Subsection 1(f), then Executive's subsequent
resignation shall not be treated as a resignation for Good Reason unless a
subsequent event described in such clauses to which Executive did not consent
occurs and (B) any changes in Executive's discretionary bonus, if any, as from
time to time may be determined by the Board of Directors of Heartland shall not
constitute Good Reason. Notwithstanding the foregoing, Executive shall be
entitled to resign for Good Reason only if any occurrence referred to in clauses
(i) or (ii) of this Subsection 1(f) is not remedied within 30 calendar days
after receipt by Heartland of written notice from Executive setting forth in
reasonable detail the facts and circumstances giving rise to such Good Reason.
(g) Person: shall mean any individual, group, partnership,
corporation, association, trust or other entity or organization.
(h) Permanent Disability: shall mean any physical or mental
disability which renders Executive unable to perform the essential functions of
his job as an employee of Heartland on a full-time basis with or without
reasonable accommodation for 180 calendar days whether or not consecutive,
within any period of 12 consecutive months; provided, however, that during any
period of Executive's disability Heartland may assign Executive's duties to any
other employee of Heartland or any Affiliate of Heartland or may engage or hire
a third party to perform such duties and any such action shall not be deemed
"Good Reason" for Executive to terminate his employment.
(i) Subsidiary: shall mean any non-individual Person of which
a majority of the combined voting power of the outstanding voting securities (or
other voting interests) is owned, directly or indirectly, by Heartland.
(j) Wireless Cable Business: shall mean the installing,
licensing, sale and/or marketing of wireless video or wireless data
communication services utilizing MMDS, MDS or ITFS frequencies (as defined at 47
C.F.R. 21.901 and 47 C.F.R. 74.902 or any successor regulation or statute),
including, without limitation, wireless cable television and direct broadcast
satellite businesses or any other installing, licensing, selling or marketing
services in which Heartland, directly or indirectly through one or more
Subsidiaries, engages.
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2. Employment and Term.
(a) Heartland hereby agrees to employ Executive as its Vice
President -- Human Resources, and Executive hereby agrees to accept such
employment, on the terms and conditions set forth herein, for the period
commencing on the date hereof (the "Effective Date") and expiring as of 11:59
p.m. on the first anniversary of the Effective Date (unless sooner terminated as
hereinafter set forth) (the "Term"); provided, however, that on each anniversary
of the Effective Date the Term shall automatically be extended for one
additional year. Provided, further, however, that no such extension shall result
on such anniversary, or on any subsequent anniversary, if, at least ninety (90)
days prior to such anniversary, Heartland or Executive shall have given notice
to the other party that it or she, as applicable, does not wish to extend this
Agreement.
(b) Executive affirms and represents that she (i) is under no
obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, Executive's employment
hereunder by Heartland or Executive's undertakings under this Agreement and (ii)
has read, understands and will comply with the terms and conditions of the
policies and procedures (the "Policies") relating to the conduct of the business
of Heartland (the "Business").
3. Compensation and Related Matters.
(a) Base Salary. Executive shall receive a base salary paid by
Heartland ("Base Salary") at the annual rate of not less than Ninety-Six
Thousand Dollars ($96,000), payable in such increments as executives of
Heartland normally are paid.
(b) Bonus Payments. Executive shall be eligible to receive, in
addition to the Base Salary: (i) compensation under Heartland's Performance
Incentive Compensation Plan (provided that the performance requirements in such
plan are achieved by Executive); and (ii) compensation under such other bonus
plan, if any, as the Board of Directors or the Option and Compensation Committee
of the Board of Directors may specify (provided that the performance
requirements in such plan are achieved by Executive).
(c) Option Grants. Executive shall be eligible to receive such
stock options, if any, as the Board of Directors or Compensation Committee may
specify, all on the terms and conditions more fully described in the option
agreement(s) pursuant to which such grant(s) is made.
(d) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by her (in
accordance with the policies and procedures established by the Board of
Directors for its senior executive officers) in performing services hereunder,
provided that Executive properly accounts therefor in accordance with the
Policies.
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(e) Vacations. Executive shall be entitled to three (3) weeks
paid vacation in each calendar year commencing on or after January 1, 1998, or
such additional number as may be determined by the Board of Directors from time
to time. For purposes of this Subsection 3(e), weekend days shall not count as
vacation days. In addition, Executive shall also be entitled to all paid
holidays given by Heartland to its senior executive officers.
(f) Taxes. All compensation payable to Executive hereunder is
stated in gross amounts and shall be subject to all applicable withholding
taxes, other normal payroll deductions and any other amounts required by law to
be withheld.
4. Duties and Restrictions.
(a) Duties as Employee of Heartland. Executive shall serve as
Heartland's Vice President -- Human Resources , with all such powers and duties
as may be set forth in Heartland's Bylaws with respect to, and/or are reasonably
incident to, such office. Executive shall report to Heartland's Chief Financial
Officer.
Executive hereby agrees faithfully and conscientiously to
serve Heartland, to devote her full professional time, skill, attention and
energy to the Business and ancillary affairs of Heartland and to perform her
duties hereunder competently, diligently, and to the best of her abilities.
During the Term, Executive shall not be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage and shall render her
professional services exclusively to Heartland or its Subsidiaries, devoting her
full time during normal business hours throughout the Term to the services
required of her hereunder. The foregoing limitation shall not be construed as
prohibiting Executive from making personal investments in such form or manner as
shall not require her services in the operation or affairs of the companies or
enterprises in which such investments are made.
(b) Other Duties. Executive agrees to serve as requested by
the Chief Executive Officer in one or more executive offices of any of
Heartland's Subsidiaries and Affiliates. Executive agrees that she shall not be
entitled to receive any compensation from Heartland for serving in any
capacities of Heartland's Subsidiaries and Affiliates other than the
compensation to be paid to Executive by Heartland pursuant to this Agreement
(except that Executive shall be entitled to retain any director's fees or
similar compensation payable as a result of her service on boards of directors
of companies at the request of Heartland). Executive shall also perform and
discharge such other executive employment duties and responsibilities as the
Chief Executive Officer shall from time to time reasonably prescribe.
5. Non-Competition.
(a) Covenant. Executive acknowledges that during the course of
Executive's engagement by Heartland, Executive will have gained access to
Confidential Information, and may have acquired, developed and/or refined skills
that could be used by Executive to compete against
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Heartland to the unfair detriment of Heartland and its future operations.
Executive also acknowledges that Heartland has a legitimate business interest in
reasonably limiting the ability of Executive to use such information and skills
to compete directly or indirectly against Heartland. Accordingly, Executive
covenants and agrees that she will not, directly or indirectly (personally,
through any other Person, or as principal, director, officer, employee,
consultant, partner, stockholder, trustee, manager or otherwise), during the
Term hereof and for a period of two (2) years following the termination of her
employment with Heartland:
(i) engage in the Wireless Cable Business in the
Geographical Area;
(ii) perform, for any Competing Business which
operates a Wireless Cable Business in the Geographical Area, any duties
substantially similar to those duties performed by Executive or his subordinates
during the Term;
(iii) employ or engage the services of any Person who
was a salaried employee of or a consultant to Heartland during the six (6)
months preceding such termination, or induce, request, advise, attempt to
influence or solicit, any Person who was a salaried employee of or consultant to
Heartland during the six (6) months preceding such termination, to terminate his
or her employment or consulting arrangement with Heartland;
(iv) lend credit, money or reputation for the purpose
of establishing or operating a business substantially similar to the Wireless
Cable Business in the Geographical Area;
(v) do any act that Executive knows or should know
might injure Heartland or that might divert subscribers or other customers,
suppliers or employees from the Business; or
(vi) without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business under the
name "Heartland Wireless Communications," or any other trade names, trademarks
or service marks used by Heartland within the Geographical Area;
For purposes of this Section 5 only, the term "Heartland" shall include
Heartland and all Subsidiaries at the time the covenants in this Section 5 are
in force or are to be enforced.
(b) Tolling of Non-Competition Term. If, during any calendar
month after the termination of Executive's employment by Heartland in which the
provisions of Subsection 5(a) are applicable, Executive is not in compliance
with the terms of Subsection 5(a), Heartland shall be entitled to, among other
remedies, demand compliance by Executive with the terms of Subsection 5(a) for
an additional number of calendar months that equals the number of calendar
months during which such noncompliance occurred.
(c) Reasonableness of Restrictions. Executive acknowledges
that the geographic boundaries, scope of prohibited activities, and time
duration of the provisions of Subsection 5(a) are
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reasonable and are no broader than are necessary to maintain and to protect the
legitimate business interests of Heartland.
(d) Separate Covenants. The parties hereto intend that the
covenants contained in Subsection 5(a) of this Agreement be construed as a
series of separate covenants, one for each county, BTA or other defined province
or governmental subdivision in each Geographical Area in which Heartland
conducts business. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the applicable covenant contained in
Subsection 5(a) hereof. Furthermore, each of the covenants in Subsection 5(a)
hereof shall be deemed a separate and independent covenant, each being
enforceable irrespective of the enforceability (with or without reformation) of
the other covenants contained in Subsection 5(a) hereof.
6. Confidentiality.
(a) Executive shall not, except as otherwise provided in this
Agreement, directly or indirectly, at any time during or, for a two (2) year
period after the Term hereof, reveal, divulge or make known to any Person or use
for Executive's personal benefit (including without limitation for the purpose
of soliciting business, whether or not competitive with any business of
Heartland or any Subsidiary, or employees of Heartland or any Subsidiary), or
for the benefit of any Person in a Competing Business, any Confidential
Information acquired by Executive during the course of employment by Heartland.
The following information shall not be restricted under this Section 6:
(i) information already in the public domain;
(ii) information that Executive can demonstrate was
already in her possession before the time of disclosure without breach of
agreement or violation of law; or
(iii) information that Executive is required to
disclose under the following circumstances: (A) at the express direction of any
authorized governmental authority; (B) pursuant to a valid subpoena or other
court process; (C) as otherwise required by law or the rules, regulations, or
orders of any applicable regulatory body; or (D) as otherwise necessary, in the
written opinion of counsel for Executive, to be disclosed by Executive in
connection with any legal action or proceeding involving Executive and Heartland
or any Subsidiary in her capacity as an employee, officer, director, or
stockholder of Heartland or any Subsidiary; provided that, in the event of any
required disclosure, Executive shall, as soon as reasonably possible, provide
prior written notice of such required disclosure to Heartland and provide
Heartland the opportunity to defend against, limit or ensure confidential
treatment of such information required to be disclosed, and such disclosure
shall be permitted only to the extent so required.
(b) Executive shall, at the termination of his employment with
Heartland or at any time requested by Heartland (either during or within two (2)
years after the termination of Executive's employment with Heartland), promptly
deliver to Heartland all materials containing Confidential Information which
Executive may then possess or have under her control.
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7. Intellectual Property. Executive shall disclose promptly to
Heartland any and all significant conceptions and ideas for innovations,
inventions, improvements and valuable discoveries, whether patentable or not,
which are conceived or made by Executive, solely or jointly with another, during
the Term or within one (1) year thereafter, which are directly related to the
Business or other activities of Heartland and which Executive conceives as a
result of his employment by Heartland or any Subsidiary or other Affiliate (the
"Intellectual Property"). Executive hereby assigns and agrees to assign all her
interests in the Intellectual Property to Heartland or its nominee. Whenever
requested to do so by Heartland, Executive shall execute any and all
applications, assignments or other instruments that Heartland shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect under relevant law Heartland's exclusive
proprietary interest in the Intellectual Property.
8. Termination. Executive's employment hereunder may be terminated by
Heartland or Executive, as applicable, without any breach of this Agreement,
only under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate
upon her death.
(b) Disability. Executive's employment hereunder shall
terminate upon her Permanent Disability.
(c) Cause. Heartland may terminate Executive's employment
hereunder for Cause.
(d) Good Reason. Executive may terminate her employment
hereunder for Good Reason.
9. Compensation Upon Termination. Executive shall be entitled to the
following compensation from Heartland upon the termination of his employment:
(a) Death. If Executive's employment shall be terminated by
reason of her death, Heartland shall pay to such Person as shall have been
designated in a notice filed with Heartland prior to Executive's death, or, if
no such Person shall be designated, to her estate as a death benefit, her Base
Salary to the date of her death in addition to any payments Executive's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any Plan
maintained by Heartland.
(b) Disability. During any period that Executive fails to
perform her material executive duties and responsibilities hereunder as a result
of incapacity due to physical or mental illness, Executive shall continue to
receive her Base Salary and bonus payments, if any, until Executive's employment
is terminated pursuant to expiration of the Term, pursuant to Subsection 8(b)
hereof. After such termination, Heartland shall pay to Executive, on or before
the fifth day following the Date of Termination (as hereinafter defined) his
Base Salary to the Date of Termination.
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(c) Cause. If Executive's employment shall be terminated for
Cause, Heartland shall pay Executive her Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination (as defined
below) is given. Such payments shall fully discharge Heartland's obligations
hereunder.
(d) Severance Benefit. If, prior to the expiration of the
Term, either (i) Executive's employment with Heartland is terminated by
Heartland other than (A) for Cause or (B) on account of Executive's death or
Permanent Disability, or (ii) Executive resigns from Heartland for Good Reason,
then Heartland shall pay to Executive, in a single lump sum which shall be paid
within 30 days after the termination of employment or resignation, a severance
payment in an amount equal to Executive's Base Salary (excluding all bonuses, if
any) at the rate then in effect, for the balance of the stated Term (determined
without regard to such termination or resignation, and also without regard to an
extension thereof that might result but for (and after) such termination or
resignation); provided that Heartland shall be permitted to make all such
payments net of any legally required tax withholdings.
10. Other Provisions Relating to Termination.
(a) Notice of Termination. Any termination of Executive's
employment by Heartland or by Executive (other than termination because of the
death of Executive) shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean: (1) if Executive's employment is terminated by her
death, the date of her death; (2) if Executive's employment is terminated
because of a Permanent Disability pursuant to Subsection 8(b), then thirty (30)
days after Notice of Termination is given (provided that Executive shall not
have returned to the performance of her duties on a full-time basis during such
thirty (30) day period); (3) if Executive's employment is terminated by
Heartland for Cause, then, subject to Subsection 9(c), the date specified in the
Notice of Termination; or (4) if Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is given.
(c) Cause. In the case of any termination of Executive for
Cause, Heartland will give Executive a Notice of Termination describing in
reasonable detail the facts or circumstances giving rise to Executive's
termination (and, if curable, the action required to cure same) and will permit
Executive thirty (30) days to cure such failure to comply or perform and an
opportunity to discuss the facts and circumstances regarding the Notice of
Termination with the Board of Directors. Executive's termination for Cause shall
be effective as of the date specified in the Notice of Termination or, if
Executive's failure to comply is curable, shall be effective within thirty (30)
days
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following Executive's receipt of a Notice of Termination for Cause unless
Executive has cured the facts or circumstances giving rise to Executive's
termination for Cause.
11. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, Executive's heirs and
legal representatives and Heartland's successors and assigns. This Agreement is
assignable by Heartland in connection with a reorganization, merger or
consolidation in which Heartland is not the surviving entity, or a sale of all
or substantially all of the assets of Heartland (a "Transaction"). In connection
with any such Transaction, Heartland shall, as a condition to consummation of
the Transaction, require the surviving or acquiring entity or Person to assume
in writing the obligations of Heartland under this Agreement. Upon any such
assumption, Heartland shall be released from all liability hereunder.
Executive's rights and obligations under this Agreement are personal in nature
and shall not be assignable by Executive.
12. Certain Payments. If Executive should die while any amounts would
still be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee or, if there
be no such designee, to Executive's estate.
13. Notice. For purposes of this Agreement, all notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when (a) delivered personally, (b) sent by
facsimile or similar electronic device and confirmed, (c) delivered by overnight
express, or (d) if sent by any other means, upon receipt. Notices and all other
communications provided for in this Agreement shall be addressed as follows:
If to Executive:
Candice M. Farley
8209 Ship Street
Frisco, TX 75035
If to Heartland:
200 Chisholm Place, Suite 200
Plano, Texas 75075
Facsimile: (972) 633-0074
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
14. Injunctive Relief. Executive acknowledges and agrees that a remedy
at law for any breach or threatened breach of the provisions of Sections 5, 6,
and 7 hereof would be inadequate and,
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therefore, agrees that Heartland shall be entitled to injunctive relief in
addition to any other available rights and remedies in cases of any such breach
or threatened breach; provided, however, that nothing contained herein shall be
construed as prohibiting Heartland from pursuing any other rights and remedies
available for any such breach or threatened breach.
15. Arbitration. Subject to Section 14 above, any unresolved dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three (3) arbitrators
(each with experience in the area of senior executive employment) in Dallas,
Texas, in accordance with the rules of the American Arbitration Association then
in effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof or to award punitive damages to any injured
party. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be shared
equally by the parties.
16. Miscellaneous. This Agreement constitutes the entire and final
expression of the agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in a written instrument signed by Executive and
Heartland. No waiver by either party hereto of, or compliance with, any
condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction, enforceability and
performance of this Agreement shall be governed by the laws of the State of
Texas, excluding any conflicts of law principles thereof. Neither this Agreement
nor any right or interest hereunder shall be assignable by Executive or his
beneficiaries or legal representatives without Heartland's prior written
consent; provided, however, that nothing in this Section 16 shall preclude
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
17. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Executive agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of Section 5, 6, or 7 hereof
is void or constitutes an unreasonable restriction against Executive, the
provisions of such Section 5, 6, or 7, as applicable, shall not be rendered void
but shall apply with respect to such reasonable restriction under the
circumstances.
18. Survival. The representations, warranties or covenants contained in
Sections 2(b)(i) and 7 of this Agreement shall survive indefinitely any
termination of this Agreement. The foregoing is without prejudice to express
time periods set forth in other sections of this Agreement.
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19. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
20. Legal Fees and Expenses. The prevailing party in any dispute or
controversy under or in connection with this Agreement (whether in arbitration
or otherwise) shall be entitled to reimbursement from the non-prevailing party
for all costs and reasonable legal fees incurred by such prevailing party. If
such dispute or controversy is resolved through arbitration, then the
arbitrators shall have the authority to determine the identity of the prevailing
party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEARTLAND WIRELESS CANDICE A. FARLEY
COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Marjean Henderson /s/ Candice Farley
--------------------- ----------------------
Name: Marjean Henderson Signature
-------------------
Title: CFO
----
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 8th day of April, 1998, between Heartland Wireless Communications,
Inc., a Delaware corporation ("Heartland"), and J. Curtis Henderson
("Executive").
WHEREAS, Executive currently is the Vice President, General Counsel and
Secretary of Heartland; and
WHEREAS, it is the desire of the Board of Directors of Heartland (the
"Board of Directors") to assure itself of the continued services of Executive by
directly engaging Executive as an officer of Heartland and, as provided herein,
its subsidiaries and affiliates; and
WHEREAS, Executive desires to commit himself to serve Heartland on the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
definitions apply:
(a) Affiliate: shall mean, with respect to any Person,
any other Person that directly or indirectly controls, is controlled by, or is
under common control with the Person in question. As used in this definition of
"Affiliate," the term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person.
(b) Cause: shall mean,
(i) a finding by a majority of the directors of
Heartland that Executive has acted with gross negligence or willful misconduct
in connection with the performance of Executive's duties as an officer of
Heartland;
(ii) a finding by a majority of the directors of
Heartland that Executive has engaged in a material act of insubordination or of
common law fraud against Heartland or its employees;
(iii) a finding by a majority of the directors of
Heartland that Executive has acted against the best interests of Heartland in a
manner that has or could have a material adverse affect on the financial
condition of Heartland;
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(iv) a finding by a majority of the directors of
Heartland of criminal conduct by Executive (other than minor infractions and
traffic violations) or the conviction of Executive, by a court of competent
jurisdiction, of any felony (or plea of nolo contendere thereto);
(v) a finding by a majority of the directors of
Heartland of a material violation by Executive of his duty of loyalty to
Heartland which results or may reasonably be expected to result in material
injury to Heartland or any Subsidiary;
(vi) a finding by a majority of the directors of
Heartland of a willful violation by Executive of Executive's covenants and
obligations under Sections 5 (Non-Competition), 6 (Confidentiality), or 7
(Intellectual Property) of this Agreement; or
(vii) a finding by a majority of the directors of
Heartland of chronic alcohol or drug abuse by Executive.
For purposes of the foregoing definition, if Executive is a director of
Heartland at the time in question, then Executive shall absent himself from any
portion of any meeting of the Board of Directors at which matters of, or
allegations of, Cause are discussed or deliberated, and he shall also abstain
from any vote thereon (or, if he should so vote, then his vote shall not be
considered for purposes of this Agreement) and, in all cases, his status as a
director shall not be considered as such for purposes of the constitution of a
majority.
(c) Competing Business: Any Person, other than Heartland or
any Subsidiary of Heartland, which engages in the Wireless Cable Business.
(d) Confidential Information: shall mean all of Heartland's or
any Subsidiary's trade secrets, know-how, financial information, intellectual
property and other proprietary rights, including without limitation
manufacturing and marketing information, formulae, knowledge, data, budgets,
products, subscriber and other customer lists, computer programs, software,
telephone numbers, prices, costs, personnel, suppliers, developments and
techniques concerning Heartland or its Subsidiaries and the Business (as defined
below) and all of Heartland's books, files, records, documents, plans, drawings,
designs, renderings, estimates, specifications, operating manuals, manuals, user
documentation, product literature, catalogues, marketing materials and similar
items relating to the Business or Heartland.
(e) Geographical Area: shall mean all counties, Basic Trading
Areas, or "BTAs" (as defined by Rand McNally in its 1992 Commercial Atlas and
Marketing Guide and used in the Federal Communications Commission's November
1995 auction of MMDS and MDS authorizations for such BTAs), and other defined
provinces or governmental subdivisions (domestic or international), considered
collectively, in which Heartland or any Subsidiary of Heartland engages in the
Wireless Cable Business at the time of the termination of Executive's employment
with Heartland, or in which Heartland or any Subsidiary of Heartland evidenced
in writing, at any time
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during the six month period prior to termination of Executive's employment, its
intention to engage in the Wireless Cable Business.
(f) Good Reason: a resignation for Good Reason shall mean the
resignation by Executive from employment by Heartland after:
(i) any material reduction of Executive's
compensation or benefits to which Executive was entitled immediately before the
reduction; or
(ii) any other material adverse change to the terms
and conditions of Executive's employment or benefits as in effect immediately
before the change;
provided, that, (A) if Executive consents in writing to any event described in
clauses (i) or (ii) of this Subsection 1(f), then Executive's subsequent
resignation shall not be treated as a resignation for Good Reason unless a
subsequent event described in such clauses to which Executive did not consent
occurs and (B) any changes in Executive's discretionary bonus, if any, as from
time to time may be determined by the Board of Directors of Heartland shall not
constitute Good Reason. Notwithstanding the foregoing, Executive shall be
entitled to resign for Good Reason only if any occurrence referred to in clauses
(i) or (ii) of this Subsection 1(f) is not remedied within 30 calendar days
after receipt by Heartland of written notice from Executive setting forth in
reasonable detail the facts and circumstances giving rise to such Good Reason.
(g) Person: shall mean any individual, group, partnership,
corporation, association, trust or other entity or organization.
(h) Permanent Disability: shall mean any physical or mental
disability which renders Executive unable to perform the essential functions of
his job as an employee of Heartland on a full-time basis with or without
reasonable accommodation for 180 calendar days whether or not consecutive,
within any period of 12 consecutive months; provided, however, that during any
period of Executive's disability Heartland may assign Executive's duties to any
other employee of Heartland or any Affiliate of Heartland or may engage or hire
a third party to perform such duties and any such action shall not be deemed
"Good Reason" for Executive to terminate his employment.
(i) Subsidiary: shall mean any non-individual Person of which
a majority of the combined voting power of the outstanding voting securities (or
other voting interests) is owned, directly or indirectly, by Heartland.
(j) Wireless Cable Business: shall mean the installing,
licensing, sale and/or marketing of wireless video or wireless data
communication services utilizing MMDS, MDS or ITFS frequencies (as defined at 47
C.F.R. 21.901 and 47 C.F.R. 74.902 or any successor regulation or statute),
including, without limitation, wireless cable television and direct broadcast
satellite businesses or any other installing, licensing, selling or marketing
services in which Heartland, directly or indirectly through one or more
Subsidiaries, engages.
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2. Employment and Term.
(a) Heartland hereby agrees to employ Executive as its Vice
President, General Counsel and Secretary, and Executive hereby agrees to accept
such employment, on the terms and conditions set forth herein, for the period
commencing on the date hereof (the "Effective Date") and expiring as of 11:59
p.m. on the second anniversary of the Effective Date (unless sooner terminated
as hereinafter set forth) (the "Term"); provided, however, that on each
anniversary of the Effective Date the Term shall automatically be extended for
one additional year. Provided, further, however, that no such extension shall
result on such anniversary, or on any subsequent anniversary, if, at least
ninety (90) days prior to such anniversary, Heartland or Executive shall have
given notice to the other party that it or he, as applicable, does not wish to
extend this Agreement.
(b) Executive affirms and represents that he (i) is under no
obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, Executive's employment
hereunder by Heartland or Executive's undertakings under this Agreement and (ii)
has read, understands and will comply with the terms and conditions of the
policies and procedures (the "Policies") relating to the conduct of the business
of Heartland (the "Business").
3. Compensation and Related Matters.
(a) Base Salary. Executive shall receive a base salary paid by
Heartland ("Base Salary") at the annual rate of not less than One Hundred
Forty-Four Thousand Dollars ($144,000), payable in such increments as executives
of Heartland normally are paid.
(b) Bonus Payments. Executive shall be eligible to receive, in
addition to the Base Salary: (i) compensation under Heartland's Performance
Incentive Compensation Plan (provided that the performance requirements in such
plan are achieved by Executive); and (ii) compensation under such other bonus
plan, if any, as the Board of Directors or the Option and Compensation Committee
of the Board of Directors may specify (provided that the performance
requirements in such plan are achieved by Executive).
(c) Option Grants. Executive shall be eligible to receive such
stock options, if any, as the Board of Directors or Compensation Committee may
specify, all on the terms and conditions more fully described in the option
agreement(s) pursuant to which such grant(s) is made.
(d) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him (in
accordance with the policies and procedures established by the Board of
Directors for its senior executive officers) in performing services hereunder,
provided that Executive properly accounts therefor in accordance with the
Policies.
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(e) Vacations. Executive shall be entitled to three (3) weeks
paid vacation in each calendar year commencing on or after January 1, 1998, or
such additional number as may be determined by the Board of Directors from time
to time. For purposes of this Subsection 3(e), weekend days shall not count as
vacation days. In addition, Executive shall also be entitled to all paid
holidays given by Heartland to its senior executive officers.
(f) Taxes. All compensation payable to Executive hereunder is
stated in gross amounts and shall be subject to all applicable withholding
taxes, other normal payroll deductions and any other amounts required by law to
be withheld.
4. Duties and Restrictions.
(a) Duties as Employee of Heartland. Executive shall serve as
Heartland's Chairman, Chief Executive Officer and President, with all such
powers and duties as may be set forth in Heartland's Bylaws with respect to,
and/or are reasonably incident to, such office. Executive shall report to
Heartland's Chief Executive Officer.
Executive hereby agrees faithfully and conscientiously to
serve Heartland, to devote his full professional time, skill, attention and
energy to the Business and ancillary affairs of Heartland and to perform his
duties hereunder competently, diligently, and to the best of his abilities.
During the Term, Executive shall not be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage and shall render his
professional services exclusively to Heartland or its Subsidiaries, devoting his
full time during normal business hours throughout the Term to the services
required of him hereunder. The foregoing limitation shall not be construed as
prohibiting Executive from making personal investments in such form or manner as
shall not require his services in the operation or affairs of the companies or
enterprises in which such investments are made.
(b) Other Duties. Executive agrees to serve as requested by
the Chief Executive Officer in one or more executive offices of any of
Heartland's Subsidiaries and Affiliates. Executive agrees that he shall not be
entitled to receive any compensation from Heartland for serving in any
capacities of Heartland's Subsidiaries and Affiliates other than the
compensation to be paid to Executive by Heartland pursuant to this Agreement
(except that Executive shall be entitled to retain any director's fees or
similar compensation payable as a result of his service on boards of directors
of companies at the request of Heartland). Executive shall also perform and
discharge such other executive employment duties and responsibilities as the
Chief Executive Officer shall from time to time reasonably prescribe.
5. Non-Competition.
(a) Covenant. Executive acknowledges that during the course of
Executive's engagement by Heartland, Executive will have gained access to
Confidential Information, and may have acquired, developed and/or refined skills
that could be used by Executive to compete against
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Heartland to the unfair detriment of Heartland and its future operations.
Executive also acknowledges that Heartland has a legitimate business interest in
reasonably limiting the ability of Executive to use such information and skills
to compete directly or indirectly against Heartland. Accordingly, Executive
covenants and agrees that he will not, directly or indirectly (personally,
through any other Person, or as principal, director, officer, employee,
consultant, partner, stockholder, trustee, manager or otherwise), during the
Term hereof and for a period of two (2) years following the termination of his
employment with Heartland:
(i) engage in the Wireless Cable Business in the
Geographical Area;
(ii) perform, for any Competing Business which
operates a Wireless Cable Business in the Geographical Area, any duties
substantially similar to those duties performed by Executive or his subordinates
during the Term;
(iii) employ or engage the services of any Person who
was a salaried employee of or a consultant to Heartland during the six (6)
months preceding such termination, or induce, request, advise, attempt to
influence or solicit, any Person who was a salaried employee of or consultant to
Heartland during the six (6) months preceding such termination, to terminate his
or her employment or consulting arrangement with Heartland;
(iv) lend credit, money or reputation for the purpose
of establishing or operating a business substantially similar to the Wireless
Cable Business in the Geographical Area;
(v) do any act that Executive knows or should know
might injure Heartland or that might divert subscribers or other customers,
suppliers or employees from the Business; or
(vi) without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business under the
name "Heartland Wireless Communications," or any other trade names, trademarks
or service marks used by Heartland within the Geographical Area;
For purposes of this Section 5 only, the term "Heartland" shall include
Heartland and all Subsidiaries at the time the covenants in this Section 5 are
in force or are to be enforced.
(b) Tolling of Non-Competition Term. If, during any calendar
month after the termination of Executive's employment by Heartland in which the
provisions of Subsection 5(a) are applicable, Executive is not in compliance
with the terms of Subsection 5(a), Heartland shall be entitled to, among other
remedies, demand compliance by Executive with the terms of Subsection 5(a) for
an additional number of calendar months that equals the number of calendar
months during which such noncompliance occurred.
(c) Reasonableness of Restrictions. Executive acknowledges
that the geographic boundaries, scope of prohibited activities, and time
duration of the provisions of Subsection 5(a) are
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reasonable and are no broader than are necessary to maintain and to protect the
legitimate business interests of Heartland.
(d) Separate Covenants. The parties hereto intend that the
covenants contained in Subsection 5(a) of this Agreement be construed as a
series of separate covenants, one for each county, BTA or other defined province
or governmental subdivision in each Geographical Area in which Heartland
conducts business. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the applicable covenant contained in
Subsection 5(a) hereof. Furthermore, each of the covenants in Subsection 5(a)
hereof shall be deemed a separate and independent covenant, each being
enforceable irrespective of the enforceability (with or without reformation) of
the other covenants contained in Subsection 5(a) hereof.
6. Confidentiality.
(a) Executive shall not, except as otherwise provided in this
Agreement, directly or indirectly, at any time during or, for a two (2) year
period after the Term hereof, reveal, divulge or make known to any Person or use
for Executive's personal benefit (including without limitation for the purpose
of soliciting business, whether or not competitive with any business of
Heartland or any Subsidiary, or employees of Heartland or any Subsidiary), or
for the benefit of any Person in a Competing Business, any Confidential
Information acquired by Executive during the course of employment by Heartland.
The following information shall not be restricted under this Section 6:
(i) information already in the public domain;
(ii) information that Executive can demonstrate was
already in his possession before the time of disclosure without breach of
agreement or violation of law; or
(iii) information that Executive is required to
disclose under the following circumstances: (A) at the express direction of any
authorized governmental authority; (B) pursuant to a valid subpoena or other
court process; (C) as otherwise required by law or the rules, regulations, or
orders of any applicable regulatory body; or (D) as otherwise necessary, in the
written opinion of counsel for Executive, to be disclosed by Executive in
connection with any legal action or proceeding involving Executive and Heartland
or any Subsidiary in his capacity as an employee, officer, director, or
stockholder of Heartland or any Subsidiary; provided that, in the event of any
required disclosure, Executive shall, as soon as reasonably possible, provide
prior written notice of such required disclosure to Heartland and provide
Heartland the opportunity to defend against, limit or ensure confidential
treatment of such information required to be disclosed, and such disclosure
shall be permitted only to the extent so required.
(b) Executive shall, at the termination of his employment with
Heartland or at any time requested by Heartland (either during or within two (2)
years after the termination of Executive's employment with Heartland), promptly
deliver to Heartland all materials containing Confidential Information which
Executive may then possess or have under his control.
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7. Intellectual Property. Executive shall disclose promptly to
Heartland any and all significant conceptions and ideas for innovations,
inventions, improvements and valuable discoveries, whether patentable or not,
which are conceived or made by Executive, solely or jointly with another, during
the Term or within one (1) year thereafter, which are directly related to the
Business or other activities of Heartland and which Executive conceives as a
result of his employment by Heartland or any Subsidiary or other Affiliate (the
"Intellectual Property"). Executive hereby assigns and agrees to assign all his
interests in the Intellectual Property to Heartland or its nominee. Whenever
requested to do so by Heartland, Executive shall execute any and all
applications, assignments or other instruments that Heartland shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect under relevant law Heartland's exclusive
proprietary interest in the Intellectual Property.
8. Termination. Executive's employment hereunder may be terminated by
Heartland or Executive, as applicable, without any breach of this Agreement,
only under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate
upon his death.
(b) Disability. Executive's employment hereunder shall
terminate upon his Permanent Disability.
(c) Cause. Heartland may terminate Executive's employment
hereunder for Cause.
(d) Good Reason. Executive may terminate his employment
hereunder for Good Reason.
9. Compensation Upon Termination. Executive shall be entitled to the
following compensation from Heartland upon the termination of his employment:
(a) Death. If Executive's employment shall be terminated by
reason of his death, Heartland shall pay to such Person as shall have been
designated in a notice filed with Heartland prior to Executive's death, or, if
no such Person shall be designated, to his estate as a death benefit, his Base
Salary to the date of his death in addition to any payments Executive's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any Plan
maintained by Heartland.
(b) Disability. During any period that Executive fails to
perform his material executive duties and responsibilities hereunder as a result
of incapacity due to physical or mental illness, Executive shall continue to
receive his Base Salary and bonus payments, if any, until Executive's employment
is terminated pursuant to expiration of the Term, pursuant to Subsection 8(b)
hereof. After such termination, Heartland shall pay to Executive, on or before
the fifth day following the Date of Termination (as hereinafter defined) his
Base Salary to the Date of Termination.
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(c) Cause. If Executive's employment shall be terminated for
Cause, Heartland shall pay Executive his Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination (as defined
below) is given. Such payments shall fully discharge Heartland's obligations
hereunder.
(d) Severance Benefit. If, prior to the expiration of the
Term, either (i) Executive's employment with Heartland is terminated by
Heartland other than (A) for Cause or (B) on account of Executive's death or
Permanent Disability, or (ii) Executive resigns from Heartland for Good Reason,
then Heartland shall pay to Executive, in a single lump sum which shall be paid
within 30 days after the termination of employment or resignation, a severance
payment in an amount equal to Executive's Base Salary (excluding all bonuses, if
any) at the rate then in effect, for the balance of the stated Term (determined
without regard to such termination or resignation, and also without regard to an
extension thereof that might result but for (and after) such termination or
resignation); provided that Heartland shall be permitted to make all such
payments net of any legally required tax withholdings.
10. Other Provisions Relating to Termination.
(a) Notice of Termination. Any termination of Executive's
employment by Heartland or by Executive (other than termination because of the
death of Executive) shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean: (1) if Executive's employment is terminated by his
death, the date of his death; (2) if Executive's employment is terminated
because of a Permanent Disability pursuant to Subsection 8(b), then thirty (30)
days after Notice of Termination is given (provided that Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty (30) day period); (3) if Executive's employment is terminated by
Heartland for Cause, then, subject to Subsection 9(c), the date specified in the
Notice of Termination; or (4) if Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is given.
(c) Cause. In the case of any termination of Executive for
Cause, Heartland will give Executive a Notice of Termination describing in
reasonable detail the facts or circumstances giving rise to Executive's
termination (and, if curable, the action required to cure same) and will permit
Executive thirty (30) days to cure such failure to comply or perform and an
opportunity to discuss the facts and circumstances regarding the Notice of
Termination with the Board of Directors. Executive's termination for Cause shall
be effective as of the date specified in the Notice of Termination or, if
Executive's failure to comply is curable, shall be effective within thirty (30)
days
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following Executive's receipt of a Notice of Termination for Cause unless
Executive has cured the facts or circumstances giving rise to Executive's
termination for Cause.
11. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, Executive's heirs and
legal representatives and Heartland's successors and assigns. This Agreement is
assignable by Heartland in connection with a reorganization, merger or
consolidation in which Heartland is not the surviving entity, or a sale of all
or substantially all of the assets of Heartland (a "Transaction"). In connection
with any such Transaction, Heartland shall, as a condition to consummation of
the Transaction, require the surviving or acquiring entity or Person to assume
in writing the obligations of Heartland under this Agreement. Upon any such
assumption, Heartland shall be released from all liability hereunder.
Executive's rights and obligations under this Agreement are personal in nature
and shall not be assignable by Executive.
12. Certain Payments. If Executive should die while any amounts would
still be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee or, if there
be no such designee, to Executive's estate.
13. Notice. For purposes of this Agreement, all notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when (a) delivered personally, (b) sent by
facsimile or similar electronic device and confirmed, (c) delivered by overnight
express, or (d) if sent by any other means, upon receipt. Notices and all other
communications provided for in this Agreement shall be addressed as follows:
If to Executive:
J. Curtis Henderson
5638 Stonegate Road
Dallas, TX 75209
If to Heartland:
200 Chisholm Place, Suite 200
Plano, Texas 75075
Facsimile: (972) 633-0074
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
14. Injunctive Relief. Executive acknowledges and agrees that a remedy
at law for any breach or threatened breach of the provisions of Sections 5, 6,
and 7 hereof would be inadequate and,
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therefore, agrees that Heartland shall be entitled to injunctive relief in
addition to any other available rights and remedies in cases of any such breach
or threatened breach; provided, however, that nothing contained herein shall be
construed as prohibiting Heartland from pursuing any other rights and remedies
available for any such breach or threatened breach.
15. Arbitration. Subject to Section 14 above, any unresolved dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three (3) arbitrators
(each with experience in the area of senior executive employment) in Dallas,
Texas, in accordance with the rules of the American Arbitration Association then
in effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof or to award punitive damages to any injured
party. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be shared
equally by the parties.
16. Miscellaneous. This Agreement constitutes the entire and final
expression of the agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in a written instrument signed by Executive and
Heartland. No waiver by either party hereto of, or compliance with, any
condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction, enforceability and
performance of this Agreement shall be governed by the laws of the State of
Texas, excluding any conflicts of law principles thereof. Neither this Agreement
nor any right or interest hereunder shall be assignable by Executive or his
beneficiaries or legal representatives without Heartland's prior written
consent; provided, however, that nothing in this Section 16 shall preclude
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
17. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Executive agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of Section 5, 6, or 7 hereof
is void or constitutes an unreasonable restriction against Executive, the
provisions of such Section 5, 6, or 7, as applicable, shall not be rendered void
but shall apply with respect to such reasonable restriction under the
circumstances.
18. Survival. The representations, warranties or covenants contained in
Sections 2(b)(i) and 7 of this Agreement shall survive indefinitely any
termination of this Agreement. The foregoing is without prejudice to express
time periods set forth in other sections of this Agreement.
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19. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
20. Legal Fees and Expenses. The prevailing party in any dispute or
controversy under or in connection with this Agreement (whether in arbitration
or otherwise) shall be entitled to reimbursement from the non-prevailing party
for all costs and reasonable legal fees incurred by such prevailing party. If
such dispute or controversy is resolved through arbitration, then the
arbitrators shall have the authority to determine the identity of the prevailing
party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEARTLAND WIRELESS J. CURTIS HENDERSON
COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ C.D. McHenry /s/ J. Curtis Henderson
--------------------------- -----------------------
Name: /s/ Carroll D. McHenry Signature
-------------------------
Title: Chairman, President & CEO
-------------------------
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 8th day of April, 1998, between Heartland Wireless Communications,
Inc., a Delaware corporation ("Heartland"), and Marjean Henderson ("Executive").
WHEREAS, Executive currently is the Senior Vice President, Chief
Financial Officer and Assistant Secretary of Heartland; and
WHEREAS, it is the desire of the Board of Directors of Heartland (the
"Board of Directors") to assure itself of the continued services of Executive by
directly engaging Executive as an officer of Heartland and, as provided herein,
its subsidiaries and affiliates; and
WHEREAS, Executive desires to commit herself to serve Heartland on the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
definitions apply:
(a) Affiliate: shall mean, with respect to any Person,
any other Person that directly or indirectly controls, is controlled by, or is
under common control with the Person in question. As used in this definition of
"Affiliate," the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person.
(b) Cause: shall mean,
(i) a finding by a majority of the directors of
Heartland that Executive has acted with gross negligence or willful misconduct
in connection with the performance of Executive's duties as an officer of
Heartland;
(ii) a finding by a majority of the directors of
Heartland that Executive has engaged in a material act of insubordination or of
common law fraud against Heartland or its employees;
(iii) a finding by a majority of the directors of
Heartland that Executive has acted against the best interests of Heartland in a
manner that has or could have a material adverse affect on the financial
condition of Heartland;
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(iv) a finding by a majority of the directors of
Heartland of criminal conduct by Executive (other than minor infractions and
traffic violations) or the conviction of Executive, by a court of competent
jurisdiction, of any felony (or plea of nolo contendere thereto);
(v) a finding by a majority of the directors of
Heartland of a material violation by Executive of his duty of loyalty to
Heartland which results or may reasonably be expected to result in material
injury to Heartland or any Subsidiary;
(vi) a finding by a majority of the directors of
Heartland of a willful violation by Executive of Executive's covenants and
obligations under Sections 5 (Non-Competition), 6 (Confidentiality), or 7
(Intellectual Property) of this Agreement; or
(vii) a finding by a majority of the directors of
Heartland of chronic alcohol or drug abuse by Executive.
For purposes of the foregoing definition, if Executive is a director of
Heartland at the time in question, then Executive shall absent herself from any
portion of any meeting of the Board of Directors at which matters of, or
allegations of, Cause are discussed or deliberated, and she shall also abstain
from any vote thereon (or, if he should so vote, then her vote shall not be
considered for purposes of this Agreement) and, in all cases, her status as a
director shall not be considered as such for purposes of the constitution of a
majority.
(c) Competing Business: Any Person, other than Heartland
or any Subsidiary of Heartland, which engages in the Wireless Cable Business.
(d) Confidential Information: shall mean all of
Heartland's or any Subsidiary's trade secrets, know-how, financial information,
intellectual property and other proprietary rights, including without limitation
manufacturing and marketing information, formulae, knowledge, data, budgets,
products, subscriber and other customer lists, computer programs, software,
telephone numbers, prices, costs, personnel, suppliers, developments and
techniques concerning Heartland or its Subsidiaries and the Business (as defined
below) and all of Heartland's books, files, records, documents, plans, drawings,
designs, renderings, estimates, specifications, operating manuals, manuals, user
documentation, product literature, catalogues, marketing materials and similar
items relating to the Business or Heartland.
(e) Geographical Area: shall mean all counties, Basic
Trading Areas, or "BTAs" (as defined by Rand McNally in its 1992 Commercial
Atlas and Marketing Guide and used in the Federal Communications Commission's
November 1995 auction of MMDS and MDS authorizations for such BTAs), and other
defined provinces or governmental subdivisions (domestic or international),
considered collectively, in which Heartland or any Subsidiary of Heartland
engages in the Wireless Cable Business at the time of the termination of
Executive's employment with Heartland, or in which Heartland or any Subsidiary
of Heartland evidenced in writing, at any time
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during the six month period prior to termination of Executive's employment, its
intention to engage in the Wireless Cable Business.
(f) Good Reason: a resignation for Good Reason shall mean
the resignation by Executive from employment by Heartland after:
(i) any material reduction of Executive's
compensation or benefits to which Executive was entitled immediately before the
reduction; or
(ii) any other material adverse change to the terms
and conditions of Executive's employment or benefits as in effect immediately
before the change;
provided, that, (A) if Executive consents in writing to any event described in
clauses (i) or (ii) of this Subsection 1(f), then Executive's subsequent
resignation shall not be treated as a resignation for Good Reason unless a
subsequent event described in such clauses to which Executive did not consent
occurs and (B) any changes in Executive's discretionary bonus, if any, as from
time to time may be determined by the Board of Directors of Heartland shall not
constitute Good Reason. Notwithstanding the foregoing, Executive shall be
entitled to resign for Good Reason only if any occurrence referred to in clauses
(i) or (ii) of this Subsection 1(f) is not remedied within 30 calendar days
after receipt by Heartland of written notice from Executive setting forth in
reasonable detail the facts and circumstances giving rise to such Good Reason.
(g) Person: shall mean any individual, group,
partnership, corporation, association, trust or other entity or organization.
(h) Permanent Disability: shall mean any physical or
mental disability which renders Executive unable to perform the essential
functions of his job as an employee of Heartland on a full-time basis with or
without reasonable accommodation for 180 calendar days whether or not
consecutive, within any period of 12 consecutive months; provided, however, that
during any period of Executive's disability Heartland may assign Executive's
duties to any other employee of Heartland or any Affiliate of Heartland or may
engage or hire a third party to perform such duties and any such action shall
not be deemed "Good Reason" for Executive to terminate his employment.
(i) Subsidiary: shall mean any non-individual Person of
which a majority of the combined voting power of the outstanding voting
securities (or other voting interests) is owned, directly or indirectly, by
Heartland.
(j) Wireless Cable Business: shall mean the installing,
licensing, sale and/or marketing of wireless video or wireless data
communication services utilizing MMDS, MDS or ITFS frequencies (as defined at 47
C.F.R. 21.901 and 47 C.F.R. 74.902 or any successor regulation or statute),
including, without limitation, wireless cable television and direct broadcast
satellite businesses or any other installing, licensing, selling or marketing
services in which Heartland, directly or indirectly through one or more
Subsidiaries, engages.
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2. Employment and Term.
(a) Heartland hereby agrees to employ Executive as its
Senior Vice President, Chief Financial Officer and Assistant Secretary, and
Executive hereby agrees to accept such employment, on the terms and conditions
set forth herein, for the period commencing on the date hereof (the "Effective
Date") and expiring as of 11:59 p.m. on the second anniversary of the Effective
Date (unless sooner terminated as hereinafter set forth) (the "Term"); provided,
however, that on each anniversary of the Effective Date the Term shall
automatically be extended for one additional year. Provided, further, however,
that no such extension shall result on such anniversary, or on any subsequent
anniversary, if, at least ninety (90) days prior to such anniversary, Heartland
or Executive shall have given notice to the other party that it or she, as
applicable, does not wish to extend this Agreement.
(b) Executive affirms and represents that she (i) is
under no obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, Executive's employment
hereunder by Heartland or Executive's undertakings under this Agreement and (ii)
has read, understands and will comply with the terms and conditions of the
policies and procedures (the "Policies") relating to the conduct of the business
of Heartland (the "Business").
3. Compensation and Related Matters.
(a) Base Salary. Executive shall receive a base salary
paid by Heartland ("Base Salary") at the annual rate of not less than Two
Hundred Thousand Dollars ($200,000), payable in such increments as executives of
Heartland normally are paid.
(b) Bonus Payments. Executive shall be eligible to
receive, in addition to the Base Salary: (i) compensation under Heartland's
Performance Incentive Compensation Plan (provided that the performance
requirements in such plan are achieved by Executive); and (ii) compensation
under such other bonus plan, if any, as the Board of Directors or the Option and
Compensation Committee of the Board of Directors may specify (provided that the
performance requirements in such plan are achieved by Executive).
(c) Option Grants. Executive shall be eligible to receive
such stock options, if any, as the Board of Directors or Compensation Committee
may specify, all on the terms and conditions more fully described in the option
agreement(s) pursuant to which such grant(s) is made.
(d) Expenses. During the Term, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
her (in accordance with the policies and procedures established by the Board of
Directors for its senior executive officers) in performing services hereunder,
provided that Executive properly accounts therefor in accordance with the
Policies.
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(e) Vacations. Executive shall be entitled to three (3)
weeks paid vacation in each calendar year commencing on or after January 1,
1998, or such additional number as may be determined by the Board of Directors
from time to time. For purposes of this Subsection 3(e), weekend days shall not
count as vacation days. In addition, Executive shall also be entitled to all
paid holidays given by Heartland to its senior executive officers.
(f) Taxes. All compensation payable to Executive
hereunder is stated in gross amounts and shall be subject to all applicable
withholding taxes, other normal payroll deductions and any other amounts
required by law to be withheld.
4. Duties and Restrictions.
(a) Duties as Employee of Heartland. Executive shall
serve as Heartland's Senior Vice President, Chief Financial Officer and
Assistant Secretary, with all such powers and duties as may be set forth in
Heartland's Bylaws with respect to, and/or are reasonably incident to, such
office. Executive shall report to Heartland's Chief Executive Officer.
Executive hereby agrees faithfully and conscientiously to
serve Heartland, to devote her full professional time, skill, attention and
energy to the Business and ancillary affairs of Heartland and to perform her
duties hereunder competently, diligently, and to the best of her abilities.
During the Term, Executive shall render her professional services exclusively to
Heartland or its Subsidiaries during normal business hours to the services
required of her hereunder. The foregoing limitation shall not be construed as
prohibiting Executive from making personal investments in such form or manner as
shall not require her services in the operation or affairs of the companies or
enterprises in which such investments are made.
(b) Other Duties. Executive agrees to serve as requested
by the Chief Executive Officer in one or more executive offices of any of
Heartland's Subsidiaries and Affiliates. Executive agrees that she shall not be
entitled to receive any compensation from Heartland for serving in any
capacities of Heartland's Subsidiaries and Affiliates other than the
compensation to be paid to Executive by Heartland pursuant to this Agreement
(except that Executive shall be entitled to retain any director's fees or
similar compensation payable as a result of her service on boards of directors
of companies at the request of Heartland). Executive shall also perform and
discharge such other executive employment duties and responsibilities as the
Chief Executive Officer shall from time to time reasonably prescribe.
5. Non-Competition.
(a) Covenant. Executive acknowledges that during the
course of Executive's engagement by Heartland, Executive will have gained access
to Confidential Information, and may have acquired, developed and/or refined
skills that could be used by Executive to compete against Heartland to the
unfair detriment of Heartland and its future operations. Executive also
acknowledges that Heartland has a legitimate business interest in reasonably
limiting the ability of
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Executive to use such information and skills to compete directly or indirectly
against Heartland. Accordingly, Executive covenants and agrees that she will
not, directly or indirectly (personally, through any other Person, or as
principal, director, officer, employee, consultant, partner, stockholder,
trustee, manager or otherwise), during the Term hereof and for a period of two
(2) years following the termination of her employment with Heartland:
(i) engage in the Wireless Cable Business in the
Geographical Area;
(ii) perform, for any Competing Business which
operates a Wireless Cable Business in the Geographical Area, any duties
substantially similar to those duties performed by Executive or his subordinates
during the Term;
(iii) lend credit, money or reputation for the
purpose of establishing or operating a business substantially similar to the
Wireless Cable Business in the Geographical Area; or
(iv) without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business under the
name "Heartland Wireless Communications," or any other trade names, trademarks
or service marks used by Heartland within the Geographical Area;
For purposes of this Section 5 only, the term "Heartland" shall include
Heartland and all Subsidiaries at the time the covenants in this Section 5 are
in force or are to be enforced.
(b) Tolling of Non-Competition Term. If, during any
calendar month after the termination of Executive's employment by Heartland in
which the provisions of Subsection 5(a) are applicable, Executive is not in
compliance with the terms of Subsection 5(a), Heartland shall be entitled to,
among other remedies, demand compliance by Executive with the terms of
Subsection 5(a) for an additional number of calendar months that equals the
number of calendar months during which such noncompliance occurred.
(c) Reasonableness of Restrictions. Executive
acknowledges that the geographic boundaries, scope of prohibited activities, and
time duration of the provisions of Subsection 5(a) are reasonable and are no
broader than are necessary to maintain and to protect the legitimate business
interests of Heartland.
(d) Separate Covenants. The parties hereto intend that
the covenants contained in Subsection 5(a) of this Agreement be construed as a
series of separate covenants, one for each county, BTA or other defined province
or governmental subdivision in each Geographical Area in which Heartland
conducts business. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the applicable covenant contained in
Subsection 5(a) hereof. Furthermore, each of the covenants in Subsection 5(a)
hereof shall be deemed a separate and
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independent covenant, each being enforceable irrespective of the enforceability
(with or without reformation) of the other covenants contained in Subsection
5(a) hereof.
6. Confidentiality.
(a) Executive shall not, except as otherwise provided in
this Agreement, directly or indirectly, at any time during or, for a two (2)
year period after the Term hereof, reveal, divulge or make known to any Person
or use for Executive's personal benefit (including without limitation for the
purpose of soliciting business, whether or not competitive with any business of
Heartland or any Subsidiary, or employees of Heartland or any Subsidiary), or
for the benefit of any Person in a Competing Business, any Confidential
Information acquired by Executive during the course of employment by Heartland.
The following information shall not be restricted under this Section 6:
(i) information already in the public domain;
(ii) information that Executive can demonstrate was
already in her possession before the time of disclosure without breach of
agreement or violation of law; or
(iii) information that Executive is required to
disclose under the following circumstances: (A) at the express direction of any
authorized governmental authority; (B) pursuant to a valid subpoena or other
court process; (C) as otherwise required by law or the rules, regulations, or
orders of any applicable regulatory body; or (D) as otherwise necessary, in the
written opinion of counsel for Executive, to be disclosed by Executive in
connection with any legal action or proceeding involving Executive and Heartland
or any Subsidiary in her capacity as an employee, officer, director, or
stockholder of Heartland or any Subsidiary; provided that, in the event of any
required disclosure, Executive shall, as soon as reasonably possible, provide
prior written notice of such required disclosure to Heartland and provide
Heartland the opportunity to defend against, limit or ensure confidential
treatment of such information required to be disclosed, and such disclosure
shall be permitted only to the extent so required.
(b) Executive shall, at the termination of his employment
with Heartland or at any time requested by Heartland (either during or within
two (2) years after the termination of Executive's employment with Heartland),
promptly deliver to Heartland all materials containing Confidential Information
which Executive may then possess or have under her control.
7. Intellectual Property. Executive shall disclose promptly to
Heartland any and all significant conceptions and ideas for innovations,
inventions, improvements and valuable discoveries, whether patentable or not,
which are conceived or made by Executive, solely or jointly with another, during
the Term or within one (1) year thereafter, which are directly related to the
Business or other activities of Heartland and which Executive conceives as a
result of his employment by Heartland or any Subsidiary or other Affiliate (the
"Intellectual Property"). Executive hereby assigns and agrees to assign all her
interests in the Intellectual Property to Heartland or its nominee. Whenever
requested to do so by Heartland, Executive shall execute any
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and all applications, assignments or other instruments that Heartland shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect under relevant law Heartland's exclusive
proprietary interest in the Intellectual Property.
8. Termination. Executive's employment hereunder may be
terminated by Heartland or Executive, as applicable, without any breach of this
Agreement, only under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate
upon her death.
(b) Disability. Executive's employment hereunder shall
terminate upon her Permanent Disability.
(c) Cause. Heartland may terminate Executive's employment
hereunder for Cause.
(d) Good Reason. Executive may terminate her employment
hereunder for Good Reason.
9. Compensation Upon Termination. Executive shall be entitled to
the following compensation from Heartland upon the termination of her
employment:
(a) Death. If Executive's employment shall be terminated
by reason of her death, Heartland shall pay to such Person as shall have been
designated in a notice filed with Heartland prior to Executive's death, or, if
no such Person shall be designated, to her estate as a death benefit, her Base
Salary to the date of her death in addition to any payments Executive's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any Plan
maintained by Heartland.
(b) Disability. During any period that Executive fails to
perform her material executive duties and responsibilities hereunder as a result
of incapacity due to physical or mental illness, Executive shall continue to
receive her Base Salary and bonus payments, if any, until Executive's employment
is terminated pursuant to expiration of the Term, pursuant to Subsection 8(b)
hereof. After such termination, Heartland shall pay to Executive, on or before
the fifth day following the Date of Termination (as hereinafter defined) his
Base Salary to the Date of Termination.
(c) Cause. If Executive's employment shall be terminated
for Cause, Heartland shall pay Executive her Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination (as defined
below) is given. Such payments shall fully discharge Heartland's obligations
hereunder.
(d) Severance Benefit. If, prior to the expiration of the
Term, either (i) Executive's employment with Heartland is terminated by
Heartland other than (A) for Cause or (B)
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on account of Executive's death or Permanent Disability, or (ii) Executive
resigns from Heartland for Good Reason, then Heartland shall pay to Executive,
in a single lump sum which shall be paid within 30 days after the termination of
employment or resignation, a severance payment in an amount equal to Executive's
Base Salary (excluding all bonuses, if any) at the rate then in effect, for the
balance of the stated Term (determined without regard to such termination or
resignation, and also without regard to an extension thereof that might result
but for (and after) such termination or resignation); provided that Heartland
shall be permitted to make all such payments net of any legally required tax
withholdings.
10. Other Provisions Relating to Termination.
(a) Notice of Termination. Any termination of Executive's
employment by Heartland or by Executive (other than termination because of the
death of Executive) shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement,
"Date of Termination" shall mean: (1) if Executive's employment is terminated by
her death, the date of her death; (2) if Executive's employment is terminated
because of a Permanent Disability pursuant to Subsection 8(b), then thirty (30)
days after Notice of Termination is given (provided that Executive shall not
have returned to the performance of her duties on a full-time basis during such
thirty (30) day period); (3) if Executive's employment is terminated by
Heartland for Cause, then, subject to Subsection 9(c), the date specified in the
Notice of Termination; or (4) if Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is given.
(c) Cause. In the case of any termination of Executive
for Cause, Heartland will give Executive a Notice of Termination describing in
reasonable detail the facts or circumstances giving rise to Executive's
termination (and, if curable, the action required to cure same) and will permit
Executive thirty (30) days to cure such failure to comply or perform and an
opportunity to discuss the facts and circumstances regarding the Notice of
Termination with the Board of Directors. Executive's termination for Cause shall
be effective as of the date specified in the Notice of Termination or, if
Executive's failure to comply is curable, shall be effective within thirty (30)
days following Executive's receipt of a Notice of Termination for Cause unless
Executive has cured the facts or circumstances giving rise to Executive's
termination for Cause.
11. Successors; Binding Agreement. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, Executive's heirs and
legal representatives and Heartland's successors and assigns. This Agreement is
assignable by Heartland in connection with a reorganization, merger or
consolidation in which Heartland is not the surviving entity, or a sale of
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all or substantially all of the assets of Heartland (a "Transaction"). In
connection with any such Transaction, Heartland shall, as a condition to
consummation of the Transaction, require the surviving or acquiring entity or
Person to assume in writing the obligations of Heartland under this Agreement.
Upon any such assumption, Heartland shall be released from all liability
hereunder. Executive's rights and obligations under this Agreement are personal
in nature and shall not be assignable by Executive.
12. Certain Payments. If Executive should die while any amounts
would still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's devisee, legatee, or other designee or,
if there be no such designee, to Executive's estate.
13. Notice. For purposes of this Agreement, all notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when (a) delivered personally, (b) sent
by facsimile or similar electronic device and confirmed, (c) delivered by
overnight express, or (d) if sent by any other means, upon receipt. Notices and
all other communications provided for in this Agreement shall be addressed as
follows:
If to Executive:
Marjean Henderson
9352 Stratford
Dallas, TX 75220-5083
If to Heartland:
200 Chisholm Place, Suite 200
Plano, Texas 75075
Facsimile: (972) 633-0074
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
14. Injunctive Relief. Executive acknowledges and agrees that a
remedy at law for any breach or threatened breach of the provisions of Sections
5, 6, and 7 hereof would be inadequate and, therefore, agrees that Heartland
shall be entitled to injunctive relief in addition to any other available rights
and remedies in cases of any such breach or threatened breach; provided,
however, that nothing contained herein shall be construed as prohibiting
Heartland from pursuing any other rights and remedies available for any such
breach or threatened breach.
15. Arbitration. Subject to Section 14 above, any unresolved
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration,
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conducted before a panel of three (3) arbitrators (each with experience in the
area of senior executive employment) in Dallas, Texas, in accordance with the
rules of the American Arbitration Association then in effect. The arbitrators
shall not have the authority to add to, detract from, or modify any provision
hereof or to award punitive damages to any injured party. A decision by a
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be shared equally by the parties.
16. Miscellaneous. This Agreement constitutes the entire and final
expression of the agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in a written instrument signed by Executive and
Heartland. No waiver by either party hereto of, or compliance with, any
condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction, enforceability and
performance of this Agreement shall be governed by the laws of the State of
Texas, excluding any conflicts of law principles thereof. Neither this Agreement
nor any right or interest hereunder shall be assignable by Executive or his
beneficiaries or legal representatives without Heartland's prior written
consent; provided, however, that nothing in this Section 16 shall preclude
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
17. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Executive agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of Section 5, 6, or 7 hereof
is void or constitutes an unreasonable restriction against Executive, the
provisions of such Section 5, 6, or 7, as applicable, shall not be rendered void
but shall apply with respect to such reasonable restriction under the
circumstances.
18. Survival. The representations, warranties or covenants
contained in Sections 2(b)(i) and 7 of this Agreement shall survive indefinitely
any termination of this Agreement. The foregoing is without prejudice to express
time periods set forth in other sections of this Agreement.
19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
20. Legal Fees and Expenses. The prevailing party in any dispute or
controversy under or in connection with this Agreement (whether in arbitration
or otherwise) shall be entitled to reimbursement from the non-prevailing party
for all costs and reasonable legal fees incurred by such
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prevailing party. If such dispute or controversy is resolved through
arbitration, then the arbitrators shall have the authority to determine the
identity of the prevailing party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEARTLAND WIRELESS MARJEAN HENDERSON
COMMUNICATIONS, INC.,
a Delaware corporation
By:/s/ Carroll D. McHenry /s/ Marjean Henderson
---------------------------- ----------------------------------
Name: Carroll D. McHenry Signature
--------------------------
Title:Chairman, President & CEO
-------------------------
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 8th day of April, 1998, between Heartland Wireless Communications,
Inc., a Delaware corporation ("Heartland"), and Randall C. May ("Executive").
WHEREAS, Executive currently is the Vice President -- Operations of
Heartland; and
WHEREAS, it is the desire of the Board of Directors of Heartland (the
"Board of Directors") to assure itself of the continued services of Executive by
directly engaging Executive as an officer of Heartland and, as provided herein,
its subsidiaries and affiliates; and
WHEREAS, Executive desires to commit himself to serve Heartland on the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
definitions apply:
(a) Affiliate: shall mean, with respect to any Person, any
other Person that directly or indirectly controls, is controlled by, or is under
common control with the Person in question. As used in this definition of
"Affiliate," the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person.
(b) Cause: shall mean,
(i) a finding by a majority of the directors of
Heartland that Executive has acted with gross negligence or willful misconduct
in connection with the performance of Executive's duties as an officer of
Heartland;
(ii) a finding by a majority of the directors of
Heartland that Executive has engaged in a material act of insubordination or of
common law fraud against Heartland or its employees;
(iii) a finding by a majority of the directors of
Heartland that Executive has acted against the best interests of Heartland in a
manner that has or could have a material adverse affect on the financial
condition of Heartland;
(iv) a finding by a majority of the directors of
Heartland of criminal conduct by Executive (other than minor infractions and
traffic violations) or the conviction of Executive, by a court of competent
jurisdiction, of any felony (or plea of nolo contendere thereto);
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(v) a finding by a majority of the directors of
Heartland of a material violation by Executive of his duty of loyalty to
Heartland which results or may reasonably be expected to result in material
injury to Heartland or any Subsidiary;
(vi) a finding by a majority of the directors of
Heartland of a willful violation by Executive of Executive's covenants and
obligations under Sections 5 (Non-Competition), 6 (Confidentiality), or 7
(Intellectual Property) of this Agreement; or
(vii) a finding by a majority of the directors of
Heartland of chronic alcohol or drug abuse by Executive.
For purposes of the foregoing definition, if Executive is a director of
Heartland at the time in question, then Executive shall absent himself from any
portion of any meeting of the Board of Directors at which matters of, or
allegations of, Cause are discussed or deliberated, and he shall also abstain
from any vote thereon (or, if he should so vote, then his vote shall not be
considered for purposes of this Agreement) and, in all cases, his status as a
director shall not be considered as such for purposes of the constitution of a
majority.
(c) Competing Business: Any Person, other than Heartland or
any Subsidiary of Heartland, which engages in the Wireless Cable Business.
(d) Confidential Information: shall mean all of Heartland's or
any Subsidiary's trade secrets, know-how, financial information, intellectual
property and other proprietary rights, including without limitation
manufacturing and marketing information, formulae, knowledge, data, budgets,
products, subscriber and other customer lists, computer programs, software,
telephone numbers, prices, costs, personnel, suppliers, developments and
techniques concerning Heartland or its Subsidiaries and the Business (as defined
below) and all of Heartland's books, files, records, documents, plans, drawings,
designs, renderings, estimates, specifications, operating manuals, manuals, user
documentation, product literature, catalogues, marketing materials and similar
items relating to the Business or Heartland.
(e) Geographical Area: shall mean all counties, Basic Trading
Areas, or "BTAs" (as defined by Rand McNally in its 1992 Commercial Atlas and
Marketing Guide and used in the Federal Communications Commission's November
1995 auction of MMDS and MDS authorizations for such BTAs), and other defined
provinces or governmental subdivisions (domestic or international), considered
collectively, in which Heartland or any Subsidiary of Heartland engages in the
Wireless Cable Business at the time of the termination of Executive's employment
with Heartland, or in which Heartland or any Subsidiary of Heartland evidenced
in writing, at any time during the six month period prior to termination of
Executive's employment, its intention to engage in the Wireless Cable Business.
(f) Good Reason: a resignation for Good Reason shall mean the
resignation by Executive from employment by Heartland after:
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(i) any material reduction of Executive's
compensation or benefits to which Executive was entitled immediately before the
reduction; or
(ii) any other material adverse change to the terms
and conditions of Executive's employment or benefits as in effect immediately
before the change;
provided, that, (A) if Executive consents in writing to any event described in
clauses (i) or (ii) of this Subsection 1(f), then Executive's subsequent
resignation shall not be treated as a resignation for Good Reason unless a
subsequent event described in such clauses to which Executive did not consent
occurs and (B) any changes in Executive's discretionary bonus, if any, as from
time to time may be determined by the Board of Directors of Heartland shall not
constitute Good Reason. Notwithstanding the foregoing, Executive shall be
entitled to resign for Good Reason only if any occurrence referred to in clauses
(i) or (ii) of this Subsection 1(f) is not remedied within 30 calendar days
after receipt by Heartland of written notice from Executive setting forth in
reasonable detail the facts and circumstances giving rise to such Good Reason.
(g) Person: shall mean any individual, group, partnership,
corporation, association, trust or other entity or organization.
(h) Permanent Disability: shall mean any physical or mental
disability which renders Executive unable to perform the essential functions of
his job as an employee of Heartland on a full-time basis with or without
reasonable accommodation for 180 calendar days whether or not consecutive,
within any period of 12 consecutive months; provided, however, that during any
period of Executive's disability Heartland may assign Executive's duties to any
other employee of Heartland or any Affiliate of Heartland or may engage or hire
a third party to perform such duties and any such action shall not be deemed
"Good Reason" for Executive to terminate his employment.
(i) Subsidiary: shall mean any non-individual Person of which
a majority of the combined voting power of the outstanding voting securities (or
other voting interests) is owned, directly or indirectly, by Heartland.
(j) Wireless Cable Business: shall mean the installing,
licensing, sale and/or marketing of wireless video or wireless data
communication services utilizing MMDS, MDS or ITFS frequencies (as defined at 47
C.F.R. 21.901 and 47 C.F.R. 74.902 or any successor regulation or statute),
including, without limitation, wireless cable television and direct broadcast
satellite businesses or any other installing, licensing, selling or marketing
services in which Heartland, directly or indirectly through one or more
Subsidiaries, engages.
2. Employment and Term.
(a) Heartland hereby agrees to employ Executive as its Vice
President -- Operations, and Executive hereby agrees to accept such employment,
on the terms and conditions set forth herein, for the period commencing on the
date hereof (the "Effective Date") and expiring
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as of 11:59 p.m. on the first anniversary of the Effective Date (unless sooner
terminated as hereinafter set forth) (the "Term"); provided, however, that on
each anniversary of the Effective Date the Term shall automatically be extended
for one additional year. Provided, further, however, that no such extension
shall result on such anniversary, or on any subsequent anniversary, if, at least
ninety (90) days prior to such anniversary, Heartland or Executive shall have
given notice to the other party that it or he, as applicable, does not wish to
extend this Agreement.
(b) Executive affirms and represents that he (i) is under no
obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, Executive's employment
hereunder by Heartland or Executive's undertakings under this Agreement and (ii)
has read, understands and will comply with the terms and conditions of the
policies and procedures (the "Policies") relating to the conduct of the business
of Heartland (the "Business").
3. Compensation and Related Matters.
(a) Base Salary. Executive shall receive a base salary paid by
Heartland ("Base Salary") at the annual rate of not less than One Hundred
Twenty-Five Thousand Dollars ($125,000), payable in such increments as
executives of Heartland normally are paid.
(b) Bonus Payments. Executive shall be eligible to receive, in
addition to the Base Salary: (i) compensation under Heartland's Performance
Incentive Compensation Plan (provided that the performance requirements in such
plan are achieved by Executive); and (ii) compensation under such other bonus
plan, if any, as the Board of Directors or the Option and Compensation Committee
of the Board of Directors may specify (provided that the performance
requirements in such plan are achieved by Executive).
(c) Option Grants. Executive shall be eligible to receive such
stock options, if any, as the Board of Directors or Compensation Committee may
specify, all on the terms and conditions more fully described in the option
agreement(s) pursuant to which such grant(s) is made.
(d) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him (in
accordance with the policies and procedures established by the Board of
Directors for its senior executive officers) in performing services hereunder,
provided that Executive properly accounts therefor in accordance with the
Policies.
(e) Vacations. Executive shall be entitled to three (3) weeks
paid vacation in each calendar year commencing on or after January 1, 1998, or
such additional number as may be determined by the Board of Directors from time
to time. For purposes of this Subsection 3(e), weekend days shall not count as
vacation days. In addition, Executive shall also be entitled to all paid
holidays given by Heartland to its senior executive officers.
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(f) Taxes. All compensation payable to Executive hereunder is
stated in gross amounts and shall be subject to all applicable withholding
taxes, other normal payroll deductions and any other amounts required by law to
be withheld.
4. Duties and Restrictions.
(a) Duties as Employee of Heartland. Executive shall serve as
Heartland's Vice President -- Operations, with all such powers and duties as may
be set forth in Heartland's Bylaws with respect to, and/or are reasonably
incident to, such office. Executive shall report to Heartland's Chief Executive
Officer.
Executive hereby agrees faithfully and conscientiously to
serve Heartland, to devote his full professional time, skill, attention and
energy to the Business and ancillary affairs of Heartland and to perform his
duties hereunder competently, diligently, and to the best of his abilities.
During the Term, Executive shall not be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage and shall render his
professional services exclusively to Heartland or its Subsidiaries, devoting his
full time during normal business hours throughout the Term to the services
required of him hereunder. The foregoing limitation shall not be construed as
prohibiting Executive from making personal investments in such form or manner as
shall not require his services in the operation or affairs of the companies or
enterprises in which such investments are made.
(b) Other Duties. Executive agrees to serve as requested by
the Chief Executive Officer in one or more executive offices of any of
Heartland's Subsidiaries and Affiliates. Executive agrees that he shall not be
entitled to receive any compensation from Heartland for serving in any
capacities of Heartland's Subsidiaries and Affiliates other than the
compensation to be paid to Executive by Heartland pursuant to this Agreement
(except that Executive shall be entitled to retain any director's fees or
similar compensation payable as a result of his service on boards of directors
of companies at the request of Heartland). Executive shall also perform and
discharge such other executive employment duties and responsibilities as the
Chief Executive Officer shall from time to time reasonably prescribe.
5. Non-Competition.
(a) Covenant. Executive acknowledges that during the course of
Executive's engagement by Heartland, Executive will have gained access to
Confidential Information, and may have acquired, developed and/or refined skills
that could be used by Executive to compete against Heartland to the unfair
detriment of Heartland and its future operations. Executive also acknowledges
that Heartland has a legitimate business interest in reasonably limiting the
ability of Executive to use such information and skills to compete directly or
indirectly against Heartland. Accordingly, Executive covenants and agrees that
he will not, directly or indirectly (personally, through any other Person, or as
principal, director, officer, employee, consultant, partner,
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stockholder, trustee, manager or otherwise), during the Term hereof and for a
period of two (2) years following the termination of his employment with
Heartland:
(i) engage in the Wireless Cable Business in the
Geographical Area;
(ii) perform, for any Competing Business which
operates a Wireless Cable Business in the Geographical Area, any duties
substantially similar to those duties performed by Executive or his subordinates
during the Term;
(iii) employ or engage the services of any Person who
was a salaried employee of or a consultant to Heartland during the six (6)
months preceding such termination, or induce, request, advise, attempt to
influence or solicit, any Person who was a salaried employee of or consultant to
Heartland during the six (6) months preceding such termination, to terminate his
or her employment or consulting arrangement with Heartland;
(iv) lend credit, money or reputation for the purpose
of establishing or operating a business substantially similar to the Wireless
Cable Business in the Geographical Area;
(v) do any act that Executive knows or should know
might injure Heartland or that might divert subscribers or other customers,
suppliers or employees from the Business; or
(vi) without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business under the
name "Heartland Wireless Communications," or any other trade names, trademarks
or service marks used by Heartland within the Geographical Area;
For purposes of this Section 5 only, the term "Heartland" shall include
Heartland and all Subsidiaries at the time the covenants in this Section 5 are
in force or are to be enforced.
(b) Tolling of Non-Competition Term. If, during any calendar
month after the termination of Executive's employment by Heartland in which the
provisions of Subsection 5(a) are applicable, Executive is not in compliance
with the terms of Subsection 5(a), Heartland shall be entitled to, among other
remedies, demand compliance by Executive with the terms of Subsection 5(a) for
an additional number of calendar months that equals the number of calendar
months during which such noncompliance occurred.
(c) Reasonableness of Restrictions. Executive acknowledges
that the geographic boundaries, scope of prohibited activities, and time
duration of the provisions of Subsection 5(a) are reasonable and are no broader
than are necessary to maintain and to protect the legitimate business interests
of Heartland.
(d) Separate Covenants. The parties hereto intend that the
covenants contained in Subsection 5(a) of this Agreement be construed as a
series of separate covenants, one for each
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county, BTA or other defined province or governmental subdivision in each
Geographical Area in which Heartland conducts business. Except for geographic
coverage, each such separate covenant shall be deemed identical in terms to the
applicable covenant contained in Subsection 5(a) hereof. Furthermore, each of
the covenants in Subsection 5(a) hereof shall be deemed a separate and
independent covenant, each being enforceable irrespective of the enforceability
(with or without reformation) of the other covenants contained in Subsection
5(a) hereof.
6. Confidentiality.
(a) Executive shall not, except as otherwise provided in this
Agreement, directly or indirectly, at any time during or, for a two (2) year
period after the Term hereof, reveal, divulge or make known to any Person or use
for Executive's personal benefit (including without limitation for the purpose
of soliciting business, whether or not competitive with any business of
Heartland or any Subsidiary, or employees of Heartland or any Subsidiary), or
for the benefit of any Person in a Competing Business, any Confidential
Information acquired by Executive during the course of employment by Heartland.
The following information shall not be restricted under this Section 6:
(i) information already in the public domain;
(ii) information that Executive can demonstrate was
already in his possession before the time of disclosure without breach of
agreement or violation of law; or
(iii) information that Executive is required to
disclose under the following circumstances: (A) at the express direction of any
authorized governmental authority; (B) pursuant to a valid subpoena or other
court process; (C) as otherwise required by law or the rules, regulations, or
orders of any applicable regulatory body; or (D) as otherwise necessary, in the
written opinion of counsel for Executive, to be disclosed by Executive in
connection with any legal action or proceeding involving Executive and Heartland
or any Subsidiary in his capacity as an employee, officer, director, or
stockholder of Heartland or any Subsidiary; provided that, in the event of any
required disclosure, Executive shall, as soon as reasonably possible, provide
prior written notice of such required disclosure to Heartland and provide
Heartland the opportunity to defend against, limit or ensure confidential
treatment of such information required to be disclosed, and such disclosure
shall be permitted only to the extent so required.
(b) Executive shall, at the termination of his employment with
Heartland or at any time requested by Heartland (either during or within two (2)
years after the termination of Executive's employment with Heartland), promptly
deliver to Heartland all materials containing Confidential Information which
Executive may then possess or have under his control.
7. Intellectual Property. Executive shall disclose promptly to
Heartland any and all significant conceptions and ideas for innovations,
inventions, improvements and valuable discoveries, whether patentable or not,
which are conceived or made by Executive, solely or jointly with another, during
the Term or within one (1) year thereafter, which are directly related to the
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Business or other activities of Heartland and which Executive conceives as a
result of his employment by Heartland or any Subsidiary or other Affiliate (the
"Intellectual Property"). Executive hereby assigns and agrees to assign all his
interests in the Intellectual Property to Heartland or its nominee. Whenever
requested to do so by Heartland, Executive shall execute any and all
applications, assignments or other instruments that Heartland shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect under relevant law Heartland's exclusive
proprietary interest in the Intellectual Property.
8. Termination. Executive's employment hereunder may be terminated by
Heartland or Executive, as applicable, without any breach of this Agreement,
only under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate
upon his death.
(b) Disability. Executive's employment hereunder shall
terminate upon his Permanent Disability.
(c) Cause. Heartland may terminate Executive's employment
hereunder for Cause.
(d) Good Reason. Executive may terminate his employment
hereunder for Good Reason.
9. Compensation Upon Termination. Executive shall be entitled to the
following compensation from Heartland upon the termination of his employment:
(a) Death. If Executive's employment shall be terminated by
reason of his death, Heartland shall pay to such Person as shall have been
designated in a notice filed with Heartland prior to Executive's death, or, if
no such Person shall be designated, to his estate as a death benefit, his Base
Salary to the date of his death in addition to any payments Executive's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any Plan
maintained by Heartland.
(b) Disability. During any period that Executive fails to
perform his material executive duties and responsibilities hereunder as a result
of incapacity due to physical or mental illness, Executive shall continue to
receive his Base Salary and bonus payments, if any, until Executive's employment
is terminated pursuant to expiration of the Term, pursuant to Subsection 8(b)
hereof. After such termination, Heartland shall pay to Executive, on or before
the fifth day following the Date of Termination (as hereinafter defined) his
Base Salary to the Date of Termination.
(c) Cause. If Executive's employment shall be terminated for
Cause, Heartland shall pay Executive his Base Salary through the Date of
Termination at the rate in effect at the time
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Notice of Termination (as defined below) is given. Such payments shall fully
discharge Heartland's obligations hereunder.
(d) Severance Benefit. If, prior to the expiration of the
Term, either (i) Executive's employment with Heartland is terminated by
Heartland other than (A) for Cause or (B) on account of Executive's death or
Permanent Disability, or (ii) Executive resigns from Heartland for Good Reason,
then Heartland shall pay to Executive, in a single lump sum which shall be paid
within 30 days after the termination of employment or resignation, a severance
payment in an amount equal to Executive's Base Salary (excluding all bonuses, if
any) at the rate then in effect, for the balance of the stated Term (determined
without regard to such termination or resignation, and also without regard to an
extension thereof that might result but for (and after) such termination or
resignation); provided that Heartland shall be permitted to make all such
payments net of any legally required tax withholdings.
10. Other Provisions Relating to Termination.
(a) Notice of Termination. Any termination of Executive's
employment by Heartland or by Executive (other than termination because of the
death of Executive) shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean: (1) if Executive's employment is terminated by his
death, the date of his death; (2) if Executive's employment is terminated
because of a Permanent Disability pursuant to Subsection 8(b), then thirty (30)
days after Notice of Termination is given (provided that Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty (30) day period); (3) if Executive's employment is terminated by
Heartland for Cause, then, subject to Subsection 9(c), the date specified in the
Notice of Termination; or (4) if Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is given.
(c) Cause. In the case of any termination of Executive for
Cause, Heartland will give Executive a Notice of Termination describing in
reasonable detail the facts or circumstances giving rise to Executive's
termination (and, if curable, the action required to cure same) and will permit
Executive thirty (30) days to cure such failure to comply or perform and an
opportunity to discuss the facts and circumstances regarding the Notice of
Termination with the Board of Directors. Executive's termination for Cause shall
be effective as of the date specified in the Notice of Termination or, if
Executive's failure to comply is curable, shall be effective within thirty (30)
days following Executive's receipt of a Notice of Termination for Cause unless
Executive has cured the facts or circumstances giving rise to Executive's
termination for Cause.
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11. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, Executive's heirs and
legal representatives and Heartland's successors and assigns. This Agreement is
assignable by Heartland in connection with a reorganization, merger or
consolidation in which Heartland is not the surviving entity, or a sale of all
or substantially all of the assets of Heartland (a "Transaction"). In connection
with any such Transaction, Heartland shall, as a condition to consummation of
the Transaction, require the surviving or acquiring entity or Person to assume
in writing the obligations of Heartland under this Agreement. Upon any such
assumption, Heartland shall be released from all liability hereunder.
Executive's rights and obligations under this Agreement are personal in nature
and shall not be assignable by Executive.
12. Certain Payments. If Executive should die while any amounts would
still be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee or, if there
be no such designee, to Executive's estate.
13. Notice. For purposes of this Agreement, all notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when (a) delivered personally, (b) sent by
facsimile or similar electronic device and confirmed, (c) delivered by overnight
express, or (d) if sent by any other means, upon receipt. Notices and all other
communications provided for in this Agreement shall be addressed as follows:
If to Executive:
Randall C. May
3032 Quail Ridge Circle
Durant, OK 74701
If to Heartland:
200 Chisholm Place, Suite 200
Plano, Texas 75075
Facsimile: (972) 633-0074
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
14. Injunctive Relief. Executive acknowledges and agrees that a remedy
at law for any breach or threatened breach of the provisions of Sections 5, 6,
and 7 hereof would be inadequate and, therefore, agrees that Heartland shall be
entitled to injunctive relief in addition to any other available rights and
remedies in cases of any such breach or threatened breach; provided, however,
that
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nothing contained herein shall be construed as prohibiting Heartland from
pursuing any other rights and remedies available for any such breach or
threatened breach.
15. Arbitration. Subject to Section 14 above, any unresolved dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three (3) arbitrators
(each with experience in the area of senior executive employment) in Dallas,
Texas, in accordance with the rules of the American Arbitration Association then
in effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof or to award punitive damages to any injured
party. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be shared
equally by the parties.
16. Miscellaneous. This Agreement constitutes the entire and final
expression of the agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in a written instrument signed by Executive and
Heartland. No waiver by either party hereto of, or compliance with, any
condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction, enforceability and
performance of this Agreement shall be governed by the laws of the State of
Texas, excluding any conflicts of law principles thereof. Neither this Agreement
nor any right or interest hereunder shall be assignable by Executive or his
beneficiaries or legal representatives without Heartland's prior written
consent; provided, however, that nothing in this Section 16 shall preclude
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
17. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Executive agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of Section 5, 6, or 7 hereof
is void or constitutes an unreasonable restriction against Executive, the
provisions of such Section 5, 6, or 7, as applicable, shall not be rendered void
but shall apply with respect to such reasonable restriction under the
circumstances.
18. Survival. The representations, warranties or covenants contained in
Sections 2(b)(i) and 7 of this Agreement shall survive indefinitely any
termination of this Agreement. The foregoing is without prejudice to express
time periods set forth in other sections of this Agreement.
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19. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
20. Legal Fees and Expenses. The prevailing party in any dispute or
controversy under or in connection with this Agreement (whether in arbitration
or otherwise) shall be entitled to reimbursement from the non-prevailing party
for all costs and reasonable legal fees incurred by such prevailing party. If
such dispute or controversy is resolved through arbitration, then the
arbitrators shall have the authority to determine the identity of the prevailing
party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEARTLAND WIRELESS RANDALL C. MAY
COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ C.D. McHenry /s/ Randall C. May
---------------------- ---------------------
Name: Carroll D. McHenry Signature
--------------------
Title: Chairman & CEO
--------------
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 8th day of April, 1998, between Heartland Wireless Communications,
Inc., a Delaware corporation ("Heartland"), and Wayne M. Taylor ("Executive").
WHEREAS, Executive currently is the Vice President -- Administration of
Heartland; and
WHEREAS, it is the desire of the Board of Directors of Heartland (the
"Board of Directors") to assure itself of the continued services of Executive by
directly engaging Executive as an officer of Heartland and, as provided herein,
its subsidiaries and affiliates; and
WHEREAS, Executive desires to commit himself to serve Heartland on the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
definitions apply:
(a) Affiliate: shall mean, with respect to any Person, any
other Person that directly or indirectly controls, is controlled by, or is under
common control with the Person in question. As used in this definition of
"Affiliate," the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person.
(b) Cause: shall mean,
(i) a finding by a majority of the directors of
Heartland that Executive has acted with gross negligence or willful misconduct
in connection with the performance of Executive's duties as an officer of
Heartland;
(ii) a finding by a majority of the directors of
Heartland that Executive has engaged in a material act of insubordination or of
common law fraud against Heartland or its employees;
(iii) a finding by a majority of the directors of
Heartland that Executive has acted against the best interests of Heartland in a
manner that has or could have a material adverse affect on the financial
condition of Heartland;
(iv) a finding by a majority of the directors of
Heartland of criminal conduct by Executive (other than minor infractions and
traffic violations) or the conviction of Executive, by a court of competent
jurisdiction, of any felony (or plea of nolo contendere thereto);
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(v) a finding by a majority of the directors of
Heartland of a material violation by Executive of his duty of loyalty to
Heartland which results or may reasonably be expected to result in material
injury to Heartland or any Subsidiary;
(vi) a finding by a majority of the directors of
Heartland of a willful violation by Executive of Executive's covenants and
obligations under Sections 5 (Non-Competition), 6 (Confidentiality), or 7
(Intellectual Property) of this Agreement; or
(vii) a finding by a majority of the directors of
Heartland of chronic alcohol or drug abuse by Executive.
For purposes of the foregoing definition, if Executive is a director of
Heartland at the time in question, then Executive shall absent himself from any
portion of any meeting of the Board of Directors at which matters of, or
allegations of, Cause are discussed or deliberated, and he shall also abstain
from any vote thereon (or, if he should so vote, then his vote shall not be
considered for purposes of this Agreement) and, in all cases, his status as a
director shall not be considered as such for purposes of the constitution of a
majority.
(c) Competing Business: Any Person, other than Heartland or
any Subsidiary of Heartland, which engages in the Wireless Cable Business.
(d) Confidential Information: shall mean all of Heartland's or
any Subsidiary's trade secrets, know-how, financial information, intellectual
property and other proprietary rights, including without limitation
manufacturing and marketing information, formulae, knowledge, data, budgets,
products, subscriber and other customer lists, computer programs, software,
telephone numbers, prices, costs, personnel, suppliers, developments and
techniques concerning Heartland or its Subsidiaries and the Business (as defined
below) and all of Heartland's books, files, records, documents, plans, drawings,
designs, renderings, estimates, specifications, operating manuals, manuals, user
documentation, product literature, catalogues, marketing materials and similar
items relating to the Business or Heartland.
(e) Geographical Area: shall mean all counties, Basic Trading
Areas, or "BTAs" (as defined by Rand McNally in its 1992 Commercial Atlas and
Marketing Guide and used in the Federal Communications Commission's November
1995 auction of MMDS and MDS authorizations for such BTAs), and other defined
provinces or governmental subdivisions (domestic or international), considered
collectively, in which Heartland or any Subsidiary of Heartland engages in the
Wireless Cable Business at the time of the termination of Executive's employment
with Heartland, or in which Heartland or any Subsidiary of Heartland evidenced
in writing, at any time during the six month period prior to termination of
Executive's employment, its intention to engage in the Wireless Cable Business.
(f) Good Reason: a resignation for Good Reason shall mean the
resignation by Executive from employment by Heartland after:
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(i) any material reduction of Executive's
compensation or benefits to which Executive was entitled immediately before the
reduction; or
(ii) any other material adverse change to the terms
and conditions of Executive's employment or benefits as in effect immediately
before the change;
provided, that, (A) if Executive consents in writing to any event described in
clauses (i) or (ii) of this Subsection 1(f), then Executive's subsequent
resignation shall not be treated as a resignation for Good Reason unless a
subsequent event described in such clauses to which Executive did not consent
occurs and (B) any changes in Executive's discretionary bonus, if any, as from
time to time may be determined by the Board of Directors of Heartland shall not
constitute Good Reason. Notwithstanding the foregoing, Executive shall be
entitled to resign for Good Reason only if any occurrence referred to in clauses
(i) or (ii) of this Subsection 1(f) is not remedied within 30 calendar days
after receipt by Heartland of written notice from Executive setting forth in
reasonable detail the facts and circumstances giving rise to such Good Reason.
(g) Person: shall mean any individual, group, partnership,
corporation, association, trust or other entity or organization.
(h) Permanent Disability: shall mean any physical or mental
disability which renders Executive unable to perform the essential functions of
his job as an employee of Heartland on a full-time basis with or without
reasonable accommodation for 180 calendar days whether or not consecutive,
within any period of 12 consecutive months; provided, however, that during any
period of Executive's disability Heartland may assign Executive's duties to any
other employee of Heartland or any Affiliate of Heartland or may engage or hire
a third party to perform such duties and any such action shall not be deemed
"Good Reason" for Executive to terminate his employment.
(i) Subsidiary: shall mean any non-individual Person of which
a majority of the combined voting power of the outstanding voting securities (or
other voting interests) is owned, directly or indirectly, by Heartland.
(j) Wireless Cable Business: shall mean the installing,
licensing, sale and/or marketing of wireless video or wireless data
communication services utilizing MMDS, MDS or ITFS frequencies (as defined at 47
C.F.R. 21.901 and 47 C.F.R. 74.902 or any successor regulation or statute),
including, without limitation, wireless cable television and direct broadcast
satellite businesses or any other installing, licensing, selling or marketing
services in which Heartland, directly or indirectly through one or more
Subsidiaries, engages.
2. Employment and Term.
(a) Heartland hereby agrees to employ Executive as its Vice
President -- Administration, and Executive hereby agrees to accept such
employment, on the terms and conditions set forth herein, for the period
commencing on the date hereof (the "Effective Date") and
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expiring as of 11:59 p.m. on the first anniversary of the Effective Date (unless
sooner terminated as hereinafter set forth) (the "Term"); provided, however,
that on each anniversary of the Effective Date the Term shall automatically be
extended for one additional year. Provided, further, however, that no such
extension shall result on such anniversary, or on any subsequent anniversary,
if, at least ninety (90) days prior to such anniversary, Heartland or Executive
shall have given notice to the other party that it or he, as applicable, does
not wish to extend this Agreement.
(b) Executive affirms and represents that he (i) is under no
obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, Executive's employment
hereunder by Heartland or Executive's undertakings under this Agreement and (ii)
has read, understands and will comply with the terms and conditions of the
policies and procedures (the "Policies") relating to the conduct of the business
of Heartland (the "Business").
3. Compensation and Related Matters.
(a) Base Salary. Executive shall receive a base salary paid by
Heartland ("Base Salary") at the annual rate of not less than One Hundred Eight
Thousand Dollars ($108,000), payable in such increments as executives of
Heartland normally are paid.
(b) Bonus Payments. Executive shall be eligible to receive, in
addition to the Base Salary: (i) compensation under Heartland's Performance
Incentive Compensation Plan (provided that the performance requirements in such
plan are achieved by Executive); and (ii) compensation under such other bonus
plan, if any, as the Board of Directors or the Option and Compensation Committee
of the Board of Directors may specify (provided that the performance
requirements in such plan are achieved by Executive).
(c) Option Grants. Executive shall be eligible to receive such
stock options, if any, as the Board of Directors or Compensation Committee may
specify, all on the terms and conditions more fully described in the option
agreement(s) pursuant to which such grant(s) is made.
(d) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him (in
accordance with the policies and procedures established by the Board of
Directors for its senior executive officers) in performing services hereunder,
provided that Executive properly accounts therefor in accordance with the
Policies.
(e) Vacations. Executive shall be entitled to three (3) weeks
paid vacation in each calendar year commencing on or after January 1, 1998, or
such additional number as may be determined by the Board of Directors from time
to time. For purposes of this Subsection 3(e), weekend days shall not count as
vacation days. In addition, Executive shall also be entitled to all paid
holidays given by Heartland to its senior executive officers.
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(f) Taxes. All compensation payable to Executive hereunder is
stated in gross amounts and shall be subject to all applicable withholding
taxes, other normal payroll deductions and any other amounts required by law to
be withheld.
4. Duties and Restrictions.
(a) Duties as Employee of Heartland. Executive shall serve as
Heartland's Vice President -- Administration, with all such powers and duties as
may be set forth in Heartland's Bylaws with respect to, and/or are reasonably
incident to, such office. Executive shall report to Heartland's Chief Financial
Officer.
Executive hereby agrees faithfully and conscientiously to
serve Heartland, to devote his full professional time, skill, attention and
energy to the Business and ancillary affairs of Heartland and to perform his
duties hereunder competently, diligently, and to the best of his abilities.
During the Term, Executive shall not be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage and shall render his
professional services exclusively to Heartland or its Subsidiaries, devoting his
full time during normal business hours throughout the Term to the services
required of him hereunder. The foregoing limitation shall not be construed as
prohibiting Executive from making personal investments in such form or manner as
shall not require his services in the operation or affairs of the companies or
enterprises in which such investments are made.
(b) Other Duties. Executive agrees to serve as requested by
the Chief Executive Officer in one or more executive offices of any of
Heartland's Subsidiaries and Affiliates. Executive agrees that he shall not be
entitled to receive any compensation from Heartland for serving in any
capacities of Heartland's Subsidiaries and Affiliates other than the
compensation to be paid to Executive by Heartland pursuant to this Agreement
(except that Executive shall be entitled to retain any director's fees or
similar compensation payable as a result of his service on boards of directors
of companies at the request of Heartland). Executive shall also perform and
discharge such other executive employment duties and responsibilities as the
Chief Executive Officer shall from time to time reasonably prescribe.
5. Non-Competition.
(a) Covenant. Executive acknowledges that during the course of
Executive's engagement by Heartland, Executive will have gained access to
Confidential Information, and may have acquired, developed and/or refined skills
that could be used by Executive to compete against Heartland to the unfair
detriment of Heartland and its future operations. Executive also acknowledges
that Heartland has a legitimate business interest in reasonably limiting the
ability of Executive to use such information and skills to compete directly or
indirectly against Heartland. Accordingly, Executive covenants and agrees that
he will not, directly or indirectly (personally, through any other Person, or as
principal, director, officer, employee, consultant, partner,
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stockholder, trustee, manager or otherwise), during the Term hereof and for a
period of two (2) years following the termination of his employment with
Heartland:
(i) engage in the Wireless Cable Business in the
Geographical Area;
(ii) perform, for any Competing Business which
operates a Wireless Cable Business in the Geographical Area, any duties
substantially similar to those duties performed by Executive or his subordinates
during the Term;
(iii) employ or engage the services of any Person who
was a salaried employee of or a consultant to Heartland during the six (6)
months preceding such termination, or induce, request, advise, attempt to
influence or solicit, any Person who was a salaried employee of or consultant to
Heartland during the six (6) months preceding such termination, to terminate his
or her employment or consulting arrangement with Heartland;
(iv) lend credit, money or reputation for the purpose
of establishing or operating a business substantially similar to the Wireless
Cable Business in the Geographical Area;
(v) do any act that Executive knows or should know
might injure Heartland or that might divert subscribers or other customers,
suppliers or employees from the Business; or
(vi) without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business under the
name "Heartland Wireless Communications," or any other trade names, trademarks
or service marks used by Heartland within the Geographical Area;
For purposes of this Section 5 only, the term "Heartland" shall include
Heartland and all Subsidiaries at the time the covenants in this Section 5 are
in force or are to be enforced.
(b) Tolling of Non-Competition Term. If, during any calendar
month after the termination of Executive's employment by Heartland in which the
provisions of Subsection 5(a) are applicable, Executive is not in compliance
with the terms of Subsection 5(a), Heartland shall be entitled to, among other
remedies, demand compliance by Executive with the terms of Subsection 5(a) for
an additional number of calendar months that equals the number of calendar
months during which such noncompliance occurred.
(c) Reasonableness of Restrictions. Executive acknowledges
that the geographic boundaries, scope of prohibited activities, and time
duration of the provisions of Subsection 5(a) are reasonable and are no broader
than are necessary to maintain and to protect the legitimate business interests
of Heartland.
(d) Separate Covenants. The parties hereto intend that the
covenants contained in Subsection 5(a) of this Agreement be construed as a
series of separate covenants, one for each
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county, BTA or other defined province or governmental subdivision in each
Geographical Area in which Heartland conducts business. Except for geographic
coverage, each such separate covenant shall be deemed identical in terms to the
applicable covenant contained in Subsection 5(a) hereof. Furthermore, each of
the covenants in Subsection 5(a) hereof shall be deemed a separate and
independent covenant, each being enforceable irrespective of the enforceability
(with or without reformation) of the other covenants contained in Subsection
5(a) hereof.
6. Confidentiality.
(a) Executive shall not, except as otherwise provided in this
Agreement, directly or indirectly, at any time during or, for a two (2) year
period after the Term hereof, reveal, divulge or make known to any Person or use
for Executive's personal benefit (including without limitation for the purpose
of soliciting business, whether or not competitive with any business of
Heartland or any Subsidiary, or employees of Heartland or any Subsidiary), or
for the benefit of any Person in a Competing Business, any Confidential
Information acquired by Executive during the course of employment by Heartland.
The following information shall not be restricted under this Section 6:
(i) information already in the public domain;
(ii) information that Executive can demonstrate was
already in his possession before the time of disclosure without breach of
agreement or violation of law; or
(iii) information that Executive is required to
disclose under the following circumstances: (A) at the express direction of any
authorized governmental authority; (B) pursuant to a valid subpoena or other
court process; (C) as otherwise required by law or the rules, regulations, or
orders of any applicable regulatory body; or (D) as otherwise necessary, in the
written opinion of counsel for Executive, to be disclosed by Executive in
connection with any legal action or proceeding involving Executive and Heartland
or any Subsidiary in his capacity as an employee, officer, director, or
stockholder of Heartland or any Subsidiary; provided that, in the event of any
required disclosure, Executive shall, as soon as reasonably possible, provide
prior written notice of such required disclosure to Heartland and provide
Heartland the opportunity to defend against, limit or ensure confidential
treatment of such information required to be disclosed, and such disclosure
shall be permitted only to the extent so required.
(b) Executive shall, at the termination of his employment with
Heartland or at any time requested by Heartland (either during or within two (2)
years after the termination of Executive's employment with Heartland), promptly
deliver to Heartland all materials containing Confidential Information which
Executive may then possess or have under his control.
7. Intellectual Property. Executive shall disclose promptly to
Heartland any and all significant conceptions and ideas for innovations,
inventions, improvements and valuable discoveries, whether patentable or not,
which are conceived or made by Executive, solely or jointly with another, during
the Term or within one (1) year thereafter, which are directly related to the
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Business or other activities of Heartland and which Executive conceives as a
result of his employment by Heartland or any Subsidiary or other Affiliate (the
"Intellectual Property"). Executive hereby assigns and agrees to assign all his
interests in the Intellectual Property to Heartland or its nominee. Whenever
requested to do so by Heartland, Executive shall execute any and all
applications, assignments or other instruments that Heartland shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect under relevant law Heartland's exclusive
proprietary interest in the Intellectual Property.
8. Termination. Executive's employment hereunder may be terminated
by Heartland or Executive, as applicable, without any breach of this Agreement,
only under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate
upon his death.
(b) Disability. Executive's employment hereunder shall
terminate upon his Permanent Disability.
(c) Cause. Heartland may terminate Executive's employment
hereunder for Cause.
(d) Good Reason. Executive may terminate his employment
hereunder for Good Reason.
9. Compensation Upon Termination. Executive shall be entitled to the
following compensation from Heartland upon the termination of his employment:
(a) Death. If Executive's employment shall be terminated by
reason of his death, Heartland shall pay to such Person as shall have been
designated in a notice filed with Heartland prior to Executive's death, or, if
no such Person shall be designated, to his estate as a death benefit, his Base
Salary to the date of his death in addition to any payments Executive's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any Plan
maintained by Heartland.
(b) Disability. During any period that Executive fails to
perform his material executive duties and responsibilities hereunder as a result
of incapacity due to physical or mental illness, Executive shall continue to
receive his Base Salary and bonus payments, if any, until Executive's employment
is terminated pursuant to expiration of the Term, pursuant to Subsection 8(b)
hereof. After such termination, Heartland shall pay to Executive, on or before
the fifth day following the Date of Termination (as hereinafter defined) his
Base Salary to the Date of Termination.
(c) Cause. If Executive's employment shall be terminated for
Cause, Heartland shall pay Executive his Base Salary through the Date of
Termination at the rate in effect at the time
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Notice of Termination (as defined below) is given. Such payments shall fully
discharge Heartland's obligations hereunder.
(d) Severance Benefit. If, prior to the expiration of the
Term, either (i) Executive's employment with Heartland is terminated by
Heartland other than (A) for Cause or (B) on account of Executive's death or
Permanent Disability, or (ii) Executive resigns from Heartland for Good Reason,
then Heartland shall pay to Executive, in a single lump sum which shall be paid
within 30 days after the termination of employment or resignation, a severance
payment in an amount equal to Executive's Base Salary (excluding all bonuses, if
any) at the rate then in effect, for the balance of the stated Term (determined
without regard to such termination or resignation, and also without regard to an
extension thereof that might result but for (and after) such termination or
resignation); provided that Heartland shall be permitted to make all such
payments net of any legally required tax withholdings.
10. Other Provisions Relating to Termination.
(a) Notice of Termination. Any termination of Executive's
employment by Heartland or by Executive (other than termination because of the
death of Executive) shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean: (1) if Executive's employment is terminated by his
death, the date of his death; (2) if Executive's employment is terminated
because of a Permanent Disability pursuant to Subsection 8(b), then thirty (30)
days after Notice of Termination is given (provided that Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty (30) day period); (3) if Executive's employment is terminated by
Heartland for Cause, then, subject to Subsection 9(c), the date specified in the
Notice of Termination; or (4) if Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is given.
(c) Cause. In the case of any termination of Executive for
Cause, Heartland will give Executive a Notice of Termination describing in
reasonable detail the facts or circumstances giving rise to Executive's
termination (and, if curable, the action required to cure same) and will permit
Executive thirty (30) days to cure such failure to comply or perform and an
opportunity to discuss the facts and circumstances regarding the Notice of
Termination with the Board of Directors. Executive's termination for Cause shall
be effective as of the date specified in the Notice of Termination or, if
Executive's failure to comply is curable, shall be effective within thirty (30)
days following Executive's receipt of a Notice of Termination for Cause unless
Executive has cured the facts or circumstances giving rise to Executive's
termination for Cause.
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11. Successors; Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, Executive's heirs and
legal representatives and Heartland's successors and assigns. This Agreement is
assignable by Heartland in connection with a reorganization, merger or
consolidation in which Heartland is not the surviving entity, or a sale of all
or substantially all of the assets of Heartland (a "Transaction"). In connection
with any such Transaction, Heartland shall, as a condition to consummation of
the Transaction, require the surviving or acquiring entity or Person to assume
in writing the obligations of Heartland under this Agreement. Upon any such
assumption, Heartland shall be released from all liability hereunder.
Executive's rights and obligations under this Agreement are personal in nature
and shall not be assignable by Executive.
12. Certain Payments. If Executive should die while any amounts would
still be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee or, if there
be no such designee, to Executive's estate.
13. Notice. For purposes of this Agreement, all notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when (a) delivered personally, (b) sent by
facsimile or similar electronic device and confirmed, (c) delivered by overnight
express, or (d) if sent by any other means, upon receipt. Notices and all other
communications provided for in this Agreement shall be addressed as follows:
If to Executive:
Wayne M. Taylor
3036 Quail Ridge Circle
Durant, OK 74701
If to Heartland:
200 Chisholm Place, Suite 200
Plano, Texas 75075
Facsimile: (972) 633-0074
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
14. Injunctive Relief. Executive acknowledges and agrees that a remedy
at law for any breach or threatened breach of the provisions of Sections 5, 6,
and 7 hereof would be inadequate and, therefore, agrees that Heartland shall be
entitled to injunctive relief in addition to any other available rights and
remedies in cases of any such breach or threatened breach; provided, however,
that
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nothing contained herein shall be construed as prohibiting Heartland from
pursuing any other rights and remedies available for any such breach or
threatened breach.
15. Arbitration. Subject to Section 14 above, any unresolved dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three (3) arbitrators
(each with experience in the area of senior executive employment) in Dallas,
Texas, in accordance with the rules of the American Arbitration Association then
in effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof or to award punitive damages to any injured
party. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be shared
equally by the parties.
16. Miscellaneous. This Agreement constitutes the entire and final
expression of the agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in a written instrument signed by Executive and
Heartland. No waiver by either party hereto of, or compliance with, any
condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction, enforceability and
performance of this Agreement shall be governed by the laws of the State of
Texas, excluding any conflicts of law principles thereof. Neither this Agreement
nor any right or interest hereunder shall be assignable by Executive or his
beneficiaries or legal representatives without Heartland's prior written
consent; provided, however, that nothing in this Section 16 shall preclude
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
17. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Executive agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of Section 5, 6, or 7 hereof
is void or constitutes an unreasonable restriction against Executive, the
provisions of such Section 5, 6, or 7, as applicable, shall not be rendered void
but shall apply with respect to such reasonable restriction under the
circumstances.
18. Survival. The representations, warranties or covenants contained in
Sections 2(b)(i) and 7 of this Agreement shall survive indefinitely any
termination of this Agreement. The foregoing is without prejudice to express
time periods set forth in other sections of this Agreement.
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19. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
20. Legal Fees and Expenses. The prevailing party in any dispute or
controversy under or in connection with this Agreement (whether in arbitration
or otherwise) shall be entitled to reimbursement from the non-prevailing party
for all costs and reasonable legal fees incurred by such prevailing party. If
such dispute or controversy is resolved through arbitration, then the
arbitrators shall have the authority to determine the identity of the prevailing
party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEARTLAND WIRELESS WAYNE M. TAYLOR
COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Marjean Henderson /s/ Wayne M. Taylor
------------------------ ---------------------
Name: Marjean Henderson Signature
---------------------
Title: Sr. V.P., CFO
--------------------
12
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0
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