CONSULTING AGREEMENT
This
CONSULTING AGREEMENT, dated as of this 12th day of May 2008 (the “Effective
Date”), is between Document Security Systems, Inc. (the “Company”) and Xxxxx
Xxxxxxxx (“Consultant”).
R
E C I T
A L S:
WHEREAS,
the Company has agreed to retain Consultant to provide professional and advisory
services and consultation as more fully described below, and Consultant is
willing to provide such services on the terms and for the consideration set
out
below.
NOW,
THEREFORE, in consideration of the foregoing and the mutual promises contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, it is hereby agreed as follows:
SECTION
1. Appointment.
The
Company hereby appoints Consultant and Consultant hereby agrees to serve the
Company in the capacity of a consultant to the Company. Consultant’s appointment
shall commence on May 12, 2008 and shall terminate on May 11, 2009 (the “Initial
Term”). If this Agreement shall continue to be in full force and effect as of
the expiration date of the Initial Term, and there shall not be existing a
default under this Agreement as of the expiration of the Initial Term, this
Agreement shall automatically continue for successive periods of one (1) year
each (each an “Additional Renewal
Term”
and
together with the Initial Term the “Term”), unless terminated by either party
hereto upon written notice to the other at least thirty (30) days prior to
the
expiration of the Initial Term or the then-current Additional Renewal Term,
as
applicable. This Agreement and the consulting arrangement described herein
may
only be terminated by prior to the end of the Term if: (i) a party hereto
materially breaches any of its material obligations under this Agreement, (ii)
the non-breaching party is given written notice of such a breach, and such
breach is not reasonably cured within thirty (30) days of such notice.
SECTION
2. Duties.
During
the Term, Consultant shall provide the Services (as described below in Section
4) to the Company, during normal business hours, as and when reasonably
requested by the Company from time to time and at such times as are mutually
agreeable (by telephonic conference if reasonably acceptable to the Company).
Consultant’s services hereunder may only be requested and supervised by the
Company’s CEO or his written designee or successor. In no event shall Consultant
be deemed, or be obligated to perform duties as a manager or executive of the
Company or any of its subsidiaries, although he shall be reasonably available
to
provide the assistance hereunder, as provided in Section 3.
SECTION
3. Time
Spent; Office; Equipment.
At the
request of the Company, Consultant shall be reasonably available to provide
Services during the Term, at such times determined by mutual agreement of the
parties.
The
Company shall not provide Consultant with an office nor any other equipment,
materials, and supplies, unless the parties otherwise mutually
agree.
SECTION
4. Services.
(a) During
the Term, Consultant may represent the Company as provided in this Section
4 in
order to sell the products and services of the Company.
(b) Consultant
and the Company agree to use commercially reasonable efforts to sell products
and services of the Company, either directly through the efforts of Consultant
individually or through a mutually agreeable entity that Consultant is an
employee or principal.
(c) Unless
otherwise agreed to in writing by the Company, Consultant shall be solely
responsible for all costs and expenses of any kind directly or indirectly
incurred by Consultant. The Company agrees to reimburse Consultant for
reasonable, documented costs incurred and paid by Consultant upon the
consummation of a sale of products or services of the Company that was the
result of the direct efforts of Consultant; provided, however, that such
reimbursement of expenses shall not exceed 5% of the net profit of the Company
on such sale of products or services.
(d) All
sales
of the products and services of the Company made pursuant to this Agreement
shall be on terms and conditions that are acceptable to the Company in its
sole
discretion.
(e) Notwithstanding
anything to the contrary contained herein, Consultant shall not make any
material contacts with any potential purchasers of the Company’s products or
services without the prior written consent of the Company. Consultant shall
clearly inform any such potential purchaser that he is acting in the capacity
of
a consultant to the Company and is not an officer or director of the
Company.
(f) Except
as
provided in Section 4(g) below or as otherwise agreed in writing by the parties
hereto, Consultant shall receive a 15% commission of the net profit on (i)
all
sales of products or services of the Company that are consummated during the
Term as a direct result of the efforts of Consultant during the Term and (ii)
all sales of products or services of the Company that are consummated during
or
after the Term as a result of an agreement entered into by the Company during
the Term as a direct result of the efforts of Consultant during the Term. For
clarification purposes and without limiting the foregoing, Consultant shall
not
be entitled to any commission, remuneration or reimbursement of expenses for
sales of products of services of the Company that are a result of efforts of
Consultant or others that occurred prior to the Term or after the Term.
(g) The
Company and Consultant acknowledge and agree that, notwithstanding provisions
to
the contrary contained herein, Consultant shall be entitled to continue to
work
with those existing potential clients of the Company listed below in Section
4(g)(i) (collectively, the “Existing Potential Clients”) on a non-exclusive
basis during the Term. Any sales by Consultant of the products or services
of
the Company to any of the Existing Potential Clients shall entitle Consultant
to
a 5% commission of the net profit on (i) all sales of products or services
of
the Company that are consummated during the Term as a direct result of the
efforts of Consultant during the Term and (ii) all sales of products or services
of the Company that are consummated during or after the Term as a result of
an
agreement entered into by the Company during the Term as a direct result of
the
efforts of Consultant during the Term.
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(i) The
Existing Potential Clients shall consist of:
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(A)
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Indra
Sistemas S.A. and all entities affiliated with Indra Sistemas and/or
its
current officers and directors;
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(B)
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The
country of Morocco;
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(C)
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International
Barcode Corporation, d/b/a BTI Technologies (“BTI”); provided, however,
that Consultant shall not be entitled to any commission in connection
with
a license agreement or similar agreement entered into between the
Company
and BTI’s licensee in the Philippines that have been substantially
negotiated as of the Effective Date.
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(D)
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Licensees
of BTI in France, and all entities affiliated with such licensees
and/or
its current officers and directors that Consultant has had meaningful
discussions with prior to the Term.
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(h)
The
Company acknowledges that Consultant believes that he or entities affiliated
with Consultant have strong ties in the operation and management of airports
and
maritime ports in South America, Central America, Europe and Australia and
that
contacts that may derive from such introductions may lead to licensing and
other
commercial opportunities for DSS in connection with maritime port, airport
and
related security operations (collectively, “Ports”). Commissions payable to
Consultant as a result of sales of the Company’s products or services to Ports
shall be pursuant to the terms and conditions, including commission rate, as
specified in Section 4(f) hereof; provided, however, that if such Port is an
Existing Potential Client that such commission shall be pursuant to Section
4(g). If Consultant has presented Company with a substantive, written proposal
on terms that are reasonably acceptable to the Company from the owner or
operator of such a facility or significant representations by the consultant
of
their interest for such facility to purchase the Company’s products and services
and the Company does not accept such proposal, Consultant shall be entitled
to a
5% commission of the Company’s net profit of any sales of products or services
of the Company to such port that are made during the immediately following
six-month period; provided, however, that such 5% commission shall not exceed
the amount of the commission that would have been payable to Consultant if
the
proposal submitted by, through or as a result of him were accepted by the
Company. The Company and agrees not to not directly or indirectly contact these
entities once the sales target has been approved in writing by the
Company.
(i)
Without
limiting anything contain herein, the Company shall only be liable for payment
of commission, remuneration or reimbursement of expenses to Consultant for
those
transactions that are agreed to in writing by the Company in its sole discretion
and such payments are clearly identified in such agreement. The only
compensation or remuneration Consultant shall be entitled to from the Company
pursuant to this Agreement shall be the commission payments as provided in
this
Section 4.
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SECTION
5. Confidentiality
Obligations.
In
consideration for the fees paid hereunder, Consultant agrees that he will not,
at any time, either during the Term of this Agreement or thereafter, divulge,
use, publish or in any other manner reveal, information obtained or learned
during the course of his engagement with the Company or otherwise, whether
before or after the date of this Agreement, with regard to the operational,
financial, business or other affairs and activities of the Company or any of
its
subsidiaries and affiliates, their officers, directors or employees, except
(i) as may be necessary to the performance of his duties hereunder; (ii)
with the express written consent of the Chief Executive Officer of the Company;
(iii) to the extent that any such information is in the public domain other
than
as a result of Consultant’s breach of any obligations hereunder; (iv) where
required to be disclosed by court order, subpoena or other government process;
or (v) to the extent such information was disclosed to Consultant by a third
party who is not subject to restriction on the dissemination of such
information. Consultant shall promptly notify the General Counsel of the Company
as soon as reasonably practicable after learning of such court order, subpoena
or government process. In such event, at the Company’s expense, Consultant
shall: (a) take all reasonably necessary steps requested by the General Counsel
to defend against the enforcement of such court order, subpoena or other
governmental process; and (b) permit the Company to intervene and participate
with counsel of its choice in any proceeding relating to the enforcement
thereof.
SECTION
6. Non-Competition
Covenant; Non Solicitation Covenant.
Consulting acknowledges and agrees that, except as otherwise provided
herein:
(a) Consultant
shall not during the Term or one year thereafter, either as an employee,
employer, consultant, agent, principal, partner, stockholder, corporate officer,
director or in any other individual or representative capacity, engage or
participate, invest in (except for investments of less than 5% of a business
entity’s capitalization) or become employed by any business that is in direct
competition with the business of the Company as of the Effective Date. For
purposes hereof, businesses that are in direct competition shall include,
without limitation, those that sell optical deterrent technologies;
(b) Consultant
shall not, directly or indirectly, influence or attempt to influence, or assist
or advise any person attempting to influence, customers, distributors, partners
or suppliers of the Company (i) to divert any part of their business away from
the Company, (ii) to cause damage to the business of the Company, or (iii)
to do
any material business with any competitor of the Company; and
(c) Consultant
shall not, directly or indirectly, solicit or recruit any employee, officer,
partner or consultant of the Company to leave the employment of the Company
or
terminate his/her relationship with the Company and Consultant shall not advise
or otherwise assist any other person to solicit or recruit any former employee,
officer, partner or consultant of the Company; provided, however, the Company
shall not unreasonably withhold its consent for Consultant to engage a
consultant of the Company.
(d)
Consultant
agrees that the prohibitions contained herein are reasonable and valuable to
the
Company, and are express conditions of the Company’s decision to engage him. If
any court shall hold that the duration, scope or any other provision of
non-competition or any other restriction contained in this Section 6 is
unenforceable, it is the parties hereto intention that same shall not thereby
be
terminated but shall be deemed amended to delete therefrom such provision or
portion adjudicated to be invalid or unenforceable or, in the alternative,
such
judicially substituted term may be substituted therefor.
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SECTION
7. Indemnification.
Consultant agrees to defend, indemnify and hold the Company harmless from any
liability, loss, costs, damages, and penalties (and related expenses and
attorney fees) arising directly or indirectly in the course of providing
Services under this Agreement, from Consultant’s (i) acts or omissions that
constitute gross negligence or willful misconduct, or (ii) breach of any
employment or contractual obligation that he may have towards any person other
than the Company or its affiliates. The Company shall not be liable to
Consultant for any acts or omissions by Consultant in the performance of his
duties under this Agreement.
SECTION
8. Relationship
Between the Parties.
Consultant’s relationship with the Company is that of an independent contractor,
and nothing in this Agreement is intended to, or should be construed to, create
any relationship of partnership, agency or employer and employee between the
Company and Consultant. As a consequence, (a) Consultant shall have no authority
to make any representation, commitment, or enter into contracts or agreements
on
behalf of the Company unless specifically required or approved in writing to
do
so by an executive officer of the Company; (b) all taxes that might be due
and
payable as a result of the services or receipt of fees under this Agreement
by
Consultant in whatever jurisdiction shall be the sole responsibility of
Consultant (and Consultant hereby agrees to indemnify Company against tax
liability); (c) Consultant will not be eligible to participate in the Company’s
pension or other fringe benefit program (including but not limited to group
health insurance), nor will he be covered by the Company’s workers’ compensation
insurance; and (d) no
part
of Consultant's compensation will be subject to payroll taxes. The Company
will
regularly report amounts paid to Consultant by filing Form 1099-MISC with the
Internal Revenue Service.
SECTION
9. Miscellaneous.
(a) Notices.
(i) All
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by overnight courier:
(1) if
to
Consultant, at 0000 Xxxx Xxxxxx Xxxx, Xxxxxx Xxxxxxx, XX 00000, or at such
other
address as Consultant may have furnished the Company in writing,
(2) if
to the
Company, at 00 Xxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, marked for the
attention of the General Counsel, or at such other address as it may have
furnished in writing to Consultant, or
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(ii) Any
notice so addressed shall be deemed to be given: if delivered by hand, on the
date of such delivery; and if mailed by overnight courier, on the first business
day following the date of such mailing.
(b) Amendment;
Entire Agreement.
This
Agreement may be amended, assigned, and the observance of any term of this
Agreement may be waived, with (and only with) the written consent of each of
the
parties hereto. This Agreement and that certain Confidential Separation
Agreement and General Release, dated May 10, 2008, between Consultant and the
Company, and the other agreements referenced herein, constitute the entire
agreement between the parties with respect to the subject matter contained
herein and therein.
(c) Severability.
If any
provision of this Agreement shall be held to be invalid, it shall not affect
the
validity or enforceability of any other provision of this Agreement, but shall
remain in full force and effect.
(d) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to its conflict of law rules.
(e) Section
Headings.
The
headings of the sections and subsections of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part
thereof.
(f) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original and all of which together shall be considered one and the
same agreement.
(g) Arbitration.
Any
dispute arising out of or relating to this Agreement shall be finally determined
by arbitration in the State of New York in accordance with the employment
arbitration rules of the American Arbitration Association. In such arbitration,
(i) the arbitrator shall agree to treat all evidence as confidential; (ii)
the
arbitrator shall have no authority to amend or modify any of the terms of this
Agreement; (iii) the arbitrator shall have ten business days from the closing
statements or submission of post-hearing briefs by the parties to render his
or
her decision. The results of any such arbitration shall be final and binding
upon the parties hereto, and any party may enforce any arbitration award in
any
court of competent jurisdiction. The prevailing party as determined by the
trier
of fact shall be entitled to recover all of its reasonable attorneys’ fees and
legal costs incurred in connection with the arbitration.
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IN
WITNESS WHEREOF, the undersigned have executed this Agreement on the day and
year first above written.
| DOCUMENT SECURITY SYSTEMS, INC. | ||
| |
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| By: | /s/ Xxxxxxx Xxxxx | |
| Name: Xxxxxxx Xxxxx | ||
| Title: Chief Executive Officer | ||
| /s/ Xxxxx Xxxxxxxx | ||
| Xxxxx Xxxxxxxx | ||
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