CONSULTING AGREEMENT
THIS
CONSULTING AGREEMENT is entered into as of January
1,
2007
between IElement Corporation, a Nevada corporation (the “Company”) and Kramerica
Capital Corporation
(“Consultant”).
RECITAL
The
Company and Consultant desire to enter into this Agreement to insure the
Company
of the services of Consultant, to provide for compensation and other benefits
to
be paid and provided by the Company to Consultant in connection therewith,
and
to set forth the rights and duties of the parties in connection therewith;
NOW,
THEREFORE, in consideration of the mutual promises herein contained, the
parties
hereby agree as follows:
1. Services.
a. The
Company hereby hires Consultant to consult with the Board of Directors, Chairman
and Chief Executive Officer, and Consultant hereby accepts such retention,
on
the terms and conditions set forth herein. During the term of this Agreement,
Consultant shall devote its entire business time and all reasonable efforts
to
the Consulting and shall perform diligently such duties as are customarily
performed by a high level executive consultant for companies the size and
structure of the Company, together with such other duties as may be reasonably
required from time to time by the Board of Directors of the Company. Without
limiting the generality of any of the foregoing, except as hereafter expressly
agreed in writing by Consultant, Consultant shall report to the Board of
Directors.
b. Relationship.
It is
the intent and purpose of the parties hereto that the relationship of the
Contractor to the Company shall be that of an independent contractor. The
Contractor has sole and exclusive control over its business, independent
of the
Company.
2. Term.
Subject to the provisions for termination hereinafter provided, the term
of this
Agreement shall begin on January 1, 2007 and shall terminate on the earlier
of:
(i) December 31, 2011 or (ii) the termination of Consultant’s Consulting in
accordance with the provisions of Paragraph 6 below; provided, however, that
the
term of this Agreement shall automatically renew for successive one year
terms,
unless Consultant or the Company gives written notice to the other, not less
than ninety (90) days prior to December 31, 2011 or the expiration of any
such one-year term, of their election not to so extend the term of this
Agreement (the “Consulting Period”).
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3. Compensation.
a. Base
Fee.
For all services Consultant may render to the Company during the term of
this
Agreement, the Company shall pay to Consultant the annual base fee of $264,000
in regular monthly installments of $22,000 per month.
b. Bonuses.
i. Performance
Bonus. As additional consideration for Consultant's services to the Company
hereunder, the Company shall pay Consultant a bonus (the "Performance Bonus"),
based upon the Company's performance during the Consulting Term, in the form
of
cash and options to purchase shares of the Company's Common Stock. In
particular, Consultant shall be entitled to a one million dollar ($1,000,000)
bonus upon the Company achieving a twelve million dollars ($12,000,000) gross
annualized ($1 million in monthly) revenue benchmark. Consultant shall be
entitled to a two million dollar ($2,000,000) bonus upon the Company achieving
a
twenty two million dollars ($22,000,000) gross annualized ($1,833,333 in
monthly) revenue benchmark. Consultant shall be entitled to a three million
dollar ($3,000,000) bonus upon the Company achieving a thirty million dollars
($30,000,000) gross annualized ($2,500,000 in monthly) revenue benchmark.
Following the Company achieving the $30,000,000 gross annualized ($2,500,000
in
monthly) revenue benchmark, Consultant and the Company shall determine
additional future benchmarks for additional Performance Bonus payments. The
bonus shall be deemed earned and shall be payable upon issuance of the Company’s
audited annual financial statements reflecting gross annualized revenue
benchmarks of the specified amount (i.e. $1,000,000; $1,833,333 and $2,500,000).
The Performance Bonus is cumulative (i.e. total Performance Bonus based on
revenue benchmarks is $6,000,000 upon achieving $30,000,000 in gross revenue,
(or $2,500,000 in monthly revenue) even if such revenue benchmark is achieved
in
the first year of this Agreement). The Performance Bonus, if earned, shall
be
paid in the form of cash and options to purchase shares of the Company's
Common
Stock valued at an exercise price equal to the average of the closing market
price of the shares of the Company's Common Stock for the thirty (30) days
prior
to the end of the applicable fiscal year. Moreover, no more than 20% of the
Performance Bonus shall be paid in cash, which cash payment may be in the
form
of a secured promissory note. In the event that payment is made via a secured
promissory note, such note shall have convertible features, be on commercially
reasonable terms, shall not exceed a payout of sixty (60) months and shall
be
adequately secured.
Any
options issued in respect of the Performance Bonus shall be subject to the
terms
and provisions of the Company's 2006 Stock Plan, if no shares are available
under such Plan, then any subsequently enacted stock option plan, as applicable.
Should there not be sufficient options available or usable under said Stock
Option Plans, the Company will use its best efforts to cause a new stock
option
plan to be adopted which will cover the options subject to the Performance
Bonus.
Provided
however, and notwithstanding the provisions of this Section 3(b), Consultant
may
determine, at Consultant’s sole discretion, to defer the payment of any bonus
compensation. In the event that Consultant determines to defer such payment,
the
Company and Consultant shall enter into an appropriate deferred payment
agreement, which agreement shall be prepared at the Company’s sole expense.
c. Business
Expenses. Upon delivery of proper documentation therefore Consultant shall
be
reimbursed for all reasonable travel, hotel and business expenses when incurred
on Company business during the term of this Agreement.
4. Consultant
Stock Awards Plan. During the term of this Agreement, Consultant shall
participate in any Consultant stock award plan the Company’s may
adopt.
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5. Payment
in the Event of Death or Disability.
a. In
the
event of Consultant’s death or Disability during the term of this Agreement, for
a period equal to the lesser of (i) twelve (12) months following the
date of such death or Disability or (ii) the balance of the term that would
have remained hereunder at such date had Consultant’s death or disability not
occurred, the Company shall continue to pay to Consultant (or its estate)
Consultant’s then effective per annum rate of fees, as determined under
Paragraph 3(a), and provide to Consultant (or to its family members covered
under its family medical coverage) the same family medical coverage as provided
to Consultant on the date of such death or Disability.
b. Except
as
otherwise provided in Paragraph 6(a), in the event of Consultant’s death or
Disability Consultant’s Consulting hereunder shall terminate and Consultant
shall be entitled to no further compensation or other payments or benefits
under
this Agreement, except as to any unpaid fees, bonus, or benefits accrued
and
earned by him up to and including the date of such death or Disability.
c. For
purposes of this Agreement, Consultant’s Disability shall be deemed to have
occurred after one hundred fifty (150) days in the aggregate during any
consecutive twelve (12) month period, or after ninety (90) consecutive
days, during which one hundred fifty (150) or ninety (90) days, as the
case may be, Consultant, by reason of its physical or mental disability or
illness, shall have been unable to discharge its duties hereunder. The date
of
Disability shall be such one hundred fiftieth (150th) or ninetieth (90th)
day,
as the case may be. If the Company or Consultant, after receipt of notice
of
Consultant’s Disability from the other, dispute that Consultant’s Disability
shall have occurred, Consultant shall promptly submit to a physical examination
by the chief of medicine of any major accredited hospital in Florida selected
by
the Company and, unless such physician shall issue its written statement
to the
effect that in its or her opinion, based on its or her diagnosis, Consultant
is
capable of resuming its Consulting and devoting its full time and energy
to
discharging its duties within thirty (30) days after the date of such
statement, such Disability shall be deemed to have occurred.
d. The
payments to be made by the Company to Consultant hereunder shall be offset
and
reduced by the amount of any insurance proceeds (on a tax-effected basis)
paid
to Consultant (or its estate) from insurance policies obtained by the Company
other than insurance policies provided under Company-wide benefit and welfare
plans.
6. Termination.
a. The
Consulting of Consultant under this Agreement:
i. shall
be
terminated automatically upon the death or Disability of Consultant;
ii. may
be
terminated for Cause, as herein defined, at any time by the Company, with
any
such termination not being in limitation of any other right or remedy the
Company may have under this Agreement or otherwise;
iii. may
be
terminated at any time by the Company without Cause with ninety (90) days
advance notice to Consultant;
iv. may
be
terminated at any time by Consultant if the Company materially breaches this
Agreement and fails to cure such breach within thirty (30) days of written
notice of such breach from Consultant, provided that Consultant has given
notice
of such breach within ninety (90) days after it has knowledge thereof and
the Company did not have Cause to terminate Consultant at the time such breach
occurred.
b. Consultant’s
contract with the Company for all purposes shall be deemed to have terminated
as
of the effective date of such termination hereunder (the “Date of Termination”),
irrespective of whether the Company has a continuing obligation under this
Agreement to make payments or provide benefits to Consultant after such date.
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7. Certain
Termination Payments.
If
Consultant’s contract with the Company is terminated by the Company without
Cause or by Consultant pursuant to Paragraph 6(a)(iv), the Company shall
(i) pay Consultant on or before the thirtieth day after the Date of
Termination an amount equal to the per annum rate of fees then in effect
under
Paragraph 3(a) and (ii) for remainder of the term of the Agreement had it
not been terminated, and (iii) pay Consultant on or before the thirtieth
day after the Date of Termination an amount equal to the maximum Performance
Bonus that could have been earned by Consultant (i.e. $6,000,000) had it
remained employed hereunder for the remainder of the term of this Agreement.
In
addition, all debt, loans and notes due and owing to Consultant are to be
paid
in full by Company upon termination.
8. Definitions.
a. “Beneficial
Owner” shall have the meaning provided in Rule 13d-3 promulgated under the
Exchange Act.
b. “Cause”
means:
i. Consultant’s
conviction of, or plea of “no contest” to, a felony;
ii. Consultant’s
willfully engaging in an act or series of acts of willful and gross misconduct
that result in demonstrable and material injury to the Company. In no case
can
the exercise of Consultant’s business judgment, whether in agreement with the
Board of Directors or otherwise, be considered cause; or
9. Certain
Covenants
a. Noncompete
and Nonsolicitation. Consultant acknowledges the Company’s reliance on and
expectation of Consultant’s continued commitment to performance of its duties
and responsibilities during the term of this Agreement. In light of such
reliance and expectation, during the term hereof and for one (1) year after
termination of this Agreement under Paragraph 6 hereof, other than termination
by the Company without Cause, Consultant shall not, directly or indirectly,
do
or suffer any of the following:
i. Own,
manage, control or participate in the ownership, management, or control of,
or
be employed or engaged by or otherwise affiliated or associated as a consultant,
independent contractor or otherwise with, any corporation, partnership,
proprietorship, firm, association or other business entity, or otherwise
engage
in any business, which is in competition with the business of the Company
as and
where conducted by it at the time of such termination; provided, however,
that
the ownership of not more than five percent (5%) of any class of publicly
traded
securities of any entity shall not be deemed a violation of this covenant;
ii. Solicit
the employment of, assist in the soliciting the employment of, or otherwise
solicit the association in business with any person or entity of, any employee,
consultant or agent of the Company; or
iii. Induce
any person who is a customer of the Company to terminate said relationship.
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b. Nondisclosure;
Return of Materials. During the term of this Agreement with the Company and
following termination of such Agreement, Consultant will not disclose (except
as
required by its duties to the Company), any concept, design, process,
technology, trade secret, customer list, plan, embodiment or invention, any
other intellectual property (“Intellectual Property”) or any other confidential
information, whether patentable or not, of Company of which Consultant becomes
informed or aware during this Agreement, whether or not developed by Consultant.
In the event of the termination of this Agreement or the expiration of this
Agreement, Consultant will return to the Company all documents, data and
other
materials of whatever nature, including, without limitation, drawings,
specifications, research, reports, embodiments, software and manuals that
pertain to its Consulting with the Company or to any Intellectual Property
and
shall not retain or cause or allow any third party to retain photocopies
or
other reproductions of the foregoing.
c. Consultant
expressly agrees and understands that the remedy at law for any breach by
of
this Paragraph 9 may be inadequate and that the damages flowing from such
breach are not easily measured in monetary terms. Accordingly, it is
acknowledged that, upon adequate proof of Consultant’s violation of any
provision of this Paragraph 9, the Company shall be entitled to immediate
injunctive relief and may obtain a temporary order restraining any threatened
or
further breach and may withhold any amounts owed to Consultant pursuant to
this
Agreement. Nothing in this Paragraph 9 shall be deemed to limit the
Company’s remedies at law or in equity for any breach by Consultant of any of
the provisions of this Paragraph 9 that may be pursued by the Company.
d. If
Consultant shall violate any legally enforceable provision of this
Paragraph 9 as to which there is a specific time period during which it is
prohibited from taking certain actions or from engaging in certain activities,
as set forth in such provision, then, in such event, such violation shall
toll
the running of such time period from the date of such violation until such
violation shall cease.
e. Consultant
has carefully considered the nature and extent of the restrictions upon it
and
the rights and remedies conferred upon the Company under this Paragraph 9,
and hereby acknowledges and agrees that the same are reasonable in time and
territory, are designed to eliminate competition that otherwise would be
unfair
to the Company, do not stifle the inherent skill and experience of Consultant,
would not operate as a bar to Consultant’s sole means of support, are fully
required to protect the legitimate interests of the Company and do not confer
a
benefit upon the Company disproportionate to the detriment to Consultant.
10. Tax
Liability. The Contractor agrees as an independent contractor to be solely
responsible for all taxes and other costs and expenses attributable to the
compensation payable to and services provided by the Contractor hereunder,
and
has taken any and all action to comply with all applicable federal, state,
and
local laws, pertaining to the same. The Contractor agrees to indemnify and
hold
the Company harmless from any claims arising from any taxing authority. The
Contractor acknowledges and agrees that the Contractor is not entitled to
workers compensation insurance benefits or unemployment compensation insurance
benefits from the Company. Further, the Contractor is obligated to pay federal,
state, and local income tax, if any, on any amounts paid to the Contractor
pursuant to this Agreement.
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11. No
Conflicting Agreements. Consultant represents and warrants that it is not
a
party to any agreement, contract or understanding, whether a Consulting contract
or otherwise, that would restrict or prohibit him from undertaking or performing
Consulting in accordance with the terms and conditions of this Agreement.
12. Severable
Provisions. The provisions of this Agreement are severable and if any one
or
more of its provisions is determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction nevertheless shall
be
binding and enforceable.
13. Binding
Agreement. The rights and obligations of the Company under this Agreement
shall
inure to the benefit of, and shall be binding on, the Company and its successors
and assigns, and the rights and obligations (other than obligations to perform
services) of Consultant under this Agreement shall inure to the benefit of,
and
shall be binding upon, Consultant and its heirs, personal and legal
representatives, executors, successors and administrators. The Company may
assign this Agreement to a purchaser (or an affiliate of a purchaser) of
all or
substantially all the assets of the Company. As used in this Agreement, the
“Company” shall mean the Company as hereinbefore defined and any successor or
assign to its assets as aforesaid that becomes bound by all the terms and
provisions of this Agreement. If the Consultant should die while any amounts
are
still payable to him, all such amounts, unless otherwise provided herein,
shall
be paid in accordance with the terms of this Agreement to the Consultant’s
devisee, legatee, or other designee or, if there be no such designee, to
the
Consultant’s estate.
14. Notices.
All notices required or permitted to be given hereunder shall be in writing
and
shall be personally delivered by courier, sent by registered or certified
mail,
return receipt requested or sent by confirmed facsimile transmission addressed
as set forth herein. Notices personally delivered, sent by facsimile or sent
by
overnight courier shall be deemed given on the date of delivery and notices
mailed in accordance with the foregoing shall be deemed given upon the earlier
of receipt by the addressee, as evidenced by the return receipt thereof,
or
three (3) days after deposit in the U.S. mail. Notice shall be sent (i) if
to
the Company, addressed to IElement Corporation, Attention: Corporate Secretary
and (ii) if to the Consultant, to its address as reflected on the payroll
records of the Company or Subsidiary, or to such other address as either
party
shall request by notice to the other in accordance with this
provision.
15. Consent
to Jurisdiction. Consultant and the Company each irrevocably: (i) submits
to the exclusive jurisdiction of the Texas court(s) for the purpose of any
proceedings arising out of this Agreement or any transaction contemplated
by
this Agreement; (ii) agrees not to commence such proceeding except in these
courts; (iii) agrees that service of any process, summons, notice or
document by U.S. registered mail to a party’s address as provided herein shall
be effective service of process for any such proceeding; and (iv) waives
any objection to the laying of venue of any such proceeding in these
courts.
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16. Waiver
of
Jury Trial. Each party waives, to the fullest extent permitted by law, any
right
it or it may have to a trial by jury in respect of any suit, action or
proceeding arising out of this Agreement or any transaction contemplated
by this
Agreement. Each party certifies that no representative, agent or attorney
of any
other party has represented, expressly or otherwise, that such other party
would
not, in the event of litigation, seek to enforce this waiver; and acknowledges
that it or it and the other party have been induced to enter into this Agreement
by, among other things, the mutual waivers and certifications in this
Paragraph 16.
17. Waiver.
The failure of either party to enforce any provision of this Agreement shall
not
in any way be construed as a waiver of any such provision as to any future
violation thereof, or prevent that party thereafter from enforcing each and
every other provision of this Agreement. The rights granted the parties herein
are cumulative and the waiver of any single remedy shall not constitute a
waiver
of such party’s right to assert all other legal remedies available to it under
the circumstances.
18. Miscellaneous.
This Agreement supersedes all prior agreements and understandings between
the
parties. This Agreement may not be modified or terminated orally. All
obligations and liabilities of each party hereto in favor of the other party
hereto relating to matters arising prior to the date hereof have been fully
satisfied, paid and discharge. No modification, termination or attempted
waiver
shall be valid unless in writing and signed by the party against whom the
same
is sought to be enforced.
19. Governing
Law. This Agreement shall be governed by and construed according to the laws
of
the State of Texas.
20. Captions
and Paragraph Headings. Captions and paragraph headings used herein are for
convenience and are not a part of this Agreement and shall not be used in
construing it.
21. Enforcement
Costs. If any legal action or other proceeding is brought for the enforcement
of
this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any provision of this Agreement, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees, court costs and all expenses even if not taxable
as
court costs (including, without limitation, all such fees, costs and expenses
incident to arbitration, appellate, bankruptcy and post-judgment proceedings),
incurred in that action or proceeding, in addition to any other relief to
which
such party or parties may be entitled.
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IN
WITNESS WHEREOF, the parties have executed this Agreement on the day and
year
first set forth above
IElement
Corporation:
By:
/s/Xxxxx Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
COO
Kramerica
Capital Corporation
By:
/s/Xxxx Xxxxx
Name:
Xxxx Xxxxx
Title:
CEO
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