EXHIBIT 10.1
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement") dated as of September 9, 2005
and effective as of August 9, 2005 (the "Effective Date"), by and between
Xenonics Holdings, Inc., a Nevada corporation having its principal offices at
0000 Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000-0000 (the
"Company"), and Patriot Associates LLC, a New York limited liability company
having its principal offices at 000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(the "Consultant").
W I T N E S S E T H
WHEREAS, the Company designs, manufactures and markets high-end,
high-intensity portable illumination products, including lightweight, long
range, ultra-high intensity illumination products used in a wide variety of
applications by the military, law enforcement, security, search and rescue, and
in other commercial markets;
WHEREAS, Consultant has significant knowledge regarding the marketing,
positioning, sales strategies and sales processes of products in foreign
markets;
WHEREAS, the Company wishes to memorialize the contract with Consultant to
provide marketing advice and perform related consulting services within its area
of expertise as an independent contractor on behalf of the Company;
WHEREAS, the Board of Directors of the Company was briefed on the
discussions with Consultant on August 5, 2005, and the terms of the engagement
of Consultant were discussed on August 7, 2005, by a representative of the
Company and a representative of Consultant, and such representatives reached an
agreement in principle;
WHEREAS, the Executive Committee of the Board of Directors of the Company
was briefed on the agreement in principle and unanimously approved the terms of
Consultant's engagement on August 8, 2005;
WHEREAS, the Company, through its President, Xxxxxxx Xxxxxxxx, and the
Consultant, through its representative Xxxxxxx Xxxxx, orally agreed to
substantially all of the terms and conditions set forth herein on the Effective
Date, and at the time of such oral agreement the fair market value of the
Company's common stock, par value $0.001 per share (the "Common Shares"), as
reported by the American Stock Exchange, was $1.76 per share;
WHEREAS, the Company previously informed the Consultant that the Board of
Directors of the Company generally approved the terms and conditions of this
Agreement as of the Effective Date, subject to the preparation of definitive
documentation to be presented to the Board of Directors for formal approval; and
WHEREAS, the Board of Directors of the Company granted such approval on
September 1, 2005.
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Consultant does hereby agree with the Company as follows:
1. Scope of Work. Consultant shall perform the services described in the
Work Specification set forth on Appendix 1, which is attached hereto and
incorporated herein by reference (hereinafter, the "Services").
2. Compensation. The Company shall pay Consultant in accordance with the
payment schedule set forth on Appendix 2, which is attached hereto and
incorporated herein by reference (hereinafter, the "Compensation") until this
Agreement is terminated.
3. Confidential Information.
(a) Except as required by law, Consultant shall not, at any time, directly
or indirectly, use, publish, disseminate or otherwise disclose any Confidential
Information (defined hereinafter) relating to or arising from the Services, the
terms or existence of this Agreement, or the present, past or prospective
business of the Company to any third party without the prior consent of the
Company.
(b) "Confidential Information" means confidential, non-public, secret or
proprietary information which is disclosed to or learned by Consultant in
performing the Services at any time during the term of this Agreement,
including, without limitation, inventions, discoveries, trade secrets and
know-how; computer software code, designs, routines, algorithms and structures;
product information; research and development information; lists of clients,
prospective clients and other information relating thereto; financial data and
information; business plans and processes; and any other information of the
Company that the Company informs Consultant, or that Consultant should know by
virtue of its position, is non-public or is otherwise to be kept confidential;
provided, however that "Confidential Information" shall not include information
which: (i) was generally available at the time of disclosure to Consultant or
becomes generally publicly available to the public thereafter, other than as a
result of disclosure by Consultant, (ii) Consultant can demonstrate was in
Consultant's possession or was available to Consultant on a non-confidential
basis, prior to its engagement by the Company, or (iii) becomes available to
Consultant from a third party who is under no obligation to maintain the
confidentiality of such information.
(c) The confidentiality terms of this Agreement shall be in effect during
the entire term of this Agreement and shall remain in full force thereafter.
(d) Consultant agrees that all such Confidential Information, in whatever
form, (including all copies thereof) that come into Consultant's possession or
control, whether prepared by Consultant or others: (i) is the property of the
Company, (ii) will not be used by Consultant in any way except in the
performance of the Services, and (iii) upon the request of the Company at the
termination of this Agreement, will be left with, or forthwith returned by
Consultant to, the Company.
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4. Export Controls. Each party represents and warrants that, in carrying
out the terms and provisions of this Agreement, it shall comply with all export
control requirements and restrictions imposed under U.S. law or regulation
applicable to the transfer or sale of the Company's products, including, but not
limited to, such requirements or restrictions arising under the U.S. Export
Administration Regulations and the International Traffic in Arms Regulations. As
between the parties, the Company shall bear the sole responsibility for
obtaining, and shall use reasonable efforts to obtain, all appropriate export
classifications, licenses and authorizations required to consummate or perform
any orders, deliveries or contracts secured under this Agreement.
5. Term and Termination.
(a) Except as set forth in Paragraph (b) of this Section 5, this Agreement
shall commence on the date hereof and shall continue for an initial period of
two (2) years (the "Term"). Notwithstanding the foregoing, the Agreement may be
terminated prior to the end of the Term as follows: (i) the Company or the
Consultant may terminate this Agreement (subject to paragraph (b)) at any time
after the first ten (10) months of the term of this Agreement and upon not less
than sixty (60) days written notice to the other party; and (ii) in the event
either party fails to cure a breach of this Agreement within ten (10) days after
receiving written notice thereof (any such event hereinafter, "Cause"), then the
non-breaching party may immediately terminate this Agreement upon written notice
to the other party.
(b) Notwithstanding the foregoing, in the event of a termination of this
Agreement, the provisions of this Section 5(b) and Section 3 shall not terminate
but instead shall survive termination of the Agreement.
6. Representations and Warranties. (a) Each of the Company and the
Consultant hereto severally, as to itself only, and not jointly, hereby
represents and warrants to the other that:
(i) such party is duly organized or formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation and has the full right, power and corporate or limited liability
company authority to execute, deliver and perform this Agreement and to bind all
persons or entities, if any, for which it is acting pursuant to this Agreement;
(ii) this Agreement has been duly authorized, executed and delivered
by or on behalf of such party and constitutes a legal, valid and binding
obligation of such party and all persons or entities, if any, for which such
party is acting, enforceable against such party, and all such persons or
entities, if any, for which it is acting, in accordance with its terms except:
(i) as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as enforceability may be
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies;
(iii) no consent, approval, authorization or order of any person is
required for the execution, delivery or performance of this Agreement by such
party or any such persons or entities, if any, for which it is acting; and
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(iv) neither the execution, delivery nor performance of its
obligations under this Agreement by such party or any such persons or entities,
if any, for which it is acting will: (i) conflict with, or result in a breach
of, or constitute a default under, or result in a violation of, any
organizational document of such party (if applicable) or any material agreement
or instrument to which such party or any such persons or entities, if any, for
which it is acting is a party or by which such party or any such persons or
entities, if any, for which it is acting or their property is bound, or (ii)
result in the violation of any applicable law or order, judgment, writ,
injunction, decree or award of any governmental authority, except for such
violations which could not have a material adverse effect on the party's ability
to consummate the transactions contemplated hereby.
(b) The Company hereby represents and warrants to the Consultant that:
(i) the Common Shares to be issued and delivered to the Consultant
pursuant to the terms of this Agreement, including, but not limited to, any
Common Shares issuable upon exercise of the Warrant and the Additional Warrant,
(A) are (or upon issuance shall be) duly authorized and validly issued, (B) )
are (or upon issuance shall be) fully paid and nonassessable and free of
preemptive and other similar rights and (C) were (or upon issuance will be)
issued in a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and otherwise in
compliance with all applicable state and federal laws concerning the issuance of
securities;
(ii) the Company has duly authorized and reserved and will continue
at all times to reserve, solely for the purpose of issuance upon exercise of the
Warrants and any Additional Warrants to be issued and delivered to the
Consultant pursuant to the terms of this Agreement a number of shares of Common
Shares sufficient to provide for the issuance of Common Shares upon the exercise
of such warrants (the "Warrant Shares");
(c) The Consultant hereby represents and warrants to the Company that it
is an "accredited investor" as defined in Rule 501(a) under the Securities Act
and was not organized for the specific purpose of acquiring the Common Shares or
the Warrant Shares. The Consultant has (i) such business and financial knowledge
and experience so as to be capable of evaluating the merits and risks of its
ownership of the Common Shares and the Warrant Shares and (ii) the ability to
bear the economic risk of its investment in the Company for an indefinite amount
of time. In addition the Consultant understands that the Common Share and the
Warrant Shares have not been registered under the Securities Act or under any
state securities laws, and are being issued in reliance upon federal and state
exemptions for transactions not involving any public offering and the Common
Shares or Warrant Shares may not be sold, transferred, offered for sale,
pledged, hypothecated or otherwise disposed of without registration under the
Securities Act, except pursuant to an exemption from such registration available
under the Securities Act.
7. Independent Contractor. This Agreement does not constitute Consultant
as agent, employee, legal representative, joint venturer or partner of the
Company for any reason whatsoever and neither party is authorized to act on
behalf of the other party. Consultant and the Company each represent, warrant
and agree that the Services to be performed by Consultant are professional in
nature, require substantial expertise and are to be performed in a manner and on
a timetable to be determined by Consultant, consistent with its obligations
hereunder, and using Consultant's own equipment and materials.
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8. Waiver. Any waiver by the Company or by Consultant of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of the same or any other provision hereof.
9. Severability; Reformation. In case any one or more of the provisions or
parts of a provision contained in this Agreement shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement; and this Agreement shall, to the fullest extent
lawful, be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provision or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible. Without limiting the foregoing, if any provision
(or part of provision) contained in this Agreement shall for any reason be held
to be excessively broad as to duration, geographical scope, activity or subject,
it shall be construed by limiting and reducing it, so as to be enforceable to
the fullest extent compatible with then existing applicable law.
10. Survival of Obligations. Consultant's obligations under this Agreement
shall survive the termination of this Agreement, regardless of the manner of
such termination.
11. Amendments; Assignments. This Agreement may be amended, modified or
assigned in whole or in part, only by an instrument in writing signed by both
parties hereto.
12. Notices. Any notices or other communications required hereunder shall
be in writing and shall be deemed given when delivered in person, or upon
receipt of confirmation of facsimile or E-mail transmission, or when mailed, by
certified or registered first-class mail, postage prepaid, return receipt
requested, addressed, to such entity at their principal offices identified on
the first page of this Agreement; or to such other addresses as either party
shall have notified the others in accordance with the provisions of this Section
12.
13. No Warranties. Consultant makes no assurances or warranties regarding
the outcome of any matters, nor the amount or likelihood of any contracts or
orders resulting from the undertakings described in Section 1.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and both of which shall
be deemed a single agreement.
15. Governing Law. This Agreement shall be subject to the provisions of
the Procurement Integrity Act, The Lobby Disclosure Act of 1995, the Armed
Services Procurement Act of 1947, the Defense Procurement Improvement Act of
1985 and all other applicable United States laws and regulations governing
contacts and conduct with the United States Congress and covered Executive
Branch Officials; and shall be subject to the laws of the STATE OF NEW YORK.
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16. No Violation of Third Party Agreements. Consultant hereby represents
and warrants that Consultant is not currently employed or retained on an
independent contractor basis by any other person, which would conflict with the
Services or the other terms of this Agreement, and Consultant's execution and
delivery of this Agreement and performance of its obligations hereunder do not,
and will not, violate the terms of any other contract, agreement or arrangement,
whether written or oral, to which Consultant is a party or otherwise subject,
including, without limitation, any agreement between Consultant and a former
employer or client.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
[Signature Page Follows]
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EXECUTED as an instrument under seal as of the date first above written.
XENONICS HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Executive Officer
Fax No.:___________________
Consultant:
PATRIOT ASSOCIATES LLC
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxx Xxxxx
Title: Senior Managing Partner
Fax No.:______________________
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: Senior Partner
Fax No.:______________________
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APPENDIX 1
WORK SPECIFICATION
Consultant will provide the Company advice relating to the marketing of
its products and consulting services relating to the development of domestic and
non-domestic sales and marketing strategies for the Company's products in the
United States and in foreign countries including, without limitation, its
portable illumination products. In rendering these services, Consultant shall
not use any improper influence, as that term is defined in the Federal
Acquisition Regulations Section 3.401, and shall otherwise comply with all
applicable laws and regulations.
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APPENDIX 2
COMPENSATION
Simultaneously with the execution of this Agreement, the Company shall
issue to the Consultant (a) 62,500 shares of the Company's common stock, par
value $0.001 per share (such shares shall be issued subject to, and in
accordance with, applicable laws, and simultaneously with such issuance, the
Company and the Consultant shall enter into a Registration Rights Agreement
substantially in form of Exhibit 1 attached hereto) (the "Common Shares") and
(b) warrants to purchase 437,500 Common Shares at US$2.00 per share (which is
the fair market value of a Common Share as of the date of this Agreement), such
warrants to vest immediately, be exercisable over a five year period and issued
substantially in the form of warrant attached hereto as Exhibit 2 (the
"Warrants"). The parties agree that the Company shall evaluate the performance
of Consultant semi-annually and determine whether any bonus compensation is
appropriate to be paid to Consultant hereunder.
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EXHIBIT 1
REGISTRATION RIGHTS AGREEMENT
EXHIBIT 2
FORM OF WARRANT
