EXHIBIT 10.3
A21, INC.
XXX XXXXXXXXXXX XXXXXX
XXXXX 000
XXX XXXXXXXXX, XX 00000
Personal and Confidential
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September 14, 2002
Xx. Xxxxxx X. Xxxxx
0000 Xxxxxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Re: Consulting Agreement for a21, Inc.("a21")
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Dear Xxxxxx:
This letter clarifies and confirms the terms of your new consulting
agreement with a21, Inc. ("a21" or "Company"). As is set forth below, your
consulting agreement will be contingent upon execution of this Letter Agreement
or a mutually agreeable form of consulting agreement and all appropriate Stock
Grant and Option Agreements. If these agreements are not completed within 30
days of their presentment, either you or a21 may terminate the relationship.
This Letter Agreement is subject to approval by the Board of Directors.
START DATE
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Unless we mutually agree otherwise, the effective date of this Letter
Agreement will be October 1, 2002 (the "Start Date").
CONSULTING FEES
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Initial consulting fees due to you or your assigns will be FIFTEEN THOUSAND
DOLLARS ($15,000), payable at the end of each month and prorated for partial
months. We have agreed that your monthly consulting fees will increase when the
Company has raised cumulatively $2,000,000 in capital or completed two (2)
acquisitions in an amount to be negotiated with the Board of Directors. Your
fees will compensate you for all hours worked. As an independent contractor,
you will be responsible for all deductions as appropriate pursuant to federal,
state and local law. At any time, at your discretion, you may change your
status to that of an employee, and the Company will then be responsible for all
deductions pursuant to federal, state and local law. If at any point in time
the Company is unable to pay your compensation in cash, you agree to accept
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SEPTEMBER 14, 2002
PAGE 2
common shares of the Company at a rate of 150% of the cash compensation due or
restricted common shares at a rate of 200% of the cash compensation due based on
the five (5) day closing average prior to the due date. Additionally, all
unvested stock and options in this agreement except for Performance Options as
defined below will vest immediately if the Company misses paying your cash
compensation for four months within a 12 month time period or will vest twelve
months earlier than scheduled if the Company misses paying your cash
compensation for more than two months.
CASH AND EQUITY BONUS
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You will receive regular performance and compensation reviews and will be
eligible for a performance bonus program to be negotiated with the Board of
Directors to be awarded on the anniversary of the Start Date and semi-annually
thereafter and will be consistent with that provided to other similarly situated
consultants or executives. In addition, you will receive a bonus fee in shares
of a21 common stock for each acquisition completed by the Company and for each
million dollars of capital raised by the Company in an amount to be negotiated
with the Board of Directors. You will receive 300,000 shares if the Company is
merged or acquired at a valuation in excess of $2.50 per share during your
consulting engagement or initiated by the Company during your consulting
engagement and subsequently completed after your consulting engagement. The
bonus shares shall be issued concurrently with the completion of such
transactions as long as it is not in violation any securities or other
regulations in which case other equivalent compensation as mutually agreed shall
be delivered to you.
BENEFITS
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The Company will reimburse you for your health insurance costs. You will
be entitled during the term of this Letter Agreement to vacation, medical and
other benefits or reimbursement for same as the Company may offer from time to
time to consultants and employees, subject to applicable eligibility
requirements. The Company reserves the right to make any modifications in the
benefits packages that it deems appropriate at its discretion. You will be
provided benefits including vacation equal to those provided to other similarly
situated consultants or executives.
EXPENSES
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You will be provided reimbursement for business expenses, subject to
verification by documentation sufficient pursuant to the Internal Revenue Code
and Company policy. Any extraordinary expenses in excess of $1,000.00 must be
submitted to the Company for approval in advance.
We will also provide a monthly allowance for your cell phone.
In addition, the Company hereby recognizes that you have incurred direct
out of pocket expenses in excess of $50,000 for activities for the benefit of
the Company which are itemized and currently recorded by the accountants for the
Company. The Company hereby confirms its obligation to you for those expenses.
The Company also recognizes and confirms that you have $17,500 remaining amount
due to you from prior accrued fees which you will use to exercise Old Options as
defined below.
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SEPTEMBER 14, 2002
PAGE 3
STOCK OPTIONS AND EQUITY COMPENSATION
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Subject to Board of Directors' approval, and the execution of all required
documentation, you will be provided with an option to purchase up to 300,000
common shares of a21 ("Performance Options") which will expire on 5/1/07, and
will vest subject to the following milestones being achieved prior to 12/31/03:
1. 150,000 when a21 completes its first acquisition.
2. 150,000 above plus an additional 50,000 when a21 achieves an annual
revenue run rate of $5mm based on the prior three months average revenue.
3. 200,000 above plus an additional 100,000 when a21 achieves an annual
revenue run rate of $7.5mm based on the prior three months average revenue.
4. If the Company completes the first acquisition on or before January 31,
2003, or the second acquisition on or before April 30, 2003, all 300,000 will
vest immediately.
The options will have an exercise price equal to the lower of $1.50 per share or
the 20-day average closing price prior to achievement of the above milestones.
If the Company completes two million dollars in capital transactions, on or
before December 31, 2002, or five million dollars in capital transactions on or
before June 30, 2003, all unvested stock and options will vest immediately.
Additional options may be provided by the Board of Directors from time to
time based on performance criteria and subject to Board approval and the
requirement of the Plan. The option you held to purchase 116,667 common shares
at $.15 is fully vested, and the Company agrees to your exercising it in
exchange for forgiving $17,500 in back fees due to you ("Old Options").
We anticipate that you will desire to consult tax counsel of your own
choosing prior to finalization of the terms set forth above. As these grants
may also affect the Company's profitability and tax obligations in a significant
manner, we may be required to work with you to adjust the numbers of options set
forth above during this initial start-up period.
TITLE
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You will serve as a consultant to a21 as well as hold the title of Chairman
of the Board of a21 (or equivalent title) until replaced. You will report to
the Board of Directors.
TERM
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The term will be for a period of three years. You may terminate the
Agreement upon providing 90 days notice (day 1 is the "Notice Date"), You will
be entitled to all vested shares and options for shares deemed earned as of the
Notice Date.
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SEPTEMBER 14, 2002
PAGE 4
The Company may terminate the Agreement without cause upon providing 180
days written notice to you (day 180 is the "Termination Date"). You will be
entitled to all vested shares and options for shares deemed earned as of the
Termination Date, plus shares and options on shares to be vested in the next
period are deemed earned on a prorated basis as of the Termination Date. All
cash compensation accrued through the Termination Date will be paid in
immediately available funds within 30 days after the Termination Date. In
addition, the Company shall continue to pay you your annual base compensation as
of the Termination Date for the term of any non-competition agreement which you
enter into with the Company (the "Severance Payments") provided, however, that
regardless of the duration of any non-competition agreement between you and the
Company, the Company shall continue to pay you your annual base compensation
through the Company Termination Date consistent with the normal practices of the
Company (the "Minimum Severance Payments").
The Company may terminate this Agreement with Cause and with no further
liability as of the Termination Date. You will be entitled to all vested shares
and options for shares deemed earned as of the Termination Date. All cash
compensation accrued through the Termination Date will be paid in immediately
available funds within 30 days after the Termination Date. For purposes of this
Agreement, "Cause" shall mean (i) the willful and continued failure of Executive
to perform his duties hereunder to the satisfaction of the Board (other than any
such failure resulting from incapacity due to physical or mental illness); (ii)
a material breach by the Executive of this Agreement; (iii) the willful engaging
by Executive in gross misconduct which could reasonably be expected to result in
injury to the financial condition or reputation of the Company; or (iv) the
willful engaging by Executive in illegal conduct which could reasonably be
expected to result in injury to the financial condition of the Company;
provided, however, that the circumstances described in each subsection (i)-(iii)
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above shall not constitute Cause until written notice of such circumstances is
delivered to you by the Board which specifically identifies the manner in which
the Board believes that you have violated such subsection, and you do not remedy
such violation within thirty (30) days of receiving such notice.
If the Company fails to execute a consulting agreement through no fault of
yours, and as a result you do not work for the Company, then you will be fairly
compensated for any business generated through your efforts and contacts that
benefit the Company. In addition, you will be paid for compensation earned to
date, plus your shares and options that would have been vested to date.
ADDITIONAL PROVISIONS
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As a condition of your consulting agreement, we will expect you to execute
a form of agreement which contains confidentiality, non-competition and
invention assignment provisions.
Your consulting agreement is also contingent upon providing proof of your
identity and authorization to work in the United States as required by federal
law. You will be expected to provide such documentation on the first day of
your consulting engagement.
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SEPTEMBER 14, 2002
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If you wish to accept a consulting position with the Company, please
indicate by signing both copies of this letter and returning both copies to a21.
Very truly yours,
Xxxx Xxxxx
President
I have read and agree to the
terms set forth above:
____________________________________ _______________________
Xxxxxx X. Xxxxx Date
