CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is made and entered into and
effective on this 1st day of August, 2003 by and between IQ BIOMETRIX, INC., a
Delaware corporation with a principal place of business at Suite 304, 00000
Xxxxx Xxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 ("Company"), and XXXXXX XXXXXXXX
with an address of 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000
("Consultant"). The Company desires to retain Consultant as an independent
contractor to perform consulting services for the Company, and Consultant is
willing to perform such services, on terms set forth more fully below. In
consideration of the mutual promises contained herein, the parties agree as
follows:
1. SERVICES, COMPENSATION, AND TERM
1.1 Consultant agrees to perform for the Company the services ("Services")
described in Appendix A, attached hereto.
1.2 The term of this agreement is one (1) year.
1.3 Company shall pay Consultant the compensation described in Appendix A,
attached hereto.
2. CONFIDENTIALITY
2.1 "Confidential Information" means any Company proprietary information,
technical data, trade secrets or know-how, including, but not limited to,
research, product plans, products, services, customers, customer lists, markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, finances
or other business information disclosed by the Company either directly or
indirectly in writing, orally or by drawings or inspection of parts or
equipment, whether marked as "confidential" or not.
2.2 Consultant will not, during or subsequent to the term of this
Agreement and for a period of two (2) years thereafter, use the Company's
Confidential Information for any purpose whatsoever other than the performance
of the Services on behalf of the Company or disclose the Company's Confidential
Information to any third party. It is understood that said Confidential
Information shall remain the sole property of the Company. Consultant further
agrees to take all reasonable precautions to prevent any unauthorized disclosure
of such Confidential Information. Confidential Information does not include
information which (i) is known to Consultant at the time of disclosure to
Consultant by the Company as evidenced by written records of Consultant, (ii)
has become publicly known and made generally available through no wrongful act
of Consultant, or (iii) has been rightfully received by Consultant from a third
party who is authorized to make such disclosure.
2.3 Consultant agrees that Consultant will not, during the term of this
Agreement, improperly use or disclose any proprietary information or trade
secrets of any former or current employer or other person or entity with which
Consultant has an agreement or duty to keep in confidence information acquired
by Consultant if any, and that Consultant will not bring onto the premises of
the Company any unpublished document or proprietary information belonging to
such employer, person or entity unless consented to in writing by such employer,
person or entity. Consultant will indemnify the Company and hold it harmless
from and against all claims, liabilities, damages and expenses, including
reasonable attorney's fees and costs of suit, arising out of or in connection
with any violation or claimed violation of a third party's rights resulting in
whole or in part from the Company's use of the work product of Consultant under
this Agreement.
2.4 Consultant recognizes that the Company has received and in the future
will receive from third parties their confidential or proprietary information
subject to a duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes. Consultant agrees
that Consultant owes the Company and such third parties, during the term of this
Agreement and thereafter, a duty to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out the
Services for the Company consistent with the Company's agreement with such third
party.
2.5 Upon the termination of this Agreement, or upon Company's earlier
request, Consultant will deliver to the Company all of the Company's property or
Confidential Information that Consultant may have in Consultant's possession or
control.
3. CONFLICTING OBLIGATIONS
Consultant certifies that Consultant has no outstanding agreement or
obligation that is in conflict with any of the provisions of this Agreement, or
that would preclude Consultant from complying with the provisions hereof, and
further certifies that Consultant will not enter into any such conflicting
agreement during the term of this Agreement.
4. TERMINATION
Either party may terminate this Agreement, with or without reason, upon
giving thirty (30) days prior written notice thereof to the other party.
Additionally, the Company may terminate this Agreement immediately for Cause as
defined below by giving Consultant written notice thereof.. Any such notice
shall be addressed to the party at the address shown above or such other address
as the party may notify the other of and shall be deemed given upon delivery if
delivered in person, or twenty (24) hours after having been deposited with any
commercial "over-night" curriers marked for "next day" delivery,, or forty-eight
(48) hours after having been deposited in the United States mail, postage
prepaid, registered or certified mail, return receipt requested.
4.1 Upon any such termination all rights and duties of the parties toward
each other shall cease except that:
(i) in the event of a termination without Cause, the Company shall be
obliged to pay, within ten (10) days of the effective date of
termination, all amounts owing to Consultant for Services completed
prior to the termination date and related expenses, if any, in
accordance with the provisions of Section 1 (Services and
Compensation) hereof, and any Compensation as defined in said
Section 1 as and when due for the Term of the Agreement as if the
Agreement had not been terminated,
Or
(ii) in the event of a termination for Cause, the Company shall be
obliged to pay, within ten (10) days of the effective date of
termination, all amounts owing to Consultant for Services completed
prior to the termination date and related expenses, if any, in
accordance with the provisions of Section 1 (Services and
Compensation) hereof. For purposes of this Agreement, Cause shall
mean and/or be deemed to have occurred upon: (i) one or more acts of
personal dishonesty, fraud or deceit taken by Consultant in
connection with his responsibilities as a Consultant and intended to
result in personal enrichment of Consultant and/or harm to the
Company, and/or (ii) the date Consultant is charged with, or pleas
nolo contendere to, any crime involving honesty, ethics or moral
turpitude, and/or (iii) any willful act(s) or omission(s) to act by
Consultant which constitutes negligence, willful bad acts and/or
gross misconduct and which is materially injurious to the
operations, prospects, reputation or business of the Company, and/or
(iv) Consultant's failure to cure performance issues within ten (10)
days following delivery to Consultant of a written demand for
performance which describes the basis for the Company's reasonable
belief that Consultant has failed to substantially and materially
perform his duties, or that Consultant has continued to violate his
obligations to the Company which violations are demonstrably willful
and deliberate on Consultant's part.
(iii) Sections 2 (Confidentiality), 6 (Independent Contractor), 8
(Accuracy of Information), and 9 through 13 shall survive
termination of this Agreement; and
5. ASSIGNMENT
Neither this Agreement nor any right hereunder or interest herein may be
assigned or transferred by Consultant without the express written consent of the
Company, and any such assignment or transfer in violation of this Section 5
shall be null and void.
6. INDEPENDENT CONTRACTOR
The parties to this Agreement are independent contractors. Nothing in this
Agreement shall in any way be construed to constitute Consultant as an agent,
employee or representative of the Company, but Consultant shall perform the
Services hereunder as an independent contractor. Consultant agrees to furnish
(or reimburse the Company for) all tools and materials necessary to accomplish
this contract, and shall incur all expenses associated with performance, except
as expressly provided on Appendix A of this Agreement. Consultant acknowledges
and agrees that Consultant is obligated to report as income all compensation
received by Consultant pursuant to this Agreement and Consultant agrees to and
acknowledges the obligation to pay any applicable self-employment and other
taxes thereon.
7. BENEFITS
Consultant acknowledges and agrees and it is the intent of the parties
hereto that Consultant receive no Company-sponsored benefits from the Company
either as a Consultant or employee. If Consultant is reclassified by a state or
federal agency or court as an employee, Consultant will become a reclassified
employee and will receive no benefits except those mandated by state or federal
law, even if by the terms of the Company's benefit plans in effect at the time
of such reclassification Consultant would otherwise be eligible for such
benefits.
8. ACCURACY OF INFORMATION
In connection with the Consultant's services, the Company will furnish to
Consultant information that Consultant reasonably believes necessary to the
provision of services under this Agreement. The Company recognizes that
Consultant does not assume responsibility for the accuracy or completeness of
this information and Consultant will not independently verify the same. The
information furnished by the Company, when delivered, will be, to the best of
the Company's knowledge, true and correct in all material respects. The
information shall be deemed to be "Confidential Information," subject to the
provisions of Section 2 hereof, and may not be disclosed without the prior
written consent of the Chief Executive Officer of the Company. Consultant
covenants that all information delivered or furnished by Consultant to any third
party shall accurately reflect the information given to it by the Company, and
Consultant shall hold Company harmless from any and all liability, expenses or
claims arising from any breach of Consultant's obligations under this Section 8.
9. GOVERNING LAW
This Agreement shall be governed by the internal substantive laws, but not
the choice of law rules, of the State of California.
10. ENTIRE AGREEMENT
This Agreement is the entire agreement of the parties and supersedes any
prior agreements between them, whether written or oral, with respect to the
subject matter hereof. No waiver, alteration, or modification of any of the
provisions of this Agreement shall be binding unless in writing and signed by
duly authorized representatives of the parties hereto.
11. ATTORNEY'S FEES
In any court action at law or equity which is brought by one of the
parties to enforce or interpret the provisions of this Agreement, the prevailing
party will be entitled to reasonable attorney's fees, in addition to any other
relief to which that party may be entitled.
12. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement, or
any terms thereof, shall not affect the validity of this Agreement as a whole,
which shall at all times remain in full force and effect.
13. INDEMNIFICATION
Consultant will indemnify and hold Company harmless from and against
expenses, damages, claims, suits, actions, judgments and costs (including but
not limited to attorneys' fees) from any third party arising from or in any way
connected with any claim, action or suit that arises from Consultant's
performance of its obligations under this Agreement.
Consultant further agrees to indemnify and hold harmless the Company and
its directors, officers, and employees from and against all taxes, losses,
damages, liabilities, costs and expenses, including attorney's fees and other
legal expenses, arising directly or indirectly from (i) any negligent, reckless
or intentionally wrongful act of Consultant or Consultant's assistants,
employees or agents, (ii) a determination by a court or agency that the
Consultant is not an independent contractor, or (iii) any breach by the
Consultant or Consultant's assistants, employee or agents of any of the
covenants contained in this Agreement.
Company will indemnify and hold Consultant harmless from and against
expenses, damages, claims, suits, actions, judgments and costs (including but
not limited to attorneys' fees) arising from or in any way connected with any
claim, action or suit that arises from Company's performance of its obligations
under this Agreement.
Company further agrees to indemnify and hold harmless the Consultant and
its partners and employees from and against all taxes, losses, damages,
liabilities, costs and expenses, including attorney's fees and other legal
expenses, arising directly or indirectly from (i) any negligent, reckless or
intentionally wrongful act of Company or Company's directors, officers, or
employees, (ii) any breach by the Company's or Company's directors, officers, or
employee of any of the covenants contained in this Agreement.
14. PRIOR AGREEMENTS.
Except as otherwise limited by this Section, To the extent not previously
terminated, the consulting agreements by and between the Company and Consultant,
dated as of December 1, 2002, January 15, 2003, and May 31, 2003 (effective as
of March 31, 2003), (collectively the "Prior Agreements") are each hereby
terminated and Consultant acknowledges that all obligations due from Company to
Consultant hereunder have been satisfied in full. Notwithstanding the foregoing,
any and all obligations of confidentiality due from Consultant to Company
pursuant to the Prior Agreements shall remain in full force and effect as
otherwise provided in such Prior Agreements.
[signatures on following page]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year written below.
DATE: COMPANY
IQ BIOMETRIX, INC.
By:
----------------------- -------------------------------------
Xxxxxxx X. X. Xxxxxxxxx
President and Chief Executive Officer
DATE: CONSULTANT
XXXXXX XXXXXXXX
------------------------ ----------------------------------------
Xxxxxx XxXxxxxx
APPENDIX A
SERVICES AND COMPENSATION
1. SERVICES
Consultant shall provide the following services as may be specified by the
Company's Chief Executive Officer and/or Board of Directors:
(a) Provide general management advice and counseling to the Company,
especially in the areas of financial management and business planning;
(b) Advise and assist the Company in identifying, evaluating, negotiating,
and securing sources of debt and equity funding, acquisition and/or merger
opportunities, joint venture or other partnering opportunities, and business
restructurings and divestitures; and.
(c) Provide such other specific services as the Chief Executive Officer
and/or Board of Directors may direct.
The parties agree that Consultant shall initially devote his efforts to
(a) raising equity funding, and (b) driving the acquisition strategy and
execution of the Company.
Consultant shall use his best efforts to perform the Services and shall
devote such time as reasonably necessary to perform the Services. Consultant
shall coordinate his work with the Company's Chief Executive Officer. Consultant
shall perform the work in a professional manner consistent with industry
standards. Notwithstanding the foregoing, during the Term of this Agreement,
Consultant agrees to provide an average of fifteen (15) hours per week of his
time to Company in discharging the Services hereunder. In the event that
Consultant regularly devotes more time to Company than said fifteen (15) hours,
then Company and Consultant will mutually agree upon an increase to the Monthly
Compensation as defined below.
For each quarter during the term of this Agreement, Consultant shall
provide a written report to Company within ten (10) days of the end of the
preceding quarter, detailing the services provided to Company.
2. MONTHLY COMPENSATION
As consideration for the performance of the Services, Company will pay
Consultant for each month of this Agreement, Ten Thousand Dollars ($10,000) per
month, payable within ten (10) days of each month end. The Company shall
reimburse Consultant for all reasonable travel and other out-of-pocket expenses
incurred in performing the Services. The Company shall reimburse Consultant
within thirty (30) days of receipt of Consultant's itemized statement and
accompanying receipts.
Payment shall be in the form of (i) common stock of the Company, commonly
known as "S-8 Shares," with a fair market value as of the date of issuance equal
to the amount due using the average of the price as of closing as reported on
the Over the Counter Bulletin Board, or, (ii) cash. Both parties must mutually
agree on form of payment.
In addition, the Board of Directors or authorized committee thereof, will
grant to the Consultant a warrant to purchase 200,000 shares of common stock
over the Term of the Agreement, prorated quarterly in advance. The warrant shall
be exercisable at any time before midnight on July 31, 2008. The exercise price
shall be set equal to the fair market value of the underlying common stock as of
the date of grant. The warrant shall also provide for "cashless" exercise.
The parties acknowledge that no amounts have been paid to Consultant under
the first paragraph of this Section 2 and that Company owes Consultant for
services rendered for the months of August, September, October, November, and
December 2003, an aggregate total of Fifty Thousand Dollars ($50,000) (the
"Prior Period Amount"). Company agrees to pay Consultant this Prior Period
immediately. Payment of the Prior Period Amount shall be in at least 50% in
cash. The remaining balance will be in the form of (i) common stock of the
Company, commonly known as "S-8 Shares," with a fair market value as of the date
of issuance equal to the amount due using the average of the price as of closing
as reported on the Over the Counter Bulletin Board, or, (ii) at the discretion
of the Company, cash.
3. CAPITAL RAISE COMPENSATION
For each dollar of financing that the Company closes upon after the
effective date hereof and so long as such financing was originated solely by
Consultant (i.e. the Company has no obligation to pay a finder's fee or success
fee to any third party for such financing , the Company will pay Consultant,
within five (5) days of the closing, (i) a fee equal to six percent (6%) of the
amount of the financing in cash, and (ii) ten percent (10%) of the amount of the
financing in a warrant for the Company's common stock. The warrant price will be
equal to the fair market value of the Company's common stock as of the day
Consultant is entitled to receive such fee. In the event that Consultant is not
the exclusive originator of the financing, then in lieu of any other
compensation hereunder, Company shall pay Consultant a success fee of ONE
HUNDRED THOUSAND DOLLARS ($100,000) upon the effective date of such financing.
4. ACQUISITION COMPENSATION
Upon the closing of any acquisition, the Company will pay Consultant,
within five (5) days of the closing, a success fee in the amount of Two Hundred,
Fifty Thousand Dollars ($250,000) ("Success Fee"). In the event that Company
shall, at any time during the twelve (12) month period following expiration of
this Agreement or following a termination without Cause as defined in this
Agreement, acquire a controlling vote and/or interest in the assets and/or
business of any company towards which Consultant has provided reasonably
material services hereunder, Company shall pay to Consultant the Success Fee
described in this Section 4.
