CONSULTING AGREEMENT
Exhibit 10-11
Exhibit
1.06(a)(vi)(A)
THIS
CONSULTING AGREEMENT (this "Agreement") is made effective the 15th day of
January, 2001, by and between DARIUS MARKETING INC. (hereinafter referred to as
the "Company"), and XXXXXX X. XXXXX ("Xxxxxx") and XXXXXXX X. XXXXX ("Xxxxxxx";
Xxxxxx and Xxxxxxx shall hereinafter be referred to collectively as the
"Consultants").
EXPLANATORY
STATEMENT
The
Company has purchased the business and certain of the assets of HIKARI HOLDINGS,
LC. and INNERLIGHT INTERNATIONAL, INC. (the "Sellers") under that certain Asset
Purchase Agreement dated January 15, 2001, by and among various parties
including the Company and the Consultants (the "Acquisition
Agreement").
For many
years, the Consultants have been key employees and principal owners of the
Sellers, and possess valuable knowledge, expertise and experience in the
business of developing, marketing and selling nutritional supplements, dietary
supplements and related products (the "Products" as defined below in Section
3.3); such Products are distributed for sale through independent representatives
nationally and internationally (collectively, the "Business"). The Company
believes that the Consultants' knowledge, expertise and experience would benefit
the Company, and the Company desires to retain the Consultants to perform
certain consulting services for the Company. The Company further desires to
insure that the Consultants do not compete with the Company, and its affiliates,
except as expressly permitted hereby.
NOW,
THEREFORE, in consideration of their mutual agreements and covenants contained
herein, and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and in further consideration of the affixation by
the parties of their respective seals herein below, the parties agree as
follows:
1. Consulting
Services.
1.1. Duties; Services. The
Consultants agree that, for a period of two (2) years beginning on the date of
this Agreement (which then shall renew automatically from year to year unless
sooner terminated by the Company in accordance with the terms of this
Agreement):
1.1.1.
The Consultants will perform certain consulting services for the Company, and
will be reasonably available for approximately ten (10) hours per month and at
ten (10) events per year to advise, counsel and inform designated officers and
employees of the Company about the industry, business, customers, budgeting,
expenses, marketing and other aspects of or concerning the Company's business
about which the Consultants have knowledge or expertise.
1.1.2.
The Consultants shall serve as independent representatives of the Company and
shall assist and advise the Company in developing new representatives, Company
products and/or services and implementing Company programs. During the term of
the consulting engagement under this Agreement, the Consultants shall use the
best efforts of the Consultants to further the network marketing operations
of the Company and the Consultants shall be available, at such times and places
for approximately ten (10) hours per month and at ten (10) events per year, as
reasonably requested by the Company and agreed to by the Consultants to meet
with, assist, advise and otherwise work with and for the Company and its
responsible personnel with regard to: (i) advice on the proper and efficient
conduct of the business of the Company and utilization of employees of the
Company; (ii) future business activities of the Company as to which the
Consultants may have or acquire knowledge; (iii) customer relationships and
activities; and (iv) the development of business opportunities and any other
matters which the parties may hereafter reasonably agree upon. It is
specifically understood that the Consultants have complete discretion and
control as to how their duties under this Agreement shall be discharged. The
Consultants shall generally be under the supervision of and shall report to the
President and Chief Executive Officer of the Company and of Darius International
Inc.
1.2.
Independent
Contractors. The Consultants shall render services to the Company as
independent contractors, and not as employees. The Consultants, rather than the
Company, shall have ultimate control over the scope and details of the
Consultants' activities pursuant to this Agreement; however, all services
rendered by the Consultants on behalf of the Company shall be performed to the
best of the Consultants' ability. As independent contractors:
1.2.1.
The Consultants shall be responsible and liable for the payment of any and all
federal, state and local taxes payable by reason of the Consultants' receipt of
compensation under this Agreement and for any and all taxes, contributions or
other sums payable for unemployment compensation insurance and old age
retirement benefits. The Consultants agree to indemnify and hold harmless the
Company from and against any and all liabilities, obligations, costs and
expenses, including attorney's fees, resulting from any claim asserted against
the Company with respect to the withholding, reporting or payment of employment
or income taxes in connection with compensation or amounts payable to the
Consultants under this Agreement.
1.2.2.
The Consultants shall not be entitled to participate in or receive any fringe or
retirement benefits, including medical, dental, life insurance, disability
insurance or retirement benefits, which the Company or its Affiliates (defined
below) may provide to its employees from time to time.
1.2.3.
The Consultants shall be responsible for providing worker's compensation and
liability insurance coverage for the Consultants and any agents or employees he
or she retains and shall be responsible for any and all claims, damages and
suits resulting from the negligence or improper performance of obligations by
the Consultants or any agents or employees of the Consultants.
1.2.4.
The Consultants shall have' no right or authority at any time to make any
contract or binding promise of any nature on behalf of the Company, either oral
or written, without the express written consent of an authorized representative
of the Company.
1.3.
Termination.
The Consultants' engagement hereunder may be terminated immediately by the
Company for Cause upon written notice to the Consultants. The term "for Cause"
for the purposes of this Agreement shall mean any (a) breach or violation of the
terms and conditions of this Agreement by the Consultants; (b) willful disregard
of or failure to perform duties or obligations under this Agreement; (c)
habitual absence from engagement hereunder except that caused by sickness; (d)
drunkenness or drug abuse; (e) dishonesty; (0 selling, passing, or otherwise
using without permission any confidential information of the Company; (g) action
or engagement in competition of the Company; or (g) a Consultant's physical or
mental injury, illness, disability, or incapacity, such that the Consultant is
unable to render the consulting services provided for in this Agreement for
a consecutive period of ninety (90) days.
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2. Non-Competition and
Confidentiality Covenants.
2.1.
The Consultants shall not, for so long as the Company pays the Consultants a
monthly payment pursuant to the terms of this Agreement (reduced, as applicable,
subject to Section 3.6) (the "Non-Competition Period"), without the Company's
prior and specific written consent, engage in any of the following
activities:
2.1.1.
Directly or indirectly, anywhere in the world, as a principal, partner,
shareholder, agent, director, employee, consultant, or in any other capacity
whatsoever, engage, participate, invest or become interested in, affiliated or
connected with, render services to, or, in exchange for any compensation or
remuneration, direct or indirect, furnish any aid, assistance or advice to any
person, corporation, firm or other organization engaged in, a business that
is competitive with the Business that is conducted by the Company, or by any
Affiliate, as defined in Section 2.3, as of the date hereof or to be conducted
by the Company, or by any Affiliate, immediately after the date hereof with the
assets acquired pursuant to the Acquisition Agreement.
2.1.2.
Directly or indirectly, as a principal, partner, shareholder, agent, director,
employee, consultant, or in any other capacity whatsoever, employ, retain, or
enter into any employment, agency, consulting or other similar arrangement with,
any person who, within the twelve-month period prior to such employment,
retention or arrangement, was an employee of the Company, or of any Affiliate,
or, induce or attempt to induce any employee of the Company, or of any
Affiliate, to terminate his employment with the Company, or with any
Affiliate.
2.2.
The Consultants acknowledge that it is the policy of the Company to maintain as
secret and confidential all Confidential Information as hereinafter
defined.
2.2.1.
"Confidential Information" shall mean any information, not generally known in
the Company's industry, which information was either sold by the Consultants or
the Sellers to the Company or acquired by Consultants from the Company, and
which gives the Company a competitive advantage in the industry, heretofore or
hereafter acquired, discovered, developed, conceived, originated, used or
prepared by the Company or by an employee of the Company as the result of
employment with the Company and which falls within the following
categories:
(a)
Information relating to trade secrets of the Company or any supplier, customer,
distributor, independent representative or consultant of the
Company;
(b)
Information relating to existing or contemplated products of the Company,
services, technology, designs, processes, manuals, formulas, computer systems
and/or software, and any research or development of the Company or any supplier
or customer of the Company;
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(c)
Information relating to business plans, sales or marketing methods, methods of
doing business, distributor or independent representative lists or information,
customer lists, customer usages and/or requirements, and supplier or customer
information of the Company or any supplier or customer of the
Company;
(d)
Information relating to work product in general; and
(e)
Any other confidential information that either the Company or any supplier,
distributor, independent representative or consultant customer of the Company
may wish to protect by patent, copyright or by keeping it secret and
confidential.
2.2.2
The Consultants recognize that the services to be performed by the Consultants
are special and unique, and that by reason of their duties, they will acquire
Confidential Information. The Consultants recognize that all such Confidential
Information is the property of the Company. In consideration of the Company's
entering into this Agreement, the Consultants agree that:
(a)
The Consultants shall never, during the term of engagement or thereafter,
directly or indirectly, use, publish, disseminate or otherwise disclose any
Confidential Information obtained in connection with their engagement by the
Company without the prior written consent of the Company;
(b)
During the term of their engagement by the Company, the Consultants shall
exercise all due and diligent precautions to protect the integrity of the
Company's Confidential Information and, upon termination of their engagement,
the Consultants shall return ail documents containing any Confidential
Information and any copies thereof, in their possession or control;
and
(c)
During the Non-Competition Period, the Consultants shall exercise all due and
diligent precautions to protect any Confidential Information and shall never,
directly or indirectly, use, publish, disseminate or otherwise disclose any
Confidential Information obtained in connection with their
engagement.
2.2.3.
Upon termination or expiration of this Agreement, the Consultants shall
immediately deliver to the Company all books, records, memoranda, reports,
software data and documents relating to the Company's business, suppliers,
customers and other assets of the Company in the possession, custody or under
the control of the Consultants, whether or not such material contains
Confidential Information. .
2.3.
The Consultants and the Company acknowledge and agree that (i) the restrictions
set forth in this Section 2 are reasonable in terms of scope, duration,
geographic area, and otherwise, and (ii) the protections afforded to the
Company, and its Affiliates, hereunder are necessary to protect their legitimate
business interests.
2.4.
For the purposes hereof, the term "Affiliate" shall mean any corporation,
partnership or other firm or entity that is engaged in the Business, and
(i) that owns more than 50% of the stock of the Company, or (ii) more than 50%
of the ownership interests of which are owned by the Company or by stockholders
of the Company, including, without limitation, Darius International
Inc.
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3. Compensation.
3.1.
Allocation;
Term. In consideration of the Consultants' covenants hereunder, the
Consultants shall be entitled to payment of the consideration described in
Section 3.2. The consideration shall be allocated (a) Fifty Percent (50%) as
compensation for consulting services, and (b) Fifty Percent (50%) as
compensation for Consultants' restrictive covenants. Unless sooner terminated
pursuant to Section 1.3 or Sections 3.4 and 3.5 hereof, this Agreement shall
terminate upon the later to occur of Robert's or Shelley's death, provided that
the Company shall continue to make payments to the estate of the second to die
of Xxxxxx or Xxxxxxx until the "Minimum Payment" (defined below) has been paid
to the Consultants or their estates. The "Minimum Payment” shall be Five Hundred
Forty Thousand Dollars ($540,000), as reduced (if at all) pursuant to Section
3.6 hereof.
3.1.1.
Except for a sale, reorganization, assignment or other transaction upon which
the successor company shall assume all of the Company's obligations under this
Agreement, for so long as payments of the Minimum Payment are being made by the
Company to the Consultants pursuant to this Agreement, the Company agrees that
it will not transfer the Purchased Assets (as defined in the Acquisition
Agreement), Products, and/or the Business to another company in a manner which
would alter or jeopardize the Business, the Adjusted Gross Revenues and/or
intended payment obligations as set forth in this Agreement or the Acquisition
Agreement.
3.2.
Consideration.
Subject to Section 3.6 hereof, the consideration payable to the Consultants
under this Agreement shall be payable on the fifteenth (15th) day of
each month beginning March 15, 2001 (each, a "Payment Date"), as
follows:
3.2.1.
Until such time as payments to the Consultants under this Section 3.2 aggregate
the Minimum Payment, Consultants shall be entitled to receive:
(a)
Twelve Percent (12%) of "Adjusted Gross Revenues" (defined below) for the month
preceding the Payment Date, if during such month Adjusted Gross Revenues were
not less than Two Hundred Fifty Thousand Dollars ($250,000); OR
(b)
Ten Percent (10%) of Adjusted Gross Revenues for the month preceding the Payment
Date, if during such month Adjusted Gross Revenues were less than Two Hundred
Fifty Thousand Dollars ($250,000).
3.2.2.
For all Payment Dates after payments to the Consultants under this Section 3.2
aggregate the Minimum Payment, Consultants shall be entitled to receive Five
Percent (5%) of Adjusted Gross Revenues for the month preceding the Payment
Date.
3.3.
Adjusted Gross
Revenues. For the purposes hereof, "Adjusted Gross Revenues" shall mean
the Company's revenues (determined in accordance with generally accepted
accounting principles of the United States) attributable to sales of the
Products, adjusted for returns, allowances and discounts. "Products"
means those nutrition, dietary supplements and related products (the "Products")
which were purchased by the Company from the Sellers and are listed on Exhibit A to the Acquisition
Agreement, together with any additional products purchased by the Company from
Sellers and/or Consultants pursuant to Section 1.09 of the Acquisition
Agreement. Consultants shall have the rights to (i) request and receive periodic
reports of Adjusted Gross Revenues from the Company, and (ii) at Consultants'
expense, to audit (no less frequently than annually) the Company's books and
records relating to the Business, in each case to verify the Company's
calculation of Adjusted Gross Revenues and payment of the consideration
hereunder.
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3.4.
Decline in Adjusted
Gross Revenues. With respect to any year beginning))n or after January 1,
2003, in the event that Adjusted Gross Revenues are less than Three
Milli0rt/F1ve Hundred Thousand Dollars ($3,500,000), or the Company ceases sales
of the Products, the Company may elect either (a) with respect to each such year
(a "Payment Year'), continue to pay the Consultants Five Percent (5%) of
Adjusted Gross Revenues in the manner set forth above, provided that if, after
all payments with respect to such Payment Year have been made, the Consultants
have not received an aggregate of One Hundred Seventy Five Thousand Dollars
($175,000) in payments, the Company shall pay the Consultants the amount of such
shortfall not later than January 31 of the following year, or (b) to terminate
this Agreement, in which case the provisions of Section 3.5 shall
apply.
3.5.
Termination. In
the event the Company elects to terminate this Agreement in accordance with
Section 3.4, (a) the Company shall grant to the Consultants anon-exclusive,
non-assignable license to market the Products, either personally or through the
Sellers, under a private label (but without any rights to the "Trademarks"
referenced in the Acquisition Agreement), (b) if the Company has terminated this
Agreement prior to the payment of the Minimum Payment, the Company shall forfeit
and terminate the license set forth in Section 1.11 of the Acquisition
Agreement, and shall be required to discontinue use of the ingredients and
formulas, and (c) the Sellers' restrictive covenants in Section 6.03 of the
Acquisition Agreement, and the Consultants' restrictive covenants contained
herein and in a Non-Competition Agreement of even date herewith, shall, if not
already expired, terminate,
3.6.
Reduction of
Compensation. The compensation payable to the Consultants hereunder shall
be Subject to reduction as provided in Section 6 of this Agreement and in
Section 6.01(d) of the Acquisition Agreement.
3.7.
Guaranty. The
Company's obligation to make payments to the Consultants has been guaranteed by
Darius International Inc. pursuant to the Guaranty Agreement executed
simultaneously herewith.
3.8.
Reimbursement of
Expenses. The Company shall reimburse the Consultants for all expenses
incurred in connection with their duties on behalf of the Company and
pre-approved by the Company, provided that such expenses shall, in all cases, be
subject to the Company's policies in effect from time to time, and the
Consultants shall keep, and present to the Company, records and receipts
relating to reimbursable expenses incurred by them. Such records and receipts
shall be maintained and presented in a format, and with such regularity, as the
Company reasonably may require in order to substantiate the Company's right to
claim income tax deductions for such expenses.
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4.
Prior
Restriction. The Consultants represent and covenant to the
Company that (a) the Consultants are able in all respects to execute and perform
this Agreement, and the execution and performance hereof does not constitute a
breach or default under any other agreement, contract or arrangement which is
binding upon the Consultants; (b) the Consultants are entering into this
Agreement in good faith, are free to execute this Agreement and to enter into
the engagement pursuant to the provisions hereof; (c) the Consultants are not
presently engaged and shall not during the term of this Agreement be engaged in
any enterprise and are not receiving income or royalties from any company
engaged in the Business; and (d) the Consultants shall disclose the existence
and terms of the restrictive covenants set forth in this Agreement to any
employer or entity that the Consultants may work for during the term of this
Agreement or after the termination of the Consultants' engagement with the
Company.
5. Assignment. This
Agreement is personal to the Consultants and may not be assigned in any way by
them except as may be agreed to in writing by the Company. If at any time during
the term of this Agreement, the Company shall merge or consolidate with, or sell
substantially all of its assets to another corporation or entity, or shall
become a controlled subsidiary of a corporation (i.e. eighty per cent or more of
the outstanding common shares of stock of the Company has been acquired by such
other corporation), then the Consultants shall render the services provided for
under this Agreement to such other corporation or entity, provided that such
other corporation or entity shall assume this Agreement and shall perform all
the terms and conditions hereof on the part of the Company. In such event, the
Consultants' rights hereunder shall remain unimpaired and their obligations
shall continue in favor of such other corporation or entity. Subject to the
foregoing, the rights and obligations under this Agreement shall inure to the
benefit of, and shall be binding upon, the heirs, legatees, successors and
permitted assigns of the Consultants, and upon the successors and assigns of the
Company.
6. Default.
6.1.
In the event either of the Consultants commits any material violation of the
provisions of this Agreement, then, in addition to any other remedies which the
Company might have at law or in equity, the Company shall have the right to
set-off any actual and reasonable damages incurred by it against any payments
otherwise due hereunder. Nothing contained herein shall preclude the Company
from seeking damages or injunctive relief against the Consultants as provided in
Section 6.2.
6.2
In the event either of the Consultants commits any material violation of the
provisions of Section 2 of this Agreement, as determined by the Company in good
faith, the Company may, by injunctive action, compel the Consultants to comply
with, or restrain the Consultants from violating, such provision, and, in
addition, and not in the alternative, the Company shall be entitled to declare
the Consultants in default hereunder and to terminate any further payments
hereunder.
7. Severability and
Reformation. The parties hereto intend all provisions of this Agreement
to be enforced to the fullest extent permitted by law. If any restriction set
forth in Section 2 is held by a court of competent jurisdiction to be
unenforceable with respect to one or more geographic areas, lines of business
and/or months of duration, then Consultants agree, and hereby submit, to the
reduction and limitation of such restriction to the minimal extent necessary so
that the provisions of Section 2 shall be enforceable. If any other provision of
this Agreement is held to be illegal, invalid, or unenforceable under present or
future law, such provision shall be fully severable, and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
were never apart hereof, and the remaining provisions shall remain in full force
and shall not be affected by the illegal, invalid, or unenforceable provision,
or by its severance.
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8. Notices. Any notices
required by this Agreement shall (i) be made in writing and mailed by certified
mail, return receipt requested, with adequate postage prepaid, (ii) be deemed
given when so mailed, (iii) be deemed to be received by the addressee within ten
(10) days after given or when the certified mail receipt for such mail is
executed, whichever is earlier, and (iv) in the case of the Company, be mailed
to its principal office, or in the case of the Consultants, be mailed to the
last address that the Consultants have given to the Company.
9. WAIVER OF
JURY TRIAL.
THE PARTIES HEREBY
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT.
10. Miscellaneous.
10.1.
This Agreement may not be amended except by a written instrument signed and
delivered by the parties hereto.
10.2.
This Agreement, together with the Acquisition Agreement, constitute the
entire understanding between the parties hereto with respect to the subject
matter hereof, and all other agreements relating to the subject matter hereof
are hereby superseded.
10.3.
This Agreement shall be governed by, and construed in accordance with, the laws
of the Commonwealth of Pennsylvania.
10.4. The Company's Affiliates
are intended to be third-party beneficiaries of this Agreement, whether or not
parties hereto, and each of them shall have the right to enforce this Agreement
against the Consultants, whether or not the Company joins in such
action.
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IN
WITNESS WHEREOF, the parties have executed, under seal, this Consulting and
Non-Competition Agreement as of the day and year first above
written.
| /s/ Xxxxxx X. Xxxxx | |||
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Xxxxxx
X. Xxxxx
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| /s/ Xxxxxxx X. Xxxxx | |||
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Xxxxxxx
X. Xxxxx
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XXXXXX
MARKETING. INC.
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| By: |
/s/ Xxxxxx X. Xxxxxx, President
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Xxxxxx
X. Xxxxxx, President
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