CONSULTING AGREEMENT
Exhibit
10.9
This
Consulting Agreement (this “Agreement’) is dated as of January 10, 2007, to be
effective as of January 11, 2007 (the “Effective Date”), by and between
XXXXXXX
TECHNOLOGIES CORPORATION,
a
Delaware corporation (the “Company”), XXXXXXX
TECHNOLOGIES, LLC,
a
Nebraska limited liability company and a wholly-owned subsidiary of the Company
(“Xxxxxxx LLC”), and XXXXX
XXXXXXXXX, an
individual (“Consultant”).
RECITALS:
WHEREAS,
Xxxxxxx
LLC desires to engage the services of Consultant for the purpose of performing
consulting services on behalf of Xxxxxxx LLC, and Consultant agrees to perform
such services, subject to the terms and conditions contained
herein.
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements and upon the terms and
subject to the conditions hereinafter set forth, the parties hereto hereby
covenant and agree as follows:
1. Services.
Xxxxxxx
LLC hereby engages Consultant, and Consultant agrees to serve Xxxxxxx LLC,
as an
independent contractor providing strategic planning, investor relations, and
other valuable services to Xxxxxxx LLC and its affiliates.
2. Term
and Termination.
The
term of this Agreement shall begin on the Effective Date and terminate on
December 31, 2007 (the “Initial Term”). After the Initial Term, this Agreement
shall automatically renew for up to two additional one year terms (each a
“Renewal Term”), provided that Consultant generated at least $300,000 in gross
sales for either Xxxxxxx LLC or Trace Technologies, LLC (“Trace”), in the
aggregate, for the preceding year. The Initial Term or any Renewal Term, as
applicable, are referred to herein as the “Term.” Notwithstanding the foregoing,
the Company may terminate this Agreement for “cause” (as defined below) prior to
the expiration of the Term immediately upon written notice to Consultant.
Termination of Consultant for “cause” shall be defined as: (i) the commission by
Consultant of an act of fraud on Xxxxxxx LLC or any of its affiliates; (ii)
conviction of, or a plea of no contest to, or deferred adjudication for any
felony or misdemeanor that causes harm or embarrassment to Xxxxxxx LLC or any
of
its affiliates, in the reasonable judgment of a manager of Xxxxxxx LLC; (iii)
actions or failures to act by Consultant directly and proximately constituting
a
material violation of any statute, regulation or other law to which Xxxxxxx
LLC
or Consultant is subject, and which causes or is reasonably likely to cause
a
material adverse effect to Xxxxxxx LLC or any of its affiliates.
3. Compensation.
(a) Consulting
Fee.
In
consideration of the services rendered by Consultant to Xxxxxxx LLC, Xxxxxxx
LLC
agrees to pay Consultant during the Term a consulting fee equal to $154,800
per
year (the “Consulting Fee”) in accordance with Xxxxxxx LLC’s normal accounting
practices.
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(b) Performance
Bonus.
For
each calendar month during the Term, Consultant will be entitled to receive
bonus payments equal to a percentage of Xxxxxxx LLC’s gross margin for such
calendar month on sales procured by Consultant after the Effective Date
(“Applicable Sales”) per the following schedule:
| Gross Margin | Percentage of Bonus Payment Paid |
| $0 - $75,000 | 50% of Xxxxxxx LLC’s gross margin on Applicable Sales |
| $76,000 - $175,000 | 25% of Xxxxxxx LLC’s gross margin on Applicable Sales |
| over $175,000 | 10% of Xxxxxxx LLC’s gross margin on Applicable Sales |
For
purposes of this Agreement, the “gross margin” of Xxxxxxx LLC for any period
means the amount that its aggregate Applicable Sales for such period exceeds
its
aggregate costs of such sales for such period as determined in accordance with
generally accepted accounting principles. For example, if Xxxxxxx LLC’s gross
margin for a particular calendar month during the Term was $300,000,
Consultant’s bonus payment for such calendar month would equal $75,000 [(50% x
$75,000) plus (25% x $100,000) plus (10% x ($300,000 - $175,000))]. Any bonus
payments payable to Consultant pursuant to the foregoing for any calendar month
during the Term will be paid by Xxxxxxx LLC within 15 days after the end of
such
calendar month.
(c) Trace
Bonus.
The
Company and Xxxxxxx LLC acknowledge and recognize that Consultant has provided
and will continue to provide value in respect to the business and development
of
the assets of Trace. The Company is pursuing certain transactions and is
attempting to maximize the value of certain assets and certain rights in the
Trace Assets (as defined below). If at any time a Trace Asset Transaction (as
defined below) occurs, the Company shall pay to Consultant an amount equal
to
3.125% of the Transaction Amount (as defined below) (the “Trace Bonus”). If the
Transaction Amount is received in installments, then the portion of the Trace
Bonus payable to Consultant shall be proportionate to the portion of the
Transaction Amount received. Further, the Company agrees to cooperate with
Consultant in an effort to obtain the most beneficial tax treatment of the
transfer or payment of the Trace Bonus, or any part thereof, to Consultant.
Such
Trace Bonus shall be paid within 10 days following receipt of the Transaction
Amount or the installment thereof, as the case may be. In the event the
Transaction Amount is paid, in any part, with consideration other than cash,
payment of the portion of the Trace Bonus to Consultant shall be made by the
transfer of the same assets or things of value received by the Company or its
assignees, designees, successors, agents, affiliates, or other similar persons
or entities (collectively referred to as “Assignees”) and/or cash in the same
proportions as the cash or the same assets or things of value received by the
Company or its Assignees, and Consultant shall be entitled to his proportion
of
all rights (including registration rights) received by the Company or its
Assignees with respect to such non-cash assets. In the event that the proceeds
can not be distributed in kind, the Company will pay the cash equivalent of
the
Trace Bonus as determined by the Board of Directors of the Company. The Trace
Bonus shall be payable even though such payments or transfers of the Transaction
Amount continue after this Agreement’s termination or expiration, and payments
thereof shall continue throughout the entire period of such transfers or
payments, should they be spread out or delayed in any fashion. The Trace Bonus
described above is in recognition of the unique knowledge, experience and effort
expended and to be expended by Consultant with respect to the development and
realization of the values of the Trace Assets to the Company and Xxxxxxx LLC
and
shall continue and be paid notwithstanding the termination of Consultant’s
services hereunder.
Any
rights or options previously granted to Consultant by the Company or Trace
in
respect to the equity of, or bonuses in respect to, Trace, including without
limitation the option to acquire membership interests in Trace, are hereby
acknowledged and agreed to be terminated without additional compensation and
are
null and void; provided that nothing in this subsection shall be taken to impact
or diminish the Trace Bonus described above, or any rights or options of any
type granted to Consultant with respect to the Company.
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For
purposes of this Agreement, the following definitions shall apply:
“Trace
Assets” consists of assets and intellectual property of Trace as of the date
hereof and any improvements thereto and enhancements thereof.
“Trace
Asset Transaction” means any transaction whatsoever, whether occurring during
the Term of this Agreement or within 5 years after the date of termination
or
expiration of this Agreement, by which all or a significant portion of the
Trace
Assets are, and/or ownership of Trace itself is, directly or indirectly, sold,
transferred, assigned, licensed, released or in any other way disposed of,
including, without limitation, by any sale of assets, merger, sale of stock,
transfer, change of control of Trace; provided that if such a transaction is
pending but not yet closed at the date 5 years after the date of termination
or
expiration of this Agreement and is thereafter closed according to its terms,
such transaction will be a Trace Asset Transaction hereunder. A transaction
involving the creation of a new entity or entities spun out to the Company
stockholders with a purpose to convey a significant portion of the Trace Assets
or control of a significant portion of the Trace Assets shall be deemed a Trace
Asset Transaction.
“Transaction
Amount” means the total amount paid to or received by either the Company or any
Assignee (including without limitation, the transferee or assignee of an
ownership interest in Trace), or any other related party or entity, whether
directly or indirectly, from a Trace Asset Transaction, net of any related
attorney’s fees and reasonable transaction expenses. In the event that the
Transaction Amount is not readily determinable or the proceeds of the Trace
Asset Transaction are not distributable in kind, the Board of Directors of
the
Company will, promptly after the Trace Asset Transaction occurs, make a
reasonable determination of the value of the Transaction Amount.
(d) Trace
Commission Bonus.
For any
sales procured by Consultant for Trace during the Term (the “Trace Sales”), the
Company agrees to pay Consultant 10% of Trace’s gross margin on such sales. For
purposes of this Agreement, the “gross margin” of Trace for any period means the
amount that its aggregate Trace Sales for such period exceeds its aggregate
costs of such sales for such period as determined in accordance with generally
accepted accounting principles.
(e) Reimbursement
of Expenses.
Consultant shall be reimbursed by Xxxxxxx LLC for all reasonable out-of-pocket
disbursements incurred by Consultant in connection with the performance of
his
services under this Agreement, including but not limited to meals, lodging
and
other travel expenses. Expenses in excess of $500 must be approved in advance
by
a manager of Xxxxxxx LLC.
4. Health
Benefits.
Consultant will be provided with notice of his COBRA rights, at which time
Consultant may elect to extend his present health and dental insurance coverage
under COBRA. If Consultant elects continuation of coverage under COBRA, Xxxxxxx
LLC agrees to pay the premiums for Consultant’s present coverage for a period of
18 months or until Consultant secures alternate coverage with another employer,
whichever occurs first.
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5. Devotion
of Time. Subject
to the provisions hereof, during the Term, Consultant shall devote such of
his
time and effort as may be reasonably necessary to the discharge of his duties
hereunder. Notwithstanding anything to the contrary herein contained, Consultant
shall not be restricted from engaging in other business activities during the
Term, and Consultant shall not be required to devote any specified amount of
time to the consulting services hereunder.
6. Nondisclosure
of Proprietary Information.
Consultant acknowledges that he has received or may receive information relating
to Xxxxxxx LLC’s and any of its affiliates’ assets, operations, clients, and
past, present, and future businesses, including without limitation developments,
technical data, intellectual property, specifications, designs, ideas, product
plans, research and development, personal information, financial information,
customer lists, business methods and operations, strategic plans. marketing
plans and pricing information, all of which are proprietary to Xxxxxxx LLC
and
involve trade secrets, know-how, techniques, and combinations of known
information of a character regarded by Xxxxxxx LLC as confidential, as well
as
other information that Xxxxxxx LLC has indicated to be confidential or which,
by
the nature of the information or the circumstances of its disclosure, Consultant
ought reasonably to consider confidential (all of the foregoing, collectively,
the “Proprietary Information”). The Proprietary Information does not include
information which (i) at the time it is disclosed by the Consultant was already
in the public domain; (ii) is subsequently published or publicly disclosed
by
persons other than Consultant through no fault of Consultant; (iii) is
subsequently acquired by Consultant from a third party having no obligation
of
confidentiality toward Xxxxxxx LLC with respect to such information; or (iv)
is
known to Consultant at the time of disclosure, provided that Consultant shall
have the burden of establishing such prior knowledge by competent written proof.
If Consultant is compelled by law to disclose Confidential Information, he
shall
use his best efforts to give Xxxxxxx LLC ten (10) days prior written notice
of
compelled disclosure and shall limit such disclosure to the extent legally
possible.
Consultant
agrees that Consultant will not disclose, either during the term of this
Agreement or at any time after termination of this Agreement, any Proprietary
Information to any person or entity, except in the course of Consultant’s duties
on behalf of Xxxxxxx LLC or with Xxxxxxx LLC’s consent, and that, similarly,
without Xxxxxxx LLC’s consent, will not use such information for the benefit of
any person or entity other than Xxxxxxx LLC at any time. Consultant agrees
that
upon termination of this Agreement, Consultant will deposit with or return
to
Xxxxxxx LLC all copies (in any media, including, without limitation, electronic
storage media) of documents, records, notebooks or any other information or
documentation of Xxxxxxx LLC’s Proprietary Information, and all derivatives
thereof, whether the Proprietary Information or documentation was developed
or
prepared by Consultant or by others. Consultant acknowledges that this covenant
of nondisclosure is an integral term of this Agreement and is given in
consideration of the engagement of Consultant and the other consideration
granted in this Agreement.
7. Company’s
Representations.
Each of
the Company and Xxxxxxx LLC represents and warrants that it is free to enter
into this Agreement and to perform each of its terms and covenants. Each of
the
Company and Xxxxxxx LLC represents and warrants that it is not restricted or
prohibited, contractually or otherwise, from entering into and performing this
Agreement and that its execution and performance of this Agreement is not a
violation or breach of any other agreements between it and any other person
or
entity. Each of the Company and Xxxxxxx LLC represents and warrants that this
Agreement is a legal, valid and binding agreement of it, enforceable in
accordance with its terms.
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8. Consultant
Representations.
Consultant represents and warrants that he is free to enter into this Agreement
and to perform each of its terms and covenants. Consultant represents and
warrants that he is not restricted or prohibited, contractually or otherwise,
from entering into and performing this Agreement, and that the execution and
performance of this Agreement is not a violation or breach of any other
agreement between Consultant and any other person or entity. Consultant
represents and warrants that this Agreement is a legal, valid and binding
agreement of the Consultant, enforceable in accordance with its
terms.
9. Withholding.
Consultant will be responsible for payment of all required federal and state
withholding taxes, if any, under this Agreement. Xxxxxxx LLC will provide
Consultant with an IRS Form 1099 at the beginning of the ensuing calendar year,
for all compensation paid under this Agreement.
10.
Independent
Contractor Status.
As an
independent contractor, Consultant is not eligible to receive the benefits
offered to Xxxxxxx LLC’s employees.
11.
No
Right of Setoff.
The
Company shall have no right of set-off or counterclaim, in respect of any claim,
debt, or obligation, against Consultant, his dependents, beneficiaries, or
estate in respect to any payments hereunder, whether of the Trace Bonus, the
Performance Bonus or otherwise.
12.
Multiple
Counterparts.
This
Agreement may be executed in counterparts, each of which for all purposes is
to
be deemed an original, and all of which constitute, collectively, one
agreement.
13.
Severability
and Savings Clause.
If any
one or more of the provisions contained in this Agreement is for any reason
(i)
objected to, contested or challenged by any court, government authority, agency,
department, commission or instrumentality of the United States or any state
or
political subdivision thereof, or any securities industry self-regulatory
organization (collectively, “Governmental Authority”), or (ii) held to be
invalid, illegal or unenforceable in any respect, the parties hereto agree
to
negotiate in good faith to modify such objected to, contested, challenged,
invalid, illegal or unenforceable provision. It is the intention of the parties
that there shall be substituted for such objected to, contested, challenged,
invalid, illegal or unenforceable provision a provision as similar to such
provision as may be possible and yet be acceptable to any objecting Governmental
Authority and be valid, legal and enforceable. Further, should any provisions
of
this Agreement ever be reformed or rewritten by a judicial body, those
provisions as rewritten will be binding, but only in that jurisdiction, on
the
parties as if contained in the original agreement. The invalidity, illegality
or
unenforceability of any one or more provisions hereof will not affect the
validity and enforceability of any other provisions hereof.
14.
Successors;
Assignment.
This
Agreement and the rights and obligations under this Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns. Neither this Agreement nor any
rights or benefits under this Agreement may be assigned by either party to
this
Agreement without the other party’s prior written consent.
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15. Entire
Agreement; Amendment.
This
Agreement supersedes any and all other agreements, either oral or in writing,
between the parties with respect to the engagement of Consultant by Xxxxxxx
LLC
(including any previously executed agreement that has not been fully performed
by both parties), and contains all of the covenants and agreements between
the
parties with respect thereto. This Agreement can only be amended by the parties
in writing, executed by the party against whom enforcement of any modifications
may be sought.
16. Governing
Law.
THIS
AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE OF NEBRASKA WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS.
VENUE OF ANY LITIGATION ARISING FROM THIS AGREEMENT SHALL BE IN A COURT OF
COMPETENT JURISDICTION IN XXXXXXX COUNTY, NEBRASKA.
17. Notices.
All
notices or other communications which are required or permitted hereunder shall
be in writing and sufficient if (i) personally delivered, (ii) sent by
nationally- recognized overnight carrier or (iii) sent by registered or
certified mail, postage prepaid, return receipt requested, addressed to the
addresses set forth below each party’s name on the signature page hereto, or to
such other address as the party to whom notice is to be given may have furnished
to each other party in accordance herewith. Any such communication shall be
deemed to have been given (i) when delivered, if personally delivered, (ii)
on
the first Business Day (as hereinafter defined) after dispatch, if sent by
nationally recognized overnight courier and (iii) on the third Business Day
following the date on which the piece of nail containing such communication
is
posted, if sent by mail. As used herein, “Business Day” means a day that is not
a Saturday, Sunday or a day on which banking institutions in the city to which
the notice or communication is to be sent are not required to be
open.
18. Third
Party Beneficiary.
No
person, firm, group or corporation is a third party beneficiary of this
Agreement.
(Signature
Page Follows)
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first mentioned above.
|
COMPANY:
XXXXXXX TECHNOLOGIES CORPORATION
|
|
| By: /s/ Xxxx Xxxx | |
| Name: Xxxx Xxxx | |
| Title: Director | |
|
Address:
0000
Xxxxx 000xx
Xxxxxx
Xxxxx,
Xxxxxxxx 00000
|
|
|
XXXXXXX LLC:
XXXXXXX TECHNOLOGIES, LLC
|
|
| By: /s/ Xxx Xxxxxxxx | |
| Name: Xxx Xxxxxxxx | |
| Title: President | |
|
Address:
0000
Xxxxx 000xx
Xxxxxx
Xxxxx,
Xxxxxxxx 00000
|
|
| CONSULTANT: | |
| /s/ Xxxxx X. Xxxxxxxxx | |
| XXXXX XXXXXXXXX | |
|
Address: ________________
________________
|
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