CONSULTING AGREEMENT
INTRODUCTION
This Consulting Agreement (this "Agreement") is made by and between
Matridigm Corporation, a California corporation ( the "Company"), and BRC
Holdings, Inc., a Delaware corporation ("Consultant"), effective as of
October 1, 1996 (the "Effective Date").
RECITALS
The Company desires to engage Consultant, and Consultant desires to
accept the engagement, to perform certain executive services for the Company
as described below, including providing the services of Consultant's Chairman
and Chief Executive Officer, X. X. Xxxxxx ("Xxxxxx"), to serve in an
executive officer position with the Company as its Chairman of the Board of
Directors, on the terms and conditions set forth below.
In connection with this consulting engagement, the Company and
Consultant concurrently are entering into a Stock Purchase Agreement (the
"Stock Purchase Agreement") pursuant to which Consultant is purchasing
2,000,000 shares of the Company's Common Stock at the purchase price of $0.75
per share, which the parties acknowledge is below the current fair value of
$0.80 per share for the shares, as determined by the Company's Board of
Directors.
AGREEMENT
Based upon the premises contained in the above recitals and the mutual
promises below, the parties hereby agree as follows:
1. THE SERVICES. the company hereby engages Consultant to assign Xxxxxx
(and not any other person) to act in the capacity of an executive officer of the
Company, having the title of Chairman of the Board. This executive officer
position shall have the following duties and responsibilities.
(A) Xxxxxx shall have general supervision of the business of the
Company, subject to the control of the Company's Board of Directors (the
"Board") and such authority as the Board may delegate to other executive
officers. Xxxxxx shall be a voting member of all standing committees and
shall have such other powers and duties as usually are vested in a Chairman
of the Board and as may be assigned to him by the Board of Directors of the
Company or pursuant to the Company's Bylaws. Xxxxxx shall report directly
to the Board.
(B) Xxxxxx and the Company, by the Company's Board of Directors or its
designated representative, shall establish expected goals, objectives and
outcomes by mutual agreement from time to time.
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(C) Consultant and Xxxxxx each shall perform their respective duties
faithfully, diligently, in a businesslike manner, and for the best
interests of the Company during the term of employment.
(D) Except as provided in the Sales Representative Agreement dated
July 22, 1996, between Consultant and the Company (the "Sales
Representative Agreement") and through the actions of Xxxxxx in his
capacity as an executive officer of the Company, Consultant shall not have
the power to bind the Company or to assume or to create any obligation or
responsibility, express or implied, on behalf or in the name of the
Company. The Company and Consultant are, and at all times shall be and
remain, independent contractors as to each other, and no joint venture,
partnership, agency or other relationship which would impose liability upon
one party for the act or failure to act of the other shall be created or
implied by or from this Agreement.
2. TERM; TERMINATION.
(A) This Agreement shall commence on the Effective Date and shall
terminate on the earlier to occur of: (i) December 31, 1999; (ii) dismissal
of Consultant for Cause (as defined below); (iii) dismissal of Xxxxxx from
executive office for the Company for Cause; (iv) resignation of either
Xxxxxx or Consultant; (v) death or disability rendering Xxxxxx unable to
perform the duties of the office of Chairman of the Board of Directors of
the Company effectively; or (vi) cessation of Xxxxxx'x status as Chairman
or Chief Executive Officer of Consultant. The Company's obligation to
compensate Consultant shall cease effective the date of such termination.
(B) Termination of this Agreement for any reason other than (i)
through (vi) of Section 2(A) above prior to October 1, 1997, shall not
relieve the Company of its obligation to compensate Consultant pursuant to
Section 3(B) below through the quarterly fiscal period ending December 31,
1999, nor shall it be considered termination of the consultancy
relationship for the purposes of triggering the Company's Repurchase Option
under Section 4 of the Stock Purchase Agreement, but such termination shall
terminate the Company's Repurchase Option.
(C) Termination of this Agreement for any reason other than (i)
through (vi) of Section 2(A) above, on or at any time after October 1,
1997, shall not trigger, but shall terminate, the Company's Repurchase
Option under Section 4 of the Stock Purchase Agreement; and the Company
shall remain subject to the obligation to compensate Consultant pursuant
to Section 3(B) of this Agreement for a period of twelve (12) months
thereafter only.
(D) Cause for termination shall mean:
(1) Malfeasance on the part of Xxxxxx or Consultant, which shall
include, but is not limited to, theft, embezzlement, fraud,
dishonesty, misappropriation or conversion of funds or property
committed against the Company, or conduct which constitutes unfair
competition with the Company, or
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breaches a fiduciary or a contractual duty to the Company set forth
in this Agreement or in the applicable Confidentiality and Proprietary
Rights Agreement with the Company. Breach or termination of any other
agreement between the Company and Consultant, including without
limitation the Sales Representative Agreement, shall not constitute
Cause for termination of the Agreement.
(2) Inducement by Xxxxxx or Consultant of any customer,
consultant, employee or supplier of the Company to breach any contract
with the Company or cease its business relationship with the Company,
other than in the context of good faith performance by him or it or
his or its duties to the Company hereunder within the authority
delegated by the Board.
(4) Subsequent to September 30, 1997, failure of Consultant or
Xxxxxx to perform the applicable performance goals, as specified from
time to time pursuant to Section 1(A)(2).
(E) The Company shall effect termination for Cause by the following
procedure:
(1) The Company shall give Consultant notice stating the alleged
Cause and the effective date of termination, not later than two (2)
weeks prior to the stated effective date of the termination.
(2) The Company shall give Consultant the opportunity to present
evidence to the Company's Board of Directors or a committee thereof,
at the Company's offices on a date and time not later than two (2)
weeks after the date of the notice described above, to refute the
claim of Cause or present evidence that the Cause has been cured. The
Board of Directors shall make a reasonable effort to schedule the
opportunity to present evidence for a date and time mutually
convenient to Consultant and the Board.
(3) The Company shall give Consultant notice, within two (2)
weeks after the presentation, of a resolution duly adopted by the Board
of Directors stating that after due consideration of the presentation,
the Board has determined in good faith that the termination is as a
result of Cause.
(4) In the event Xxxxxx or Consultant disputes the determination
of the Board that the termination is as a result of Cause, Xxxxxx or
Consultant shall have the right to seek resolution of the dispute by
arbitration in accordance with Section 8.
3. COMPENSATION.
(A) Xxxxxx shall remain an employee of Consultant and not of the
Company during the term of the Agreement. The Company shall not compensate
Xxxxxx for his services. Xxxxxx will look solely to Consultant for
compensation in connection with such activities.
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(B) The Company shall compensate Consultant during the term of the
Agreement, as a function of the Company's pre-tax operating income, as
determined in accordance with generally accepted accounting principles
(GAAP), as follows:
(1) Payments will be made as a function of the Company's
quarterly pre-tax operating income, no later than thirty (30) days
after the normal quarterly closing of the Company's books.
(2) The amount of the payments initially will be five percent
(5%) of pre-tax operating income, up to cumulative pre-tax operating
income of $100 Million. After achievement of cumulative pre-tax
operating income of $100 Million, the payment percentage will decline
by 0.00444444 for each additional increment of $10 Million, up to the
achievement of cumulative pre-tax operating income of $1 Billion,
after which the payment percentage will remain one percent (1%) until
the end of the contract term.
(3) Compensation for the fiscal quarter in which termination
occurs shall be based upon the appropriate pro-rated portion of the
quarterly pre-tax operating income for that quarter.
4. FACILITIES. Consultant and Xxxxxx will be entitled to perform the
Services at Consultant's place of business in Dallas, Texas, except as otherwise
reasonably required for effective interaction with the Company's personnel and
customers. Consultant shall provide the facilities necessary for effective
performance of the Services.
5. EXPENSES. The Company shall be responsible for all "Direct Expenses"
incurred by Consultant or Xxxxxx, as applicable, on the Company's behalf in
conjunction with their rendering of the Services. Direct Expenses shall include
all expenses incurred on the Company's behalf, with the exception of: (i)
salaries, benefits, and related employment costs of Xxxxxx and any other
employees of Consultant who perform services on the Company's behalf; and (ii)
facilities costs associated with the Consultant's corporate offices. The
Company will have the right to pre-approve all Direct Expenses and request
reasonable documentation or invoices related to such Direct Expenses. Except
for the foregoing, Consultant and the Company each shall bear the full and sole
responsibility for their own respective expenses, liabilities, costs of
operation, and the like.
6. TAXES AND BENEFITS. the Company shall not be obligated to withhold
federal and state taxes, social security taxes, state disability or unemployment
taxes and such other taxes or government-mandated withholdings with respect to
Xxxxxx or any of Consultant's other personnel, or to provide Xxxxxx or any of
Consultant's other personnel with benefits, including disability insurance, life
insurance, health insurance, vacation, participation in any applicable
profit-sharing, retirement or 401-K programs the Company may offer, or any other
benefits provided or offered by the Company to other administrative officers
employed by the Company. Xxxxxx and Consultant's other personnel shall look
solely to BRC for such benefits. Consultant hereby agrees to indemnify the
Company for any taxes, interest, and penalties which result in
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whole or in part from the Consultant not paying such taxes or benefits on
Consultant's own behalf.
7. CONFIDENTIALITY AND INTELLECTUAL PROPERTY. Each of Xxxxxx and
Consultant shall execute his or its respective Confidentiality and Intellectual
Property Agreement in the form attached as an exhibit hereto.
8. RESOLUTION OF DISPUTES. Any controversy or claim arising out of or
related to this Agreement or the breach thereof, except when injunctive relief
or specific performance is sought, shall be resolved by arbitration in
accordance with the following procedure:
(A) Either party shall be entitled to demand arbitration under this
provision. The party demanding arbitration (the "Notifying Party") shall
notify the other party (the "Non-Notifying Party") of the demand by
delivering a written demand for arbitration (the "Arbitration Demand").
(B) The Arbitration Demand shall contain the name and address of an
eligible arbitrator selected by the Notifying Party and a description of
the matter or matters the Notifying party seeks to have to be resolved (the
"Disputed Matters").
(C) Within ten (10) days of receipt of the Arbitration Demand, the
Non-Notifying Party shall notify the Notifying Party in writing, of the
name and address of an eligible arbitrator selected by the Non-Notifying
Party, as well as a description of any further Disputed Matters which the
Non-Notifying Party seeks to have resolved. Failure by the Non-Notifying
Party to name an eligible arbitrator within said ten (10) day period shall
be deemed a waiver of its right to select a second arbitrator on its own
behalf and the Notifying Party may select a second arbitrator on behalf of
the Non-Notifying Party.
(D) For purposes of this procedure, an "eligible arbitrator" is an
individual who has no financial relationship with either Consultant or the
Company, and who is a recognized arbitrator with the American Arbitration
Association. In the case of an eligible arbitrator selected by the
Company, the arbitrator shall be selected by vote of the Board of Directors
of the Company, excluding the vote of Xxxxxx and any other director elected
by class vote of a class or series of voting shares of which the majority
is owned or controlled by any affiliate of Consultant or Xxxxxx.
(E) Within ten (10) days after the date the second arbitrator shall
have been appointed, the two (2) arbitrators so selected shall appoint a
third eligible arbitrator. In the event the two arbitrators fail to select
a third eligible arbitrator within ten (10) days following the second
arbitrator's selection, they shall request prompt selection of a third
eligible arbitrator by the American Arbitration Association.
(F) As promptly as practicable after selection of the third
arbitrator, the three (3) arbitrators so selected shall notify the parties
of the name and address of the third arbitrator so selected and shall
specify the date, time and location of the arbitration hearing, with
reasonable time to accommodate discovery under Section 8(h).
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(G) The parties shall be entitled, should they so desire, to submit
written briefs of the Disputed Matters to the arbitrators at the addresses
of the arbitrators provided. At the hearing, the arbitrators so selected
shall hear the presentations of the respective parities with respect to the
Disputed Matters. In any arbitration proceedings hereunder, all testimony
of witnesses shall be taken under oath.
(H) Discovery will be allowed under the provisions of Section 1283.05
of the California Code of Civil Procedure as presently in force, which
provisions are incorporated herein.
(I) The Disputed Matters shall be resolved by the concurrence upon a
resolution by at least two (2) of the arbitrators. The award of the
arbitrators shall be of the same force and effect as a final enforceable
judgment of a court of competent jurisdiction. The parties hereby consent
to the in personam jurisdiction of the Superior Court of the State of
California for the purposes of confirming and entering judgment upon any
decree or award based upon such resolution. The parties agree to use all
reasonable efforts to keep all matters relating to any arbitration
hereunder confidential.
(J) If the arbitrators are unable to complete their determinations in
one meeting, they may continue to hear the Disputed Matters and to consult
after the hearing at such times as they deem necessary for a reasonable
period following the date of the initial hearing in order to reach
concurrence of at least two (2) of them on resolution of all Disputed
Matters.
(K) Upon the agreement during such period of at least two (2) of the
arbitrators upon any of the Disputed Matters, the arbitrators shall, in
simple letter form executed by the agreeing arbitrators, forthwith render
findings of fact and conclusions of law in a written opinion setting forth
the basis and reasons for any decision reached and deliver such document to
each party to this Agreement.
(L) Upon request of either party within ten (10) days after the date
of notice of resolution, the parties shall be entitled to rehearing of the
Disputed Matters, to be held at a date, time and location selected by the
arbitrators, no less than fifteen (15) days nor later than sixty (60) days
after the effective date of the request for rehearing. The arbitrators
shall notify the parties of their final decision within ten (10) days after
the date of any such rehearing and shall provide a written opinion setting
forth the basis and reasons for any new or modified findings of fact and
conclusions of law. Such final determination of the Disputed Matters shall
be determinative and binding on the parties; provided, that failure of the
arbitrators to follow the procedures set forth in this section or to
provide findings of fact and conclusions of law shall render the
determination non-binding, and shall be grounds for overturning the
arbitration determination.
(M) In the event a dispute is submitted to arbitration, the
arbitrators may award costs and reasonable attorneys' fees as they may
deem appropriate.
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(N) Nothing contained herein shall prevent the parties from jointly
selecting a single mediator to assist them in resolving any Disputed
Matter.
9. NOTICES. Any notice to be given pursuant to this Agreement shall be in
writing and shall be deemed to have been given at the time when delivered in
person to a party, if an individual, or to an officer of a party otherwise or
upon the earlier of (i) actual receipt by the addressee and (ii) five (5) days
after deposit in the U.S. mail when sent postage prepaid, express, certified or
registered mail, and addressed to the address of the intended recipient thereof
appearing on the last page of this Agreement (marked attention Chief Executive
Officer, if being sent to the Company) or such other address as any party hereto
shall have designated in writing and given notice thereof to the other party
pursuant to this subsection.
10. LIABILITY.
(A) Other than as set forth with respect to Xxxxxx in Section 10(B),
Xxxxxx and Consultant shall in no way be liable to the Company, its
shareholders, or any third party, for non-performance of their respective
obligations hereunder, including but not limited to, any cost, claim or
liability, including direct, indirect, or consequential damages, arising
from non-performance of the Services or failure to achieve expected goals,
objectives or outcomes. The Company's sole remedy shall be to terminate
this Agreement in accordance with Section 2.
(B) Subject to the Director's Indemnification Agreement between Xxxxxx
and the Company, no limitation of the liability of either party shall limit
in any way the common law fiduciary duties of Xxxxxx to the Company as a
director and an officer during the time he serves in those capacities.
11. GENERAL.
(A) If the application of any provision or provisions of this
Agreement to any particular facts or circumstances shall be held to be
invalid or unenforceable by any court of competent jurisdiction, then the
provision or provisions shall be deemed modified in such a manner as to
best approximate the intent of the parties as expressed in the provision,
within the boundaries of applicable law; and the validity and
enforceability of the provision or provisions as applied to any other
particular facts or circumstances and the validity of other provisions of
this Agreement shall not in any way be affected or impaired thereby. The
waiver of any one default shall not waive defaults of the same or a
different kind.
(B) This Agreement is to be governed by California law as such law is
applied to agreements between California residents entered into and to be
performed entirely in California. It constitutes the full and complete
understanding of the parties, superseding all previous discussions,
understandings or agreements on the subject matter hereof, including,
without limitation, any previous consulting engagement agreements or
purchase orders of Consultant, except as provided in the Confidentiality
and Intellectual Property Agreements executed pursuant hereto, the Stock
Purchase Agreement, and in the
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Company's standard form of Directors Indemnification Agreement entered into
by and between the Company and Xxxxxx.
(C) This agreement may be amended or modified only by a writing
executed by Consultant and the Company by their respective executive
officers (excluding Xxxxxx), with respect to execution of such amendment or
modification by the Company.
(D) This Agreement shall inure to the benefit of and shall be binding
upon the successors and permitted assigns of the parties. Permitted
assigns of Consultant and the Company shall include any entity acquiring
all or substantially all of the assets or outstanding equity of a party and
any corporation controlled by or under common control of the party, as well
as any other assignee approved in writing by the other party.
(E) The section headings in this Agreement are solely for convenience
and shall not be considered in its interpretation.
(F) Any lawsuit or proceeding which arises out of or relates to this
Consulting Agreement which is not arbitrated pursuant to Section 8 above
shall be brought in the State of California in Alameda or Santa Xxxxx
County (and for the purpose of any such suit irrevocably submit and consent
to the personal and subject matter jurisdiction and venue of any court
located there). Service of process may be effected in the same manner
notice is given pursuant to Section 9 above. The prevailing party shall be
entitled to reasonable attorneys' fees.
(G) This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute
one instrument. The exhibits referred to herein and annexed hereto are
hereby incorporated into and made a part of this Agreement.
(H) In the event that force majeure (such as war, flood, earthquake,
act of God, and so forth) prevents Consultant from achieving agreed
performance goals, objectives or outcomes, the scheduled deadline for
achievement of the same shall be extended for a reasonable time in view of
the gravity and extent of interruption of normal business activity, but not
in any event beyond ninety (90) days.
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12. AUTHORIZED SIGNATURES.
For the purpose of binding the parties to the above Consulting Agreement, the
parties or their duly authorized representatives have signed their names on the
dates indicated.
MATRIDIGM CORPORATION BRC HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ X. X. Xxxxxx
------------------------- -------------------------
XXXXX X. XXXXX X. X. XXXXXX
CHIEF EXECUTIVE OFFICER CHIEF EXECUTIVE OFFICER
Address: Address:
00000 Xxxxxxx Xxxxxxx 0000 X. Xxxxxxxxxxx Xxxx, Xxx. 0000
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
CONCURRENCE BY XXXXXX
I agree to be bound by the terms of the foregoing Consulting Agreement
insofar as they pertain to me personally.
/s/ X. X. Xxxxxx
-----------------------
X.X. XXXXXX
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