EXHIBIT 10.14
CONSULTING AGREEMENT
AGREEMENT is made as of this 1st day of July, 1995, by and between, Augment
Systems Inc., a Delaware corporation with its principal place of business
located at 00 Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx (the "Company"), and Young
Management Group, Inc., a Massachusetts corporation with its principal place of
business located at 8 New England Executive Park, Xxxxxxxxxx, Xxxxxxxxxxxxx
00000 ("Consultant").
RECITALS
WHEREAS, the Company has agreed to engage Consultant as a Consultant to
render advice and services from time to time regarding the preparation, review
and development of a business plan for the Company; the preparation, review and
development of marketing plans and strategies; assistance with investor and
stockholder relations; the writing of internal reports regarding corporate
finance; and general business advice requested from time to time by the Company;
WHEREAS, Consultant and the Company agree that certain information
regarding the trade secrets, marketing plans and strategies, business and
operations of the Company that Consultant may obtain, prepare, review or develop
during the course of its relationship with the Company should be used
exclusively for the benefit of the Company and are deemed to be "works for hire"
for the Company.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and conditions herein contained, the parties hereto agree as follows:
1. Consultant's Services
a) The Company hereby retains Consultant, and its officers and employees,
to perform the following consulting and advisory services (the "Services") upon
the terms and conditions set forth in this Agreement.
b) Consultant's Services to be rendered to the Company shall include the
following: advice and consultation regarding the preparation, review, critique,
and development of a business plan for the Company; advice and assistance for
enhancing the Company's management structure and operation plan; assistance in
recruiting executive officers and key employees for the Company; the preparation
of a financial plan; assistance in the evaluation by the Company of various
financing options, including the assessment of various forms of financing,
whether through bank lines of credit, private placements, public offering,
merger or acquisition; the preparation, review and development of a strategic
marketing plan and financial plan; the preparation, review, evaluation, and
development of a private placement memorandum; the identification of, and
introduction of the Company to commercial banks, investment banks and investment
advisors; assistance in structuring and negotiating any such acquisitions;
assistance in preparing, drafting and reviewing offering literature and business
plans for private placements of
the Company's debt or equity securities; evaluation and critique of the
Company's operations, marketing strategies and management; and such other
general business advice and assistance relating to the Company's capital
structure, operations, finance and administration, sales and marketing, research
and development, marketing plans, management and working capital requirements as
may be requested from time to time by the Board of Directors and senior
executive officers of the Company.
c) Consultant will assist the Company in identifying a registered
broker-dealer that will act as placement agent of a private placement by the
Company for the purpose of raising $1.1 million in first round financing. The
securities to be offered in the placement will be:
i) $850,000 convertible subordinated debentures at 10% interest. The
debentures will be redeemed 1/3 ($283,333.33) at the time of the
closing of the Company's initial public offering (IPO) and 1/3 at the
end of each year subsequent to the IPO or in three years, whichever is
earlier. The debenture holder may elect to convert any portion of his
outstanding debt to common stock of the Company at a price equal to
$1.00 above the IPO price, and the Company may call for the conversion
of the debt at such price at any time the Company's stock price is
equal to or greater than $3.00 above the IPO price.
ii) $250,000 for 15% of the Company's post money common stock, or 330,882
shares of the Company's expected recapitalized shares.
Consultant will also assist the Company in identifying a strategic partner or
registered broker-dealer that will act as placement agent of a private placement
by the Company for the purpose of raising $1.1 million in second round
financing. The securities to be offered in the placement will be similar in
nature to (i) and (ii) above, except the equity portion will purchase 5% of the
Company's common stock. Such financing shall be planned for approximately five
months from round one funding.
Consultant will also assist the Company in the selection of an investment banker
to underwrite a public offering of the Company's securities with a view to
raising from $5 million to $6 million in gross proceeds within four to five
months from round two funding, depending on market conditions. The Company will
target selling 20% - 25% of its common stock, or a post money valuation of $20
million - $30 million.
2. Independent Contractor. It is expressly understood that the
relationship of Consultant to the Company is that of an independent contractor
and consultant. Nothing contained herein shall be construed to create an
employer and employee or principal and agent relationship between the Company
and Consultant. Consultant shall have sole and exclusive responsibility for the
payment of all federal, state and local taxes and for all employment and
disability insurance, Social Security to Consultant or Consultant's officers,
employees and agents. Consultant shall assume and accept all responsibilities
which are imposed upon an independent contractor by any statute, regulation,
rule of law or otherwise. Consultant is not authorized to bind the Company, to
incur any obligation or liability on behalf of the Company, or to use the
Company's name except as expressly authorized in writing by the Company or as
contemplated by this Agreement.
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3. Compensation for Services. For the performance of the Services to
be rendered to the Company during the term of this Agreement, the Company shall
pay and provide Consultant, as full and complete compensation for the Services,
compensation as follows:
a) Cash Compensation. For each month during the term of this
Agreement, Consultant shall be paid cash compensation in the amount of $7,000
(seven thousand dollars). Consultant agrees that the Company may accrue $3,000
per month of the cash compensation until the sooner of an IPO, a third round of
financing, or a mutually agreed upon time, at which time all accrued and unpaid
cash compensation shall be due and payable immediately. For any period during
the term of this Agreement that is less than a full month, the payment shall be
prorated.
b) Equity Participation. The Company sells to Consultant, concurrent
with the execution of this Agreement, 375,000 shares of common stock to Young
Management Group or its designees at a price of $.01 per share as per attached
Schedule "A".
4. Expenses. The Company shall reimburse Consultant for all reasonable
and necessary out-of-pocket expenses incurred by Consultant in connection with
the Services rendered hereunder, provided that such expenses are deductible to
the Company and are properly documented in reasonable, itemized detail.
Consultant's expenses shall in no event exceed $1,000 per month unless such
expenses are authorized in advance and in writing by the Company.
5. Nondisclosure of Proprietary Information.
a) Proprietary Information. For purposes of this Agreement, the term
"Proprietary Information" shall mean all knowledge and information which
Consultant has acquired or may acquire as a result of, or related to, or arising
from its relationship with the Company concerning the Company's business,
finances, operations, marketing plans and marketing strategies, research and
development activities, software designs and specifications, products, services,
trade secrets, and cost and pricing policies. Notwithstanding the foregoing
sentence, such Proprietary Information does not include (i) information which is
or becomes publicly available or is a matter for the public domain (except as
may be disclosed by Consultant in violation of this Agreement); (ii) information
acquired by Consultant from a source other than the Company or any of its
employees, which source legally acquired such information directly from the
Company without any obligation of nondisclosure; or (iii) information known to
Consultant prior to the date hereof.
b) Nondisclosure Obligation. Consultant agrees that it will not at any
time, either during or after the term or any termination of this Agreement,
without the prior written consent of the Company, divulge or disclose to anyone
outside the Company, or appropriate for its own use or the use of any third
party, any such Proprietary Information, and will not during its engagement by
the Company hereunder, or at any time thereafter, disclose or use, or attempt to
use, any such Proprietary Information for its own benefit, or the benefit of any
third party, or in any manner which may injure or cause loss, or may be
calculated to injure or cause loss, to the Company. Consultant shall obtain from
all employees, Consultants, agents, or other representatives employed or engaged
by it to do any work for the benefit of the Company a
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written agreement obligating them to the same restrictions on the disclosure of
Proprietary Information as set forth in this Section.
c) Works for Hire. Consultant and the Company agree that any and all
reports, business plans, memoranda, notes, drawings, private placement memoranda
or other written materials conceived, devised, developed or otherwise obtained
by Consultant for the benefit of the Company during the course of rendering
Services to the Company hereunder are "works for hire" and are hereby assigned
to the Company. Such materials shall be the sole and exclusive property of the
Company as consideration for any and all compensation paid to Consultant under
this Agreement.
6. Term. The term of this Agreement shall be for one year commencing
on July 1, 1995 and shall automatically extend thereafter from year-to-year
until the earlier of (i) the dissolution, liquidation or cessation of business
in the ordinary course of Consultant or the Company, or (ii) termination as
provided in Section 7 below. The term of the Agreement may be extended and
renewed by mutual, written agreement of the parties.
7. Termination. Either party may terminate this Agreement upon (i)
five (5) days prior written notice in the event of a material breach of the
terms of this Agreement; or (ii) at any time subsequent to June 30, 1996, upon
30 days prior written notice. The Company may terminate this Agreement "for just
cause" upon five (5) days prior written notice to Consultant. "Just cause" shall
mean any one or more of the following: (a) the substantial and continuing
failure of Consultant to render Services to the Company in accordance with its
obligations under this Agreement for a continuous period of thirty (30) days;
(b) willful misconduct, malfeasance, misfeasance or gross negligence of
Consultant (or any of Consultant's employees, consultants or agents) in
connection with the performance of such Services; (c) the conviction of
Consultant (or any of Consultant's employees, Consultants or agents) of a
felony, either in connection with the performance of its obligations to the
Company or which shall adversely affect Consultant's ability to perform such
obligations; (d) disloyalty, dishonesty or breach of fiduciary duty to the
Company; or (e) the commission of an act of embezzlement, fraud or deliberate
disregard of the rules or policies of the Company which results in loss, damage
or injury to the Company. After any termination becomes effective, both the
Company and Consultant shall thereafter be relieved of any further obligations
pursuant to this Agreement.
8. Registration Rights. The Company hereby grants the following rights
with respect to any securities issuable to Consultant under this Agreement.
a) "Piggy-Back" Registrations. If at any time the Company shall
determine to register under the Securities Act of 1933 any of its common stock
(other than on Form S-8 or Form S-4 or their then equivalents relating to shares
of common stock issuable in connection with any stock option or other employee
benefits plan or shares of common stock to be issued solely in connection with
an acquisition of any entity or business), it shall send to Consultant written
notice of such determination and, if within 15 days after receipt of such
notice, Consultant so requests in writing, the Company shall use its best
efforts to include in such registration statement all or any part of the
Registrable Shares, as defined below, that Consultant requests be included in
the registration statement. Notwithstanding the foregoing, if in
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connection with underwritten offering, the managing underwriter shall impose a
limitation on the number of shares of common stock which may be included in any
such registration statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution of the common stock and to
maintain a stable market for the securities of the Company then the Company
shall be obligated to include in such registration statement only such limited
portion (which may be none) of the Registrable Shares with respect to which
Consultant has requested registration. The obligations of the Company under this
Section shall expire and terminate at such time as Consultant shall be entitled
to sell such securities without restriction and without registration under the
Securities Act, including, without limitations, pursuant to any of the
provisions of Rule 144 as promulgated by the Securities and Exchange Commission.
For purposes of this Section 9, "Registrable Shares" shall mean the securities
of the Company issued and issuable to Consultant hereunder pursuant to Section 3
hereof.
b) Expenses. In the case of a registration under this Section, the
Company shall bear all costs and expenses of each such registration, including,
but not limited to, printing, legal and accounting expenses, Securities and
Exchange Commission and NASD filing fees, and "Blue Sky" fees and expenses;
provided, however, that the Company shall have no obligation to pay or otherwise
bear any portion of the underwriters commissions or discounts attributable to
the Registrable Shares offered and sold by Consultant, or the fees and expenses
of any counsel for Consultant in connection with the registration of the
Registrable Shares.
9. Indemnification and Contribution. Each party (the "Indemnifying
Party") agrees to indemnify and hold harmless the other party (the "Indemnified
Party") and each of the Indemnified Party's directors, officers, agents,
employees and controlling persons (as such persons are defined in the Securities
Act) against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) related to or arising out of any actions or
omissions committed by the Indemnifying Party hereunder (including any violation
of applicable federal and state securities laws), and will reimburse the
Indemnified Party and each other person indemnified hereunder for all legal and
other expenses incurred in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding in connection with pending
or threatened litigation or other actions or investigations in which the
Indemnified Party or any of its directors, officers, agents, employees and
controlling persons is a party; provided however, that the Indemnifying Party
will not be liable in any such case for losses, claims, damages, liabilities or
expense that a court of competent jurisdiction shall have found to have arisen
primarily from the recklessness, negligence or willful misconduct, malfeasance,
misfeasance of the Indemnified Party or any party claiming a right to
indemnification.
In case any proceeding shall be instituted involving any person in
respect of whom indemnity may be sought, the Indemnified Party shall promptly
notify the Indemnifying Party, and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnified Party may designate in such proceeding and shall pay as incurred the
fees and expenses of such counsel related to such proceeding. In any such
proceeding, the Indemnified Party shall have the right to retain its own counsel
at its own expense. In no event shall the Indemnifying Party be liable for the
fees and expenses of more than one counsel for all Indemnified Parties in
connection with any one action or separate but similar or related actions in
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the same or other jurisdictions arising out of the same general allegations or
circumstances. The Indemnifying Party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Party agrees to indemnify the Indemnified Party to the extent set forth in this
Section.
In the event a claim for indemnification under this Section is
determined to be unenforceable by a final judgment of a court of competent
jurisdiction, then the Indemnifying Party shall contribute to the aggregate
losses, claims, damages or liabilities to which the Indemnified Party or its
officers, directors, agents, employees or controlling persons may be subject in
such amount as is appropriate to reflect the relative benefits received by each
of the Indemnifying Party and the party seeking contribution on the one hand the
relative faults of the Indemnified Party and the party seeking contribution on
the other, as well as any other relevant equitable contributions; provided,
however, that no person adjudged guilty of fraudulent judicial determination
shall be entitled to contribution from the Indemnifying Party. The provisions of
this Section shall survive any termination of this Agreement and shall be
binding upon any successors or assigns of the Company and Consultant.
10. Absence of Conflicting Agreements. Consultant represents and
warrants that it is not a party to any agreement or arrangement, whether oral or
written, which conflicts with this Agreement or would prevent it from satisfying
completely its obligations to the Company under this Agreement.
11. General. This Agreement constitutes the entire Agreement between
the parties relative to the subject matter hereof, and supersedes all proposals,
letters of intent or agreements, written or oral, and all other communications
between the parties relating to the subject matter of this Agreement.
No provision of this Agreement shall be waived, amended, modified,
superseded, canceled, renewed or extended except in a written instrument signed
by the party against whom any of the foregoing actions is asserted. Any waiver
shall be limited to the particular instance and for the particular purpose when
and for which it is given.
The invalidity, illegality or unenforceability of any provision of
this Agreement shall in no way effect the validity, legality or enforceability
or any other provision of this Agreement. This Agreement is entered into subject
to compliance by Consultant with all applicable federal and state securities
laws, including the Securities Act of 1933, the Securities Exchange Act of 1934,
the Investment Company Act of 1940, and the Investment Advisors of 1940. The
Services rendered by Consultant shall be limited to the services described
herein and shall not extend to the placement of securities or otherwise offering
or soliciting the purchase of any of the Company's securities. Consultant shall
not act as a "broker", "dealer" or "finder" and the compensation payable to
Consultant thereunder shall be paid regardless of the consummation of any
financing of the Company.
This Agreement, Consultant's Services to be performed thereunder, and
all rights thereunder are personal to Consultant and may not be transferred or
assigned by Consultant at any time without the prior written consent of the
Company.
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This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the internal laws of The
Commonwealth of Massachusetts.
All notices provided for in this Agreement shall be given in writing
and shall be effective when either served by personal delivery, electronic
facsimile transmission, express overnight courier service or by registered or
certified mail, return receipt requested, addressed to the parties at their
respective addresses herein set forth, or to such other address or addresses as
either party may later specify by written notice to the other.
This Agreement may be executed in duplicate counterparts, which, when
taken together, shall constitute one instrument and each of which shall be
deemed to be an original instrument.
The provisions of Sections 5 and 9 shall survive the termination or
expiration of this Agreement as a continuing covenant and obligation of the
Company and Consultant.
Any dispute, controversy or claim arising out of, in connection with,
or in relation to this Agreement or the breach of any of the provisions hereof
shall be settled by binding arbitration in Boston, Massachusetts, pursuant to
the rules then obtaining of the American Arbitration Association. Any award
shall be final, binding and conclusive upon the parties and a judgment rendered
thereon may be entered in any court having competent jurisdiction thereof. The
prevailing party shall be entitled to recover all reasonable fees and expenses
of the costs of such arbitration (including reasonable attorneys' fees), and if
no party shall be determined by the arbitrator(s) to have successfully
prevailed, or to be less at fault than the other party, then each party shall
bear its own costs and expenses (including attorneys' fees). The parties agree
to use their best efforts to settle any and all disputes without resort to
arbitration and litigation.
IN WITNESS WHEREOF, Parties have executed this Agreement as of the day
and year first above written.
AUGMENT SYSTEMS, INC. YOUNG MANAGEMENT GROUP, INC.
By: /s/ Xxxxxx Xxxx By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxx Xxxx, President and Xxxxxxx X. Xxxxx,
Chairman
Chief Executive Officer
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SCHEDULE A
STOCK PURCHASE ALLOCATION
Young Management Group, Inc. 50,000 shares
Xxxxxxx X. Xxxxx Irrevocable 150,000 shares
Trust for Issue
Xxxxxxx X. Xxxxx 100,000 shares
Xxxx X. Xxxxx 50,000 shares
Xxxxx Xxxxx 25,000 shares
-------------
375,000 shares
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