EXHIBIT 10.5
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement") is entered into by and
between Santera Systems Inc, a Delaware corporation (the "Company"), and Xxxxx
Xxxxxx, an individual ("Consultant"), effective as of June 25, 2003 (the
"Effective Date").
RECITALS
A. Consultant, formerly a director and Chairman of the Board of the
Company, is familiar with the Company's business and operations and possesses
specialized skills and abilities related to the Company's technologies, products
and markets.
B. The Company and Tekelec, a California corporation ("Tekelec"), have
completed a series of transactions pursuant to which, among other things,
Tekelec currently owns a majority of the outstanding shares of capital stock of
the Company.
C. The Company desires to engage Consultant to perform certain services
for the Company and Consultant desires to accept such engagement, all on the
terms and conditions set forth herein.
TERMS AND CONDITIONS
NOW THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties hereto hereby agree as follows:
1. Engagement; Duties.
(a) On the terms and conditions set forth herein, the Company
hereby retains Consultant to provide, and Consultant hereby agrees to so
provide, as and when requested by the President or the Chairman of the Board of
Directors of the Company (the "Board") and in addition to such other duties and
responsibilities upon which the parties shall mutually agree, (i) consultation
and advice to the Company concerning the business and operations of the Company,
including without limitation the development of the Company's technologies, the
marketing and sales of the Company's products and strategic business planning,
(ii) introductions of the Company and its management to third parties that may
enter into relationships with the Company in furtherance of the Company's
business and (iii) services as the Chairman and as a member of the Advisory
Committee (or any successor thereto) of the Company (collectively, the
"Services"). Consultant agrees to devote sufficient time, skill, attention and
efforts to performing the Services in order to promptly and timely complete the
Services in a professional manner and to the reasonable satisfaction of the
Company. Consultant shall report to the President of the Company and the
Chairman of the Board in performing the Services hereunder.
(b) Consultant agrees to devote such time as is necessary to
perform the duties and discharge the responsibilities described in Section 1(a)
in a timely and professional manner.
(c) Consultant will from time to time travel to the Company's and
Tekelec's offices and undertake such other business travel (e.g., travel to the
locations of potential and actual customers and strategic business partners of
the Company) as may reasonably be requested by the Company in connection with
Consultant's performance of Services hereunder.
2. Term of Agreement; Termination. This Agreement shall become
effective on the Effective Date and shall continue in effect for a period of one
year thereafter. The term shall automatically renew for successive one-year
periods following each anniversary date of this Agreement unless either party
shall have delivered to the other party a written notice of non-renewal at least
30 days prior to the expiration of the then current term. Notwithstanding the
foregoing, the Company may at any time terminate this Agreement for "Cause" (as
defined herein), effective upon delivery of written notice of termination to
Consultant or without "Cause" upon 90 days prior written notice. For purposes of
this Agreement, "Cause" shall mean (i) Consultant's death or long-term
disability, (ii) the indictment or conviction of Consultant for, or the entering
of a plea of nolo contendere with respect to, any felony or for any misdemeanor
involving moral turpitude, (iii) the breach of a material obligation,
representation or warranty under this Agreement or under any confidentiality and
nondisclosure agreement entered into between Consultant and either the Company
or Tekelec, or (iv) any act or failure to act by Consultant which is likely to
or which does in fact injure the reputation, business or business relationships
of the Company or any affiliated entity.
3. Cash Compensation. Provided that Consultant complies with the
terms and conditions of this Agreement, the Company shall pay to Consultant
compensation for the Services performed during each of the initial term and the
renewal term, if applicable, at the rate of $75,000 per annum. Such compensation
shall be payable monthly in arrears on the last business day of each calendar
month for the calendar month then ending; provided, however, that in the event
of any termination of this Agreement for any reason, all unpaid compensation
accrued at the time of termination shall be paid within ten business days
following such termination. Such compensation, together with the stock options
referenced in Section 4 of this Agreement, shall constitute the full
compensation payable by the Company to Consultant for the Services.
4. Stock Options.
(a) Consultant shall receive, effective as of the Effective Date,
nonstatutory stock options (the "Options") under Tekelec's 2003 Stock Option
Plan (the "Plan") to purchase 50,000 shares of Tekelec's Common Stock at an
exercise price equal to the closing sales price of Tekelec's Common Stock on the
date of grant (as reported in The Wall Street Journal). The Options shall vest
cumulatively in quarterly installments on the following dates and as to the
following numbers of shares, provided that on each vesting date Consultant
remains a consultant to the Company under this Agreement:
Number of
Vesting Date Shares Vesting
------------ --------------
09/30/03 9,375
12/31/03 9,375
03/31/04 9,375
06/30/04 9,375
09/30/04 3,125
12/31/04 3,125
03/31/05 3,125
06/11/05 3,125
------
50,000
======
and, provided further, that notwithstanding anything herein to the contrary, in
the event that, other than for Cause, the Company either terminates this
Agreement at any time during the initial term or the renewal term or fails to
renew this Agreement for the initial renewal term, all unvested Options shall
vest on the date of such termination. Subject to Section 4(b) below, each
quarterly installment shall terminate four years after such installment vests.
(b) Each installment of the Options shall expire and terminate to
the extent not exercised upon the earlier to occur of (1) four years after the
vesting date of each Option installment; or (2) the date which occurs (as
applicable) (i) 24 months after the date upon which Consultant's employment with
the Company is terminated (A) by the Company without Cause at any time during or
after the term of this Agreement (including any renewal hereof) or (B) with
Cause due to the Optionee's death or long-term disability on or before June 25,
2005; (ii) 12 months after the date upon which Consultant's employment with the
Company is terminated by Consultant for any reason after June 25, 2005; or (iii)
30 days after the date upon which Consultant's employment with the Company is
terminated (A) by the Company with Cause, other than due to death or long-term
disability of Consultant, on or before June 25, 2005; (B) by the Company with
Cause at any time after June 25, 2005; or (C) by Consultant for any reason on or
before June 25, 2005.
(c) The terms of the Options shall be set forth in greater detail
in a stock option agreement to be entered into between Consultant and the
Company (the "Stock Option Agreement") pursuant to the terms and conditions of
the Plan and, except as provided herein, the Options shall generally be subject
the terms, definitions and provisions of the Plan and the Stock Option
Agreement.
5. Expenses. The Company shall reimburse Consultant for the
ordinary and reasonable out-of-pocket business expenses incurred in rendering
the Services hereunder in accordance with the Company's expense authorization
and approval procedures then in effect, including submission by Consultant to
the Company of proper documentation therefor.
6. Relationship Between Parties. The parties intend that Consultant
shall be an independent contractor with respect to the Company, and nothing
herein shall be construed to create the relationship of an employer and employee
or agency between the parties. No
employee, agent or subcontractor of Consultant shall be, or shall be deemed to
be, an employee or agent of the Company. Consultant will be solely and entirely
responsible for his acts and those of his agents, employees or subcontractors,
if any. In performing the Services, Consultant shall comply with all applicable
federal, state, county and city laws, ordinances and regulations.
7. Benefits; Taxes. Consultant understands and agrees that he is
not an employee of the Company and is not entitled to any benefits provided by
the Company to its employees, including but not limited to workers'
compensation, unemployment, vacation, sick leave, holiday pay, medical, dental,
accident and life insurance, pension or any other benefit or insurance coverage
that is now or may be from time to time provided by the Company to its
employees. Consultant understands that because he is not an employee of the
Company, any compensation received by him for services rendered under this
Agreement shall not be subject to employment tax withholding, nor shall the
Company pay Federal Social Security tax (FICA) or make contributions to the
federal or state unemployment or disability insurance funds on behalf of
Consultant. Consultant shall be solely responsible for complying with all
applicable employment tax and income tax laws with respect to the compensation
provided under this Agreement.
8. Non-Exclusive Arrangement. The parties understand and agree that
the Company is not obligated to use Consultant's services exclusively. The
parties further understand and agree that Consultant is free to perform services
in any capacity for other clients, persons or companies as Consultant, in
Consultant's reasonable discretion, sees fit and provided that any such other
services do not result in the disclosure of any trade secrets or other
proprietary or confidential information of the Company or any of its affiliates
and are not performed for a competitor of the Company or any of its affiliates.
9. Insurance; Indemnity. Consultant shall be solely responsible for
maintaining insurance coverage applicable to Consultant's actions under this
Agreement.
10. Confidentiality. Consultant shall execute and deliver to the
Company on the Effective Date a confidentiality and nondisclosure agreement in
the form attached as Exhibit A hereto.
11. Miscellaneous.
(a) Assignment/Subcontracting. This Agreement is assignable by
the Company upon written notice to Consultant. Because the Services to be
rendered by Consultant are personal in nature, this Agreement may not be
assigned by Consultant without the prior written consent of the Company, which
consent may be granted or withheld in the sole discretion of the Company. This
Agreement shall be binding on Consultant's heirs, executors, administrators,
personal representatives and permitted successors and assigns. Consultant shall
not subcontract the performance of the Services or any portion of the Services
without the prior written consent of the Company, which consent may be granted
or withheld in the sole discretion of the Company.
(b) No Authority to Bind the Company. Consultant has no authority
to enter into contracts or agreements on behalf of the Company or to represent
the Company as an agent or in any other capacity without the prior written
consent of the Company's President.
(c) Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California applicable
to contracts between residents of California which are wholly executed and
performed in California.
(d) Notices. All notices under this Agreement shall be in
writing, shall specifically reference this Agreement and shall be deemed to be
duly sent and given upon personal delivery, three days after deposit in the U.S.
mail by certified or registered mail, return receipt requested, with postage
prepaid, or one business day after deposit with a national courier service,
addressed to the party to be notified at such party's address as set forth below
(if, however, a party has given the other party due notice of another address
for the sending of notices, then future notices shall be sent to such new
address):
If to the Company: Santera Systems Inc.
0000 Xxxx Xxxxx Xxxxxxx
Xxxxx, Xxxxx 00000
Attention: President
If to Consultant: Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
(e) Entire Agreement. This Agreement (including the Stock Option
Agreement and the confidentiality and nondisclosure agreement referenced in
Section 10 hereof) constitutes the entire agreement between the parties relating
to the subject matter hereof. This Agreement supersedes all prior or
contemporaneous agreements, arrangements, conditions, negotiations and
understandings between the parties relating to the subject matter hereof.
(f) Amendment and Waiver. No supplement, modification or
amendment of any term, provision or condition of this Agreement shall be binding
or enforceable unless evidenced in a writing executed by the parties hereto. No
waiver of any term, provision or condition of this Agreement shall be deemed to
be, or shall be, or shall constitute, a waiver of any other term, provision or
condition herein, whether or not similar. No such waiver shall be binding unless
in writing and signed by the waiving party.
(g) Severability. If any provision of this Agreement is declared
invalid by any tribunal, then such provision shall be deemed automatically
adjusted to the minimum extent necessary to conform to the requirements for
validity as declared at such time and, as so adjusted, shall be deemed a
provision of this Agreement as though originally included herein. In the event
the provision invalidated is of such a nature that it cannot be so adjusted, the
provision shall be
deemed deleted from this Agreement as though such provision had never been
included herein. In either case, the remaining provisions of this Agreement
shall remain in effect.
(h) Legal Advice and Construction of Agreement. Both parties
hereto have received independent legal advice with respect to, and neither has
relied upon the other (or its advisors) in, entering into this Agreement.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, Consultant and the Company have voluntarily signed
this Agreement to be effective as of the Effective Date.
COMPANY: SANTERA SYSTEMS INC.
By: /s/ XXXXXXXXX X. XXX
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Xxxxxxxxx X. Xxx, Chairman
of the Board of Directors
By: /s/ XXXXX XXXXX
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Xxxxx Xxxxx, President
/s/ XXXXX XXXXXX
CONSULTANT: ----------------------------------
Xxxxx Xxxxxx
