NETWORK SYSTEMS INTERNATIONAL, INC.
CONSULTING AGREEMENT
AGREEMENT, dated as of the 1st day of June, 1999, by and
between NETWORK SYSTEMS INTERNATIONAL, INC., a Nevada corporation
with its principal office at 000 Xxxxx Xxx Xxxxxx, Xxxxxxxxxx,
Xxxxx Xxxxxxxx (the "Company"), and X. X. XXXXXX, XX., a resident
of Greensboro, North Carolina (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant is currently employed by Network
Information Services, Inc., a wholly owned subsidiary of the
Company (the "Subsidiary"; the Company and the Subsidiary shall
hereinafter be collectively referred to as the "Affiliated
Companies"), under the terms of an employment agreement between
the Subsidiary and the Consultant dated the 19th day of April,
1996 (the "Employment Agreement"); and
WHEREAS, the Subsidiary and the Consultant desire to
terminate the Employment Agreement; and
WHEREAS, the Company and the Consultant desire to enter into
an agreement for the Consultant to render consulting and advisory
services to the Company; and
WHEREAS, the Consultant is willing to provide such
consulting and advisory services to the Company, and the Company
is willing to retain the Consultant to render such consulting and
advisory services, pursuant to the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Company and the Consultant agree as follows:
1. Engagement as Consultant. The Company hereby engages
the Consultant to render consulting and advisory services, and
the Consultant hereby accepts such engagement, under the terms
and conditions hereinafter set forth.
2. Services. The Consultant agrees that he will furnish
to the Company such consulting and advisory services pertaining
to the business of the Company as the Board of Directors (the
"Board") or the Chairman of the Board of the Company may
reasonably request. It is understood and agreed that the
services to be rendered by the Consultant hereunder will include,
without limitation, services similar to the Affiliated Companies'
past operating procedures, relationships with customers and
suppliers, and sales and marketing activities. During the term
of this Agreement, the Consultant shall devote such time as may
be reasonably requested from time to time by the Board or the
Chairman of the Board to the business and affairs of the Company
and shall use his best efforts to discharge such
responsibilities. The Consultant also agrees to continue to
serve as a member of the Board during the term of this Agreement
as long as the Consultant is nominated and elected to such
position by the shareholders of the Company in accordance with
the Articles of Incorporation and the Bylaws of the Company.
3. Term. The term of this Agreement shall commence as of
the date hereof and shall continue in effect for a period of five
(5) years; provided, however, that this Agreement may be
terminated pursuant to paragraph 9 hereof.
4. Termination of Employment Agreement; Release.
(a) Termination. The Consultant and the Subsidiary hereby
agree to terminate the Employment Agreement.
(b) Release. The Consultant hereby releases the Affiliated
Companies and all other persons from any and all liability or
anything done or not done by the Affiliated Companies or by
anyone acting for the Affiliated Companies, prior to and
including the date of this Agreement, and the Consultant hereby
agrees not to xxx the Affiliated Companies or anyone who acted or
failed to act for the Affiliated Companies to enforce any such
liability or to seek damages for any such act or failure to act
(the "Release"). The Consultant understands that this Release
covers, but is not limited to, all contract claims, all claims
for wages or other compensation, and all claims based on
allegations of discrimination whether based on race, color,
religion, sex, national origin, handicap, disability or age,
whether arising under the Age Discrimination in Employment Act of
1967, as amended, 29 U.S.C. Section 621, et seq., the Americans
with Disabilities Act, 42 U.S.C. Section 12101, et seq., the
North Carolina Handicapped Persons Protection Act, N.C.G.S.
Section 168A-1, et seq., or any other state or federal statute or
the common law. The Consultant also understands that this Release
applies to any and all other claims that he may have arising out
of any of the terms and conditions of his employment with the
Subsidiary, including the termination of that employment. The
Consultant understands that the parties hereby released admit
absolutely no liability of any sort, but specifically deny that
they have discriminated against him in any of the terms and
conditions of his employment, whether on grounds of race, color,
religion, sex, national origin, age, disability, or otherwise, or
have otherwise violated his statutory, common law or
constitutional rights, and they have made no agreement or promise
to do or omit to do any act or thing not herein set forth. The
Consultant further understands that the consideration provided
for pursuant to this Agreement is provided to address any
controversy and claims whatsoever, whether known or unknown, in
any way growing out of or connected with anything done, omitted
or suffered to be done by and of the parties hereby released,
prior to and including the date hereof.
5. Compensation.
(a) Put Right. During the term of this Agreement, for
each period of twelve (12) days that begins on the third day
after the Company announces its quarterly earnings from the
previous fiscal quarter of the Company (each an "Earnings
Announcement") and ends two (2) weeks after the Company makes
such an Earnings Announcement, the Consultant shall have the
right, exercisable by notice in writing to the Company (each an
"Exercise Notice"), to require the Company to purchase from the
Consultant up to a maximum of ten thousand (10,000) shares of the
capital stock of the Company owned by the Consultant (the
"Consultant Shares") at a purchase price of Four Dollars ($4.00)
per share. Each Exercise Notice shall set forth the number of
the Consultant Shares, up to a maximum of ten thousand (10,000)
Consultant Shares per Exercise Notice, that the Consultant
requires the Company to purchase pursuant to this paragraph 5(a)
(the "Put Shares"). If so requested pursuant to an Exercise
Notice, the Company agrees to purchase the Put Shares. A failure
by the Consultant to give an Exercise Notice during such period
of twelve (12) days period shall be deemed a rejection by the
Consultant of his right for such fiscal quarter to require the
Company to purchase the Put Shares. Notwithstanding the
foregoing, if the Consultant sells, transfers or otherwise
disposes of (other than by gift to a Family Member or to a
Charity) any of the Consultant Shares in an open market
transaction (including, without limitation, in any transaction on
the NASDAQ Exchange) during any fiscal quarter of the Company,
then the number of Consultant Shares which the Consultant shall
have the right to require the Company to purchase under this
paragraph 5(a) for such fiscal quarter shall be reduced by the
number of Consultant Shares which were sold, transferred or
otherwise disposed of.
(b) Initial Put. Notwithstanding the foregoing, for
the period related to the fiscal quarter of the Company ended
March 31, 1999, the Consultant shall have the right, exercisable
by notice in writing to the Company (the "Initial Exercise
Notice"), to require the Company to purchase from the Consultant
up to a maximum of ten thousand (10,000) shares of the Consultant
Shares at a purchase price of Four Dollars ($4.00) per share.
The Consultant must exercise his rights pursuant to this
paragraph 5(b), if at all, by giving the Company the Initial
Exercise Notice no later than July 15, 1999. The Initial
Exercise Notice shall set forth the number of the Consultant
Shares, up to a maximum of ten thousand (10,000) Consultant
Shares, that the Consultant requires to Company to purchase
pursuant to this paragraph 5(b) (the "Initial Put Shares"). If
so requested pursuant to the Initial Exercise Notice, the Company
agrees to purchase the Initial Put Shares. A failure by the
Consultant to give the Initial Exercise Notice by July 15, 1999,
shall be deemed a rejection by the Consultant of his right to
require the Company to purchase the Initial Put Shares for the
period related to the fiscal quarter of the Company ended March
31, 1999.
(c) Conditions. Notwithstanding the foregoing, the
Company's obligation to purchase the Put Shares from the
Consultant pursuant to this paragraph 5 is expressly conditioned
upon the following:
(i) Such purchase will not contravene, result in any breach
of, or constitute a default under, or result in the creation of
any lien in respect of any property of the Company or any of its
subsidiaries or affiliates under any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, partnership
agreement, corporate charter or bylaws, or any other agreement or
instrument to which the Company or any of its subsidiaries or
affiliates is bound or by which the Company or any of its
subsidiaries or affiliates or any of their respective properties
may be bound or affected (a "Breach"); provided that the Company
shall have used its reasonable efforts to obtain a waiver of any
such contravention, breach or default or an amendment of any such
instruments (a "Waiver");
(ii) The Company shall have secured financing for the
purchase of such Put Shares on terms reasonably acceptable to the
Company (the inability to satisfy this condition being referred
to as a "Lack of Financing"); provided that the Company shall
have used its reasonable, good faith efforts to secure financing
for the purchase on terms reasonably acceptable to the Company
("Purchase Financing"); and
(iii) Such purchase, at the time made, shall not be
prohibited by law.
In connection with the condition described under paragraph
5(c)(i) above and the Breach referred to therein, the Company
warrants and represents to the Consultant that, to the best
knowledge of the Company's officers, at the time of entering into
this Agreement, the purchase of ten thousand (10,000) shares of
Consultant Shares per fiscal quarter will not cause a Breach
under any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, partnership agreement, corporate charter
or bylaws, or any other agreement or instrument by which any of
the Affiliated Companies is currently bound. The Company also
represents and warrants to the Consultant that it is not in the
process of entering into any such arrangement and has no current
plans to enter into any arrangement that will result in a Breach.
In the event that the Company signs any loan agreement or enters
into any other arrangement that will result in a Breach, the
Company will immediately notify the Consultant in writing of such
agreement or arrangement.
(d) Postponement of Purchase. Notwithstanding the
foregoing, the Company shall be entitled to postpone the purchase
of the Put Shares during the existence of any of the following
conditions: (i) a Registration Period (as defined below), (ii) a
Quiet Period (as defined below), (iii) a Breach would occur as a
result of the purchase, or (iv) a Lack of Financing. Within
thirty (30) days after such Registration Period or Quiet Period
expires, or within thirty (30) days after the Company obtains a
Waiver or Purchase Financing which removes the Breach or Lack of
Financing condition, the Company shall purchase from the
Consultant that number of Put Shares specified in any applicable
Exercise Notice given to the Company, if the Exercise Notice
otherwise satisfies the terms of paragraph 5(a) hereof.
(e) Assignment. After the Company has received the
Exercise Notice from the Consultant for a fiscal quarter, the
Company shall have the right, in its sole discretion, to assign
its obligation to purchase all or any portion of the Put Shares
applying to such fiscal quarter to any person or entity desiring
to purchase such Put Shares (the "Assignee"); provided, however,
that the following shall be conditions to any such assignment:
(i) there shall be no assignment to any such person or entity
unless the Company makes a good faith determination that such
person or entity has the financial ability to meet the obligation
to purchase the Put Shares; (ii) within five (5) business days
after the date of any such assignment, the Company shall give to
the Consultant written notice of such assignment, including the
name and address of the Assignee; (iii) the Assignee shall be
required to purchase such Put Shares in accordance with the terms
of conditions of this paragraph 5 (excluding the conditions of
paragraphs 5(c)(i) and 5(c)(ii) above and excluding any right to
postpone the purchase under paragraph 5(d)), to the same extent
as the Company would have been required to purchase the Put
Shares under this paragraph 5; (iv) notwithstanding any
assignment, the place of closing shall continue to be as
specified in paragraph 5(f); (v) in the event that the Assignee
fails to purchase the Put Shares and deliver the entire purchase
price to the Consultant within three (3) weeks from the date that
the Company receives the Exercise Notice, then the Company shall
be required to purchase the Put Shares within five (5) days of
the date that the Assignee was required to complete the purchase
(provided, however, that the Company's obligation to purchase the
Put Shares is subject to the provisions of paragraph 5(c) above);
and (vi) the Company may only assign its obligation to purchase
Put Shares with respect to any fiscal quarter after the
Consultant delivers the Exercise Notice to the Company with
respect that particular fiscal quarter.
(f) Closing. The closing of the purchase and sale
transaction of the Initial Put Shares pursuant to paragraph 5(b)
hereof shall be held at the principal office of the Company on a
date designated by the Company; provided, however, that the
closing date shall be no more than one (1) week from the date the
Company receives the Initial Exercise Notice. The closing of any
purchase and sale transaction of Put Shares pursuant to paragraph
5(a) hereof shall be held at the principal office of the Company
on a date designated by the Company; provided, however, that the
closing date shall occur before the later of: (i) three (3) weeks
from the date the Company receives the Exercise Notice, or (ii)
thirty (30) days from the expiration of any applicable
Registration Period or Quiet Period, or (iii) thirty (30) days
from the date the Company obtains a Waiver or Acceptable
Financing which removes a Breach or Lack of Financing condition
as specified in paragraph 5(c) above. At the closing of any
purchase and sale transaction as provided in this paragraph 5,
the Consultant shall deliver to the purchaser, upon tender of the
purchase price, certificates evidencing the Put Shares or the
Initial Put Shares (as appropriate), duly endorsed for transfer
and with any necessary documentary stamps attached, and such
other documentation as may be reasonably requested by the
purchaser for the purpose of effecting the purchase.
(g) Separate Put Agreement Upon Termination. Upon
termination or expiration of this Agreement due to the
Consultant's disability pursuant to paragraph 9(b) hereof or due
to the expiration of the term of this Agreement pursuant to
paragraph 3 hereof, the Consultant or his personal representative
shall have the right, exercisable by notice in writing to the
Company within sixty (60) days of such termination or expiration,
to require the Company to enter into a separate put agreement
(the "Put Agreement") with the Consultant with terms and
conditions substantially similar to those as provided for in
paragraphs 5, 9(e), 15, 16, 17, 18, 19, 20, 21 and 22 hereof. In
addition to the foregoing, the Put Agreement shall specifically
provide that it shall terminate and the Consultant's put option
shall expire at the earlier of: (i) eight (8) years from the date
of the Put Agreement, (ii) the death of the Consultant, or (iii)
the date on which the Consultant has sold, transferred, or
otherwise disposed of (other than by gifts to Family Members
and/or Charities) after the date of this Agreement a total of
more than five hundred thousand (500,000) shares of the
Consultant Shares (including, without limitation, the sale of Put
Shares in accordance with the terms of the Consultant's rights
pursuant to this paragraph 5).
(h) Definitions. Whenever any of the terms set forth
below is used in this paragraph 5, it shall have the following
meaning:
(i) "Registration Period" shall mean, with
respect to the Company, that there has been an
organizational meeting with underwriters regarding a
proposed public offering of the Company's securities,
and the Company is actively pursuing the consummation
of such public offering.
(ii) "Quiet Period" shall mean any
period of time during which insiders of the Company
(including, but not limited to, officers and directors
of the Company) are precluded from trading shares of
the Company's capital stock. Such period shall be
determined by reference to: (A) the rules or guidelines
of any public exchange upon which the Company's shares
are traded (including, but not limited to, the NASDAQ
Exchange), (B) the advice of legal counsel to the
Company concerning a provision of any applicable law or
regulation (including, but not limited to, the
Securities Act of 1933, the Securities Exchange Act of
1934, or the regulations promulgated thereunder), or
(C) any Company xxxxxxx xxxxxxx policy of general
applicability to Company insiders (including, but not
limited to, officers and directors of the Company).
(iii) "Family Member" shall include (A) the
spouse, any lineal descendant, any sibling and any ancestor
of the Consultant and the spouses of any such persons; (B)
any trust which is created for the sole lifetime benefit of
any one or more of such persons; and (C) any charitable
remainder trust or charitable lead trust under which all of
the beneficiaries are either the Consultant or a Family
Member.
(iv) "Charity" shall mean any organization
described in Sections 170(b)(1)(A), 170(c), 2055(a) and
2522(a) of the Internal Revenue Code of 1986, as amended.
6. Benefits. During the period of his engagement under
this Agreement, the Consultant shall be entitled to the following
benefits:
(a) The Company shall provide the Consultant a leased
automobile consistent with the automobiles provided to the senior
executives of the Company. The Company shall pay for expenses
associated with the operation of such automobile pursuant to the
Company's existing leased automobile plan for senior executives,
as may be revised from time to time by the Company.
(b) The Consultant shall be entitled to reimbursement
for all reasonable, out-of-pocket expenses incurred by him
associated with the Consultant's use of: (i) a separate home
telephone line, and (ii) a cellular telephone. The Consultant
shall be entitled to such reimbursement upon presentation by the
Consultant to the Company, from time to time, of an itemized
account of such expenses and appropriate documentation therefor.
(c) The Company shall provide the Consultant with the
use of: (i) a personal computer, (ii) a computer printer, and
(iii) a facsimile machine (collectively, the "Office Equipment")
for use at Consultant's home or at such other locations as he may
choose. The Company shall pay for the purchase of such Office
Equipment, as well as the business expenses associated with the
Consultant's use of such Office Equipment.
(d) The Company shall provide the Consultant with a
term life insurance policy (with premiums thereon paid by the
Company) with a face amount of at least One Million Dollars
($1,000,000) payable to the beneficiaries designated by the
Consultant on terms consistent with the term life insurance
policies provided to the senior executives of the Company.
Company agrees to cooperate with the Consultant in connection
with his personal estate planning as it relates to such life
insurance policy and to take such actions as the Consultant may
reasonably request regarding the ownership of and beneficiary
designation under such policy, including, but not limited to,
transferring all ownership rights in such policy to a third party
(such as an irrevocable life insurance trust). At the
termination of this Agreement, Company shall cooperate with the
Consultant in arranging for him to exercise any rights to
continue such life insurance policy at the Consultant's expense
or to purchase such policy.
(e) The Company shall provide the Consultant with a
health and dental insurance policy (with premiums thereon paid by
the Company) in accordance with the terms of the Company's
existing health and dental insurance benefits plan, as may be
revised from time to time by the Company. At such time as this
Agreement terminates, Company shall continue to provide health
and dental insurance coverage for the Consultant (with premiums
paid by the Company) until he attains age sixty-five (65) under
the Company's then existing health and dental insurance plan or
under another plan with comparable benefits; provided, however,
that Consultant shall reimburse the Company for the actual cost
of coverage for any dependents of Consultant covered under any
such policy.
(f) The Company shall provide the Consultant with a
disability insurance policy (with premiums thereon paid by the
Company) in accordance with the terms of the Company's existing
group disability insurance benefits plan, as may be revised from
time to time. In addition, the Company shall pay the premiums
for the Consultant's individual disability policy as it now
exists.
(g) The Company shall pay on behalf of the Consultant
the reasonable legal fees (but not more than the attorneys' usual
hourly charges for actual work performed) and other reasonable
expenses associated with revising and updating the personal
estate plan of the Consultant and his spouse, including xxxxx
and/or revocable living trusts (with credit shelter provisions),
durable powers of attorney, health care powers of attorney,
living xxxxx, irrevocable life insurance trust and family limited
partnership, if deemed appropriate. Such benefit will pay for
costs incurred within one (1) year after the date of this
Agreement by any attorney selected by the Consultant.
7. Business Expense Reimbursements. During the period of
his engagement under this Agreement, the Consultant shall be
entitled to reimbursement for all reasonable, out-of-pocket
expenses incurred by him in performing services hereunder,
provided that such expenses are incurred in accordance with the
applicable policies of the Company and at the request of the
Company. The Consultant shall be entitled to such reimbursement
upon presentation by the Consultant to the Company, from time to
time, of an itemized account of such expenses and appropriate
documentation therefor.
8. Indemnification. The Consultant shall have rights to
indemnification and advancement of expenses to the maximum extent
allowed by applicable law. The Company shall maintain directors'
and officers' liability coverage for the Consultant to the same
extent as provided generally to other directors of the Company.
9. Termination of Consulting Relationship.
(a) Death. In the event of the death of the
Consultant during his engagement as a consultant under this
Agreement, this Agreement shall terminate and any rights and
benefits the Consultant or his estate or any other person may
have under benefit plans and programs of the Company described in
paragraph 6 hereof shall be determined in accordance with the
terms of such plans and programs. Except as provided in this
paragraph 9(a), neither the Consultant's estate nor any other
person shall have any rights or claims against the Company in the
event of the death of the Consultant during the term of this
Agreement.
(b) Long-Term Disability. In the event of the
Consultant's disability (as that term is hereinafter defined)
during his engagement as a consultant under this Agreement, the
engagement of the Consultant to render consulting and advisory
services to the Company and this Agreement may be terminated by
the Company. Upon termination of the Consultant's engagement
under this Agreement by reason of disability pursuant to this
paragraph 9(b), the Consultant shall be entitled to benefits
pursuant to paragraph 6 hereof in accordance with and subject to
the terms and provisions of the Company's disability plans in
effect at the time of the commencement of disability. For
purposes of this Agreement, "disability" shall have the same
meaning as given that term under the Company's long-term
disability plan as in effect from time to time; provided,
however, that if the Company does not have such a long-term
disability plan in effect at the time of the Consultant's
disability, the term "disability" shall mean the determination in
good faith by the Board, after written notice and opportunity to
be heard has been given to the Consultant, that the Consultant
has become disabled or incapacitated and as a result he is unable
to perform his duties under this Agreement. Any rights and
benefits the Consultant may have pursuant to paragraph 6 hereof
under benefit plans and programs of the Company in the event of
the Consultant's disability shall be determined in accordance
with the terms of such plans and programs. Except as provided in
this paragraph 9(b), neither the Consultant nor his estate, or
any other person, shall have any rights or claims against the
Company in the event of the termination of this Agreement by
reason of disability.
(c) Termination for Cause. Nothing herein shall
prevent the Company from terminating the Consultant's engagement
as a consultant under this Agreement for Cause (as that term is
hereinafter defined). Upon termination for Cause, any rights and
benefits the Consultant may have pursuant to paragraph 6 hereof
under benefit plans and programs of the Company following a
termination of this Agreement for Cause shall be determined in
accordance with the terms of such plans and programs. For
purposes of this Agreement, termination for Cause shall mean:
(i) termination due to (x) willful or gross
neglect of duties for which engaged, or (y) willful
misconduct in the performance of duties for which
engaged, in either such instance so as to cause
material harm to the Company, all such facts to be
determined in good faith by the Board;
(ii) termination due to the Consultant's
committing fraud, misappropriation or embezzlement in
the performance of his duties as a consultant of the
Company; or
(iii) termination due to the Consultant's
committing any felony for which he is convicted and
which, as determined in good faith by the Board,
constitutes a crime involving moral turpitude.
(d) Voluntary Termination. The Consultant may
terminate this Agreement at any time upon ninety (90) days prior
written notice to the Company; provided, however, that the
Company, in its discretion, may cause such termination to be
effective at any time during the ninety (90) day period. In the
event of such a voluntary termination of this Agreement, neither
the Consultant nor any other person shall have any rights or
claims against the Company.
(e) Company Option to Terminate. In the event that,
during the term of this Agreement, the Consultant sells, assigns,
transfers, makes a gift of or otherwise disposes of (other than
by gifts to Family Members and/or Charities) a total of more than
five hundred thousand (500,000) shares of the Consultant Shares
(including, without limitation, sales of Put Shares pursuant to
paragraph 5 hereof), the Company shall have the option to
terminate this Agreement upon written notice to the Consultant.
10. Covenant Not to Compete.
(a) The Consultant promises and agrees that until the
expiration of one (1) year following the termination or expira
tion for any reason of his engagement by the Company as a
consultant, he will not, either directly or indirectly within the
United States:
(i) Own, manage, operate, control, be
employed by, render consulting or advisory services to,
participate in or be connected in any management or
control of any business that is then engaged, in
competition with the Company or any of its subsidiaries
or affiliates, in the sale of any products or services
sold by the Company or any of its subsidiaries or
affiliates at the time of such termination (including,
but not limited to, the development and marketing of
enterprise software products for complex manufacturers
emphasizing sales order processing, enterprise resource
planning, manufacturing execution, and distribution
management), unless his duties, responsibilities and
activities for or on behalf of such business are not
related in any way to the sale of any such products or
services;
(ii) Influence or attempt to influence any
customer of the Company or any of its subsidiaries or
affiliates to discontinue its purchases of any product
or service sold by the Company or any of its
subsidiaries or affiliates at the time of termination
of his engagement by the Company as a consultant or to
divert such purchases to any other person, firm, or
corporation;
(iii) Interfere with, disrupt or attempt
to disrupt the relationship, contractual or otherwise,
between the Company or any of its subsidiaries or
affiliates and any of its respective suppliers,
distributors, lessors, or licensors; or
(iv) Solicit any employee of the Company or
any of its subsidiaries or affiliates, whose base
annual salary at the time of the Consultant's
termination was Thirty Thousand Dollars ($30,000) or
more, to work for any other person, firm or
corporation.
For purposes of this paragraph 10(a), "competition with the
Company or any of its subsidiaries or affiliates" shall mean
direct competition for customers of products or services of the
kind described above in any geographic area in which the Company
or any of its subsidiaries or affiliates is engaged, directly or
indirectly, in selling or attempting to sell such products or
services.
The Consultant understands and agrees that the Company and
its affiliates conduct business throughout the United States, and
that each of the provisions of this paragraph 10 (including
without limitation, its scope, geographic limitations and time
period covered) are reasonable and necessary for the protection
of the Company and its affiliates and of their legitimate
business interests.
(b) It is the desire and intent of the parties that
the provisions of this paragraph 10 shall be enforced to the
fullest extent permitted under the laws and public policies of
each jurisdiction in which enforcement is sought. Accordingly,
if any particular portion of this paragraph 10 shall be
adjudicated to be invalid or unenforceable, such adjudication
shall apply only with respect to the operation of that portion in
the particular jurisdiction in which such adjudication is made,
and all other portions shall continue in full force and effect.
11. Confidential Information; Rights to Materials.
(a) Confidential Information. The Consultant
recognizes and acknowledges that in his prior relationship with
the Affiliated Companies as an employee under the Employment
Agreement and during the performance of his consulting and
advisory services under this Agreement, the Consultant had and
will have ready access to certain proprietary and confidential
information and know-how of the Affiliated Companies relating to
the Affiliated Companies' business, products, financial status,
performance and operations, and that the Consultant's engagement
to render consulting and advisory services to the Company creates
a relationship of confidence and trust with respect to such
proprietary and confidential information and know-how. The
Consultant promises and agrees that he will not, either during
the term of this Agreement or at any time thereafter, disclose to
any person not employed by the Affiliated Companies, or not
engaged to render services to the Affiliated Companies, or use,
for himself or any other person, firm, corporation or entity, any
confidential information of the Affiliated Companies obtained by
him while in the employ of the Subsidiary or while engaged by the
Company to render consulting and advisory services, including,
without limitation, any of the Affiliated Companies' methods,
processes, techniques, shop practices, formulae, research data,
marketing and sales information, personnel data, customer lists,
financial data, plans, know-how, trade secrets, and proprietary
information of the Affiliated Companies; provided, however, that
this provision shall not preclude the Consultant from use or
disclosure of information known generally to the public (other
than information known generally to the public as a result of a
violation of this paragraph 11(a) by the Consultant), from use or
disclosure of information acquired by the Consultant outside of
his affiliation with the Affiliated Companies, from disclosure
required by law or court order, or from disclosure or use
appropriate and in the ordinary course of carrying out the
consulting and advisory services hereunder. The Consultant
agrees that he will not copy any such information or materials or
divulge the same or any part thereof to any person, firm,
corporation or organization or use such information or materials,
either for himself or for the benefit of any third party, whether
in competition with the Affiliated Companies or otherwise, except
as is necessary in the ordinary course of the Consultant's
engagement by the Company. Upon termination of this Agreement,
for whatever reason, or upon the prior demand of the Company, the
Consultant will immediately return to the Company all
confidential information and material then in the Consultant's
possession or control relating to the Affiliated Companies'
business, financial status, performance or operations.
(b) Rights to Materials. The Consultant further
promises and agrees that, upon termination of his engagement as a
consultant for whatever reason and at whatever time, he will not
take with him, without the prior written consent of an officer
authorized to act in the matter by the Board, any records, files,
memoranda, reports, price lists, customer lists, drawings, plans,
sketches, documents, specifications, and the like (or any copies
thereof) relating to the business of the Company or any of its
subsidiaries or affiliates.
12. New Developments. The Consultant hereby further agrees
that during the course of his engagement as a consultant
hereunder, he will promptly disclose to the Company any and all
improvements, inventions, developments, discoveries, innovations,
systems, techniques, ideas, processes, programs, and other things
that may be of assistance to the Company, whether patentable or
unpatentable, that (a) relate to the Company's business or actual
or demonstrably anticipated research or development, or
(b) result from any work performed by the Consultant for the
Company, or (c) are developed on the Company's time or using the
Company's equipment, supplies, facilities or trade secret
information, and that is made or conceived by the Consultant,
alone or with others, while engaged to render consulting and
advisory services for the Company (collectively referred to
hereinafter as the "New Developments"). The Consultant
acknowledges and agrees that New Developments shall include any
and all improvements, inventions, developments, discoveries,
innovations, systems, techniques, ideas, processes, programs, and
other things that may be of assistance to the Company, whether
patentable or unpatentable, developed by the Company, the
Subsidiary and/or the Consultant prior to the date hereof. The
Consultant further agrees that all New Developments shall be and
remain the sole and exclusive property of the Company and that he
shall, upon the request of the Company, and without further
compensation, do all things reasonably necessary to insure the
Company's ownership of such New Developments, including, without
limitation, the execution of any necessary documents assigning
and transferring to the Company and its assigns all of the
Consultant's rights, title and interest in and to such New
Developments, and the execution of all necessary documents
required to enable the Company to file and obtain patents in the
United States and foreign countries on any of such New
Developments. The Consultant agrees that his obligations
pursuant to this paragraph 12 shall continue beyond the
termination of the Consultant's engagement to render consulting
and advisory services to the Company. In the event that the
Consultant is unable or unavailable or shall unreasonably refuse
to sign any lawful or necessary document required in order for
the Company to apply for and obtain a patent or patents with
respect to a New Development (including applications therefor or
renewals, extensions, divisions or continuations thereof), the
Consultant hereby irrevocably designates and appoints the Company
and its duly authorized officers and agents as the Consultant's
agents and attorneys-in-fact to act for and in the Consultant's
behalf, and in his place and stead, to execute and file any such
applications and to do all other lawfully permitted acts to
further the prosecution and issuance of patents with respect to
such New Developments with the same legal force and effect as if
executed by the Consultant.
13. Injunctive Relief. The Consultant acknowledges and
agrees that the rights of the Company under paragraphs 10, 11 and
12 of this Agreement are of a specialized and unique character
and that immediate and irreparable damage will result to the
Company if the Consultant fails or refuses to perform his
obligations under this Agreement, and notwithstanding any
election by the Company to claim damages from the Consultant as a
result of such failure or refusal, the Company may, in addition
to any such other remedies and damages available, seek an
injunction in a court of competent jurisdiction to restrain any
such failure or refusal by the Consultant to perform or comply
with the Consultant's obligations hereunder.
14. Relationship Created. It is understood and agreed that
in acting pursuant to this Agreement, the Consultant shall be an
independent contractor and not an employee of the Company.
Accordingly, the Company shall not withhold any state or federal
income taxes, social security or other taxes from amounts paid to
the Consultant, nor shall it make any workers' compensation or
unemployment benefit payments, contributions or payroll tax
payments on behalf of the Consultant. The Consultant agrees to
hold the Company harmless for any and all expense, liability or
responsibility arising from failure to withhold such taxes and
social security payments or make any such workers' compensation
or unemployment benefit payments, contributions or payroll tax
payments.
15. Capital Adjustments; Antidilution. In the event
that, by reason of any merger, consolidation, combination,
liquidation, reorganization, recapitalization, stock dividend,
stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital
structure of the Company (collectively, a "Reorganization"), the
common stock of the Company is substituted, combined, or changed
into any cash, property, or other securities, or the common stock
is changed into a greater or lesser number of shares of common
stock, (i) the number and/or kind of shares and/or interests
subject to the Consultant's put right as provided for in
paragraph 5 hereof, (ii) the number and/or kind of shares and/or
interests subject to the Company's option to terminate pursuant
to paragraph 9(e) hereof, and (iii) the per share price or value
thereof, shall be appropriately and equitably adjusted by the
Company to give appropriate effect to such Reorganization. Any
fractional shares or interests resulting from such adjustment
shall be eliminated.
16. Jurisdiction. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of,
this Agreement may be brought against any of the parties in the
courts of the State of North Carolina, County of Guilford, or, if
it has or can acquire jurisdiction, in the United States District
Court for the Middle District of North Carolina, and each of the
parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding
and waives any objection to venue laid therein.
17. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the Consultant and
his personal representatives, estate and heirs and the Company
and its successors and assigns, including without limitation any
corporation or other entity to which the Company may transfer all
or substantially all of its assets and business (by operation of
law or otherwise) and to which the Company may assign this
Agreement. The Consultant may not assign this Agreement or any
part hereof without the prior written consent of the Company,
which consent may be withheld by the Company for any reason it
deems appropriate.
18. Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the engagement of the
Consultant by the Company to render consulting and advisory
services and supersedes and replaces all other understandings and
agreements, whether oral or in writing, previously entered into
by the parties with respect to such engagement.
19. Amendment; Waiver. No provision of this Agreement may
be amended, modified or waived unless such amendment, modifica
tion or waiver is agreed to in writing and signed by the
Consultant and by a duly authorized officer of the Company. No
waiver by either party of any breach by the other party of any
provision of this Agreement shall be deemed a waiver of any other
breach.
20. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered
personally, sent by facsimile transmission, sent by certified,
registered or express mail, or by Federal Express or other
overnight courier, postage or other charges prepaid. Any such
notice shall be deemed given on the date so delivered personally,
or sent by facsimile transmission, or, if mailed, two days after
the date of deposit in the United States mail, or, if sent by
overnight courier, the day after delivery to the overnight
courier, addressed as follows:
If to the Company:
Network Systems International, Inc.
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
If to the Consultant:
X. X. Xxxxxx, Xx.
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Either party may change its address for purposes of this
Agreement by notice given in compliance with this paragraph 20.
21. Severability. If any one or more of the provisions
contained in this Agreement shall be invalid, illegal, or
unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
22. Governing Law; Arbitration. This Agreement shall be
governed and construed in accordance with the laws and judicial
decisions of the State of North Carolina applicable to agreements
made and to be performed entirely within such state. Any
controversy arising out of or relating to this Agreement or any
of the documents provided for herein (including any modifications
hereof or thereof) shall be settled by arbitration in Greensboro,
North Carolina, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon
any award may be entered in any court of competent jurisdiction.
The arbitrators in any such controversy (the "Arbitration") shall
have no power to alter or modify any express provision of this
Agreement or any of the documents provided for herein or to
render any award that directly or indirectly effects any such
alteration or modification. The parties consent to the
application of North Carolina or Federal arbitration statutes
and to the jurisdiction of the court of North Carolina or the
Federal District Courts in North Carolina, as the case may be,
for all purposes in connection with this agreement to arbitrate.
Each party to any such arbitration or court proceeding shall bear
his or its own attorneys' fees and other costs; provided,
however, that the arbitrators may award attorneys' fees and other
costs to the prevailing party, if deemed appropriate. Each party
hereto shall also have all rights to provisional remedies that he
or it would have at law or equity, notwithstanding the existence
of this agreement to arbitrate.
23. Consultation with Counsel, Acceptance and Right to
Revoke. The Consultant hereby acknowledges that he understands
that he has up to twenty-one (21) days to review this Consulting
Agreement (including, but not limited to, the terms and
conditions of paragraph 4 hereof) and that he is aware of his
right to consult with an attorney of his choosing before signing
this Consulting Agreement. Should the Consultant choose to sign
this document within the twenty-one (21) day period, he
acknowledges that he has carefully read this Consulting Agreement
(including, but not limited to, the terms and conditions of
paragraph 4 hereof), that he knows and understands the contents
of this Consulting Agreement, that he has had ample opportunity
to review the terms of this Consulting Agreement, that he is
under no pressure to execute this Consulting Agreement, and that
he executes this Consulting Agreement of his own free will. The
Consultant also acknowledges that he has the option to revoke
this Consulting Agreement within seven (7) days following its
execution.
24. Survival. The terms of Sections 10, 11, 12 and 13
hereof shall survive termination for any reason of this
Agreement.
25. Expenses. In the event of any litigation between
the parties hereto regarding a breach of this Agreement, the
prevailing party shall be entitled to award of costs and
attorneys fees.
26. Counterparts. This Agreement may be executed by the
parties hereto in any number of counterparts, each of which when
so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a copy hereof
containing multiple signature pages, each signed by less than
all, but together signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
THE COMPANY:
NETWORK SYSTEMS INTERNATIONAL, INC.
(Corporate Seal) /s/ Xxxxxxxxxxx X. Xxxxx
By: Xxxxxxxxxxx X. Xxxxx
Title: President
ATTEST:
/s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx, Chief Financial Officer
THE CONSULTANT:
/s/ X. X. Xxxxxx, Xx. (SEAL)
X. X. Xxxxxx, Xx.
AGREED TO AND ACCEPTED BY:
NETWORK INFORMATION SERVICES, INC.
/s/ Xxxxxxxxxxx X. Xxxxx
By: Xxxxxxxxxxx X. Xxxxx
Title: President
