CONSULTING AGREEMENT
This CONSULTING AGREEMENT is dated as of October 1, 2004 (the
"Agreement"), by and among Spectrum Sciences & Software Holdings Corp., a
Delaware corporation ("Spectrum"), Endeavor Capital Group, LLC., a Florida
corporation ("Endeavor"), BG Capital Group Ltd., a Bahamian corporation ("BG")
and Xxxxxx Xxxxxxxx, an individual ("Xxxxxxxx" and together with Endeavor and
BG, the "Xxxxxxxx Entities"). Spectrum, Endeavor, BG and Xxxxxxxx are sometimes
collectively referred to herein as the "Parties" and individually as a "Party."
W I T N E S S E T H :
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WHEREAS, Endeavor and Spectrum entered into a Consulting Agreement
dated as of March 1, 2003 (the "Endeavor Agreement"), pursuant to which Endeavor
agreed to provide certain consulting services to Spectrum;
WHEREAS, Xxxxxxxx and Spectrum entered into a Consulting Agreement
dated as of February 25, 2004, and a Consulting Agreement dated March 11, 2004,
as amended by the Amended and Restated Consulting Agreement dated April 16, 2004
(all of the forgoing being collectively referred to as the "Xxxxxxxx
Agreement"), pursuant to which Xxxxxxxx agreed to provide certain consulting
services to Spectrum;
WHEREAS, each of the Parties has agreed to acknowledge the expiration
of the Endeavor Agreement, to modify and replace in its entirety the Xxxxxxxx
Agreement by providing for the limited consulting services described herein, and
to terminate any other Prior Agreement, understanding or contract relating to
providing consulting or advisory services by any Party to any other Party
(collectively the "Prior Agreements").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Parties hereto agree as follows:
1. MODIFICATION AND RESOLUTION OF PRIOR AGREEMENTS.
(a) Notwithstanding any provision of the Endeavor Agreement to the
contrary, Endeavor and Spectrum hereby acknowledge and agree that the term of
the Endeavor Agreement has expired and that the Endeavor Agreement is no longer
in force.
(b) Notwithstanding any provision of the Xxxxxxxx Agreement to the
contrary, Xxxxxxxx and Spectrum hereby modify and replace in its entirety the
Xxxxxxxx Agreement as described in Section 3 hereafter.
(c) Notwithstanding any provision of any other Prior Agreement to the
contrary, the Parties hereby terminate any other Prior Agreement.
2. EXPENSE REIMBURSEMENT COOPERATION. Notwithstanding Section 1 above,
the Parties agree to cooperate in good faith to properly determine and document
for accounting and tax purposes reimbursements from Spectrum to the Xxxxxxxx
Entities of approximately $903,711 paid by the Xxxxxxxx Entities to third
parties on behalf of Spectrum.
3. LIMITED CONSULTING SERVICES.
(a) Spectrum hereby engages Xxxxxxxx and Xxxxxxxx hereby agrees to
render limited independent advisory consulting services concerning suitable
merger or acquisition candidates (each a "Merger Candidate") for Spectrum,
perform appropriate diligence investigations with respect thereto, advise
Spectrum with respect to the desirability of pursuing such candidates, and
assist Spectrum in any negotiations which may ensue therefrom; provided,
however, that Xxxxxxxx may provide such services to Spectrum only with respect
to any Merger Candidate that was identified to the Board of Directors of
Spectrum by Xxxxxxxx as of May 4, 2004, as set forth on Exhibit A hereto (the
"Identified Merger Candidates"), or with respect to any additional Merger
Candidate identified to the Board by Xxxxxxxx and approved by the Board, in its
sole discretion, as subject to this Agreement.
(b) Xxxxxxxx shall keep the Board of Directors of Spectrum
informed in all material respects as to all communications, discussion and
negotiations with any Merger Candidate and shall not enter into any contract,
agreement or understanding on behalf of Spectrum.
(c) Xxxxxxxx and Spectrum agree that Xxxxxxxx is not entitled to
any further compensation in connection with the provision of services under this
Agreement.
(d) Xxxxxxxx shall have the right to retain agents and other
representatives to perform his consulting services with the prior written
consent of Spectrum. No arrangement for the compensation of or reimbursement of
expenses to any such agent or representative by Spectrum shall be binding upon
Spectrum unless specifically approved by Spectrum in writing.
4. NO AGENCY OR AUTHORITY TO BIND SPECTRUM. Notwithstanding Section
3(a) above, Xxxxxxxx shall not be an agent of Spectrum and does not have the
authority or ability to enter into any contract, agreement or understanding on
behalf of Spectrum or to legally bind Spectrum in any manner. Additionally, the
services to be rendered by Xxxxxxxx to Spectrum shall under no circumstances
include the following:
(a) any activities which could be deemed by the Securities and
Exchange Commission to constitute investment banking;
(b) services in connection with the offer or sale of securities;
(c) services that directly or indirectly promote or maintain a
market for the securities of the Spectrum including without limitation the
dissemination of information that reasonably may be expected to sustain or raise
or otherwise influence the price of the securities;
(d) services providing investor relations or shareholder
communications; or
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(e) consultation in connection with financing that involves any
issuance of Spectrum's securities.
5. AGREEMENT TO STAND STILL.
(a) Each of the Xxxxxxxx Entities hereby agrees that until the
Standstill Termination Date (as defined below), without the prior written
consent of Spectrum, specifically expressed in a resolution adopted by the Board
of Directors of Spectrum, it will not and will cause its Affiliates (as defined
below) to not:
(i) acquire, directly or indirectly (including through the
exercise of any options), any Securities (as defined below) of
Spectrum;
(ii) make, or in any way participate, directly or indirectly,
in any "solicitation" (as such term is used in the proxy rules of the
Securities and Exchange Commission as in effect on the date hereof) of
proxies or consents (whether or not relating to the election or removal
of directors), seek to advise, encourage or influence any person with
respect to the voting of any Securities, initiate, propose or otherwise
"solicit" (as such term is used in the proxy rules of the Securities
and Exchange Commission as in effect on the date hereof) stockholders
of Spectrum for the approval of stockholder proposals whether made
pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise, or induce or attempt to
induce any other person to initiate such stockholder proposal;
(iii) form or cause the formation of, join or in any way
participate, directly or indirectly, in a "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) with respect to any Securities
of Spectrum;
(iv) otherwise act, alone or in concert with others, to
control or seek to control the management, Board of Directors or
policies of Spectrum; provided, however, that Xxxxxxxx shall not be
prohibited from communicating with the Board or officers of Spectrum in
connection with the performance of his obligations under this
Agreement;
(v) seek, alone or in concert with others, the removal of any
member of the Board of Directors of Spectrum;
(vi) issue any press release regarding the business of
Spectrum; and
(vii) enter into any arrangements, understandings or
agreements (whether written or oral) with, or advise, finance, assist
or encourage, any other person to take any action which the Xxxxxxxx
Entities would be prohibited from taking under this Section 5.
(b) For purposes of this agreement, an "Affiliate" of a person
shall have the meaning set forth in Rule 12b-2 of the Exchange Act as in effect
on the date hereof and, in addition, shall include "Associates" (as defined in
Rule 12b-2) of the Exchange Act as in effect on the date hereof) of such person
and its Affiliates.
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(c) The term "Securities" shall mean the shares of common stock
and other securities of Spectrum, as the context implies, entitled to vote
generally in the election of directors, any other securities (including, without
limitation, rights and options) convertible into, exchangeable for or
exercisable for, any of the foregoing (whether or not presently convertible,
exchangeable or exercisable), or any indebtedness of Spectrum.
(d) The "Standstill Termination Date" shall be December 31, 2005.
6. CONFIDENTIAL INFORMATION AND MATERIALS.
(a) Xxxxxxxx agrees that during the course of his relationship
with Spectrum, he has obtained and may obtain in the future "Confidential
Information." "Confidential Information" is information concerning Spectrum
which Spectrum attempts to keep confidential, has not been publicly disclosed by
Spectrum, is not a matter of common knowledge in its industry, including, but
not limited to, certain information relating to the business plans, trade
practices, finances, accounting methods, methods of operations, trade secrets,
marketing plans or programs, forecasts, statistics relating to markets,
contracts, customers, compensation arrangements, and business opportunities.
Xxxxxxxx agrees that the Confidential Information is proprietary to Spectrum.
(b) During Xxxxxxxx'x engagement by Spectrum, Xxxxxxxx may have
access to the Confidential Information and shall occupy a position of trust and
confidence with respect to the Confidential Information and Spectrum's affairs
and business. Xxxxxxxx agrees to take the following steps to preserve the
confidential and proprietary nature of the Confidential Information:
(i) During Xxxxxxxx'x engagement by Spectrum and for a period
of three years after the Consulting Termination Date (the
"Confidentiality Termination Date"), Xxxxxxxx shall not use, disclose
or otherwise permit any person or entity access to any of the
Confidential Information other than as directed by Spectrum in the
performance of Xxxxxxxx'x duties with Spectrum and other than is
required to be disclosed by law or by any court, administrative agency,
or arbitration panel.
(ii) During Xxxxxxxx'x engagement by Spectrum hereunder and
until the Confidentiality Termination Date, other than as directed by
Spectrum in the performance of Xxxxxxxx'x duties with Spectrum and
other than is required to be disclosed by law or by any court,
administrative agency, or arbitration panel, Xxxxxxxx shall take all
reasonable precautions to prevent disclosure of the Confidential
Information (including disclosure by agents or representatives of
Xxxxxxxx) to unauthorized persons or entities, other than as required
to be disclosed by law or by any court, administrative agency, or
arbitration panel.
(iii) Upon termination of Xxxxxxxx'x engagement by Spectrum
for any reason whatsoever, or earlier if requested by Spectrum,
Xxxxxxxx shall deliver to Spectrum all tangible materials relating to,
but not limited to, the Confidential Information and any other
information regarding Spectrum, including any documentation, records,
listings, notes, data, sketches, drawings, memoranda, models, accounts,
reference materials, samples, machine-readable media and equipment
which in any way relate to the Confidential Information and shall not
retain any copies of any of the above materials.
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7. RETURN OF SHARES. On April 15, 2004, the Company received a notice
from Xxxxxxxx with respect to the exercise by Xxxxxxxx of options representing
approximately 1.1 million shares of common stock of Spectrum (the "Optioned
Shares"). Based on Xxxxxxxx'x representation to the Company that such notice was
sent as the result of an administrative error, Spectrum and Xxxxxxxx agree that
Xxxxxxxx'x notice and exercise of such options will be canceled and considered
null and void if Xxxxxxxx returns the Optioned Shares to Spectrum within 5 days
of this Agreement. Xxxxxxxx will owe no fees in connection with such
cancellation and, upon return of the Optioned Shares, will owe no fees with
respect to the original notice and exercise of such options.
8. REMEDIES. It is understood and agreed that money damages would not
be a sufficient remedy for any breach of this Agreement by any Party hereto and
that the non-breaching Party shall be entitled to equitable relief, including
injunction and specific performance, as a remedy for any such breach. Such
remedies shall not be deemed to be the exclusive remedies for a breach of this
Agreement, but shall be in addition to all other remedies available at law or
equity to the non-breaching Party. In the event of litigation relating to this
Agreement, if a court of competent jurisdiction determines that a Party has
breached this Agreement, such breaching Party shall be liable for and pay to the
other Party on demand the legal fees and expenses incurred by the non-breaching
Party in connection with such litigation, including any appeal therefrom.
9. WAIVERS AND AMENDMENTS. No failure or delay by any Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder. No provision of this Agreement can be amended without the specific
written consent of the Parties hereto.
10. CHOICE OF LAW/CONSENT TO JURISDICTION.
(a) The validity, interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Delaware without regard
to the conflict of laws principles thereof.
(b) In the event any Party brings any action, suit or proceeding
against the other arising out of or relating to this Agreement or the
Transaction, each Party hereby irrevocably and unconditionally consents to the
jurisdiction of the federal and state courts of the State of Delaware for such
action, suit or proceeding arising out of or relating to this Agreement, and
agrees not to commence any action, suit or proceeding related thereto except in
such courts. Each Party further hereby irrevocably and unconditionally waives
any objection to the laying of venue of any action, suit or proceeding arising
out of or relating to this Agreement in the federal and state courts of the
State of Delaware, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
(c) Each Party hereto further agrees that service of any process,
summons, notice or document by U.S. registered mail to its address shall be
effective service of process for any action, suit or proceeding brought against
it in any such court.
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11. COUNTERPARTS. For the convenience of the Parties, any number of
counterparts of this Agreement may be executed by the Parties hereto. Each such
counterpart shall be, and shall be deemed to be, an original instrument, but all
such counterparts taken together shall constitute one and the same Agreement.
12. SUCCESSORS AND ASSIGNS. The benefits of this Agreement shall inure
to the respective successors and assigns of the Parties hereto, and the
obligations and liabilities assumed in this Agreement by the Parties hereto
shall be binding upon their respective successors and assigns. Without the
written consent of Spectrum, no Xxxxxxxx Entity may assign any of its duties,
rights or obligations hereunder.
13. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the Parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to the matters provided for herein. No
alteration, waiver, amendment, change or supplement hereto shall be binding or
effective unless the same is set forth in writing signed by a duly authorized
representative of each Party and may be modified or waived only by a separate
letter executed by each Party expressly so modifying or waiving this Agreement.
14. SEVERABILITY. The covenants and agreements contained in this
Agreement are separate and severable and the invalidity or unenforceability of
any one or more of such covenants or agreements, if not material to the
arrangement that is the basis for this Agreement, shall not affect the validity
or enforceability of any other covenant or agreement contained in this
Agreement. If, in any judicial proceeding, a court shall refuse to enforce one
or more of the covenants or agreements contained in this Agreement because the
duration thereof is too long, it is expressly agreed between the Parties to this
Agreement that such duration shall be deemed reduced to the extent necessary to
permit the enforcement of such covenants or agreements.
15. RELATIONSHIP OF THE PARTIES. This Agreement shall neither create a
joint venture, partnership, agency nor other form of association. It is
expressly agreed that Xxxxxxxx is acting as an independent contractor in
performing its services hereunder. Spectrum shall carry no workmen's
compensation insurance or any health or accident insurance to cover Xxxxxxxx.
Spectrum shall not pay any contributions to social security, unemployment
insurance, Federal or State withholding taxes nor pay any other contributions or
benefits, which might be expected in an employer-employee relationship.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the Parties hereto have executed or caused this
Agreement to be executed as of the day and year first written above.
SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.
By: /s/ Xxxxxxx X. Xxx, Xx.
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Name: Xxxxxxx X. Xxx, Xx.
Title: President and Chief Executive
Officer
ENDEAVOR CAPITAL GROUP, LLC
By: /s/ Xxxxxxx Xxxxxxxxx
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Name: Xxxxxxx Xxxxxxxxx
Title: Managing Member
BG CAPITAL GROUP, LTD.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
XXXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx
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[Signature Page - Consulting Agreement]
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