EXHIBIT 10.2
CONSULTING AGREEMENT
BETWEEN
OPTRON TECHNOLOGIES, INC.
AND
THE XXXXXX GROUP, LLC
THIS CONSULTING AGREEMENT (the "Agreement") is entered into as of the 14th
day of February, 2004, by and between the following parties (hereinafter
collectively referred to as the "Parties"):
The Xxxxxx Group, LLC, a California limited liability company ("Xxxxxx")
AND
Optron Technologies, Inc., a Nevada corporation ("Optron").
RECITALS
WHEREAS, Optron, directly or through one or more of its affiliates
currently intends to enter into a business combination transaction (the
Transaction") with Cadogan Investments Limited (with its subsidiary, Optron
(Pty) Ltd, a South African company) and Cetalon Corporation, a Nevada
corporation, or an alternative publicly tradable company (following the closing
of the Transaction, Cetalon (or such alternative company) and Optron are
referred to herein as the "Public Company") and, thereafter, to list the Public
Company's shares of common stock (the "Common Stock") on a nationally recognized
stock exchange or to request a market-maker to commence quotations of the Common
Stock on an electronic exchange medium;
WHEREAS, Optron would like assistance with the financing of the
Transaction;
WHEREAS, Optron would like assistance with expansion of its business;
WHEREAS, Optron desires that both it and the Public Company receive the
benefits of this Agreement following the closing of the Transaction;
AND
WHEREAS, Xxxxxx is a management consulting and advisory firm with
management consulting expertise and has relationships and contacts that may
assist the Public Company in closing the Transaction and achieving its business
plan and financing needs;
WHEREAS, Xxxxxx would like to enjoy the benefits of this Agreement with
both Optron and the Public Company following the closing of the Transaction;
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties, intending legally to
be bound, hereby agree as follows
-1-
SERVICES
1. If requested by Optron or the Public Company, Xxxxxx shall cause Xxxxxxx
Xxxxx to serve as non-executive Chairman of the Board or as a non-executive
Director of either or both of Optron or the Public Company. Such appointments
will be subject to (i) the approval of the Board of Directors of Optron or the
Public Company, as relevant, and (ii) such entity obtaining a D&O insurance
policy, reasonably acceptable to Xx. X. Xxxxx, of not less than $5,000,000 of
coverage, unless waived by Xx. X. Xxxxx.
2. If Requested by Optron or the Public Company, Xxxxxx shall cause Xxxx
Xxxxx to serve as Chief Executive Officer of Optron until the closing of the
Transaction. Such appointment will be subject to the approval of the Board of
Directors of Optron.
3. In August of 2003, in anticipation of the closing of the Transaction and
for the benefit of Optron and the Public Company, Xxxxxx conducted a two-day
strategic planning seminar with Optron (Pty) Ltd's senior management, directors,
and consultants. Thereafter, but prior to the effective date of this Agreement,
Xxxxxx has continued to provide various management consulting, strategic plan,
and prospective operations services.
4. If requested by Optron or the Public Company, Xxxxxx shall provide
advice and assistance in the preparation and periodic updating of a strategic
plan designed to optimize such entity's business and value for its stockholders,
which strategic plan shall be suitable for presentation to financial and
securities analysts and to such entity's current stockholders, as well as to
prospective investors.
5. In connection with the strategic plan, Xxxxxx shall provide advice and
assistance recommend alternative organizational structures and assignments of
responsibilities.
6. During the term hereof, Xxxxxx shall act as a management consultant to
Optron or the Public Company, as relevant.
7. During the term hereof, Xxxxxx shall act as the exclusive financial
consultant to Optron and, following the closing of the Transaction, the Public
Company.
8. If requested by Optron, Xxxxxx shall use commercially reasonable efforts
to assist Optron in its efforts to identify prospective investors to obtain up
to $2,500,000 of equity not later than 60 days from the date of this Agreement,
on terms and conditions reasonably acceptable to, and subject to the approval
of, the Board of Directors of Optron.
9. If requested by Optron or the Public Company, as relevant, Xxxxxx shall
use commercially reasonable efforts to assist such entity in its efforts to
identify prospective investors to obtain up to an additional $10,000,000 of debt
or equity financing in one or more tranches, on terms and conditions reasonably
acceptable to, and subject to the approval of, the Board of Directors of such
entity. Xxxxxx shall analyze and quantify alternative structures for equity,
debt, or quasi-equity financing that are designed to meet 'such entity's growth
plan in accordance its strategic plan.
10. If requested by Optron or the Public Company, as relevant, Xxxxxx shall
provide advice and assistance to such entity regarding negotiations with lenders
-2-
or leasing companies for the placement of any commercial debt, subordinated
debt, mezzanine debt, other debt facility, or leasing facility.
11. If requested by Optron or the Public Company, as relevant, Xxxxxx shall
assist such entity's management, attorneys, and accountants with the preparation
of the various documents to be utilized with respect to Optron's or the Public
Company's debt or equity capital raising or leasing activities.
12. If requested by Optron or the Public Company, as relevant, Xxxxxx shall
provide advice and assistance to such entity in respect of all aspects of the
merger or acquisition process, from identifying such entity's business
requirements and financial abilities, to identifying prospective targets and
assisting with the due diligence investigations thereof, assisting with the
structure of the proposed transaction, and providing advice regarding various
alternatives for financing the proposed transaction.
13. If requested by Optron or the Public Company, as relevant, Xxxxxx shall
provide advice and recommendations to such entity regarding alternative
composition structures and functions of such entity's board of directors,
including designing codes of conduct and ethics, trading policies, and rules to
implement good corporate governance.
14. If requested by Optron or the Public Company, as relevant, Xxxxxx shall
provide advice regarding adequate D&O insurance to protect and indemnify the
officers, directors, and such entity.
TERM, CONDITIONS, FEES, AND PAYMENTS
1. The initial term of this Agreement is 24 months. This Agreement shall be
automatically renewed for an additional 12-month period unless either Party
provides the other with written notice of non-renewal not later than six months
prior to the expiration of the initial term hereof.
2. Upon Xxxxxxx Xxxxx'x commencement of service as a director or Chairman
of the Board of Directors of Optron or the Public Company, as relevant, such
entity shall grant to Xx. X. Xxxxx 50,000 shares of such entity's common stock.
Further. During the term of his service, such entity shall pay directly to Xx.
X. Xxxxx his out-of-pocket expenses, plus a fee of $5,000 per month directly to
him.
3. Optron shall reimburse Xxxxxx for all of its out-of-pocket, third-party
legal, accounting, and research expenses incurred that directly relate to the
Transaction.
4. Optron or the Public Company, as relevant, shall reimburse Xxxxxx for
all authorized expenses.
5. Optron or the Public Company, as relevant, shall pay to Xxxxxx a fee for
the services described in Section 9, above, in cash at the closing of such an
equity, debt, or quasi-equity financing. Such fees shall be equivalent to ten
percent (10%) of the first $10,000,000 of aggregate gross proceeds of such
financing and seven and one-half percent (7 1/2%) of any amount of aggregate
gross proceeds of such financing in excess of $10,000,000. This fee applies to
any equity, debt, or quasi-equity financing transactions that close during the
-3-
term of this Agreement or within twelve months thereafter if the party making
equity, debt, or quasi-equity investment was introduced to Optron or the Public
Company, as relevant, during the term hereof.
6. Optron or the Public Company, as relevant, will pay to Xxxxxx a fee for
the services described in Section 10, above, in cash at the closing of such a
commercial loan or lease transaction. Such fees shall be equivalent to four
percent (4%) of the first $5,000,000 of borrowings or lease transactions in
favor of Optron or the Public Company, as relevant, and two and one-half percent
(2 1/2%) of any amount of borrowings or lease transactions in excess of
$5,000,000. This fee applies to any borrowings or lease transactions that close
during the term of this Agreement or within twelve months thereafter if the
party making such loan or lease transaction was introduced to Optron or the
Public Company, as relevant, during the term hereof. If warrants or other equity
or quasi-equity structures are granted or issued in connection with such a
borrowing or lease transaction lenders or lessors, Optron or the Public Company,
as relevant, will pay a fee to Xxxxxx equivalent to ten percent (10%) of the
total amount of funds received by Optron or the Public Company upon the exercise
of the warrants and for the warrants, equity or quasi-equity, on an as-received
by Optron or the Public Company as relevant, basis.
7. Optron or the Public Company, as relevant, will pay to Xxxxxx a fee for
the services described in Section 12, above, in cash at the closing of such a
merger or acquisition. Such fees shall be equivalent to five percent (5%) of the
first $5,000,000 of enterprise value of such merger or acquisition and two and
one-half percent (2 1/2%) of any amount of enterprise value in excess of
$5,000,000.
8. As of the closing of the Transaction and in connection with such
closing, Optron will cause the Public Company to assume all of Optron's
obligations hereunder. This Section 8 shall not act as a novation of Optron's
obligations under this Agreement, such that notwithstanding such assumption,
Optron shall remain liable, jointly and severally, therefor and, upon the
request of Xxxxxx, shall execute such documents as Xxxxxx may reasonably request
such that Optron shall become an absolute guarantor of any obligations hereunder
incurred by the Public Company.
DISPUTES AND CONTROVERSIES
The Parties agree that all disputes, claims, and other matters in
controversy arising out of or relating to this Agreement, or the performance or
breach thereof, shall be submitted to binding arbitration in accordance with the
provisions and procedures of this paragraph; PROVIDED, HOWEVER, that the
arbitrator shall not be empowered to award punitive, exemplary or consequential
damages.
Any arbitration shall be held in Los Angeles, California, in accordance
with applicable law except as provided to the contrary hereunder. Such
arbitration shall be held before and decided by a single neutral arbitrator. The
single neutral arbitrator shall be selected from a list of retired judges of the
Court of Los Angeles by a process mutually agreed upon by the parties.
The parties shall mutually agree upon the date and location of the
arbitration subject to the availability of the arbitrator, except that the
arbitrator shall give not less than (30) days notice of the hearing unless the
parties mutually agree to shorten time for notice.
-4-
The parties shall be entitled to undertake discovery in the arbitration in
accordance with California law. In conjunction with these processes, the parties
shall be entitled to request and obtain production of documents in discovery in
the arbitration in accordance with the same rights, remedies and procedures, and
shall be subject to all of the same duties, liabilities and obligations as if
the subject matter of the arbitration were pending in a civil action before a
Superior Court of the State of California. The parties hereby agree that any
discovery taken hereunder shall be permitted without first securing leave of the
arbitrator and shall be kept to a reasonable minimum.
The decision of the arbitrator appointed pursuant to this Agreement shall
be final and binding.
The arbitration proceedings themselves and any discovery taken in
connection with the arbitration, shall be kept strictly confidential and, unless
required by law or court order, shall not be disclosed to any third party.
The arbitrator may award to any prevailing party, as determined by the
arbitrator, part or all of the prevailing party's costs and fees. "Cost and
fees" means all reasonable pre-award expenses of the arbitration, including the
arbitrator's fees, administrative fees, travel expenses, out-of-pocket expenses
such as photocopy, telecopy and telephone charges, witness fees and attorneys'
fees.
CONFIDENTIALITY
Xxxxxx acknowledges and agrees that it will receive and become aware of
certain information which is proprietary to Optron and the Public Company,
including, without limitation, prices, costs, personnel, knowledge, data and
techniques, other non-public information concerning the business or finances of
Optron and the Public Company, and other information the disclosure of which
might harm or destroy the competitive advantage of Optron and the Public Company
(all of the foregoing shall hereinafter be referred to as the "Proprietary
Information"). Notwithstanding the foregoing, the Proprietary Information shall
not include any information which is generally known or becomes part of the
public domain through no fault of Xxxxxx, or is required to be disclosed in the
context of any administrative or judicial proceeding.
Xxxxxx agrees that it will not, directly or indirectly, disclose any
Proprietary Information to third parties, copy or use any Proprietary
Information, or publish any Proprietary Information, except for the purpose of
fulfilling its obligations to Optron and the Public Company.
INDEMNIFICATION
Except as may be prohibited by applicable law, Optron and the Public
Company shall indemnify and hold harmless Xxxxxx including each member,
Executive Committee member and officer thereof, their respective partners,
officers, directors, shareholders and trustees and the partners, officers,
directors, shareholders and trustees of such parties and in the discretion of
the Executive Committee, may indemnify and hold harmless any affiliate thereof,
and any employee or agent of, or adviser to, each member, Executive Committee
member and officer, and their respective Affiliates (such persons, to the extent
they are required to be indemnified hereunder or are provided indemnity
hereunder by the Executive Committee, are herein collectively referred to as
"Indemnified Parties") from and against any and all losses, claims, demands,
costs, damages, liabilities, expenses of and nature (including reasonable
-5-
attorneys' fees and expenses), judgments, fines, settlements and other amounts
(collectively, the "Liabilities") arising from, or related or incidental to, any
and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which such Indemnified Party may be
involved, or threatened to be involved, as a party or otherwise, and arising out
of or related to this Agreement or the services to be provided by Xxxxxx under
this Agreement, including, without limitation, liabilities under Nevada law if
such Indemnified Party acted in good faith and in a manner it reasonably
believed to be in, or not opposed to, the interests of Optron or the Public
Company, as relevant, and, with respect to any criminal proceeding, did not in
good faith believe its conduct was unlawful; PROVIDED, HOWEVER, that such
Indemnified Party shall not be indemnified against any such Liabilities and the
Indemnified Party shall repay all amounts previously advanced by Optron or the
Public Company, as relevant, pursuant hereto, that were caused by such
Indemnified. Party's actual fraud, gross negligence or wanton or willful
misconduct, unless the court in which such proceeding was brought shall
determine the Indemnified Party is fairly and reasonably entitled to indemnify,
in which case such indemnification shall be provided only to the extent
permitted by such court. Notwithstanding the foregoing, to the extent that an
Indemnified Party has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in this paragraph, or in connection
with any appeal therein, or in defense of any claim, issue or matter therein,
Optron or the Public Company, as relevant, shall indemnify such Indemnified
Party against the expenses, including, without limitation, reasonable attorneys'
and accountants' fees and expenses, incurred by such Indemnified Party in
connection therewith. The termination of any pending or threatened action, suit
or proceeding by judgment, order settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent shall not, in and of itself, create a presumption
or otherwise constitute evidence that the Indemnified Party did not satisfy
standards indemnification set forth in this paragraph.
Liabilities incurred by any Indemnified Party in defending any pending or
threatened claim, demand, action, suit or proceeding shall, from time to time,
be paid by the Company in advance of the final disposition or settlement of such
claim, demand, action, suit or proceeding upon receipt of an undertaking by or
on behalf of the Indemnified Party to repay such amounts (or a proportionate
share of such amounts determined in accordance with the following paragraph, if
applicable) if it is ultimately determined that the Indemnified Party is not to
be indemnified by Optron or the Public Company, as relevant, as provided in this
Agreement.
If for any reason (other than the gross negligence or the wanton or willful
misconduct or bad faith of the Indemnified Party), the foregoing indemnification
is unavailable to such Indemnified Party, then Optron or the Public Company, as
relevant, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such Liabilities in such proportion as is appropriate to
reflect not only the relative benefits received by Optron or the Public Company,
as relevant, on the one hand, and such Indemnified Party on the other hand, but
also the relative fault of Optron or the Public Company, as relevant, and such
Indemnified Party, as well as any relevant equitable considerations.
The indemnification (or contribution) and advancement of amounts provided
by this Agreement shall not be deemed exclusive of, but shall be in addition to,
any other rights to which those persons seeking indemnification (or
contribution) or advancement of amounts may otherwise be entitled and shall
continue as to any Indemnified Party notwithstanding the dissolution or other
cessation to exist of such Indemnified Party or the withdrawal, adjudication of
bankruptcy or insolvency of such Indemnified Party, such Indemnified Party's no
-6-
longer serving m the capacity entitling it to indemnification under the
provisions of this Agreement or the dissolution of Optron or the Public Company,
as relevant.
The advancement, indemnity and contribution obligations of Optron and the
Public Company, as relevant, under this Agreement shall be in addition to any
obligation that such entity may otherwise have, shall be binding upon and inure
to the benefit of any successors assigns, heirs and personal representatives of
such entity and each of the Indemnified Parties and shall not be deemed to
create any rights for the benefit of any other party. The provisions of this
paragraph shall survive any termination of this Agreement.
This Agreement shall constitute the whole and entire agreement of the
Parties hereto with respect to the matters set forth herein and shall not be
modified or amended in any respect unless in a writing signed by all of the
Parties.
This Agreement is governed by and to be construed in accordance with the
laws of the State of California without regard to conflict of laws principles,
except that the provisions of the Nevada General Corporation Law shall apply to
the conduct of and indemnification in favor of officers and directors of Optron
or the Public Company, as relevant, in lieu of the California Corporations Code
for such persons.
THE XXXXXX GROUP, LLC OPTRON TECHNOLOGIES, INC.
By: By:
------------------------- --------------------------
Xxxxxxx X.X. Xxxxx, Xx. Xxxxxxx X.X. Xxxxx, Xx.
-7-
