Exhibit (10)
CONSULTANT AGREEMENT
THIS AGREEMENT is made and entered into effective as of October 15, 1999
(the"Agreement"), by and among TENGTU INTERNATIONAL CORP., a Delaware
corporation ("Tengtu"), COMADEX INDUSTRIES LTD., a British Columbia company
("Comadex") and Pak Xxxx Xxxxxx ("Xxxxxx").
WHEREAS, Xxxxxx, the principal of Comadex, has acted as Tengtu's Chairman of the
Board of Directors and Chief Executive Officer ("CEO") since July, 1996; and
WHEREAS, Xxxxxx has provided exemplary leadership to Tengtu, advanced Tengtu's
interests and has been successful in creating a business plan and forging
strategic alliances for Tengtu's future; and
WHEREAS, Xxxxxx has worked for Tengtu without compensation since July, 1996 even
though he was to have received U.S.$10,000 per month; and
WHEREAS, the Tengtu's Compensation Committee of its Board of Directors has
decided to compensate Xxxxxx for his past services to Tengtu and has deemed it
in Tengtu's best interests to retain Xxxxxx through Comadex, to serve as its CEO
and Chairman of its Board of Directors for five years, pursuant to a consulting
agreement;
NOW, THEREFORE, in consideration of past services rendered by Xxxxxx, Xxxxxx'x
continued retention as CEO and other valuable consideration, receipt of which is
hereby acknowledged, Tengtu, Comadex and Xxxxxx agree as follows:
1. SERVICES TO BE PROVIDED AND COMMITMENT.
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1.1
Services to Be Provided by Xxxxxx.
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Comadex shall designate Xxxxxx to serve as Tengtu's CEO, Chairman of its Board
of Directors and such other positions to which Xxxxxx may be appointed or
designated by Tengtu 's Board of Directors. Xxxxxx shall perform all services
required of the foregoing positions on a full-time basis.
1.2
Exclusivity.
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Comadex shall not enter into any other contract or arrangement requiring
services to be performed by Xxxxxx, other than completing already existing
contracts or commitments or any future contract if, in the opinion of a majority
of Tengtu's board of directors, exclusive of Xxxxxx, that contract does not
conflict with any aspect of the business of Tengtu, or any affiliate of Tengtu,
and the performance of Xxxxxx'x duties under this Agreement.
1.3
Other Services to be Provided by Comadex.
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Services other than those required of Tengtu's CEO, Chairman of the Board of
Directors may be performed by Comadex employees other than Xxxxxx if approved by
Tengtu's Board of Directors.
2.
TERM. The term of this Agreement shall be five (5) years. Notwithstanding
anything in this Section 2 to the contrary, this Agreement may be terminated at
any time in accordance with Section 6.
3.
COMPENSATION OF COMADEX.
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3.1 Compensation for Past Services Performed by Xxxxxx. In consideration of
services performed by Xxxxxx for Tengtu between July,
1996 and November 30, 1999, Tengtu shall issue three million (3,000,000) shares
of its $.01 par value Common Stock to Comadex, with the following restrictive
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED(THE "SECURITIES ACT), AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH OFFER, SALE OR DISTRIBUTION.
3.2
Base Compensation for Services Rendered by Comadex and Xxxxxx after November 30,
1999.
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Subsequent to November 30, 1999, Comadex shall receive base compensation of
U.S.$10,000 per month, plus seven percent (7%) of that amount for the Canadian
General Services Tax, for all services rendered to Tengtu by its employees
("Base Compensation"). Every 12 months, beginning one year after the effective
date of this Agreement, the compensation Committee can increase Xxxxxx'x base
salary up to a maximum of $10,000 per year.
3.3
Incentive Compensation.
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3.3.1
Tengtu Stock Option.
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If, by November 15, 2000, Xxxxxx is primarily responsible for raising three
million dollars (U.S.$3,000,000) or more in capital for Tengtu, or any
subsidiary or joint venture in which Tengtu has at least a fifty percent (50%)
equity interest, Comadex shall receive an option to purchase one million
(1,000,000) shares of Tengtu stock at the closing market price of Tengtu's stock
on the day the capital is received by Tengtu. In the event that Tengtu's stock
is not traded on that day, then the option price shall be the closing price of
Tengtu stock on the last day that it was traded prior to the receipt of capital
by Tengtu. Any option granted pursuant to this section 3.3.1 shall expire ten
(10) years from the date granted. For purposes of this provision, if the funds
raised prior to November 15, 2000 are in the form of a security convertible into
Common Stock, and at least three million dollars (U.S. $3,000,000) worth of that
security is converted after November 15, 2000, Comadex shall be entitled to
receive the option to purchase the 1,000,000 shares. The exercise price shall be
the lesser of the price of the Common Stock on the date of initial receipt of
the funds or the date of conversion.
3.3.2
Percentage of Capital Raised.
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Tengtu shall pay to Comadex incentive compensation equal to one percent (1%) of
all capital raised, in excess of three million dollars (U.S. $3,000,000), by
Xxxxxx for Tengtu, or any subsidiary or joint venture in which Tengtu has at
least a fifty percent (50%) equity interest (the "Capital Incentive"). The
Capital Incentive shall be payable to Comadex in either cash, or the same
security sold, as determined by Tengtu, within five (5) business days of receipt
of the capital by Tengtu.
3.3.3
Percentage of Tengtu Net Profits.
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Tengtu shall pay to Comadex incentive compensation equal to one percent (1%) of
Tengtu's annual pre-tax net profits (the "Net Profit Incentive"). The Net Profit
Incentive shall only be payable to Comadex under the following circumstances:
3.3.3.1
Tengtu's Board of Directors, or a committee thereof, prior to the start of a
fiscal year, sets a pre-tax profit target;
3.3.3.2
Tengtu's pre-tax net profits as reported in its audited financial statements
exceed the profit target.
The Net Profit Incentive, if any, shall be paid, in cash, to Comadex annually,
within thirty (30) days of the receipt by Tengtu from its accountants of its
final audited financial statements.
3.4
Participation in Tengtu Stock Option Incentive Plan.
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Xxxxxx shall be permitted to participate in any Tengtu Stock Option Incentive
Plan in effect during the term of this Agreement upon the same terms and
conditions as other Tengtu consultants and employees.
.
4.
EXPENSE REIMBURSEMENTS AND PAYMENTS. Xxxxxx, or other employees of Comadex shall
promptly be reimbursed for reasonable and actual out-of-pocket expenses incurred
by it the performance of their duties and responsibilities hereunder after
presentation of proper vouchers and expense reports.
5.
VACATION, HOLIDAYS, SICK LEAVE AND OTHER FRINGE BENEFITS. Xxxxxx shall be
entitled to four (4) weeks vacation per year during the term of this Agreement
and no more than two (2) weeks vacation at a time, unless he obtains a longer
period with the prior consent of the Board of Directors. Xxxxxx shall also be
entitled to days off for holidays as are available to other Canadian employees
of Tengtu.
6.
TERMINATION.
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6.1
Termination by Tengtu for Cause. Tengtu may terminate this Agreement for Cause
(as defined herein) any time effective upon written notice to Comadex. As used
herein, the term "Cause" shall mean:
6.1.1 Habitual neglect, gross negligence or malfeasance in the performance of
the duties required of Xxxxxx as CEO and Chairman of the Board of Directors
which continues uncorrected for a period of thirty (30) days after written
notice thereof by Tengtu to Comadex; or
6.1.2 Consultant's confession or conviction of theft, fraud, embezzlement, or
any other crime involving dishonesty with respect to Tengtu.
If this Agreement is terminated by Tengtu for cause, then Comadex shall be
entitled to receive the Base Compensation and any incentive compensation owed by
Tengtu through the effective date of such termination.
6.2
Termination Upon Death or Disability. This Agreement shall terminate upon
Xxxxxx'x death or disability (as defined herein). For this purpose "disability"
means incapacity, whether by reason of physical or mental illness or disability,
which prevents Xxxxxx from substantially performing his material duties as CEO
and Chairman of the Board for six (6) months, or for shorter periods aggregating
six (6) months during the term of this Agreement. Termination for death shall
become effective upon the occurrence of such event and termination for
disability shall become effective upon written notice to Comadex.
6.3
Events Upon Termination. The termination of this Agreement pursuant to Sections
6.1 and 6.2 shall also result in the termination of all rights and benefits of
Comadex under this Agreement, except for any rights to compensation accrued
under Section 3 prior to the date of termination or rights to expense
reimbursement under Section 4, and except as provided by law.
6.4
Payments Upon Termination Without Cause. In the event Tengtu elects to terminate
this Agreement prior to the scheduled termination date for any reason other than
Cause, Tengtu shall continue to make all payments and provide all benefits due
under this Agreement for the full remaining term of this Agreement as if there
had been no termination, or $150,000, whichever is greater. Such payments shall
be deemed to be liquidated damages for the damage done to Comadex' and Xxxxxx'x
reputation and for having foregone the opportunity to pursue other employment
opportunities while performing services pursuant to this Agreement. Comadex
hereby agrees that such amount shall constitute a realistic and reasonable
valuation of the damages with respect to Consultant's claims.
6.5
Merger or Acquisition of Tengtu.
In the event that Tengtu is merged into another company, or another company
acquires more than fifty percent (50%) of Tengtu's outstanding voting stock, or
the right to acquire more than fifty percent (50%) of Tengtu's outstanding
voting stock, this Agreement shall terminate and all compensation due Comadex
under Section 3.2 as if Comadex performed under this Agreement until November
30, 2004, and any amounts owed Comadex under Section 3.3 shall be payable within
thirty (30) days of the closing of such merger or acquisition. In addition, in
the event of a merger, any Tengtu stock options held by Comadex or Xxxxxx shall
have a new five year period, beginning on the date of closing of the merger,
within which to exercise those stock options to obtain comparable stock in the
successor company.
7. RESIGNATION. In the event that Comadex resigns or terminates this Agreement
with Tengtu, Comadex shall be entitled to no further payments or other benefits
under this Agreement, other than any accrued Base Compensation through the date
of resignation or voluntary termination.
8.
COMADEX' REPRESENTATIONS. Comadex represents and warrants that Comadex has the
power to enter into this Agreement and to perform each of the provisions
contained herein. Comadex represents and warrants that Comadex is not restricted
or prohibited, contractually, by court order or otherwise from entering into and
performing this Agreement, and the services to be performed hereunder, and that
Xxxxxx'x execution and performance of this Agreement is not a violation or
breach of any agreement between or among Comadex, Xxxxxx and any other person or
entity.
9.
NONDISCLOSURE OF CONFIDENTIAL
INFORMATION; NON COMPETITION; NON SOLICITATION.
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9.1
NONDISCLOSURE OF CUSTOMERS OR SUPPLIERS. Comadex and Xxxxxx will not, at any
time, either during the term of this Agreement or during the period of one (1)
year after the termination of this Agreement either directly or indirectly,
divulge, disclose or communicate to any person, firm, or corporation, in any
manner whatsoever, any Confidential Information (as defined herein), except as
may be required by law or valid legal process. In the event that Comadex is
served with formal legal process requesting any Confidential Information,
Comadex shall notify Tengtu within three (3) business days of receipt of the
request and provide Tengtu with a copy of the request. "Confidential
Information" includes, but is not limited to, all customer lists, names and
addresses of customers, investors and joint venture partners, contact persons at
customers, investors and joint venture partners, agreements or arrangements with
customers, items usually purchased by customers, supplier lists, names and
addresses of suppliers, contact persons at suppliers, agreements or arrangements
with suppliers, sales techniques, pricing and prices, marketing information or
strategies, and other confidential information of any kind, nature or
description concerning any matters affecting or relating to the business of
Tengtu which derives economic value, actual or potential, from not being
generally known to the public or trade. Comadex agrees said confidential
information is proprietary to Tengtu, and constitutes a trade secret owned
exclusively by Tengtu, the disclosure of which would be harmful and damaging to
Tengtu's business.
9.2. TENGTU MATERIALS. All reports and analysis, contracts, contractual
arrangements, specifications, computer software, computer records and data
stored in Tengtu's computers, computer printouts, computer disks, documents,
memoranda, notebooks, correspondence, files, lists and other records, and the
like, and all photocopies or other reproductions thereof, affecting or relating
to the business of Tengtu which Comadex or Xxxxxx shall prepare, use, construct,
observe, possess or control ("Tengtu Materials"), shall be and remain the sole
property of Tengtu. Upon termination of this Agreement, Comadex and Xxxxxx shall
deliver promptly to Tengtu all such Tengtu Materials.
9.3
CERTAIN RESTRICTIONS ON BUSINESS ACTIVITIES. Comadex and Xxxxxx agree that:
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9.3.1 BUSINESS ACTIVITIES. During the term of this Agreement, Comadex and Xxxxxx
will not, directly or indirectly, own an interest in, operate, join, control or
participate in, or be connected as an officer, employee, agent, independent
contractor, partner, shareholder or principal of any corporation, partnership,
proprietorship, firm, association, person or other entity providing services
and/or products or a combination thereof which directly or indirectly compete
with Tengtu's business, and they will not undertake planning for or organization
of any business activity competitive with Tengtu's business or combine or
conspire with other employees or representatives of Tengtu's business for the
purpose of organizing any such competitive business activity.
9.3.2 SOLICITATION OF CUSTOMERS, SUPPLIERS, ETC. Comadex and Xxxxxx will not,
either during the term of this Agreement, or during the period of two (2) years
after termination of this Agreement under any circumstances, directly or
indirectly, either for themselves or for any other person, firm, or corporation,
compete for, solicit, divert, or take away, or attempt to divert or take away,
any of the customers or suppliers.
9.3.3 SOLICITATION OF EMPLOYEES, ETC. Comadex and Xxxxxx will not at any time,
either during the term of this Agreement, or during the period of two (2) years
after termination of this Agreement under any circumstances, directly or
indirectly, either for themselves or for any other person, firm, or corporation,
solicit (or seek to solicit ) any person who is engaged (as an employee, agent,
independent contractor or otherwise) by Tengtu to terminate his or his
employment or engagement.
9.4
SEVERABILITY. Comadex agrees, in the event that any provision of this Section 9
or any word, phrase, clause, sentence or other portion thereof shall be held to
be unenforceable or invalid for any reason, such provision or portion thereof
shall be modified or deleted in such a manner so as to make this Section 9 , as
modified, legal and enforceable to the fullest extent permitted under applicable
laws. The validity and enforceability of the remaining provisions or portions
thereof shall not be affected thereby and shall remain valid and enforceable to
the fullest extent permitted under applicable laws. A waiver of any breach of
the provisions of this Section 9 shall not be construed as a waiver of any
subsequent breach of the same or any other provision.
10. GENERAL PROVISIONS.
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10.1
SEVERABLE PROVISIONS. The provisions of this Agreement are severable, and if any
one or more provisions may be determined to be judicially unenforceable, in
whole or in part, the remaining provisions shall nevertheless be binding and
enforceable.
10.2
ASSIGNMENT. Neither this Agreement nor any of the rights or obligations of
Comadex or Tengtu hereunder shall be assignable.
10.3
ARBITRATION. Any dispute arising under or in connection with this Agreement
shall be subject to arbitration before the American Arbitration Association
("AAA") at the facility nearest Tengtu's principal place of business.
10.4
ATTORNEYS' FEES. If any dispute arises under this Agreement or by reason of any
asserted breach of it, the prevailing party shall be entitled to recover all
costs and expenses, including reasonable attorneys' fees, incurred in enforcing
or attempting to enforce any of the terms, covenants or conditions, including
costs incurred prior to commencement of any action, and all costs and expenses,
including reasonable attorneys' fees, incurred in any appeal from an action
brought to enforce any of the terms, covenants or conditions.
10.5
NOTICES. Any notice to be given to Tengtu under the terms of this Agreement
shall be addressed to Tengtu at the address of Tengtu's principal place of
business, with a copy to Xxxxx & Xxxxxxxx, P.C., 00 Xxxx 00xx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 10165-5101, Attn: Xxxxxxx X. Xxxxx, Esq., and any
notice to be given to Comadex shall be addressed to Comadex at its address last
shown on the records of Tengtu, or at such other address as either party may
hereafter designate in writing to the other. Any notice required or permitted
under this Agreement shall be in writing and shall be deemed effective: (i) upon
receipt in the event of delivery by hand,
including delivery made by private delivery or overnight mail service where
either the recipient or delivery agent executes a written receipt or
confirmation of delivery; or (ii) 72 hours after deposited in the mail,
registered or certified mail, return receipt requested, postage prepaid.
10.6
WAIVER. Any party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, or prevent that party thereafter from enforcing each and every other
provision of this Agreement.
10.7
ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the consulting relationship between Comadex by Tengtu and contains all of the
covenants and agreements between the parties with respect to the consulting
relationship between Comadex by Tengtu. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements,
orally or otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not embodied herein, and that no other agreement, statement
or promise not contained in this Agreement will be effective unless it is in
writing signed by the party to be charged.
10.8
TITLES AND HEADINGS. Titles and headings to sections of this Agreement are for
the purpose of reference only and shall in no way limit, define or otherwise
affect the interpretation or construction of such provisions.
10.9 COUNTERPARTS. This document may be executed in one or more counterparts,
each of which shall be deemed to be an original, and all of which together shall
constitute a single agreement.
10.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COMADEX:
By:___________________________
By: Pak Xxxx Xxxxxx
Title:____________________________
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Pak Xxxx Xxxxxx
TENGTU INTERNATIONAL CORP.
By:___________________________
Title:__________________________
