EXHIBIT 10.18
Xxxxxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
Integral Technologies, Inc.
000 X. Xxxxxxx Xxxxx
Xxxxx 0
Xxxxxxxxxx XX 00000
June 20, 2005
Xxxx:
This letter sets forth the terms of the agreement for The QuanStar Group, LLC
("QuanStar" or the "Advisor"), as the Advisor, to render strategic and
consulting services to Integral Technologies, Inc. ("Integral" or the "Company")
(the "Agreement").
1) BUSINESS ACTIVITIES
--------------------
QuanStar agrees to provide the following services to the Company pursuant to the
terms of this agreement:
a) Research of Business Channels - QuanStar will assist the Company
in its research of potential business channels for the Company's
products, evaluate such channels and provide recommendations to the
Company.
b) Strategic and Negotiation Consultation - Upon request by the
Company, QuanStar will be available to provide strategic and
negotiation consulting advice to the Company. This may include, but
not be limited to, such things as:
i) Planning for and participating in major negotiation with
vendors, suppliers and clients
ii) Reviewing the business and operations plan, strategic growth
plan, and/or financial plan of the Company
iii) Supporting Board and Investor meetings, either by
teleconference or in person
iv) As needed, provide telephonic consultation relating to time
sensitive business decisions
c) Distributor/Client Support - QuanStar will review with the
Company potential new distributors and clients, provide an evaluation
of such organizations, help develop agreements for sales and assist
where needed in negotiations for such agreements.
d) Governmental Channels and Research - QuanStar will assist the
Company in developing a program to introduce the Company's products to
various targeted governmental agencies for the purpose of product
sales as well as for potential research grants to enhance or extend
the Company's product line.
INTEGRAL TECHNOLOGIES INC. - BUSINESS AGREEMENT
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e) Manufacturing Expansion - QuanStar will advise the Company in
discussions regarding expanding the production capabilities of the
Company and will assist in developing a manufacturing plan once
alternatives are chosen.
f) International Licensees and Distributors - QuanStar will provide
initial research into potential international licensees and
distributors, evaluate such organizations and provide input as to the
development of any agreements.
g) Client Introductions - QuanStar will assist the Company by
providing potential sales leads from its internal and affiliate
relationships.
h) Exit Planning - QuanStar will work with the Company to define
various potential exit event scenarios, hold discussions regarding the
viability of such events and help the Company prepare any
developmental activities necessary to enhance the possibilities of
those events happening.
i) Other Services - Quanstar will assist the Company with other
services as mutually agreed to by the parties during the term of this
Agreement.
2) EXECUTIVE MANAGEMENT
---------------------
QuanStar will be responsible for reporting directly to the CEO of the
Company and all activities shown above will be provided in a direct
working relationship with the CEO and others as designated by the Company
in its discretion. QuanStar will establish and provide an executive
management team to the Company to support the services outlined above,
subject to the approval of the Company. QuanStar's executive management
team shall, at all times during the term of this Agreement, be headed by
Xxxx X. Xxxxxxxxx.
3) BUSINESS ACTIVITIES AND EXECUTIVE MANAGEMENT FEES
------------------------------------------------------
Prior to the termination of this Agreement pursuant to Section 4, the
Company will agree to pay to QuanStar for its ongoing executive
management services:
a) A monthly retainer of $15,000 beginning on the execution date of
this Agreement, prorated for any partial month and on the 1st day of
each month thereafter; in the event of termination of this Agreement
effective in the middle of any month, QuanStar shall return to the
Company a prorated portion of the retainer for such month, based upon
the number of days in such month following the termination, and
payable within five (5) days following the effective termination date.
b) 500,000 shares of restricted common stock.
c) Business Development Fee - The Company will pay to QuanStar a fee
equal to 5% of Net Revenue (as defined below) actually paid to the
Company by new clients or other persons directly introduced by
QuanStar under this Agreement (each, a "Third Party"); provided,
however, that QuanStar shall only be entitled to receive the fee
described in
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this Section 3(c) if it first identifies the name of the Third
Party in writing prior to engaging in negotiations with such Third
Party with respect to consummation of a commercial transaction between
the Third Party and the Company, and the Company approves the Third
Party in writing; provided further, however, that QuanStar shall not
be entitled to receive the fee provided for under this Section 3(c)
with respect to any person with whom the Company had a pre-existing
relationship prior to the date of this Agreement, unless the Company
requests in writing QuanStar's participation with such relationship.
For purposes of this Agreement, the term "Net Revenue" shall mean
revenue actually received by the Company from Third Parties in respect
of sales of the Company's products and/or services, license fees, or
research grants, net of taxes payable by the Company with respect to
such amounts and all direct costs incurred by the Company in
generating such revenue (including, without limitation, expenses paid
to QuanStar pursuant to Sections 6 of this Agreement).,.
4) TERM
----
a) Unless earlier terminated pursuant to Section 4(b) or 4(c) below,
the initial term of the Agreement shall begin on the execution hereof
and continue for an initial period of one (1) year (the "Initial
Term"). Unless terminated by either party at least thirty (30) days
prior to the end of the initial one (1) year term, this Agreement will
automatically be renewed for successive one-year periods (each a,
"Successive Term" and, together with the "Initial Term," the "Term").
b) This Agreement may be terminated without Cause (as defined in
Section 4(c) below) by either party prior to the end of the Term at
any time upon thirty (30) days prior written notice, given at any time
but not prior to ninety (90) days from the starting date. Quanstar
agrees to continue to provide regular services and support activities
during the thirty (30) day notification period.
c) This Agreement may be terminated by the Company prior to the end
of the Term for Cause immediately upon notice to QuanStar. For
purposes of this Agreement, the term "Cause" shall mean shall a good
faith determination by the Company that there has been: (i) a failure
by QuanStar to perform its duties hereunder after notice of such
failure from the Company, if such failure has not been cured within
ten (10) days after receipt of such notice, (ii) any act by, or an
event with respect to, QuanStar involving embezzlement, theft,
material dishonesty, or material harm to the Company's reputation, or
a conviction of or plea of nolo contendere to a crime involving moral
turpitude or a felony of any of the principals of QuanStar, or (iii)
any breach of this Agreement by QuanStar, if such breach has not been
cured within ten (10) days after receipt of such notice.
d) Upon any termination of this Agreement, all obligations of the
parties shall end; provided, however, that no such termination shall
affect the obligations of QuanStar pursuant to Section 7 below, the
indemnification obligations of the Company or QuanStar set forth in
Section 8 below, or the right of QuanStar to receive any retainer and
performance fees earned and payable during the term of this Agreement
or the right of QuanStar to receive reimbursement for its
out-of-pocket expenses previously incurred as described below in
Section 6. The Company will continue to pay QuanStar
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the fees earned in Section 3(c) for all agreements signed before
the termination of this Agreement for the duration of such contract.
5) REPORTS AND MEETINGS
----------------------
a) QuanStar shall, at its expense, provide the Company with the following
full and complete reports during the term of this Agreement: (i)
written periodic reports summarizing QuanStar's efforts with respect
to the services described in Section 1 above; (ii) market information
from reports which QuanStar receives from time to time; and (iii) such
other reports as mutually agreed upon by the parties.
b) QuanStar's executive management team and the Company shall maintain a
close working relationship which shall include periodic meetings
during which the business activities undertaken by QuanStar pursuant
to this Agreement shall be reviewed and discussed.
6) EXPENSES
--------
The Company will reimburse QuanStar, upon its request, for all reasonable
out of pocket expenses, including economy travel, incurred by it in
connection with performing services as outlined in this Agreement, provided
that any single expense in excess of $500, or any single event expense in
excess of $1,000 will require the prior written consent of the Company, and
aggregate expenses in excess of $15,000 during the Initial Term or any
Successive Term will also require the prior written consent of the Company.
Subject to the provisions of the preceding paragraph, the Company will
establish a prepaid expense account with QuanStar in the amount of $2,500
which it will maintain at that level and from which QuanStar will deduct
all valid expenses; QuanStar shall send to the Company a monthly expense
report detailing all expenses deducted from such account. Any excess in
such account will, upon termination of this Agreement, be returned to the
Company in full.
7) INFORMATION AND CONFIDENTIALITY
---------------------------------
a) QuanStar agrees that all non-public information pertaining to the
prior, current or contemplated business of the Company are
valuable and confidential assets of the Company. Such information
shall include, without limitation, information relating to customer
lists, bidding procedures, intellectual property, trade secrets,
financing techniques and sources and such financial statements of the
Company as are not available to the public. QuanStar shall hold all
such information provided to it in trust and confidence for the
Company and shall not use or disclose any such information to any
other person except with the prior consent of the Company. The terms
of this Agreement and the relationship of the parties shall also be
governed by the Confidentiality Agreement between the Company and
Quanstar dated August 18, 2004 (the "Confidentiality Agreement"). In
the event of any conflict between the terms of this Agreement and the
terms of the Confidentiality Agreement, the terms of the
Confidentiality Agreement shall govern.
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b) Upon request from the Company during or upon the termination of this
Agreement, QuanStar will provide the Company any and all of its
work product information related to the services provided under this
Agreement.
c) QuanStar acknowledges that any breach of this Section 7 may cause
immediate and irreparable injury to the Company and that monetary
damages may be inadequate to compensate the Company for such breach.
Having acknowledged the foregoing, QuanStar agrees that, in the event
of such breach, the Company shall be entitled to injunctive relief, in
addition to all other remedies available to it at law or in equity.
This Section in no way limits the liability or damages that may be
assessed against QuanStar in the event of a breach of any of the
provisions of this Section 7.
8) INDEMNIFICATION
---------------
The Company and Quanstar mutually agree to defend, indemnify and hold each
other and their directors, officers, employees and agents, harmless
from and against any and all claims or liability arising out of their
performance under this Agreement except to the extent such claims or
liability result from the gross negligence or willful misconduct of the
party claiming indemnification rights.
9) INDEPENDENT CONTRACTOR
-----------------------
It is expressly understood and agreed that QuanStar shall, at all times,
act as an independent contractor with respect to the Company and not
as an employee or agent of the Company, and nothing contained in any
agreement shall be construed to create a joint venture, partnership,
association or other affiliation, or like relationship, between the
parties.
10) AMENDMENT
---------
No modification, waiver, amendment, discharge or change of this Agreement
shall be valid unless the same is evidenced in writing and signed by
the parties.
11) NOTICES
-------
All notices given shall be in writing and shall be deemed to have been
provided when delivered by certified or overnight mail to the primary
business addresses of the other party.
12) ENTIRE AGREEMENT
-----------------
This Agreement contains all of the understandings and agreements of the
parties with respect to the subject matter discussed herein. All prior
agreements, whether written or oral, are merged herein and shall be of no
force or effect.
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13) SEVERABILITY
------------
The invalidity, illegality or unenforceability of any provision or
provisions of this Agreement will not affect any other provision of
this Agreement, which will remain in full force and effect, nor will the
invalidity, illegality or unenforceability of a portion of any provision of
this Agreement affect the balance of such provision.
14) CONSTRUCTION AND ENFORCEMENT; VENUE
--------------------------------------
This Agreement shall be construed in accordance with the laws of the State
of Washington, without application of the principles of conflicts of
laws. The parties agree to exclusive jurisdiction of the state and federal
courts in Whatcom County, Washington, each party submits to the
jurisdiction of those courts, and each party agrees not to object to venue
before such courts.
15) BINDING NATURE
---------------
The terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties, and their respective successors and
assigns. QuanStar cannot assign the work requirements of this Agreement
without prior consent of the Company.
16) COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, including
facsimile signatures, which shall be deemed as original signatures.
All executed counterparts shall constitute one Agreement, notwithstanding
that all signatories are not signatories to the original or the same
counterpart.
17) ASSIGNMENT
----------
QuanStar shall not assign or delegate any of its obligations under this
Agreement without the prior written consent of the Company which shall
not be unreasonably withheld, including through a transfer of greater than
fifty percent (50%) of the ownership interest of QuanStar, through a
merger, consolidation or otherwise, or otherwise by operation of law. Any
assignment or delegation in contravention of this provision shall be null
and void. Except as provided in the preceding sentences, all the terms and
provisions of this Agreement will be binding upon and inure to the benefit
of and be enforceable by the parties and their respective successors and
permitted assigns.
18) AUTHORIZATION
-------------
The Company represents and warrants that it has the requisite power and
authority to enter into and carry out the terms and conditions of this
Agreement.
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19) NON-WAIVER
----------
The failure by either party hereto at any time to require performance by
the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require the performance with respect thereto or to claim a breach
with respect thereto.
20) COMPLIANCE WITH LAWS
----------------------
QuanStar hereby represents and warrants that the conduct of its business is
in compliance with all applicable laws, and QuanStar has obtained, and
will maintain during the term of this Agreement, all licenses necessary for
the conduct of its business.
Please confirm that the foregoing correctly set forth our agreement by signing
and returning to us a copy of this Agreement.
Sincerely,
/s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx
Chief Executive Officer
The QuanStar Group, LLC
Accepted By:
/s/ Xxxxxxx X. Xxxx
______________________________
Xxxxxxx X. Xxxx
President
Integral Technologies Inc.
Date: June 20, 2005
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